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Rule 424(b)(3)
Registration No. 333-66761
FINANCIAL BANCORP, INC.
42-25 QUEENS BOULEVARD
LONG ISLAND CITY, NEW YORK 11104
(718) 729-5002
November 6, 1998
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders of
Financial Bancorp, Inc. ("FIBC") which will be held on December 18, 1998, at
9:30 a.m., Eastern Standard Time, at the LaGuardia Marriott, 102-05 Ditmars
Boulevard, East Elmhurst, New York 11369 (the "Special Meeting"). At the
Special Meeting, you will be asked to approve and adopt an Agreement and Plan
of Merger, dated as of July 18, 1998, by and between Dime Community
Bancshares, Inc. ("DCB") and FIBC (the "Merger Agreement").
The Merger Agreement provides for the merger of FIBC with and into DCB, with
DCB being the surviving corporation (the "Merger"). Pursuant to the Merger
Agreement, upon consummation of the Merger, each outstanding share of common
stock, par value $0.01 per share, of FIBC ("FIBC Common Stock") will be
converted into the right to receive, at the election of the holder thereof,
either shares of common stock, par value $0.01 per share, of DCB ("DCB Common
Stock") or cash, subject to the election, allocation and proration procedures
set forth in the Merger Agreement. If DCB's Average Closing Price (as defined
in the Merger Agreement) is between $22.95 and $31.05, then the value of the
consideration per share to be received by FIBC stockholders, whether in the
form of stock or cash, will be $40.50, and 50% of the total consideration to
be paid to FIBC's stockholders will consist of DCB Common Stock and 50% will
consist of cash. If DCB's Average Closing Price is less than $22.95 or greater
than $31.05, then the value of the consideration per share to be received by
FIBC stockholders in the Merger will be adjusted, and the percentage of the
total consideration consisting of DCB Common Stock and cash will change, all
as set forth in the Merger Agreement and more fully described in the enclosed
Proxy Statement-Prospectus. The actual consideration ultimately received by a
stockholder of FIBC will depend upon certain election, allocation and
proration procedures and the elections of other stockholders as described in
the accompanying materials. Accordingly, no guarantee can be given that the
election of any given stockholder will be honored. Under the terms of the
Merger Agreement, cash will be paid in lieu of fractional shares of DCB Common
Stock.
FIBC will have the right to terminate the Merger Agreement if DCB's Average
Closing Price is less than or equal to $20.25 per share, unless DCB elects to
increase the consideration to be received by FIBC's stockholders pursuant to
the Merger Agreement to provide a minimum value of $38.12 for each share of
FIBC Common Stock.
AFTER CAREFUL CONSIDERATION, YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY AND
HAS UNANIMOUSLY CONCLUDED THAT THE TERMS OF THE MERGER ARE FAIR TO AND IN THE
BEST INTERESTS OF FIBC AND ITS STOCKHOLDERS. ACCORDINGLY, YOUR BOARD
UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT.
Approval and adoption of the Merger Agreement by the stockholders of FIBC is
a condition to the consummation of the Merger. Consummation of the Merger is
also subject to certain other conditions, including the approval of the Merger
by the Office of Thrift Supervision, which is the primary federal bank
regulatory agency for DCB and FIBC.
The enclosed Notice of Special Meeting of Stockholders and Proxy Statement-
Prospectus describe the Merger and provide information concerning the Special
Meeting. Please read these materials carefully.
The affirmative vote of a majority of the issued and outstanding shares of
FIBC Common Stock is required for approval and adoption of the Merger
Agreement. Accordingly, a failure to return a properly executed proxy card or
to vote in person will have the same effect as a vote against the Merger
Agreement. Your vote is very important regardless of the number of shares you
own. It is important that your shares be represented at the
<PAGE>
Special Meeting whether or not you are present. Please be sure to sign, date
and mail the enclosed Proxy Card in the enclosed postage-paid envelope, even if
you plan to attend in person. If you attend the Special Meeting, you may vote
in person even if you have already mailed your Proxy Card.
On behalf of the Board of Directors, I urge you to vote FOR the approval and
adoption of the Merger Agreement and I thank you for your continued support.
If you have any questions, please call (718) 729-5002.
Sincerely,
/s/ Frank S. Latawiec
Frank S. Latawiec
President and Chief Executive
Officer
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FINANCIAL BANCORP, INC.
42-25 QUEENS BOULEVARD
LONG ISLAND CITY, NEW YORK 11104
(718) 729-5002
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 18, 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Financial
Bancorp, Inc. ("FIBC") will be held on December 18, 1998, at 9:30 a.m.,
Eastern Standard Time, at the LaGuardia Marriott, 102-05 Ditmars Boulevard,
East Elmhurst, New York 11369 (the "Special Meeting"). A Proxy Statement-
Prospectus and Proxy Card for the Special Meeting are enclosed.
The Special Meeting will be held for the purpose of considering and voting
upon the following matters:
1. The approval and adoption of the Agreement and Plan of Merger, dated
as of July 18, 1998, by and between Dime Community Bancshares, Inc. ("DCB")
and FIBC (the "Merger Agreement"); and
2. Such other business incident to the conduct of the Special Meeting as
may properly come before the Special Meeting and any adjournment or
postponement thereof, including, without limitation, a motion to adjourn
the Special Meeting to another time or place for the purpose of soliciting
additional proxies in order to approve and adopt the Merger Agreement.
The Board of Directors of FIBC has established October 30, 1998 as the
record date for the determination of stockholders entitled to receive notice
of and to vote at the Special Meeting and at any adjournment or postponement
thereof. Only record holders of FIBC Common Stock as of the close of business
on that date will be entitled to vote at the Special Meeting or any
adjournment or postponement thereof. A complete list of stockholders entitled
to vote at the Special Meeting will be open for examination by any stockholder
for any purpose germane to the Special Meeting during ordinary business hours
at FIBC's principal office located at 42-25 Queens Boulevard, Long Island
City, New York 11104 for a period of ten days prior to the Special Meeting and
will also be available at the Special Meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN AND PROMPTLY RETURN
THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE AS SOON AS
POSSIBLE.
By Order of the Board of Directors,
/s/ Robert E. Adamec
Robert E. Adamec
Senior Vice President and Corporate
Secretary
Long Island City, New York
November 6, 1998
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FINANCIAL BANCORP, INC.
PROXY STATEMENT
FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 18, 1998
----------------
DIME COMMUNITY BANCSHARES, INC.
PROSPECTUS
FOR COMMON STOCK OF DIME COMMUNITY BANCSHARES, INC.
----------------
This Proxy Statement-Prospectus is being furnished to the holders of
Financial Bancorp, Inc. ("FIBC") common stock, par value $0.01 per share
("FIBC Common Stock"), in connection with the solicitation of proxies by
FIBC's Board of Directors (the "FIBC Board") for use at a special meeting of
FIBC's stockholders to be held on December 18, 1998, at 9:30 a.m., Eastern
Standard Time, at the LaGuardia Marriott, 102-05 Ditmars Boulevard, East
Elmhurst, New York 11369, and at any adjournment or postponement thereof (the
"Special Meeting").
At the Special Meeting, holders of FIBC Common Stock will consider and vote
upon a proposal to approve and adopt the Agreement and Plan of Merger, dated
as of July 18, 1998, by and between Dime Community Bancshares, Inc. ("DCB")
and FIBC (the "Merger Agreement"), pursuant to which FIBC will merge with and
into DCB (the "Merger"), with DCB surviving the Merger. Holders of FIBC Common
Stock who deliver a written objection to the Corporate Secretary of FIBC
before the vote on the approval and adoption of the Merger Agreement is taken
at the Special Meeting and who otherwise comply with the additional
requirements of Section 262 of the Delaware General Corporation Law ("DGCL")
will be entitled to appraisal rights in connection with the Merger. See "THE
MERGER -- Appraisal Rights."
For a description of the Merger Agreement, which is included in its entirety
as Appendix A to this Proxy Statement-Prospectus, see "THE MERGER."
This Proxy Statement-Prospectus also constitutes a prospectus of DCB with
respect to up to 1,967,267 shares of DCB Common Stock (the "Merger Shares") to
be issued in exchange for shares of FIBC Common Stock upon consummation of the
Merger pursuant to the Merger Agreement, subject to adjustment in the event
the Merger Consideration is increased as described in "THE MERGER --
Termination." This Proxy Statement-Prospectus and the accompanying Proxy Card
are first being mailed to stockholders of FIBC on or about November 10, 1998.
(continued on next page)
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT-PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF DCB COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS,
DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL
AGENCY. INVESTMENT IN DCB COMMON STOCK IS SUBJECT TO INVESTMENT RISK,
INCLUDING POSSIBLE LOSS OF INVESTMENT.
STOCKHOLDERS OF FIBC WHO ARE NOT AFFILIATED WITH FIBC AND WHO RECEIVE SHARES
OF DCB COMMON STOCK IN CONNECTION WITH THE MERGER WILL BE ABLE TO SELL SUCH
SHARES WITHOUT THE USE OF A RESALE PROSPECTUS.
----------------
THE DATE OF THIS PROXY STATEMENT-PROSPECTUS IS NOVEMBER 6, 1998.
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Upon consummation of the Merger, each outstanding share of FIBC Common Stock
(other than Dissenters' Shares, as defined herein) will be converted into the
right to receive, at the election of the holder thereof and subject to the
election, allocation and proration procedures set forth in the Merger
Agreement, either shares of DCB common stock, par value $0.01 per share ("DCB
Common Stock"), or cash, in each case as determined pursuant to the Merger
Agreement. See "THE MERGER -- Merger Consideration and Election, Allocation
and Proration Procedures." The number of shares of DCB Common Stock to be
received by FIBC stockholders per share of FIBC Common Stock in the Merger is
sometimes referred to herein as the "Stock Consideration," and the amount of
cash to be received by FIBC stockholders per share of FIBC Common Stock in the
Merger is sometimes referred to herein as the "Cash Consideration." The Stock
Consideration and the Cash Consideration are sometimes referred to herein
generally as the "Merger Consideration." Under the terms of the Merger
Agreement, cash will be paid in lieu of the issuance of fractional shares of
DCB Common Stock. In addition, for each share of DCB Common Stock issued in
the Merger, the FIBC stockholder receiving such share also will receive the
related preferred share purchase right (a "DCB Right") issued pursuant to the
Rights Agreement, dated as of April 9, 1998 (the "DCB Rights Agreement"),
between DCB and ChaseMellon Shareholder Services, L.L.C., as Rights Agent.
The number of shares of DCB Common Stock constituting the Stock
Consideration and the amount of cash constituting the Cash Consideration will
be determined pursuant to a formula set forth in the Merger Agreement, which
provides that so long as the Average Closing Price (as defined below) is
between $22.95 and $31.05, the Merger Consideration, whether in the form of
stock or cash, will have a value of $40.50 (with the Stock Consideration
valued at the Average Closing Price for such purpose), and 50% of the total
consideration to be paid to FIBC stockholders will consist of DCB Common Stock
and 50% will consist of cash. If the Average Closing Price is less than $22.95
or greater than $31.05, then the value of the Merger Consideration will be
adjusted, and the percentages of the total consideration consisting of DCB
Common Stock and cash will change, all as set forth in the Merger Agreement
and more fully described below under "THE MERGER -- Merger Consideration and
Election, Allocation and Proration Procedures." The "Average Closing Price"
means the average of the closing sale prices per share for DCB Common Stock as
reported on the National Market System of the Nasdaq Stock Market (the "Nasdaq
National Market") during the ten consecutive trading-day period during which
the shares of DCB Common Stock are traded on the Nasdaq National Market ending
on the tenth business day immediately prior to the anticipated effective date
of the Merger (the "Pricing Period").
THE FORM OF THE CONSIDERATION ULTIMATELY RECEIVED BY A STOCKHOLDER OF FIBC
WILL DEPEND UPON CERTAIN ELECTION, ALLOCATION AND PRORATION PROCEDURES AND THE
ELECTIONS OF OTHER STOCKHOLDERS AS DESCRIBED IN THE ACCOMPANYING MATERIALS.
ACCORDINGLY, NO GUARANTEE CAN BE GIVEN THAT THE ELECTION OF ANY GIVEN
STOCKHOLDER WILL BE HONORED.
Assuming the Pricing Period ended on July 17, 1998 (the last trading day
prior to announcement of the Merger), the Average Closing Price would be
$26.66, the Stock Consideration would be equal to 1.5194 shares of DCB Common
Stock and the Cash Consideration would be $40.50. Assuming the Pricing Period
ended on November 5, 1998 (the latest practicable trading date prior to the
mailing of this Proxy Statement-Prospectus), the Average Closing Price would
be $23.66, the Stock Consideration would be equal to 1.7117 shares of DCB
Common Stock and the Cash Consideration would be $40.50. DCB Common Stock and
FIBC Common Stock are currently, and the shares of DCB Common Stock to be
issued in the Merger will be, traded in the over-the-counter market and
included for quotation on the Nasdaq National Market. The last reported sale
prices per share of DCB Common Stock and FIBC Common Stock, as reported on the
Nasdaq National Market on July 17, 1998, the last business day preceding
public announcement of the signing of the Merger Agreement, were $26 1/8 and
$32, respectively, and on November 5, 1998, the latest practicable date prior
to the mailing of this Proxy Statement-Prospectus, were $25 and $37 5/8,
respectively. It is expected that the market price of DCB Common Stock will
fluctuate between the date of this Proxy Statement-Prospectus and the date on
which the Merger is consummated and thereafter. Holders of FIBC Common Stock
are urged to obtain current market prices for DCB Common Stock in connection
with voting their shares at the Special Meeting and making their elections.
See "COMPARATIVE COMMON STOCK PRICE AND DIVIDEND INFORMATION."
2
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FIBC will have the right to terminate the Merger Agreement if DCB's Average
Closing Price is less than or equal to $20.25 per share, unless DCB elects to
increase the Merger Consideration pursuant to the Merger Agreement to provide
a minimum value of $38.12 for each share of FIBC Common Stock. See "THE
MERGER -- Termination."
3
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
AVAILABLE INFORMATION...................................................... 6
FORWARD-LOOKING STATEMENTS................................................. 7
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................ 8
SUMMARY.................................................................... 9
Parties to the Merger.................................................... 9
The Special Meeting...................................................... 9
Effects of the Merger.................................................... 10
Effective Time........................................................... 10
Merger Consideration and Election, Allocation and Proration Procedures... 10
Special Dividend......................................................... 13
Reasons for the Merger; Recommendation of the FIBC Board................. 13
Opinion of FIBC's Financial Advisor...................................... 14
Conditions; Regulatory Approvals......................................... 14
Material Federal Income Tax Consequences................................. 14
Accounting Treatment..................................................... 14
Nasdaq Listing........................................................... 14
Appraisal Rights......................................................... 14
Termination.............................................................. 15
Termination Fee.......................................................... 15
Interests of Certain Persons in the Merger............................... 15
Management of DCB after the Merger....................................... 16
Stock Option Agreement................................................... 16
Certain Differences in Stockholders' Rights.............................. 17
COMPARATIVE COMMON STOCK PRICE AND DIVIDEND INFORMATION.................... 18
SELECTED PRO FORMA CONSOLIDATED COMPARATIVE PER SHARE DATA................. 20
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA............................ 22
DCB -- Historical........................................................ 22
FIBC -- Historical....................................................... 26
SELECTED PRO FORMA COMBINED CONSOLIDATED FINANCIAL DATA.................... 29
RECENT DEVELOPMENTS........................................................ 32
DCB...................................................................... 32
FIBC..................................................................... 33
THE SPECIAL MEETING........................................................ 34
THE MERGER................................................................. 36
Parties to the Merger.................................................... 36
Effects of the Merger.................................................... 36
Effective Time........................................................... 37
Merger Consideration and Election, Allocation and Proration Procedures... 37
Special Dividend......................................................... 41
Background of the Merger................................................. 42
Reasons for the Merger; Recommendation of the FIBC Board................. 43
Opinion of FIBC's Financial Advisor...................................... 44
Procedures for Exchange of FIBC Certificates............................. 48
Regulatory Approvals..................................................... 50
Conditions to the Consummation of the Merger............................. 51
Representations and Warranties........................................... 52
FIBC Stock Option Plans.................................................. 52
Conduct of Business Pending the Merger................................... 53
</TABLE>
4
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
No Solicitation........................................................ 56
Amendment and Waiver................................................... 57
Termination............................................................ 57
Termination Fee........................................................ 58
Expenses............................................................... 59
Material Federal Income Tax Consequences............................... 59
Accounting Treatment................................................... 62
Appraisal Rights....................................................... 62
Interests of Certain Persons in the Merger............................. 63
Effect on FIBC Employee Benefit Plans.................................. 65
Operations after the Merger............................................ 66
Management of DCB after the Merger..................................... 66
CERTAIN RELATED TRANSACTIONS............................................. 67
Stock Option Agreement................................................. 67
Resales of DCB Common Stock............................................ 69
OTHER MATTERS............................................................ 69
BENEFICIAL OWNERSHIP OF FIBC COMMON STOCK................................ 70
Principal Security Ownership........................................... 70
Directors and Executive Officers....................................... 71
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL
INFORMATION............................................................. 72
DESCRIPTION OF DCB CAPITAL STOCK......................................... 79
General................................................................ 79
DCB Common Stock....................................................... 79
DCB Preferred Stock.................................................... 80
COMPARISON OF CERTAIN RIGHTS OF STOCKHOLDERS............................. 81
General................................................................ 81
Amendment of the Certificate of Incorporation.......................... 81
Special Meetings of Stockholders....................................... 82
Indemnification of Directors and Officers.............................. 82
Other Constituencies................................................... 82
Stockholder Rights Plans............................................... 83
LEGAL MATTERS............................................................ 84
EXPERTS.................................................................. 84
STOCKHOLDER PROPOSALS.................................................... 84
APPENDIX A Agreement and Plan of Merger
APPENDIX B Stock Option Agreement
APPENDIX C Opinion of FIBC's Financial Advisor
APPENDIX D Section 262 of the Delaware General Corporation Law
</TABLE>
5
<PAGE>
AVAILABLE INFORMATION
DCB and FIBC are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith file reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission").
Copies of both DCB's and FIBC's reports, proxy statements and other
information can be obtained, upon payment of prescribed fees, from the public
reference facilities of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549. In addition, such reports, proxy
statements and other information can be inspected at the Commission's
facilities referred to above and at the Commission's Regional Offices at 7
World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. If available,
such information may also be accessed through the Commission's Electronic Data
Gathering, Analysis and Retrieval System via electronic means, including the
Commission's website on the Internet (http://www.sec.gov).
DCB Common Stock and FIBC Common Stock are currently included for quotation
on the Nasdaq National Market and such reports, proxy statements and other
information concerning DCB and FIBC are available for inspection and copying
at the offices of the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20006.
DCB has filed with the Commission a Registration Statement on Form S-4
(together with any amendments thereto, the "DCB Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Merger Shares. This Proxy Statement-Prospectus does not contain all of the
information set forth in the DCB Registration Statement and the exhibits
thereto. Such additional information may be obtained from the Commission's
principal office in Washington, D.C. Statements contained in this Proxy
Statement-Prospectus or in any document incorporated by reference in this
Proxy Statement-Prospectus as to the contents of any contract or other
document referred to herein or therein are not necessarily complete, and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the DCB Registration Statement or such other document,
each such statement being qualified in all respects by such reference.
All information contained in this Proxy Statement-Prospectus relating to DCB
and its subsidiaries has been supplied by DCB, and all information relating to
FIBC and its subsidiaries has been supplied by FIBC.
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN AS CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS IN
CONNECTION WITH THE SOLICITATIONS OF PROXIES OR THE OFFERING OF SECURITIES
MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY DCB OR FIBC. THIS PROXY
STATEMENT-PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, ANY SECURITIES, OR THE SOLICITATION OF A PROXY, BY ANYONE
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR
IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROXY STATEMENT-PROSPECTUS NOR ANY DISTRIBUTION
OF SECURITIES MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF DCB OR FIBC SINCE
THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
6
<PAGE>
FORWARD-LOOKING STATEMENTS
THIS JOINT PROXY STATEMENT-PROSPECTUS CONTAINS CERTAIN FORWARD LOOKING
STATEMENTS WITH RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND
BUSINESS OF DCB FOLLOWING THE CONSUMMATION OF THE MERGER, INCLUDING STATEMENTS
RELATING TO THE COST SAVINGS AND REVENUE ENHANCEMENTS THAT ARE EXPECTED TO BE
REALIZED FROM THE MERGER. SEE "SUMMARY," "THE MERGER -- BACKGROUND OF THE
MERGER," "-- REASONS FOR THE MERGER; RECOMMENDATION OF BOARDS OF DIRECTORS --
DCB" AND "PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL INFORMATION."
FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
CONTEMPLATED BY SUCH FORWARD LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE
FOLLOWING POSSIBILITIES: (1) EXPECTED COST SAVINGS OR REVENUE ENHANCEMENTS
FROM THE MERGER CANNOT BE FULLY REALIZED; (2) DEPOSIT ATTRITION, CUSTOMER LOSS
OR REVENUE LOSS FOLLOWING THE MERGER IS GREATER THAN EXPECTED; (3) COMPETITIVE
PRESSURE IN THE BANKING AND FINANCIAL SERVICES INDUSTRY INCREASES
SIGNIFICANTLY; (4) CHANGES IN THE INTEREST RATE ENVIRONMENT REDUCE MARGINS;
(5) GENERAL ECONOMIC CONDITIONS, EITHER NATIONALLY OR IN THE STATE OF NEW
YORK, ARE LESS FAVORABLE THAN EXPECTED; (6) CHANGES IN REAL ESTATE VALUES; (7)
CHANGES IN ACCOUNTING PRINCIPLES; (8) CHANGES IN LEGISLATION AND (9) CHANGES
IN OTHER ECONOMIC, COMPETITIVE, GOVERNMENT, REGULATORY AND TECHNOLOGICAL
FACTORS AFFECTING DCB'S OPERATIONS, PRICING, PRODUCTS AND SERVICES.
7
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (EXCLUDING
CERTAIN EXHIBITS THERETO) WILL BE FURNISHED WITHOUT CHARGE TO ANY PERSON TO
WHOM THIS PROXY STATEMENT-PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL
REQUEST OF SUCH PERSON, DIRECTED, IN THE CASE OF DOCUMENTS RELATING TO DCB, TO
INVESTOR RELATIONS, DIME COMMUNITY BANCSHARES, INC., 209 HAVEMEYER STREET,
BROOKLYN, NEW YORK 11211, TELEPHONE NUMBER (718) 782-6200, AND, IN THE CASE OF
DOCUMENTS RELATING TO FIBC, TO INVESTOR RELATIONS, FINANCIAL BANCORP, INC.,
42-25 QUEENS BOULEVARD, LONG ISLAND CITY, NEW YORK 11104, TELEPHONE NUMBER
(718) 729-5002. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY
REQUEST SHOULD BE MADE BY DECEMBER 11, 1998.
The following documents filed with the Commission by DCB (File No. 0-27782)
pursuant to the Exchange Act are incorporated by reference in this Proxy
Statement-Prospectus:
1. DCB's Annual Report on Form 10-K for the fiscal year ended June 30,
1998;
2. DCB's Current Report on Form 8-K, dated July 20, 1998, as amended by a
Form 8-K/A, dated July 27, 1998;
3. DCB's Current Report on Form 8-K, dated October 21, 1998;
4. The description of DCB Common Stock and Preferred Stock Purchase
Rights set forth in DCB's Registration Statements on Form 8-A, dated
February 15, 1996 and April 15, 1998, respectively, and any amendment
or report filed for the purpose of updating any such descriptions; and
5. The portions of DCB's Proxy Statement for the Annual Meeting of
Stockholders held on November 12, 1998 that have been incorporated by
reference in DCB's Annual Report on Form 10-K for the fiscal year
ended June 30, 1998.
The following documents filed with the Commission by FIBC (File No. 0-18126)
pursuant to the Exchange Act are incorporated by reference in this Proxy
Statement-Prospectus:
1. FIBC's Annual Report on Form 10-K for the fiscal year ended September
30, 1997;
2. The description of FIBC Common Stock set forth in FIBC's Registration
Statement on Form 8-A, dated April 1, 1994, and any amendment or
report filed for the purpose of updating any such descriptions;
3. FIBC's Current Report on Form 8-K, dated July 23, 1998;
4. FIBC's Quarterly Report on Form 10-Q for the periods ended December
31, 1997, March 31, 1998 and June 30, 1998;
5. FIBC's Current Report on Form 8-K, dated October 28, 1998; and
6. The portions of FIBC's Proxy Statement for the Annual Meeting of
Stockholders held on January 22, 1998 that have been incorporated by
reference in FIBC's Annual Report on Form 10-K for the fiscal year
ended September 30, 1997.
All documents filed by DCB or FIBC with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Proxy Statement-Prospectus and prior to the date of the Special Meeting shall
be deemed to be incorporated by reference in this Proxy Statement-Prospectus
and to be a part hereof from the date of filing of such documents. Any
statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement-Prospectus to the extent that a statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Proxy
Statement-Prospectus.
8
<PAGE>
SUMMARY
The following summary is not intended to be a complete description of all
material facts regarding DCB, FIBC and the matters to be considered at the
Special Meeting and is qualified in all respects by the information appearing
elsewhere or incorporated by reference in this Proxy Statement-Prospectus, the
Appendices hereto and the documents referred to herein.
PARTIES TO THE MERGER
DCB. DCB is a Delaware corporation incorporated in December 1995 and is the
holding company for The Dime Savings Bank of Williamsburgh, a federally
chartered stock savings bank ("Dime of Williamsburgh"). The principal business
of DCB is the operation of its wholly owned subsidiary, Dime of Williamsburgh.
Dime of Williamsburgh's principal business is attracting retail deposits from
the general public and investing those deposits, together with funds generated
from operations, principal repayments and borrowings, primarily in multi-family
mortgage loans, one- to four-family residential mortgage loans, mortgage-backed
securities and, to a lesser extent, commercial real estate loans and consumer
loans, as well as securities issued by the U.S. Government and federal agencies
and other securities. At June 30, 1998, DCB had total consolidated assets of
$1.62 billion, deposits of $1.04 billion and stockholders' equity of $186.3
million. As of June 30, 1998, Dime of Williamsburgh had 14 retail banking
office locations located in the boroughs of Brooklyn, Queens and The Bronx and
in Nassau County on Long Island. The principal executive offices of DCB are
located at 209 Havemeyer Street, Brooklyn, New York 11211 and its telephone
number is (718) 782-6200. Dime of Williamsburgh's deposits are insured by the
Bank Insurance Fund ("BIF") or the Savings Association Insurance Fund ("SAIF")
of the Federal Deposit Insurance Corporation ("FDIC").
FIBC. FIBC is a Delaware corporation incorporated in February 1994 and is the
holding company for Financial Federal Savings Bank, a federally chartered stock
savings bank ("Financial Federal"). The principal business of FIBC is the
operation of its wholly owned subsidiary, Financial Federal. Financial
Federal's principal business is attracting retail deposits from the general
public and investing those deposits, together with funds generated from
operations, principal repayments and borrowings, primarily in one- to four-
family residential mortgage loans and mortgage-backed and mortgage-related
securities and, to a lesser extent, commercial real estate loans, multi-family
mortgage loans and consumer loans. In addition, Financial Federal invests its
funds in other securities, including U.S. Government and Federal agency
securities, investment grade preferred stock and federal funds. At June 30,
1998, FIBC had total consolidated assets of $341.0 million, deposits of $229.0
million and stockholders' equity of $28.7 million. As of June 30, 1998,
Financial Federal had 5 full service banking facilities, four of which are
located in Queens and one located in Brooklyn. The principal executive offices
of FIBC are located at 42-25 Queens Boulevard, Long Island City, New York 11104
and its telephone number is (718) 729-5002. Financial Federal's deposits are
insured by the SAIF or the BIF of the FDIC.
See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE," "THE MERGER -- Parties
to the Merger," "SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA" and "PRO
FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL INFORMATION."
THE SPECIAL MEETING
The Special Meeting will be held on December 18, 1998, at 9:30 a.m., Eastern
Standard Time, at the LaGuardia Marriott, 102-05 Ditmars Boulevard, East
Elmhurst, New York 11369. The purpose of the Special Meeting is to consider and
vote upon a proposal to approve and adopt the Merger Agreement and to transact
such other business incident to the conduct of the Special Meeting as may
properly come before the Special Meeting and any adjournment or postponement
thereof, including, without limitation, a motion to adjourn the Special Meeting
to another time or place for the purpose of soliciting additional proxies in
order to approve and adopt the Merger Agreement.
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<PAGE>
Only holders of record of FIBC Common Stock at the close of business on
October 30, 1998 (the "Record Date") will be entitled to notice of and to vote
at the Special Meeting. Approval and adoption of the Merger Agreement and the
Merger requires the affirmative vote of a majority of the outstanding shares of
FIBC Common Stock entitled to vote at the Special Meeting. As of the Record
Date, there were 1,708,632 shares of FIBC Common Stock outstanding and entitled
to be voted at the Special Meeting.
At the Record Date, the directors and executive officers of FIBC and their
affiliates (nine persons) had voting power with respect to an aggregate of
180,632 shares, or approximately 10.57% of the outstanding shares, of FIBC
Common Stock (exclusive of 69,562 shares which may be acquired through exercise
of stock options which are currently exercisable), and all such persons have
agreed to vote their shares in favor of the Merger Agreement. See "THE SPECIAL
MEETING" and "BENEFICIAL OWNERSHIP OF FIBC COMMON STOCK."
EFFECTS OF THE MERGER
Upon consummation of the Merger, FIBC will be merged with and into DCB, and
FIBC stockholders will receive the consideration described in "THE MERGER --
Effects of the Merger" and "-- Merger Consideration and Election, Allocation
and Proration Procedures." For information on how FIBC stockholders will be
able to exchange certificates representing shares of FIBC Common Stock ("FIBC
Certificates") for the certificates representing shares of DCB Common Stock
and/or cash, see "THE MERGER -- Procedures for Exchange of FIBC Certificates."
Each outstanding share of DCB Common Stock at the Effective Time (as defined
below) shall remain outstanding and unchanged as a result of the Merger.
Pursuant to the Merger Agreement, Dime of Williamsburgh and Financial Federal
have entered into the Plan of Bank Merger, dated as of July 27, 1998 (the "Plan
of Bank Merger"), pursuant to which Financial Federal will merge with and into
Dime of Williamsburgh (the "Bank Merger") immediately following consummation of
the Merger, with Dime of Williamsburgh surviving the Bank Merger.
EFFECTIVE TIME
The Merger will become effective at the date and time set forth in the
certificate of merger (the "Certificate of Merger") that will be filed with the
Secretary of State of the State of Delaware in accordance with applicable law
(the "Effective Date" and the "Effective Time," respectively). The Certificate
of Merger will be filed no earlier than two and not more five business days
following the satisfaction or waiver of the latest to occur of the conditions
specified in the Merger Agreement, unless another date is agreed to by DCB and
FIBC; provided, that in no event will the Effective Date be earlier than
January 5, 1999. The date of such filing is referred to herein as the "Closing
Date." See "THE MERGER -- Effective Time" and "-- Conditions to Consummation of
the Merger."
MERGER CONSIDERATION AND ELECTION, ALLOCATION AND PRORATION PROCEDURES
General. Upon consummation of the Merger, each outstanding share of FIBC
Common Stock (other than Dissenters' Shares, as defined herein) will be
converted into the right to receive, at the election of the holder thereof and
subject to the election, allocation and proration procedures set forth in the
Merger Agreement, either the Stock Consideration or the Cash Consideration, in
each case as determined pursuant to the Merger Agreement. See "THE MERGER --
Merger Consideration and Election, Allocation and Proration Procedures." Under
the terms of the Merger Agreement, cash will be paid in lieu of the issuance of
fractional shares of DCB Common Stock. In addition, for each share of DCB
Common Stock issued in the Merger, the FIBC stockholder receiving such share
also will receive the related DCB Right issued pursuant to the DCB Rights
Agreement.
The number of shares of DCB Common Stock constituting the Stock Consideration
and the amount of cash constituting the Cash Consideration will be determined
pursuant to a formula set forth in the Merger Agreement, which provides that so
long as the Average Closing Price is between $22.95 and $31.05, the Merger
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Consideration, whether in the form of stock or cash, will have a value of
$40.50 (with the Stock Consideration valued at the Average Closing Price for
such purpose), and 50% of the total consideration to be paid to FIBC
stockholders will consist of DCB Common Stock and 50% will consist of cash. If
the Average Closing Price is less than $22.95 or greater than $31.05, then the
value of the Merger Consideration will be adjusted, and the percentages of the
total consideration consisting of DCB Common Stock and cash will change, all as
set forth in the Merger Agreement and more fully described below under "THE
MERGER -- Merger Consideration and Election, Allocation and Proration
Procedures."
The following table sets forth the value of the Merger Consideration to be
received by the holders of FIBC Common Stock, including the percentage of the
total consideration that will consist of DCB Common Stock and the percentage
that will consist of cash, at the Average Closing Price of DCB Common Stock
specified. For purposes of the following table, Per Share Consideration refers
to the cash consideration per share of FIBC Common Stock and the Final Exchange
Ratio refers to the stock consideration per share of FIBC Common Stock.
<TABLE>
<CAPTION>
AVERAGE PER SHARE FINAL
CLOSING PRICE CONSIDERATION EXCHANGE RATIO % STOCK % CASH
------------- ------------- -------------- ------- ------
<S> <C> <C> <C> <C>
$32.00 $41.12 1.2850 50.75% 49.25%
$31.05 $40.50 1.3043 50.00% 50.00%
$30.00 $40.50 1.3500 50.00% 50.00%
$28.00 $40.50 1.4464 50.00% 50.00%
$26.00 $40.50 1.5577 50.00% 50.00%
$24.00 $40.50 1.6875 50.00% 50.00%
$22.95 $40.50 1.7647 50.00% 50.00%
$22.00 $39.66 1.8027 48.94% 51.06%
$21.00 $38.78 1.8467 47.78% 52.22%
$20.25 $38.12 1.8825 46.88% 53.12%
$20.00 $37.90 1.8950 46.57% 53.43%
$19.00 $37.01 1.9479 45.29% 54.71%
$18.00 $36.13 2.0072 43.95% 56.05%
</TABLE>
Notwithstanding the figures indicated above, if the percentage of the total
consideration that will consist of DCB Common Stock is below 50% and either
Thacher Proffitt & Wood or Skadden, Arps, Slate, Meagher & Flom LLP is unable
to render its tax opinion, as described below under "-- Material Federal Income
Tax Consequences," as a result of the Merger potentially failing to qualify as
a reorganization under Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), then DCB will reduce the aggregate Cash Consideration,
and correspondingly increase the aggregate Stock Consideration, to the minimum
extent necessary to enable Thacher Proffitt & Wood or Skadden, Arps, Slate,
Meagher & Flom LLP, as the case may be, to render its tax opinion.
Assuming the Pricing Period ended on July 17, 1998 (the last trading day
prior to announcement of the Merger), the Average Closing Price would be
$26.66, the Stock Consideration would be equal to 1.5194 shares of DCB Common
Stock and the Cash Consideration would be $40.50. Assuming the Pricing Period
ended on November 5, 1998 (the latest practicable trading date prior to the
mailing of this Proxy Statement-Prospectus), the Average Closing Price would be
$23.66, the Stock Consideration would be equal to 1.7117 shares of DCB Common
Stock and the Cash Consideration would be $40.50. It is expected that the
market price of DCB Common Stock will fluctuate between the date of this Proxy
Statement-Prospectus and the date on which the Merger is consummated and
thereafter. Holders of FIBC Common Stock are urged to obtain current market
prices for DCB Common Stock in connection with voting their shares at the
Special Meeting and making their elections. See "COMPARATIVE COMMON STOCK PRICE
AND DIVIDEND INFORMATION."
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<PAGE>
THE FORM OF THE CONSIDERATION ULTIMATELY RECEIVED BY A STOCKHOLDER OF FIBC
WILL DEPEND UPON THE ELECTION, ALLOCATION AND PRORATION PROCEDURES DESCRIBED
BELOW AND THE ELECTIONS OF OTHER STOCKHOLDERS. ACCORDINGLY, NO GUARANTEE CAN BE
GIVEN THAT THE ELECTION OF ANY GIVEN STOCKHOLDER OF FIBC WILL BE HONORED. See
"THE MERGER -- Merger Consideration and Election, Allocation and Proration
Procedures." In addition, because the tax consequences of receiving the Cash
Consideration will differ from the tax consequences of receiving the Stock
Consideration, FIBC stockholders are urged to read carefully the information
set forth below under "THE MERGER -- Material Federal Income Tax Consequences."
FIBC will have the right to terminate the Merger Agreement if DCB's Average
Closing Price is less than or equal to $20.25 per share, unless DCB elects to
increase the Merger Consideration pursuant to the Merger Agreement to provide a
minimum value of $38.12 for each share of FIBC Common Stock. See "THE MERGER --
Termination." During the period following the execution of the Merger
Agreement and preceding the mailing of this Proxy Statement-Prospectus, there
was substantial volatility in U.S. and foreign stock markets. During this time,
the price of a share of DCB Common Stock, as reported on the Nasdaq National
Market, has from time-to-time been below $20.25. See "COMPARATIVE COMMON STOCK
PRICE AND DIVIDEND INFORMATION." The FIBC Board has not yet determined what
action it might take under the Merger Agreement if the Average Closing Price is
less than or equal to $20.25. DCB is under no obligation to increase the Merger
Consideration, and there can be no assurance that DCB would elect to increase
the Merger Consideration if the FIBC Board were to exercise its right to
terminate the Merger Agreement. Any such determination by either the FIBC Board
or the DCB Board would be made, consistent with its fiduciary duties, taking
into account all relevant facts and circumstances that exist at such time,
including without limitation, the advice of its financial advisor and its legal
counsel. See "THE MERGER -- Merger Consideration and Election, Allocation and
Proration Procedures."
Elections. After the date of the Special Meeting and prior to the Effective
Time, each record holder of shares of FIBC Common Stock will be sent an
election form ("Election Form") and other customary transmittal materials
("Letter of Transmittal"), which will permit such stockholder to elect (an
"Election") to receive either (i) the Stock Consideration in exchange for each
share of FIBC Common Stock held (a "Stock Election") or (ii) the Cash
Consideration in exchange for each share of FIBC Common Stock held (a "Cash
Election"). Notwithstanding the foregoing, no holder of FIBC Common Stock may
elect to receive DCB Common Stock with respect to fewer than 50 shares of FIBC
Common Stock. If a stockholder either (i) does not submit a properly completed
Election Form in a timely fashion or (ii) revokes its Election Form prior to
the deadline for the submission of the Election Form, the shares of FIBC Common
Stock held by such stockholder will be designated "No Election Shares."
Election Procedures. All elections will be required to be made on an Election
Form. To make an effective election with respect to shares of FIBC Common
Stock, the holder thereof must, in accordance with the Election Form, (i)
complete properly and return the Letter of Transmittal and Election Form to the
Exchange Agent, (ii) either (a) deliver therewith his or her certificates
representing shares of FIBC Common Stock (the "FIBC Certificates") with respect
to such shares (or an appropriate guarantee of delivery thereof), or (b)
complete the procedure for delivery by book-entry transfer of such shares on a
timely basis, and (iii) deliver therewith any other required documents, prior
to 5:00 p.m. on the 20th day following mailing of the Letter of Transmittal and
Election Form (the "Election Deadline"). It is anticipated that the Letter of
Transmittal and Election Form will be mailed to FIBC stockholders immediately
following the Special Meeting, and in any event at least thirty (30) days prior
to the anticipated Effective Time. See "THE MERGER -- Merger Consideration and
Election, Allocation and Proration Procedures." For a description of the
allocation procedures to be used upon completion of the election procedures,
see "THE MERGER -- Merger Consideration and Election, Allocation and Proration
Procedures."
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<PAGE>
CERTIFICATES REPRESENTING FIBC COMMON STOCK SHOULD NOT BE RETURNED WITH THE
ENCLOSED PROXY AND SHOULD NOT BE FORWARDED TO CHASEMELLON SHAREHOLDER SERVICES,
L.L.C. (THE "EXCHANGE AGENT") UNTIL AN FIBC STOCKHOLDER HAS RECEIVED THE LETTER
OF TRANSMITTAL AND ELECTION FORM. SEE "THE MERGER -- PROCEDURES FOR EXCHANGE OF
FIBC CERTIFICATES."
A HOLDER OF SHARES OF FIBC COMMON STOCK HAVING A PREFERENCE AS TO THE FORM OF
CONSIDERATION TO BE RECEIVED FOR HIS OR HER SHARES OF FIBC COMMON STOCK SHOULD
MAKE AN ELECTION BECAUSE SHARES AS TO WHICH AN ELECTION HAS BEEN MADE WILL BE
GIVEN PRIORITY IN ALLOCATING SUCH CONSIDERATION OVER SHARES AS TO WHICH AN
ELECTION HAS NOT BEEN MADE. NEITHER FIBC NOR THE FIBC BOARD MAKES ANY
RECOMMENDATION AS TO WHETHER STOCKHOLDERS SHOULD ELECT TO RECEIVE THE CASH
CONSIDERATION OR THE STOCK CONSIDERATION IN THE MERGER. EACH HOLDER OF FIBC
COMMON STOCK MUST MAKE HIS OR HER OWN DECISION WITH RESPECT TO SUCH ELECTION.
Dissenting Stockholders. Pursuant to Section 262 of the DGCL, FIBC
stockholders will be entitled to dissenters' rights of appraisal with respect
to the Merger by following certain procedures. Any shares as to which such
appraisal rights have been asserted and not withdrawn ("Dissenters' Shares")
shall not be converted into the right to receive the Merger Consideration
unless and until the holder shall have failed to perfect, or shall have
effectively withdrawn or lost, such holder's appraisal rights. If any such
holder shall have so failed to perfect or shall have effectively withdrawn or
lost such rights, each share of such holder's FIBC Common Stock shall be deemed
to be a No Election Share and shall be subject to the allocation and proration
procedures described herein. See "THE MERGER -- Merger Consideration and
Election, Allocation and Proration Procedures" and "-- Appraisal Rights."
SPECIAL DIVIDEND
The Merger Agreement prohibits FIBC from paying dividends other than normal
quarterly dividends not in excess of $0.125 per share of FIBC Common Stock;
provided, however, that FIBC may pay a special dividend on FIBC Common Stock
(the "Special Dividend") prior to the Effective Time, in an amount not to
exceed $1.00 per share, in the event that Financial Federal receives sufficient
cash proceeds from the disposition of a specified real estate investment prior
to the Effective Time. See "THE MERGER -- Special Dividend." FIBC has entered
into an agreement providing for the sale of such real estate investment to a
third party. The amount of the Special Dividend, if any, will depend upon the
final terms upon which the real estate investment is sold and the expenses
incurred by FIBC in connection with such sale. In any event, although FIBC
would not be prohibited pursuant to the Merger Agreement from paying the
Special Dividend at any time after completion of the proposed sale of the real
estate investment, FIBC does not intend to pay the Special Dividend unless FIBC
is reasonably certain that all conditions to the consummation of the Merger
have been satisfied (or, where permissible, waived). No assurance can be given
as to whether or on what terms such real estate investment will be disposed of,
and, accordingly, as to the amount, if any, of the Special Dividend.
REASONS FOR THE MERGER; RECOMMENDATION OF THE FIBC BOARD
FIBC. THE FIBC BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY AND HAS UNANIMOUSLY CONCLUDED THAT THE MERGER
AND THE MERGER AGREEMENT ARE FAIR TO, AND IN THE BEST INTERESTS OF, FIBC AND
ITS STOCKHOLDERS. ACCORDINGLY, THE FIBC BOARD UNANIMOUSLY RECOMMENDS THAT
FIBC'S STOCKHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
See "THE MERGER -- Reasons for the Merger; Recommendation of Boards of
Directors -- FIBC."
DCB. THE BOARD OF DIRECTORS OF DCB (THE "DCB BOARD") HAS UNANIMOUSLY APPROVED
THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY AND HAS
UNANIMOUSLY CONCLUDED THAT THE MERGER AND THE MERGER AGREEMENT ARE FAIR TO AND
IN THE BEST INTERESTS OF DCB AND ITS STOCKHOLDERS. The stockholders of DCB are
not required to approve the Merger and, therefore, there will be no special
meeting of DCB's stockholders for that purpose. See "THE MERGER -- Reasons for
the Merger; Recommendation of Boards of Directors -- DCB."
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<PAGE>
OPINION OF FIBC'S FINANCIAL ADVISOR
Sandler O'Neill & Partners, L.P. ("Sandler O'Neill") has served as financial
advisor to FIBC in connection with the Merger and has rendered a written
opinion to the FIBC Board that, as of the date of this Proxy Statement-
Prospectus, the consideration to be received by FIBC's stockholders in the
Merger is fair to such stockholders from a financial point of view (the
"Sandler O'Neill Fairness Opinion"). The Sandler O'Neill Fairness Opinion is
attached as Appendix C to this Proxy Statement-Prospectus. Stockholders are
urged to read such opinion in its entirety for a description of the procedures
followed, assumptions made, matters considered and qualifications and
limitations on the review undertaken by Sandler O'Neill in connection
therewith. See "THE MERGER -- Opinion of FIBC's Financial Advisor."
CONDITIONS; REGULATORY APPROVALS
Consummation of the Merger is subject to various conditions, including
receipt of the approval of FIBC's stockholders, receipt of the necessary
regulatory approvals, receipt of the opinion of counsel of each of DCB and FIBC
regarding certain tax aspects of the Merger and satisfaction of other customary
closing conditions.
The regulatory approvals and consents necessary to consummate the Merger
include the approval of the Office of Thrift Supervision (the "OTS"). An
application for approval of the transactions contemplated by the Merger
Agreement was filed with the OTS on September 25, 1998. Such application is
currently under review. THERE CAN BE NO ASSURANCE THAT THE NECESSARY REGULATORY
APPROVALS AND CONSENTS WILL BE OBTAINED, AND, IF THE MERGER IS APPROVED, THERE
CAN BE NO ASSURANCE AS TO THE DATE OF ANY SUCH APPROVAL. THERE CAN ALSO BE NO
ASSURANCE THAT ANY SUCH APPROVALS WILL NOT CONTAIN A CONDITION OR REQUIREMENT
WHICH CAUSES SUCH APPROVALS TO FAIL TO SATISFY THE CONDITIONS SET FORTH IN THE
MERGER AGREEMENT AND DESCRIBED UNDER "THE MERGER -- REGULATORY APPROVALS" AND
"-- CONDITIONS TO THE CONSUMMATION OF THE MERGER."
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
It is intended that the Merger will be treated as a reorganization within the
meaning of Section 368(a) of the Code. Consummation of the Merger is
conditioned upon receipt by DCB of an opinion of Thacher Proffitt & Wood and
receipt by FIBC of an opinion of Skadden, Arps, Slate, Meagher & Flom LLP, each
dated as of the Effective Time, substantially to such effect. In general, it is
expected that (i) no gain or loss will be recognized by DCB or FIBC as a result
of the Merger and (ii) except where any Cash Consideration or cash in lieu of a
fractional share interest in DCB Common Stock is received, no gain or loss will
be recognized by holders of FIBC Common Stock as a result of the receipt of
shares of DCB Common Stock in exchange for their shares of FIBC Common Stock.
See "THE MERGER -- Material Federal Income Tax Consequences."
ACCOUNTING TREATMENT
DCB will treat the Merger as a purchase for accounting purposes. See "THE
MERGER -- Accounting Treatment."
NASDAQ LISTING
DCB Common Stock and FIBC Common Stock are currently included for quotation
on the Nasdaq National Market. It is a condition to consummation of the Merger
that the DCB Common Stock to be issued to the stockholders of FIBC pursuant to
the Merger Agreement will be included for quotation on the Nasdaq National
Market.
APPRAISAL RIGHTS
Pursuant to Section 262 of the DGCL, FIBC stockholders will be entitled to
dissenters' rights of appraisal with respect to the Merger by following certain
procedures. FIBC stockholders desiring to exercise appraisal rights and to
obtain an appraisal of the "fair value" of their shares of FIBC Common Stock
must continually hold such shares through the Effective Time and must follow
the procedures set forth in Section 262 of the DGCL, which is attached to this
Proxy Statement-Prospectus as Appendix D. Failure to comply strictly with the
provisions of Section 262 of the DGCL may result in a waiver or forfeiture of
such appraisal rights. VOTING IN FAVOR OF THE MERGER AGREEMENT OR RETURNING A
SIGNED PROXY CARD WHICH DOES NOT SPECIFY A VOTE AGAINST
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APPROVAL AND ADOPTION OF THE MERGER AGREEMENT WILL CONSTITUTE A WAIVER OF SUCH
RIGHTS OF APPRAISAL AND WILL NULLIFY ANY PREVIOUSLY FILED WRITTEN DEMAND FOR
APPRAISAL. STOCKHOLDERS WISHING TO AVAIL THEMSELVES OF APPRAISAL RIGHTS UNDER
THE DGCL ARE URGED TO READ CAREFULLY THE DISCUSSION UNDER "THE MERGER --
APPRAISAL RIGHTS" AND APPENDIX D TO THIS PROXY STATEMENT-PROSPECTUS.
TERMINATION
The Merger Agreement may be terminated, and the Merger abandoned, prior to
the Effective Time, either before or after its approval by FIBC's stockholders,
under certain specified circumstances, including, without limitation, a
termination by FIBC if the Average Closing Price is less than or equal to
$20.25, unless DCB elects to increase the Merger Consideration to equal a
minimum value of $38.12 per share of FIBC Common Stock exchanged pursuant to
the Merger. See "THE MERGER -- Termination."
TERMINATION FEE
In recognition of the efforts and expenses of DCB in structuring and
negotiating the terms of the Merger, the Merger Agreement provides that FIBC
shall pay a termination fee of $1.0 million to DCB under certain circumstances.
See "THE MERGER -- Termination Fee."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of FIBC's management and the FIBC Board may be deemed to have
certain interests in the Merger that are in addition to or potentially
different from the interests of the stockholders of FIBC generally. These
include, among other things, provisions in the Merger Agreement relating to
indemnification, the acceleration and/or payout of benefits under certain
agreements and employee benefit plans and the creation of an advisory board.
Employment/Salary and Benefit Continuation Agreements. FIBC has in effect
employment agreements ("Employment Agreements") with Robert E. Adamec and P.
James O'Gorman which provide, among other things, for severance and other
benefits to be paid in the event of a qualifying termination of the executive's
employment with FIBC during the term of the Employment Agreement and following
a change in control (as defined in the Employment Agreements). In addition,
FIBC has in effect Salary and Benefits Continuation Agreements (the "Salary
Continuation Agreements") with Frank S. Latawiec and Valerie M. Swaya which
provide for salary continuation and other benefits to be paid in the event of a
change in control (as defined in the Salary Continuation Agreements). DCB has
entered into a letter agreement with each such executive officer whereby such
executive will receive on the Closing Date in full settlement of his or her
rights to severance pay under the Employment Agreements and Salary Continuation
Agreements a lump sum in cash not to exceed: for Mr. Latawiec, $240,032; for
Ms. Swaya, $130,416; for Mr. Adamec, $319,958; and Mr. O'Gorman, $462,747. In
addition, each executive will be entitled to continued welfare-type benefits
for the 36-month period (in the case of Mr. Latawiec and Ms. Swaya, 24-month
period) following the Closing Date, and, in the case of Messrs. Adamec and
O'Gorman, to receive benefits due to him or contributed on his behalf to any
retirement, incentive, profit sharing, bonus, performance disability or other
employee benefit plan maintained by FIBC or Financial Federal on his behalf. In
exchange for the receipt of such payment on the Closing Date, each executive
officer of FIBC has agreed to execute a general release of FIBC, Financial
Federal and DCB from any claims which the executive has or may have with
respect to the Employment Agreement or Salary Continuation Agreement, as
applicable (except in each case for claims with respect to continued welfare
benefits).
FIBC Stock Plans. In addition, upon the approval of the Merger by FIBC's
stockholders, all then unvested options to purchase FIBC Common Stock held by
executive officers and directors of FIBC will become immediately vested and
exercisable and restricted shares of FIBC Common Stock held by such officers
will become immediately vested and free of restrictions. Amounts also become
payable to directors of FIBC or
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Financial Federal under the Outside Directors' Consultation and Retirement
Plan. See "THE MERGER --Interests of Certain Persons in the Merger" for a more
detailed discussion of such agreements and plans and the benefits payable
thereunder.
Advisory Board. In addition, DCB has agreed in the Merger Agreement to cause
Messrs. Raymond M. Calamari, Richard J. Hickey, Peter S. Russo and Dominick L.
Segrete, if such persons are willing to so serve, to be elected or appointed as
members of an advisory board ("Advisory Board") to advise DCB with respect to
deposit and lending activities in FIBC's former market area and to maintain and
develop customer relationships.
ESOP. The Merger Agreement further provides that FIBC will terminate, as of
the Effective Time, the Financial Federal Savings and Loan Association Employee
Stock Ownership Plan (the "FIBC ESOP"), and that the balances in all FIBC ESOP
accounts will be fully vested as of such time. In connection with such
termination, FIBC will use its best efforts to cause the FIBC ESOP trustee to
elect cash under the Merger Agreement sufficient to repay any remaining FIBC
ESOP loan balance, and to cause the shares of FIBC Common Stock and any cash
remaining in the FIBC ESOP suspense account following such loan repayment to be
allocated to the accounts of all FIBC ESOP participants who have account
balances as of the Closing Date.
The FIBC Board was aware of these interests and considered them, among other
matters, in approving the Merger Agreement and the transactions contemplated
thereby. For additional information, including amounts payable under such
employee benefit plans and agreements in certain circumstances, see "THE
MERGER --Interests of Certain Persons in the Merger."
MANAGEMENT OF DCB AFTER THE MERGER
The Merger Agreement provides that, at the Effective Time, the directors and
officers of DCB will consist of the directors and officers of DCB immediately
prior to the Effective Time. The directors and officers of Dime of
Williamsburgh following the Bank Merger will consist of the directors and
officers of Dime of Williamsburgh immediately prior to the Effective Time. See
"THE MERGER -- Management of DCB after the Merger."
STOCK OPTION AGREEMENT
As a condition to DCB entering into the Merger Agreement, DCB required that
FIBC enter into a stock option agreement, dated as of July 18, 1998 (the "Stock
Option Agreement"), pursuant to which FIBC granted DCB an option (the "DCB
Option"), exercisable upon the occurrence of certain events (none of which has
occurred, to the best of DCB's and FIBC's knowledge, as of the date hereof), to
purchase up to 339,627 shares of FIBC Common Stock (representing approximately
19.9% of the outstanding shares of FIBC Common Stock on July 18, 1998), at an
exercise price of $32.00 per share, subject to adjustment in certain
circumstances and subject to termination within certain periods.
The Stock Option Agreement is intended to increase the likelihood that the
Merger will be consummated in accordance with the terms of the Merger
Agreement. Certain aspects of the Stock Option Agreement may have the effect of
discouraging persons who might now or prior to the consummation of the Merger
be interested in acquiring all of or a significant interest in FIBC from
considering or proposing such an acquisition, even if such persons were
prepared to pay a higher price per share for the FIBC Common Stock than the
value per share contemplated by the Merger Agreement. The acquisition of FIBC
or an interest in FIBC, or an agreement to do either, could cause the DCB
Option to become exercisable. The existence of the DCB Option could
significantly increase the cost to a potential acquiror of acquiring FIBC
compared to its cost had the Stock Option Agreement not been entered into. Such
increased costs might discourage a potential acquiror from considering or
proposing an acquisition or might result in a potential acquiror proposing to
pay a lower per share price to acquire FIBC than it might otherwise have
proposed to pay. The management of FIBC believes that the exercise of the DCB
16
<PAGE>
Option is likely to prohibit any acquiror of FIBC from accounting for any
acquisition of FIBC using the pooling-of-interests accounting method for a
period of two years. The inability to use the pooling-of-interests accounting
method could discourage or preclude an acquisition by other organizations
during that period.
The Stock Option Agreement provides that the total profit that DCB may
realize pursuant to the Stock Option Agreement is $4.0 million. A copy of the
Stock Option Agreement is attached as Appendix B to this Proxy Statement-
Prospectus. A more detailed description of the terms of the Stock Option
Agreement, including a description of the events which will result in the
Option becoming exercisable, is set forth under "CERTAIN RELATED
TRANSACTIONS -- Stock Option Agreement."
CERTAIN DIFFERENCES IN STOCKHOLDERS' RIGHTS
At the Effective Time, stockholders of FIBC who receive shares of DCB Common
Stock will continue to have their rights governed by the DGCL, but will be
governed by the Certificate of Incorporation and Bylaws of DCB, rather than by
the Certificate of Incorporation and Bylaws of FIBC. Although the rights of
stockholders of each of DCB and FIBC are governed by the DGCL, the rights of
stockholders of DCB differ from rights of the stockholders of FIBC with respect
to certain matters set forth in their respective certificates of incorporation
or bylaws. For a summary of these differences, see "COMPARISON OF CERTAIN
RIGHTS OF STOCKHOLDERS."
17
<PAGE>
COMPARATIVE COMMON STOCK PRICE AND DIVIDEND INFORMATION
DCB Common Stock and FIBC Common Stock are included for quotation on the
Nasdaq National Market (symbols: "DCOM" and "FIBC," respectively). The
following table sets forth the high and low sale prices of shares of DCB Common
Stock and FIBC Common Stock as reported in the Nasdaq National Market, and the
quarterly cash dividends declared per share, for the periods indicated.
<TABLE>
<CAPTION>
DCB COMMON STOCK FIBC COMMON STOCK
------------------------------- ------------------------------
HIGH LOW DIVIDENDS(1) HIGH LOW DIVIDENDS(2)
---- ---- ------------ ---- ---- ------------
<S> <C> <C> <C> <C> <C> <C>
1996
Quarter ended March 31..... N/A N/A N/A $13 3/4 $12 1/2 $0.075
Quarter ended June 30...... $11 3/4 $11 11/16 N/A 13 1/2 12 1/2 0.075
Quarter ended September 30. 14 11 3/4 N/A 16 1/4 12 1/2 0.075
Quarter ended December 31.. 15 1/8 13 1/4 N/A 15 1/4 14 0.075
1997
Quarter ended March 31..... 19 5/8 14 1/2 N/A 18 1/2 15 0.10
Quarter ended June 30...... 20 16 5/8 $0.045 18 1/4 14 7/8 0.10
Quarter ended September 30. 20 3/8 19 9/16 N/A 23 15/16 18 1/8 0.10
Quarter ended December 31.. 25 1/2 19 3/16 0.06 25 3/4 22 1/4 0.10
1998
Quarter ended March 31..... 25 1/8 19 7/8 0.08 27 22 0.125
Quarter ended June 30...... 29 5/16 25 0.09 32 1/4 24 3/4 0.125
Quarter ended September 30.. 28 15 1/4 0.10 37 5/8 30 1/4 0.125
Quarter ending December
31 (through November 5,
1998)..................... 25 14 3/4 0.12 38 27 3/4 0.125
</TABLE>
- --------
(1) Pursuant to the Merger Agreement, DCB may not, without the prior written
consent of FIBC, declare or pay any dividend on the DCB Common Stock,
except for normal quarterly dividends not in excess of $0.15 per share.
(2) Pursuant to the Merger Agreement, (i) FIBC may not, without the prior
written consent of DCB, declare or pay any dividend on the FIBC Common
Stock, except for normal quarterly dividends not in excess of $0.125 per
share, and except that FIBC may pay a special one-time dividend under
certain circumstances, as described below under "THE MERGER -- Conduct of
Business Pending the Merger," and (ii) FIBC has agreed to coordinate the
declaration of any dividends in respect of the FIBC Common Stock and the
record dates and payment dates relating thereto with those of the DCB
Common Stock.
The following table sets forth the last reported sale price per share of DCB
Common Stock and FIBC Common Stock, as reported on the Nasdaq National Market,
on (i) July 17, 1998, the last business day preceding public announcement of
the signing of the Merger Agreement and (ii) November 5, 1998, the latest
practicable date prior to the mailing of this Proxy Statement-Prospectus:
<TABLE>
<CAPTION>
EQUIVALENT
DCB FIBC PRICE PER
COMMON STOCK COMMON STOCK FIBC SHARE(1)
------------ ------------ -------------
<S> <C> <C> <C>
July 17, 1998(2)........................ $26 1/8 $32 $40.50
November 5, 1998(3)..................... $25 $37 5/8 $40.50
</TABLE>
- --------
(1) The equivalent prices per share of FIBC Common Stock on July 17, 1998 and
on November 5, 1998, respectively (based on the formulas set forth in the
Merger Agreement -- see "THE MERGER -- Merger Consideration and Election,
Allocation and Proration Procedures"), were determined by multiplying an
assumed exchange ratio of 1.5500 and 1.7117, respectively, by the closing
price of DCB Common Stock on the relevant date. See Note (C) in the NOTES
TO PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) herein.
(notes continued on next page)
18
<PAGE>
(2) On July 17, 1998, the high and low sales prices of DCB Common Stock were
$26 9/16 and $26 1/8, respectively, and the high and low sales prices of
FIBC Common Stock were $33 and $31 3/4, respectively, all as reported on
the Nasdaq National Market.
(3) On November 5, 1998, the high and low sales prices of DCB Common Stock were
$25 and $24 7/16, respectively, and the high and low sales prices of FIBC
Common Stock were $37 3/4 and $37 5/8, respectively, all as reported on the
Nasdaq National Market.
FIBC STOCKHOLDERS ARE ADVISED TO OBTAIN CURRENT MARKET QUOTATIONS FOR DCB
COMMON STOCK AND FIBC COMMON STOCK. The market price of DCB Common Stock will
fluctuate between the date of this Proxy Statement-Prospectus and the Effective
Date and thereafter. No assurance can be given concerning the market price of
DCB Common Stock before or after the Effective Date.
19
<PAGE>
SELECTED PRO FORMA
CONSOLIDATED COMPARATIVE PER SHARE DATA
The following table sets forth for DCB Common Stock and FIBC Common Stock
certain historical, pro forma and pro forma equivalent per share financial
information. The pro forma and pro forma equivalent per share information gives
effect to the Merger as if the Merger had been effective on June 30, 1998, in
the case of the book value data presented, and as if the Merger had become
effective July 1, 1997, in the case of the net income and dividends declared
data presented. The pro forma data in the tables assumes that the Merger is
accounted for using the purchase method of accounting. See "THE MERGER --
Accounting Treatment." The information presented herein is based on, and is
qualified in its entirety by, the historical financial statements, including
the notes thereto, of DCB and FIBC incorporated by reference herein and the pro
forma financial information, including the notes thereto, appearing elsewhere
in this Proxy Statement-Prospectus, and should be read in conjunction
therewith. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and "PRO FORMA
CONDENSED COMBINED CONSOLIDATED FINANCIAL INFORMATION." The pro forma and pro
forma equivalent per share data in the following tables are presented for
comparative purposes only and are not necessarily indicative of what the
combined financial position or results of operations would have been had the
Merger been consummated during the period or as of the date for which such pro
forma tables are presented.
<TABLE>
<CAPTION>
AT OR FOR THE TWELVE
MONTHS ENDED
JUNE 30, 1998
--------------------
<S> <C>
COMPARATIVE PER SHARE DATA:
Cash dividend per common share:
DCB...................................................... $ 0.23
FIBC..................................................... 0.45
DCB Pro Forma(1)......................................... 0.23
Per equivalent FIBC share(2)............................. 0.40
Book value per common share:
DCB...................................................... $15.30
FIBC..................................................... 16.83
DCB Pro Forma(3)......................................... 16.15
Per equivalent FIBC share(2)............................. 28.27
Tangible book value per common share:
DCB...................................................... $13.10
FIBC..................................................... 16.77
DCB Pro Forma(3)......................................... 10.89
Per equivalent FIBC share(2)............................. 19.06
Basic earnings per common share:
DCB...................................................... $ 1.19
FIBC..................................................... 1.79
DCB Pro Forma(3)......................................... 1.01
Per equivalent FIBC share(2)............................. 1.77
Diluted earnings per common share:
DCB...................................................... $ 1.09
FIBC..................................................... 1.71
DCB Pro Forma(3)......................................... 0.93
Per equivalent FIBC share(2)............................. 1.63
</TABLE>
(see notes on the next page)
20
<PAGE>
- --------
(1) DCB pro forma cash dividends per share represent historical cash dividends
declared by DCB and assumes no changes in cash dividends declared per
share.
(2) Assuming the conversion of 50% of the outstanding shares of FIBC Common
Stock into shares of DCB Common Stock at an exchange ratio of 1.7502. See
Note (C) in the NOTES TO PRO FORMA CONDENSED COMBINED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED) herein.
(3) DCB pro forma book value per common share and tangible book value per
common share amounts are based on the historical total stockholders' equity
of the combined entity divided by the total pro forma common shares of the
combined entity assuming conversion of 50% of the outstanding shares of
FIBC Common Stock into shares of DCB Common Stock at an exchange ratio of
1.7502. See Note (C) in the NOTES TO PRO FORMA CONDENSED COMBINED
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) herein.
21
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
DCB -- HISTORICAL
The following tables set forth selected historical consolidated financial and
other data of DCB for the five years ended June 30, 1998. The financial
information for the five years ended June 30, 1998 of DCB is based on, and
qualified in its entirety by, the consolidated financial statements of DCB and
subsidiary, including the notes thereto, which are incorporated by reference in
this Proxy Statement-Prospectus and should be read in conjunction therewith.
22
<PAGE>
DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARY
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA
<TABLE>
<CAPTION>
AT JUNE 30
---------------------------------------------------
1998 1997 1996(1) 1995 1994
---------- ---------- ---------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL
CONDITION DATA:
Total assets(2)........... $1,623,926 $1,315,026 $1,371,821 $662,739 $646,458
Loans, net(3)............. 938,046 739,858 575,874 424,680 427,960
Mortgage-backed
securities(4)............ 410,589 308,525 209,941 91,548 94,356
Investment
securities(2)(4)......... 174,551 168,596 392,450 101,695 86,686
Federal funds sold(2)..... 9,329 18,902 115,130 17,809 7,029
Goodwill.................. 24,028 26,433 28,438 -- --
Deposits.................. 1,038,342 963,395 950,114 554,841 546,761
Borrowings................ 360,106 139,543 27,708 17,820 17,871
Stockholders' equity(5)... 186,349 190,889 213,071 77,067 67,919
Tangible stockholders'
equity(5)................ 159,558 162,361 184,188 76,321 67,646
<CAPTION>
FOR THE YEAR ENDED JUNE 30,
---------------------------------------------------
1998 1997 1996(1) 1995 1994
---------- ---------- ---------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Interest income........... $ 106,464 $ 89,030 $ 52,619 $ 49,223 $ 49,821
Interest expense on
deposits and borrowings.. 56,935 41,564 23,516 18,946 17,594
---------- ---------- ---------- -------- --------
Net interest income....... 49,529 47,466 29,103 30,277 32,227
Provision for losses...... 1,635 4,200 2,979 2,950 4,105
---------- ---------- ---------- -------- --------
Net interest income after
provision for loan
losses................... 47,894 43,266 26,124 27,327 28,122
Non-interest income....... 7,007 4,133 1,375 1,773 2,267
Non-interest expense(6)... 29,937 27,492 14,021 14,053 12,714
---------- ---------- ---------- -------- --------
Income before income tax
expense and cumulative
effect of changes in
accounting principle..... 24,964 19,907 13,478 15,047 17,675
Income tax expense(7)..... 11,866 7,591 6,181 6,621 8,211
---------- ---------- ---------- -------- --------
Income before cumulative
effect of changes in
accounting principle..... 13,098 12,316 7,297 8,426 9,464
Cumulative effect on prior
years of changing to a
different method of
accounting for:
Income taxes(8)......... -- -- -- -- (383)
Postretirement benefits
other than
pensions(9)............ -- -- (1,032) -- --
---------- ---------- ---------- -------- --------
Net Income(10).......... $ 13,098 $ 12,316 $ 6,265 $ 8,426 $ 9,081
========== ========== ========== ======== ========
</TABLE>
(see notes on the next page)
23
<PAGE>
DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARY
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA -- (CONTINUED)
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED JUNE 30,
----------------------------------------
1998 1997 1996 1995 1994
-------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL RATIOS AND OTHER
DATA(11):
PERFORMANCE RATIOS:
Return on average assets(10)(12).... 0.90% 1.00% 1.07% 1.33% 1.46%
Return on average stockholders' eq-
uity(10)(12)....................... 7.06 5.94 9.07 11.50 14.66
Return on average tangible stock-
holders' equity(10)(12)............ 8.24 6.84 11.84 11.53 14.66
Stockholders' equity to total assets
at end of period................... 11.48 14.52 15.53 11.63 10.51
Tangible equity to tangible assets
at end of period................... 9.99 12.62 13.72 11.53 10.47
Loans to deposits at end of period.. 91.50 77.91 61.43 77.47 78.94
Average interest rate spread(13).... 2.97 3.38 3.85 4.51 4.80
Net interest margin(14)............. 3.56 4.07 4.41 4.91 5.12
Average interest-earning assets to
average interest-bearing
liabilities........................ 114.38 119.33 115.68 113.15 111.50
Non-interest expense to average as-
sets(10)........................... 2.05 2.24 2.06 2.21 1.97
Core non-interest expense to average
assets(16)......................... 1.73 1.87 2.06 2.21 1.97
Efficiency ratio(10)(15)............ 56.09 54.32 45.98 44.11 37.63
Core efficiency ratio(15)(16)....... 47.39 45.55 45.98 44.11 37.63
PER SHARE DATA:
Diluted Earnings per share(10)...... $ 1.09 $ 0.95 N/A N/A N/A
Cash dividends per share............ 0.23 0.045 -- N/A N/A
Book value per share................ 15.30 14.58 $14.65 N/A N/A
Tangible book value per share....... 13.10 12.40 12.66 N/A N/A
CASH EARNINGS INFORMATION:
Cash return on average as-
sets(12)(17)....................... 1.31% 1.36% 1.07% 1.33% 1.46%
Cash return on average stockholders'
equity(12)(17)..................... 10.30 8.06 9.07 11.50 14.66
Cash return on average tangible
stockholders' equity(12)(17)....... 12.01 9.27 9.07 11.50 14.66
Cash earnings per share(17)......... $ 1.74 $ 1.29 N/A N/A N/A
ASSET QUALITY RATIOS AND OTHER DATA:
Total non-performing loans(18)...... $ 884 $3,190 $6,551 $5,073 $6,248
Other real estate owned, net........ 825 1,697 1,946 4,466 8,200
Non-performing loans to total
loans.............................. 0.09% 0.43% 1.12% 1.18% 1.45%
Non-performing loans and real estate
owned to total assets.............. 0.11 0.37 0.62 1.44 2.23
ALLOWANCE FOR LOAN LOSSES TO:
Non-performing loans................ 1,365.95% 336.24% 119.25% 101.99% 58.15%
Total loans(19)..................... 1.27 1.43 1.34 1.20 0.84
REGULATORY CAPITAL RATIOS: (DIME OF
WILLIAMSBURGH ONLY)
Tangible capital.................... 8.32% 9.86% 9.49% 11.53% 10.47%
Core capital........................ 8.32 9.87 9.50 11.56 10.51
Risk-based capital.................. 16.58 19.99 21.24 22.18 19.83
FULL SERVICE BRANCHES............... 14 15 15 7 7
</TABLE>
- --------
(1) Since the acquisition of Conestoga was completed at June 26, 1996, it is
reflected in the financial condition data at June 30, 1996; however, its
contribution to DCB's earnings and the effect upon average balance
computations for fiscal year ended June 30, 1996 were not material.
(2) At June 30, 1996, investment securities and federal funds sold include
$125.0 million and $6.1 million respectively, of excess proceeds resulting
from the oversubscription to DCB's initial public offering. The excess
proceeds were refunded on July 1, 1996.
(notes continued on next page)
24
<PAGE>
(3) Loans, net, represents gross loans less net deferred loan fees and
allowance for loan losses.
(4) The company has classified its securities as "held-to-maturity" or
"available for sale" since July 1, 1994, when it adopted SFAS No. 115,
"Accounting for Investments in Debt and Equity Securities" ("SFAS 115").
Amount includes investment in Federal Home Loan Bank of New York
("FHLBNY") capital stock.
(5) Stockholders' equity and tangible stockholders' equity increased from June
30, 1995 to June 30, 1996 primarily due to the initial public offering.
(6) Excluding a non-recurring charge of $2.0 million related to the
recapitalization of the SAIF non-interest expense was $25.5 million during
the year ended June 30, 1997. See "Impact of Recent Legislation."
(7) Excluding non-recurring New York State and New York City income tax
recoveries of $1.9 million and $1.0 million, respectively, income tax
expense was $10.5 million during the fiscal year ended June 30, 1997.
(8) Pursuant to Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," ("SFAS 109"), on July 1, 1993, DCB changed
prospectively to the deferred method of accounting for income taxes. The
effect of the adoption of this standard is reflected in the selected
operating data as the cumulative effect of adopting a change in accounting
principles.
(9) DCB adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions"
("SFAS 106"), effective July 1, 1995. DCB elected to record the full
accumulated postretirement benefit obligation upon adoption. This resulted
in a cumulative effect adjustment of $1,032,000 (after reduction for
income taxes of $879,000) to apply retroactively to previous years the new
method of accounting, which is shown in the consolidated statement of
income for the year ended June 30, 1996.
(10) Excluding the effects of the SAIF special assessment and the recovery of
New York State and City deferred income taxes previously provided, net
income would have been $10.5 million, and the return on average assets,
return on average stockholders' equity, return on average tangible
stockholders' equity, non-interest expense to average assets, the
efficiency ratio, and earnings per share would have been 0.86%, 5.08%,
5.85%, 2.07%, 50.30% and $0.81, respectively, for the year ended June 30,
1997.
(11) With the exception of end of period ratios, all ratios are based on
average daily balances during the indicated periods. Asset Quality Ratios
and Regulatory Capital Ratios are end of period ratios.
(12) Income before cumulative effect of changes in accounting principles is
used to calculate return on average assets and return on average equity
ratios.
(13) Average interest rate spread represents the difference between the
weighted-average yield on interest-earnings assets and the weighted-
average cost of interest-bearing liabilities.
(14) The net interest margin represents net interest income as a percentage of
average interest-earning assets.
(15) The efficiency ratio represents non-interest expense as a percentage of
the sum of net interest income and non-interest income excluding any gains
or losses on sales of assets.
(16) In calculating these ratios, amortization expense related to goodwill and
the SAIF recapitalization charge are excluded from non-interest expense.
(17) In calculating these ratios, non-interest expense excludes expenses such
as goodwill amortization and the after-tax effect of compensation expense
related to DCB's stock benefit plans which are accretive to book value.
Excluding the effects of the SAIF Special Assessment and the recovery of
New York State and City deferred income taxes previously provided cash
return on average assets, cash return on average stockholders' equity,
cash return on average tangible stockholders' equity, and cash earnings
per share would have been 1.21%, 7.19%, 8.28%, and $1.15 for the year
ended June 30, 1997.
(18) Non-performing loans consist of non-accrual loans; DCB did not have any
loans that were 90 days or more past due and still accruing at any of the
dates presented. Non-performing loans do not include troubled-debt
restructurings ("TDRs"). See "Asset Quality."
(19) Total loans represents loans, net, plus the allowance for loan losses.
25
<PAGE>
FIBC -- HISTORICAL
The following tables set forth selected historical consolidated financial and
other data of FIBC for the five years ended September 30, 1997 and the nine
months ended June 30, 1998 and 1997. Following the Merger, the combined
company's fiscal year, like that of DCB, will end on June 30. The financial
information for the five years ended September 30, 1997 of FIBC is based on,
and qualified in its entirety by, the consolidated financial statements of FIBC
and subsidiary, including the notes thereto, which are incorporated by
reference in this Proxy Statement-Prospectus and should be read in conjunction
therewith. The financial information for the nine-month periods ended June 30,
1998 and 1997 for FIBC reflects, in the opinion of management of FIBC, all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of such information. Results for this period are not
necessarily indicative of the results which may be expected for the full year
or any other interim period.
26
<PAGE>
FINANCIAL BANCORP, INC. AND SUBSIDIARY
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
--------------------------------------------
AT JUNE 30,
1998 1997 1996 1995 1994 1993
----------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
SELECTED FINANCIAL CON-
DITION DATA:
Total assets............ $340,999 $296,956 $266,763 $228,823 $171,642 $147,871
Total loans receivable,
net.................... 191,822 153,292 140,314 110,062 83,505 83,425
Investments securi-
ties(1)................ 52,249 71,986 56,406 40,359 17,801 5,435
Mortgage-backed securi-
ties(2)................ 53,897 47,878 54,853 62,008 49,839 49,408
Deposits................ 229,027 213,394 202,884 186,492 140,182 136,638
Borrowed funds.......... 78,000 53,000 33,652 12,501 -- --
Stockholders' equity.... 28,730 26,856 25,787 27,179 29,300 9,374
</TABLE>
<TABLE>
<CAPTION>
FOR THE
NINE MONTHS
ENDED JUNE 30, FOR THE YEAR ENDED SEPTEMBER 30,
---------------- -------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Interest income......... $16,281 $14,791 $20,072 $17,823 $14,256 $10,490 $11,305
Interest expense........ 8,734 7,315 10,029 8,691 6,286 4,000 4,383
------- ------- ------- ------- ------- ------- -------
Net interest income..... 7,547 7,476 10,043 9,132 7,970 6,490 6,922
Provision for loan loss-
es..................... 313 307 427 543 342 183 732
------- ------- ------- ------- ------- ------- -------
Non-interest income:
Fees, service charges,
gain/(loss) on sales
and other income...... 781 473 656 490 309 355 1,063
Gain/(loss) from real
estate operations..... 41 14 28 (313) (618) (300) (380)
------- ------- ------- ------- ------- ------- -------
Total non-interest
income (loss)......... 822 487 684 177 (309) 55 683
------- ------- ------- ------- ------- ------- -------
Non-interest expense:
Salaries and employee
benefits.............. 2,194 2,480 3,207 3,048 2,619 2,301 1,967
Occupancy and
equipment............. 894 867 1,155 1,064 1,048 826 920
Advertising............ 77 24 62 70 129 41 19
Loss (income) from real
estate owned.......... 22 8 16 84 77 (12) 183
Federal insurance
premiums(3)........... 93 143 173 1,502 390 360 306
Miscellaneous.......... 994 967 1,253 1,170 1,014 668 700
------- ------- ------- ------- ------- ------- -------
Total non-interest
expense............... 4,274 4,489 5,866 6,938 5,277 4,184 4,095
------- ------- ------- ------- ------- ------- -------
Income before income
taxes.................. 3,782 3,167 4,434 1,828 2,042 2,178 2,778
Income tax expense(4)... 1,566 1,333 1,929 675 836 921 1,099
------- ------- ------- ------- ------- ------- -------
Net income.............. $ 2,216 $ 1,834 $ 2,505 $ 1,153 $ 1,206 $ 1,257 $ 1,679
======= ======= ======= ======= ======= ======= =======
SELECTED FINANCIAL RA-
TIOS AND OTHER DATA:
Return on average as-
sets(5)................ 0.96% 0.91% 0.92% 0.47% 0.60% 0.79% 1.09%
Return on average equi-
ty(5).................. 10.64 9.40 9.57 4.31 4.18 9.76 19.71
Retained earnings to as-
sets at period end..... 8.43 9.36 9.04 9.67 11.88 17.07 6.34
Net interest rate
spread................. 2.95 3.44 3.43 3.48 3.70 4.12 4.63
Net interest margin..... 3.46 3.89 3.87 3.91 4.18 4.29 4.74
Operating expenses to
average assets(6)(7)... 1.86 2.10 2.05 2.20 2.57 2.63 2.55
Efficiency ratio(6)(7).. 51.64 53.20 52.31 56.01 62.81 61.29 53.38
Non-performing assets to
total assets........... 2.06 2.29 2.17 2.17 2.65 2.95 4.05
Non-performing loans to
total loans............ 1.49 1.94 1.69 1.45 1.72 1.95 2.58
Allowance for loans
losses to total loans.. 0.87 0.88 0.91 1.09 1.10 1.31 1.18
Number of full-service
facilities............. 5 5 5 5 5 5 5
</TABLE>
(see notes on the next page)
27
<PAGE>
- --------
(1) Includes Federal Home Loan Bank of New York ("FHLB") stock and investments
available for sale.
(2) Includes mortgage-backed securities available for sale.
(3) Includes non-recurring SAIF assessment of $1,115,000 for the year ended
September 30, 1996.
(4) Includes for the year ended September 30, 1993, an income tax benefit of
$197,000, which reflects the cumulative effect of a change in accounting
for income taxes resulting from the adoption of SFAS 109 as of October 1,
1992.
(5) Return on average assets and return on average equity for the nine-month
periods are annualized.
(6) Operating expenses represent total non-interest expenses excluding (income)
loss from real estate owned.
(7) Excludes non-recurring SAIF assessment of $1,115,000 and severance payment
of $369,000 for the year ending September 30, 1996 and severance payment of
$268,000 for the year ending September 30, 1997.
28
<PAGE>
SELECTED PRO FORMA COMBINED CONSOLIDATED FINANCIAL DATA
(UNAUDITED)
The following tables set forth certain selected consolidated financial data
for DCB and FIBC on an unaudited pro forma combined basis as if the Merger had
become effective June 30, 1998, in the case of the selected consolidated
statement of financial condition data presented, and as if the Merger had
become effective at the beginning of the period indicated, in the case of the
consolidated statement of operations data presented. The pro forma information
in the tables assumes that the Merger is accounted for using the purchase
method of accounting. See "THE MERGER -- Accounting Treatment." Financial
information for the year ended June 30, 1998 combine DCB and FIBC with FIBC's
results presented to coincide with the reporting period of DCB. Following the
Merger, the combined company's fiscal year, like that of DCB, will end on June
30. These tables should be read in conjunction with, and are qualified in their
entirety by, the historical financial statements, including the notes thereto,
of DCB and FIBC incorporated by reference herein and the more detailed pro
forma financial information, including the notes thereto, appearing elsewhere
in this Proxy Statement-Prospectus. Certain FIBC financial information has been
reclassified to conform with DCB's financial presentation. See "INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE" and "PRO FORMA CONDENSED COMBINED
CONSOLIDATED FINANCIAL INFORMATION."
The selected pro forma combined consolidated financial data set forth in the
following tables does not give effect to anticipated cost savings and revenue
enhancement opportunities that could result from the Merger or any other items
of income or expense which may result from the Merger. Additionally, the pro
forma financial information does not give effect to any anticipated leveraging
of DCB's pro forma assets. The unaudited pro forma historical consolidated
financial information is presented for informational purposes only and is not
necessarily indicative of the combined financial position or results of
operations that would have occurred had the Merger been consummated on June 30,
1998, or at the beginning of the period indicated or which may occur in the
future.
29
<PAGE>
DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARY
AND FINANCIAL BANCORP, INC. AND SUBSIDIARY
SELECTED PRO FORMA COMBINED CONSOLIDATED FINANCIAL DATA
(UNAUDITED)
<TABLE>
<CAPTION>
AT JUNE 30, 1998
----------------
(IN THOUSANDS)
<S> <C>
FINANCIAL CONDITION DATA:
Total assets................................................... $2,012,945
Loans, net..................................................... 1,129,096
Mortgage-backed securities..................................... 464,817
Investment securities.......................................... 213,538
Federal funds sold............................................. 38,704
Goodwill....................................................... 66,277
Core deposit premium........................................... 2,905
Deposits....................................................... 1,269,036
Borrowings..................................................... 478,971
Stockholders' equity........................................... 220,567
Tangible stockholders' equity.................................. 148,681
<CAPTION>
FOR THE YEAR
ENDED
JUNE 30, 1998
----------------
(IN THOUSANDS)
<S> <C>
SELECTED OPERATING DATA:
Interest income................................................ $ 127,877
Interest expense on deposits and borrowings.................... 69,890
----------
Net interest income............................................ 57,987
Provision for losses........................................... 2,068
----------
Net interest income after provision for loan losses............ 55,919
Non-interest income............................................ 8,033
Non-interest expense........................................... 38,343
----------
Income before income tax expense............................... 25,609
Income tax expense............................................. 13,044
----------
Net income..................................................... $ 12,565
==========
</TABLE>
30
<PAGE>
DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARY
AND FINANCIAL BANCORP, INC. AND SUBSIDIARY
SELECTED PRO FORMA COMBINED CONSOLIDATED FINANCIAL RATIOS
(UNAUDITED)
<TABLE>
<CAPTION>
AT OR FOR THE
YEAR ENDED
JUNE 30, 1998
-------------
<S> <C>
SELECTED FINANCIAL RATIOS AND OTHER DATA:
FINANCIAL AND PERFORMANCE RATIOS:
Return on assets(1).............................................. 0.62%
Return on stockholders' equity(1)................................ 5.70
Return on tangible stockholders' equity(1)....................... 8.45
Stockholders' equity to total assets at end of period............ 10.96
Tangible equity to tangible assets at end of period.............. 7.66
Loans to deposits at end of period............................... 90.10
Efficiency ratio................................................. 61.01
PER SHARE DATA:
Basic earnings per share......................................... $ 1.01
Diluted earnings per share....................................... 0.93
Book value per share............................................. 16.15
Tangible book value per share.................................... 10.89
CASH EARNINGS INFORMATION:
Cash return on assets(1)......................................... 1.04%
Cash return on stockholders' equity(1)........................... 9.52
Cash return on tangible stockholders' equity(1).................. 14.12
Cash diluted earnings per share.................................. $ 1.55
ASSET QUALITY RATIOS AND OTHER DATA:
Total non-performing loans (in thousands)........................ 3,771
Other real estate owned, net (in thousands)...................... 4,976
Ratios:
Non-performing loans to total loans............................. 0.33%
Non-performing loans and real estate owned to total assets...... 0.43
ALLOWANCE FOR LOAN LOSSES TO:
Non-performing loans............................................. 364.78
Total loans...................................................... 1.20
REGULATORY CAPITAL RATIOS: (DIME OF WILLIAMSBURGH ONLY)
Tangible capital................................................. 6.26
Core capital..................................................... 6.40
Risk-based capital............................................... 13.66
FULL SERVICE BRANCHES............................................. 19
</TABLE>
- --------
(1) In calculating the return on assets, stockholders' equity and tangible
stockholders' equity, and cash return on assets, stockholders' equity and
tangible stockholders' equity, pro forma combined assets, stockholders'
equity and tangible stockholders' equity of $2,012,945,000, $220,567,000
and $148,681,000 at June 30, 1998, respectively, were utilized instead of
average assets, average stockholders' equity and average tangible
stockholders' equity.
31
<PAGE>
RECENT DEVELOPMENTS
DCB
The selected consolidated financial and other data and financial ratios of
DCB set forth below at and for the three months ended September 30, 1998 were
derived from unaudited financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the results of the unaudited period presented have been
included. The results of operations and ratios and other data presented for the
three months ended September 30, 1998 are not necessarily indicative of what
the results of operations will be for DCB's fiscal year ending June 30, 1999.
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS ENDED
SEPTEMBER 30, 1998
-------------------------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C>
SELECTED FINANCIAL CONDITION DATA:
Total assets.......................................... $1,743,657
Loans, net............................................ 1,013,658
Mortgage-backed securities............................ 460,652
Investment securities................................. 174,780
Deposits.............................................. 1,025,137
Borrowings............................................ 473,942
Stockholders' equity.................................. 180,074
SELECTED OPERATING DATA:
Net interest income................................... $ 12,600
Provision for loan losses............................. 60
Non-interest income................................... 1,254
Non-interest expense.................................. 6,692
Income tax expense.................................... 3,119
Net income............................................ 3,983
PERFORMANCE RATIOS:
Return on average assets.............................. 0.96%
Return on average stockholders' equity................ 8.74
Average interest rate spread.......................... 2.66
Net interest margin................................... 3.15
Non-interest expense to average assets................ 1.62
Efficiency ratio...................................... 49.23
PER SHARE DATA:
Basic earnings per share.............................. $ 0.38
Diluted earnings per share............................ 0.35
Cash dividends paid per common share.................. 0.10
Book value per share.................................. 15.37
Tangible book value per share......................... 13.04
</TABLE>
32
<PAGE>
FIBC
The selected consolidated financial and other data and financial ratios of
FIBC set forth below at and for the twelve months ended September 30, 1998 were
derived from unaudited financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the results of the unaudited period presented have been
included.
<TABLE>
<CAPTION>
AT OR
FOR THE YEAR ENDED
SEPTEMBER 30, 1998
----------------------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C>
SELECTED FINANCIAL CONDITION DATA:
Total Assets........................................... $318,611
Loans receivable, net.................................. 196,027
Mortgage-backed securities............................. 48,921
Investment securities.................................. 54,599
Deposits............................................... 228,096
Borrowings............................................. 55,770
Total stockholders' equity............................. 29,175
SELECTED OPERATING DATA:
Net interest income.................................... $ 10,175
Provision for loan losses.............................. 401
Non-interest income.................................... 957
Non-interest expenses.................................. 5,614
Income taxes........................................... 2,116
Net income............................................. 3,001
PERFORMANCE RATIOS:
Return on average assets............................... 0.97%
Return on average stockholders' equity................. 10.69
Average interest rate spread........................... 2.95
Net interest margin.................................... 3.45
Non-interest expense to average assets................. 1.81
Efficiency ratio....................................... 50.61
PER SHARE DATA:
Basic earnings per share............................... $ 1.86
Diluted earnings per share............................. 1.77
Book value, per common share........................... 17.08
Tangible book value per share.......................... 17.01
Cash dividends paid per common share................... 0.475
</TABLE>
33
<PAGE>
THE SPECIAL MEETING
General. This Proxy Statement-Prospectus and the accompanying Proxy Card are
being mailed to holders of FIBC Common Stock in connection with the FIBC
Board's solicitation of proxies for use at the Special Meeting. The Special
Meeting is scheduled to be held on December 18, 1998, at 9:30 a.m., Eastern
Standard Time, at the LaGuardia Marriott, 102-05 Ditmars Boulevard, East
Elmhurst, New York 11369. At the Special Meeting, FIBC stockholders will (i)
consider and vote upon a proposal to approve and adopt the Merger Agreement
and (ii) act upon such other matters incident to the conduct of the Special
Meeting as may properly be brought before the Special Meeting.
HOLDERS OF FIBC COMMON STOCK ARE REQUESTED TO COMPLETE, SIGN AND DATE THE
ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID,
ADDRESSED ENVELOPE.
FIBC STOCKHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH THEIR PROXY
CARDS.
Recommendation of the FIBC Board. THE FIBC BOARD HAS UNANIMOUSLY APPROVED
THE MERGER AGREEMENT AND HAS DETERMINED THAT THE TERMS OF THE MERGER AND THE
MERGER AGREEMENT ARE FAIR TO AND IN THE BEST INTERESTS OF FIBC AND ITS
STOCKHOLDERS. THE FIBC BOARD THEREFORE UNANIMOUSLY RECOMMENDS THAT FIBC'S
STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. See "THE
MERGER -- Reasons for the Merger; Recommendation of Boards of Directors --
FIBC."
Record Date. The FIBC Board has fixed the close of business on October 30,
1998 as the Record Date for the determination of holders of FIBC Common Stock
entitled to receive notice of and to vote at the Special Meeting. Only holders
of record of FIBC Common Stock at the close of business on the Record Date are
entitled to receive notice of and to vote at the Special Meeting.
Voting and Solicitation of Proxies. FIBC stockholders will be entitled to
one vote for each share of FIBC Common Stock held of record as of the close of
business on the Record Date on each matter to be voted upon at the Special
Meeting. The presence in person or by proxy of the holders of at least a
majority of the outstanding shares of FIBC Common Stock on the Record Date is
necessary to constitute a quorum at the Special Meeting.
The shares of FIBC Common Stock represented by properly executed proxies
received at or prior to the Special Meeting and not subsequently revoked prior
to the vote at the Special Meeting will be voted as directed in such proxies.
IF INSTRUCTIONS ARE NOT GIVEN, SHARES REPRESENTED BY PROPERLY EXECUTED PROXIES
WILL BE VOTED FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. If any other
matters incident to the conduct of the Special Meeting are properly brought
before the Special Meeting for consideration, including a motion to adjourn
the Special Meeting to another time or place for the purpose of soliciting
additional proxies or otherwise, shares represented by properly executed
proxies will be voted in the discretion of the persons named in the Proxy Card
enclosed herewith in accordance with their best judgment; provided, however,
that no proxy which is voted against the proposal to approve the Merger
Agreement will be voted in favor of any adjournment of the Special Meeting for
such purpose; provided, further, that such discretionary authority will only
be exercised to the extent permitted under applicable federal and state
securities and corporation laws. FIBC does not have any knowledge of any
matters to be presented at the Special Meeting other than the matters set
forth above under "-- General."
Any holder of FIBC Common Stock who has executed and delivered a proxy may
revoke it at any time before it is voted by attending the Special Meeting and
voting in person, by giving notice of revocation in writing or by submitting a
signed proxy card bearing a later date to the Corporate Secretary of FIBC at
42-25 Queens Boulevard, Long Island City, New York 11104; provided that such
notice or proxy card is actually received by FIBC before the vote of FIBC
stockholders. A proxy will not be revoked by death or supervening incapacity
of the FIBC stockholder executing the proxy unless, before the vote, notice of
such death or incapacity is filed with the Corporate Secretary of FIBC or
other person responsible for tabulating votes on behalf of FIBC.
34
<PAGE>
The cost of soliciting proxies from holders of FIBC Common Stock in the form
enclosed herewith will be borne by FIBC. Such solicitation will be made by
mail, but also may be made by telephone or in person by the directors,
officers and employees of FIBC (who will receive no additional compensation
for doing so). FIBC has retained Kissel-Blake & Co., a proxy solicitation
firm, to assist in such solicitation. The fee to be paid to such firm is not
expected to exceed $3,500, plus reasonable out-of-pocket costs and expenses
authorized by FIBC. In addition, FIBC will make arrangements with brokerage
firms and other custodians, nominees and fiduciaries to send proxy materials
to their principals and will reimburse such parties for their expenses in
doing so.
A representative of FIBC's independent certified public accountants, Radics
& Co., LLC, will be present at the Special Meeting.
Vote Required. The affirmative vote of a majority of the shares of FIBC
Common Stock outstanding and entitled to be voted at the Special Meeting is
required in order to approve and adopt the Merger Agreement. A failure to
return a properly executed Proxy Card or to vote in person or abstaining from
voting will have the same effect as a vote against the Merger Agreement.
Broker non-votes will not be counted as having been voted in person or by
proxy at the Special Meeting and will have the same effect as a vote against
the Merger Agreement. As of the Record Date, there were a total of 1,708,632
shares of FIBC Common Stock outstanding and entitled to be voted at the
Special Meeting.
As of October 30, 1998, FIBC's directors and executive officers and their
affiliates (nine persons) had voting power with respect to an aggregate of
180,632 shares, or approximately 10.57% of the outstanding shares, of FIBC
Common Stock (exclusive of 69,562 shares which may be acquired through
exercise of stock options which are currently exercisable). Such persons have
agreed to vote their shares in favor of the approval and adoption of the
Merger Agreement. See "BENEFICIAL OWNERSHIP OF FIBC COMMON STOCK."
35
<PAGE>
THE MERGER
The following information, insofar as it relates to matters contained in the
Merger Agreement or the Stock Option Agreement, is qualified in its entirety
by reference to the Merger Agreement or the Stock Option Agreement, which are
attached hereto as Appendix A and Appendix B, respectively, and are
incorporated herein by reference. FIBC stockholders are urged to read the
Merger Agreement and the Stock Option Agreement in their entirety.
PARTIES TO THE MERGER
DCB. DCB is a Delaware corporation incorporated in December 1995 and is the
holding company for Dime of Williamsburgh. The principal business of DCB is
the operation of its wholly owned subsidiary, Dime of Williamsburgh, a
federally-chartered stock savings bank. Dime of Williamsburgh's principal
business is attracting retail deposits from the general public and investing
those deposits, together with funds generated from operations, principal
repayments and borrowings, primarily in multi-family mortgage loans, one- to
four-family residential mortgage loans, mortgage- backed securities and, to a
lesser extent, commercial real estate loans and consumer loans. In addition,
Dime of Williamsburgh invests in mortgage-backed securities, securities issued
by the U.S. Government and Federal agencies and other securities. At June 30,
1998, DCB had total consolidated assets of $1.62 billion, deposits of $1.04
billion and stockholders' equity of $186.3 million. As of June 30, 1998, Dime
of Williamsburgh had 14 retail banking office locations located in the
boroughs of Brooklyn, Queens and The Bronx and in Nassau County on Long
Island. The principal executive offices of DCB are located at 209 Havemeyer
Street, Brooklyn, New York 11211 and its telephone number is (718) 782-6200.
Dime of Williamsburgh's deposits are insured by the BIF or the SAIF.
FIBC. FIBC is a Delaware corporation incorporated in February 1994 and is
the holding company for Financial Federal. The principal business of FIBC is
the operation of its wholly owned subsidiary, Financial Federal, a federally-
chartered stock savings bank. Financial Federal's principal business is
attracting retail deposits from the general public and investing those
deposits, together with funds generated from operations, principal repayments
and borrowings, primarily in one- to four-family residential mortgage loans
and mortgage-backed and mortgage-related securities and, to a lesser extent,
commercial real estate loans, multi-family mortgage loans and consumer loans.
In addition, Financial Federal invests its funds in other securities,
including U.S. Government and Federal agency securities, investment grade
preferred stock and federal funds. At June 30, 1998, FIBC had total
consolidated assets of $341.0 million, deposits of $229.0 million and
stockholders' equity of $28.7 million. As of June 30, 1998, Financial Federal
had 5 full service banking facilities, four of which are located in Queens and
one located in Brooklyn. The principal executive offices of FIBC are located
at 42-25 Queens Boulevard, Long Island City, New York 11104 and its telephone
number is (718) 729-5002. Financial Federal's deposits are insured by the BIF
or the SAIF.
EFFECTS OF THE MERGER
Pursuant to the terms of the Merger Agreement, subject to the satisfaction
or waiver (where permissible) of certain conditions, including, among other
things, the receipt of all necessary regulatory approvals, the expiration of
all waiting periods in respect thereof and the approval of the Merger
Agreement by the requisite vote of the stockholders of FIBC, FIBC will be
merged with and into DCB. FIBC stockholders will receive the consideration
described below in "-- Merger Consideration and Election, Allocation and
Proration Procedures." DCB shall be the surviving corporation in the Merger.
Upon consummation of the Merger, the separate corporate existence of FIBC
shall terminate.
In connection with the Merger Agreement, Dime of Williamsburgh and Financial
Federal have entered into the Plan of Bank Merger, which provides that,
immediately following consummation of the Merger, Financial Federal will merge
with and into Dime of Williamsburgh, with Dime of Williamsburgh being the
surviving bank.
Each outstanding share of DCB Common Stock at the Effective Time will remain
outstanding and unchanged as a result of the Merger.
36
<PAGE>
EFFECTIVE TIME
The Merger will become effective at the date and time set forth in the
Certificate of Merger that will be filed with the Secretary of State of the
State of Delaware in accordance with applicable law. The Certificate of Merger
will be filed no earlier than two and not more than five business days
following the satisfaction or waiver of the latest to occur of the conditions
specified in the Merger Agreement, unless another date is agreed to by DCB and
FIBC; provided, that in no event will the Effective Date be earlier than
January 5, 1999. See "-- Conditions to Consummation of the Merger." It is
expected that a period of time will elapse between the Special Meeting and the
Effective Time while the parties seek to obtain the regulatory approvals
required to consummate the Merger. There can be no assurance that such
regulatory approvals will be obtained, and if obtained, there can be no
assurance as to the date of any such approval. There can likewise be no
assurance that the United States Department of Justice or the New York State
Attorney General will not challenge the Merger or, if such a challenge is
made, as to the result thereof. See "-- Regulatory Approvals."
MERGER CONSIDERATION AND ELECTION, ALLOCATION AND PRORATION PROCEDURES
General. Upon consummation of the Merger, each outstanding share of FIBC
Common Stock (other than Dissenters' Shares) will be converted into the right
to receive, at the election of the holder thereof and subject to the election,
allocation and proration procedures set forth in the Merger Agreement, either
the Stock Consideration or the Cash Consideration, in each case as determined
pursuant to the Merger Agreement. See "Merger Consideration," "Election
Procedures" and "Allocation Procedures" below. Under the terms of the Merger
Agreement, cash will be paid in lieu of the issuance of fractional shares of
DCB Common Stock. In addition, for each share of DCB Common Stock issued in
the Merger, the FIBC stockholder receiving such share also will receive the
related DCB Right issued pursuant to the DCB Rights Agreement.
The number of shares of DCB Common Stock constituting the Stock
Consideration and the amount of cash constituting the Cash Consideration will
be determined pursuant to a formula set forth in the Merger Agreement, which
provides that so long as the Average Closing Price is between $22.95 and
$31.05, the Merger Consideration, whether in the form of stock or cash, will
have a value of $40.50 (with the Stock Consideration valued at the Average
Closing Price for such purpose), and 50% of the total consideration to be paid
to FIBC stockholders will consist of DCB Common Stock and 50% will consist of
cash. If the Average Closing Price is less than $22.95 or greater than $31.05,
then the value of the Merger Consideration will be adjusted, and the
percentages of the total consideration consisting of DCB Common Stock and cash
will change, all as set forth in the Merger Agreement and more fully described
below under "-- Merger Consideration."
THE FORM OF THE CONSIDERATION ULTIMATELY RECEIVED BY A STOCKHOLDER OF FIBC
WILL DEPEND UPON THE ELECTION, ALLOCATION AND PRORATION PROCEDURES DESCRIBED
BELOW AND THE ELECTIONS OF OTHER STOCKHOLDERS. ACCORDINGLY, NO GUARANTEE CAN
BE GIVEN THAT THE ELECTION OF ANY GIVEN STOCKHOLDER OF FIBC WILL BE HONORED.
In addition, because the tax consequences of receiving the Cash Consideration
will differ from the tax consequences of receiving the Stock Consideration,
FIBC stockholders are urged to read carefully the information set forth below
under "-- Material Federal Income Tax Consequences."
Merger Consideration. The Merger Agreement provides that each share of FIBC
Common Stock issued and outstanding at the Effective Time will be converted
into the right to receive, at the election of the holder thereof, either:
(i) a number of shares of DCB Common Stock (together with the number of
DCB Rights associated therewith) equal to the Final Exchange Ratio (as
defined below), or
(ii) cash in an amount equal to the Per Share Consideration (as defined
below).
For purposes of determining the amount of the Merger Consideration each
holder of FIBC Common Stock will be entitled to receive, the following
definitions will apply:
"Aggregate Cash Consideration" means the product obtained by multiplying
(x) the Outstanding Shares Number by (y) $20.25.
37
<PAGE>
"Aggregate Merger Consideration" means the sum of (x) the Aggregate Cash
Consideration and (y) the Aggregate Stock Consideration.
"Aggregate Stock Consideration" means (w) 0.5 multiplied by (x) the
Outstanding Shares Number multiplied by (y) the Average Closing Price
multiplied by (z) the Preliminary Stock Ratio.
"Average Closing Price" means the average of the closing sale prices per
share for DCB Common Stock as reported on the Nasdaq National Market during
the ten consecutive trading-day period during which the shares of DCB
Common Stock are traded on the Nasdaq National Market ending on the tenth
business day immediately prior to the anticipated Effective Time.
"Final Exchange Ratio" means the quotient, rounded to the nearest ten-
thousandth, obtained by dividing the Per Share Consideration by the Average
Closing Price.
"Outstanding Shares Number" means the number of shares of FIBC Common
Stock issued and outstanding immediately prior to the Effective Time.
"Per Share Consideration" means the quotient obtained by dividing the
Aggregate Merger Consideration by the Outstanding Shares Number.
"Preliminary Stock Ratio" means the quotient, rounded to the nearest ten-
thousandth, obtained by dividing $40.50 by the Average Closing Price;
provided, that (i) if the Average Closing Price is equal to or greater than
$31.05, the Preliminary Stock Ratio shall be 1.3043 (the "Minimum Stock
Ratio"), and (ii) if the Average Closing Price is equal to or less than
$22.95, the Preliminary Stock Ratio shall be 1.7647 (the "Maximum Stock
Ratio").
The following table sets forth the value of the Merger Consideration to be
received by the holders of FIBC Common Stock, including the percentage of the
total consideration that will consist of DCB Common Stock and the percentage
that will consist of cash, at the Average Closing Price of DCB Common Stock
specified.
<TABLE>
<CAPTION>
AVERAGE PER SHARE FINAL
CLOSING PRICE CONSIDERATION EXCHANGE RATIO % STOCK % CASH
------------- ------------- -------------- ------- ------
<S> <C> <C> <C> <C>
$32.00 $41.12 1.2850 50.75% 49.25%
$31.05 $40.50 1.3043 50.00% 50.00%
$30.00 $40.50 1.3500 50.00% 50.00%
$28.00 $40.50 1.4464 50.00% 50.00%
$26.00 $40.50 1.5577 50.00% 50.00%
$24.00 $40.50 1.6875 50.00% 50.00%
$22.95 $40.50 1.7647 50.00% 50.00%
$22.00 $39.66 1.8027 48.94% 51.06%
$21.00 $38.78 1.8467 47.78% 52.22%
$20.25 $38.12 1.8825 46.88% 53.12%
$20.00 $37.90 1.8950 46.57% 53.43%
$19.00 $37.01 1.9479 45.29% 54.71%
$18.00 $36.13 2.0072 43.95% 56.05%
</TABLE>
Notwithstanding the figures indicated above, if the percentage of the total
consideration that will consist of DCB Common Stock is below 50% and either
Thacher Proffitt & Wood or Skadden, Arps, Slate, Meagher & Flom LLP is unable
to render its tax opinion, as described below under "-- Material Federal
Income Tax Consequences," as a result of the Merger potentially failing to
qualify as a reorganization under Section 368(a) of the Code, then DCB will
reduce the Aggregate Cash Consideration, and correspondingly increase the
Aggregate Stock Consideration, to the minimum extent necessary to enable
Thacher Proffitt & Wood or Skadden, Arps, Slate, Meagher & Flom LLP, as the
case may be, to render its tax opinion.
Assuming the Pricing Period ended on July 17, 1998 (the last trading day
prior to announcement of the Merger), the Average Closing Price would be
$26.66, the Stock Consideration would be equal to 1.5194 shares of DCB Common
Stock and the Cash Consideration would be $40.50. Assuming the Pricing Period
ended on
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November 5, 1998 (the latest practicable trading date prior to the mailing of
this Proxy Statement-Prospectus), the Average Closing Price would be $23.66,
the Stock Consideration would be equal to 1.7117 shares of DCB Common Stock
and the Cash Consideration would be $40.50. It is expected that the market
price of DCB Common Stock will fluctuate between the date of this Proxy
Statement-Prospectus and the date on which the Merger is consummated and
thereafter. Because the aggregate number of shares of DCB Common Stock to be
received by FIBC stockholders in the Merger will be fixed following
determination of the Average Closing Price (subject to possible adjustment in
the circumstances described herein) and because the market price of DCB Common
Stock is subject to fluctuation, the value of the shares of DCB Common Stock
that a holder of FIBC Common Stock may receive in the Merger may increase or
decrease following determination of the Average Closing Price. For further
information concerning the historical prices of DCB Common Stock, see
"COMPARATIVE COMMON STOCK PRICE AND DIVIDEND INFORMATION." Holders of FIBC
Common Stock are urged to obtain current market prices for DCB Common Stock in
connection with voting their shares at the Special Meeting and making their
elections.
If the Average Closing Price is less than or equal to $20.25, then the FIBC
Board will have the right to terminate the Merger Agreement unless, following
receipt of FIBC's notice of termination, DCB elects to increase the Per Share
Consideration to be received by FIBC's stockholders to at least $38.12 for
each share of FIBC Common Stock. During the period following the execution of
the Merger Agreement and preceeding the mailing of this Proxy Statement-
Prospectus, there was substantial volatility in United States and foreign
stock markets. During this time, the price of a share of DCB Common Stock, as
reported on the Nasdaq Stock Market, was, from time-to-time, below $20.25.
Following approval of the Merger Agreement by the FIBC stockholders at the
Special Meeting, the FIBC Board may elect not to terminate the Merger
Agreement and to consummate the Merger without resoliciting the FIBC
stockholders if the Average Closing Price is less than or equal to $20.25,
even though the Per Share Consideration would be less than $38.12. The FIBC
Board has not yet determined what action it might take under the Merger
Agreement if the Average Closing Price is less than or equal to $20.25. In
such a situation, in considering whether to consummate the Merger without the
resolicitation of the FIBC stockholders, the FIBC Board will, consistent with
its fiduciary duties, take into account all relevant facts and circumstances
that exist at such time, including, without limitation, the advice of its
financial advisor and its legal counsel.
DCB is under no obligation to increase the Per Share Consideration, and
there can be no assurance that DCB would elect to increase the Per Share
Consideration, if the FIBC Board were to exercise its right to terminate the
Merger Agreement. Any such decision would be made by the DCB Board, consistent
with its fiduciary duties, taking into account all relevant facts and
circumstances that exist at such time, including, without limitation, the
advice of its financial advisor and its legal counsel. If the DCB Board elects
to increase the Per Share Consideration as set forth in the Merger Agreement
and as described above, it must give FIBC prompt notice of such election and
of its proposed increase in the Per Share Consideration, in which case no
termination of the Merger Agreement would occur. See "THE MERGER --
Termination."
Elections. Following the date of the Special Meeting and prior to the
Effective Time, each record holder of shares of FIBC Common Stock will be sent
an Election Form, which shall permit such stockholder to elect to receive
either (i) the Stock Consideration in exchange for each share of FIBC Common
Stock held or (ii) the Cash Consideration in exchange for each share of FIBC
Common Stock held. Notwithstanding the foregoing, no holder of FIBC Common
Stock may elect to receive DCB Common Stock with respect to fewer than 50
shares of FIBC Common Stock. If a stockholder either (i) does not submit a
properly completed Election Form in a timely fashion or (ii) revokes its
Election Form prior to the deadline for the submission of the Election Form,
the shares of FIBC Common Stock held by such stockholder shall be designated
"No Election Shares."
Election Procedures. All elections will be required to be made on an
Election Form. To make an effective election with respect to shares of FIBC
Common Stock, the holder thereof must, in accordance with the Election Form,
(i) complete properly and return the Letter of Transmittal and Election Form
to the Exchange Agent, (ii) either (a) deliver therewith his or her FIBC
Certificates with respect to such shares (or an appropriate guarantee
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of delivery thereof), or (b) complete the procedure for delivery by book-entry
transfer of such shares on a timely basis, and (iii) deliver therewith any
other required documents, prior to the Election Deadline. It is anticipated
that the Letter of Transmittal and Election Form will be mailed to FIBC
stockholders immediately following the Special Meeting, and in any event at
least thirty (30) days prior to the anticipated Effective Time.
FIBC CERTIFICATES SHOULD NOT BE RETURNED WITH THE ENCLOSED PROXY AND SHOULD
NOT BE FORWARDED TO THE EXCHANGE AGENT UNTIL AN FIBC STOCKHOLDER HAS RECEIVED
THE LETTER OF TRANSMITTAL AND ELECTION FORM. SEE "-- PROCEDURES FOR EXCHANGE
OF FIBC CERTIFICATES."
A holder of shares of FIBC Common Stock having a preference as to the form
of consideration to be received for his or her shares of FIBC Common Stock
should make an Election because shares as to which an Election has been made
will be given priority in allocating such consideration over shares as to
which an Election is not received. Neither FIBC nor the FIBC Board makes any
recommendation as to whether stockholders should elect to receive the Cash
Consideration or the Stock Consideration in the Merger. Each holder of FIBC
Common Stock must make his or her own decision with respect to such election.
Allocation Procedures. If the Aggregate Cash Consideration is greater than
the Per Share Consideration multiplied by the total number of Cash Election
Shares (the "Cash Election Amount"), then:
(i) all Cash Election Shares will be converted into the right to receive
an amount of cash equal to the Per Share Consideration;
(ii) the Exchange Agent will select, on a pro rata basis, first from
among the holders of No Election Shares and then, if necessary, from among
the holders of Stock Election Shares, a sufficient number of such shares
("Cash Designee Shares") such that the sum of the Cash Designee Shares and
the Cash Election Shares multiplied by the Per Share Consideration equals
as closely as practicable the Aggregate Cash Consideration (the Cash
Designee Shares will be converted into the right to an amount of cash equal
to the Per Share Consideration); and
(iii) any Stock Election Shares and any No Election Shares, in each case,
not so selected as Cash Designee Shares will be converted into the right to
receive DCB Common Stock at the Final Exchange Ratio.
If the Aggregate Cash Consideration is less than the Cash Election Amount,
then:
(i) all Stock Election Shares and all No Election Shares will be
converted into the right to receive DCB Common Stock at the Final Exchange
Ratio;
(ii) the Exchange Agent will select, on a pro rata basis from among the
holders of Cash Election Shares, a sufficient number of such shares ("Stock
Designee Shares") such that the number of Stock Designee Shares multiplied
by the Per Share Consideration equals as closely as practicable the
difference between the Cash Election Amount and the Aggregate Cash
Consideration (the Stock Designee Shares shall be converted into the right
to receive DCB Common Stock at the Final Exchange Ratio); and
(iii) any Cash Election Shares not so selected as Stock Designee Shares
shall be converted into the right to receive an amount of cash equal to the
Per Share Consideration.
The pro rata selection process to be used by the Exchange Agent will consist
of such equitable pro ration processes as shall be mutually determined by DCB
and FIBC.
Dissenting Stockholders. Any shares of FIBC Common Stock as to which
appraisal rights have been asserted and not withdrawn will not be converted
into the right to receive the Merger Consideration unless and until the holder
shall have failed to perfect, or shall have effectively withdrawn or lost, his
or her right to dissent. If any such holder shall have so failed to perfect or
shall have effectively withdrawn or lost such right, each share of such
holder's FIBC Common Stock shall be deemed to be No Election Shares and shall
be subject to the allocation and proration procedures described herein. See
"-- Appraisal Rights."
Miscellaneous. If DCB effects a stock dividend, reclassification,
recapitalization, split-up, combination, exchange of shares or similar
transaction prior to the Effective Time, an appropriate adjustment to the
consideration will be made.
No fractional shares of DCB Common Stock will be issued in connection with
the Merger and cash will be paid in lieu thereof.
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Upon consummation of the Merger, any shares of FIBC Common Stock that are
owned by FIBC as treasury stock or that are held directly or indirectly by
DCB, other than in a fiduciary capacity or in satisfaction of a debt
previously contracted, will be canceled and retired and no payment will be
made with respect thereto and such shares will not be considered for purposes
of the foregoing allocation procedures. For certain information concerning the
historical market prices of FIBC Common Stock and DCB Common Stock, see
"COMPARATIVE STOCK PRICE AND DIVIDEND INFORMATION."
SPECIAL DIVIDEND
The Merger Agreement prohibits FIBC from paying dividends other than normal
quarterly dividends not in excess of $0.125 per share of FIBC Common Stock;
provided, however, that FIBC may pay a special one-time dividend on FIBC
Common Stock prior to the Effective Time, in an amount not to exceed $1.00 per
share, in the event that Financial Federal receives sufficient cash proceeds
from the disposition of a specified real estate investment prior to the
Effective Time. See "-- Conduct of Business Pending the Merger." The amount of
the Special Dividend will be computed as follows: (i) if the cash proceeds
(received in the form of a certified check or immediately available funds) of
such sale (net of transaction expenses and transfer taxes, if any) are greater
than or equal to the book value of such assets on FIBC's books and records,
net of any specific reserves established as of March 31, 1998 ("Book Value"),
the Special Dividend may be paid in the aggregate amount of the product of the
number of shares of FIBC Common Stock outstanding immediately prior to the
Effective Time and $1.00, or (ii) if the cash proceeds (received in the form
of a certified check or immediately available funds) of such sale are less
than the Book Value, then the Special Dividend may be paid in an aggregate
amount equal to the amount by which (A) the product of the number of shares of
FIBC Common Stock outstanding immediately prior to the Effective Time and
$1.00 exceeds (B) the difference between the Book Value and the cash proceeds
of such sale; provided, further, that such sale may not occur without the
prior written consent of DCB if such sale would result in the amount set forth
in (B) exceeding the amount set forth in (A).
FIBC has entered into an agreement providing for the sale of such real
estate investment to a third party. The amount of the Special Dividend will
depend upon the final terms upon which the real estate investment is sold and
the expenses incurred by FIBC in connection with such sale. In any event,
although FIBC would not be prohibited pursuant to the Merger Agreement from
paying the Special Dividend at any time after completion of the proposed sale
of the real estate investment, FIBC does not intend to pay the Special
Dividend unless FIBC is reasonably certain that all conditions to the
consummation of the Merger have been satisfied (or, where permissible,
waived). No assurance can be given as to whether or on what terms such real
estate investment will be disposed of, and, accordingly, as to the amount, if
any, of the Special Dividend.
The federal income tax treatment of the Special Dividend is unclear and
depends in part upon whether the Special Dividend and the Merger are treated
as a single integrated transaction for federal income tax purposes. If the
Special Dividend and the Merger are treated as a single integrated
transaction, the cash received by a stockholder of FIBC from the Special
Dividend is likely to be treated as cash consideration received by such
stockholder for his or her FIBC Common Stock in the Merger (see "-- Material
Federal Income Tax Consequences -- Exchange of FIBC Common Stock for DCB
Common Stock and Cash"), although other characterizations are possible,
including treating the cash received as a dividend to such stockholder to the
extent of FIBC's current or accumulated earnings and profits. If, on the other
hand, the Special Dividend and the Merger are not treated as a single
integrated transaction, the cash received by an FIBC stockholder from the
Special Dividend may be treated as either a dividend to the extent of FIBC's
current or accumulated earnings and profits, or as a payment in exchange for
any portion of the FIBC Common Stock deemed surrendered in exchange for the
Special Dividend (generally resulting in capital gain or loss equal to the
difference between the amount of cash received in the Special Dividend and the
basis in the FIBC Common Stock deemed exchanged therefor). Each FIBC
stockholder is urged to consult his or her tax advisor regarding the federal,
state, local, foreign and other tax consequences of the Special Dividend and
the Merger.
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BACKGROUND OF THE MERGER
Financial Federal, formerly Financial Federal Savings and Loan Association,
converted from the mutual to the stock form of organization on August 17,
1994, and in connection therewith was acquired by FIBC in a holding company
formation transaction. The period since the Financial Federal conversion has
been one of continuous and significant change in the financial services
industry, marked by steadily increasing competition and widespread
consolidation. Based on the FIBC Board's belief that continued consolidation
and competition in the financial services industry would make it increasingly
difficult for smaller thrifts or thrift holding companies such as FIBC to
maintain their competitive position and market share, the FIBC Board has from
time to time considered and analyzed, with the assistance of Sandler O'Neill,
FIBC's strategic alternatives, including prospects for FIBC continuing as an
independent entity and possible business combination transactions with
financial institutions of varying sizes and the effects of such transactions
on FIBC and its stockholders, employees and the communities it serves.
In June 1998, the FIBC Board retained Sandler O'Neill to serve as its
financial advisor in connection with FIBC's review of its strategic
alternatives and potential merger and acquisition transactions. Sandler
O'Neill reviewed with the FIBC Board FIBC's strategic alternatives and the
current condition of the financial institution merger and acquisition market.
Based on Sandler O'Neill's analysis and recommendations and based on the
values that the FIBC Board believed might be obtainable in a business
combination transaction, the FIBC Board determined that a business combination
between FIBC and another financial institution may be in the best interests of
FIBC and its stockholders and authorized Sandler O'Neill to contact
representatives of certain selected financial institutions to ascertain their
interest in engaging in a business combination transaction with FIBC. These
institutions were selected jointly by Sandler O'Neill and the FIBC Board based
on their suitability with respect to certain characteristics, including size,
location, performance, operating strategy and pro forma impact.
In mid-June, Sandler O'Neill communicated with 11 financial institutions
regarding their interest in engaging in a business combination transaction
with FIBC. A number of these institutions expressed interest, and each of such
companies was requested to deliver to Sandler O'Neill by July 6, 1998, a
written proposal containing the per share price and other proposed terms upon
which such party would be willing to enter into a business combination
transaction with FIBC. Three companies, including DCB, submittted proposals
for a business combination transaction.
On July 8, 1998, the FIBC Board, together with its legal and financial
advisors, met to review the three proposals received. Of the three proposals
received, DCB's proposal offered the highest per share consideration to the
holders of FIBC Common Stock. DCB proposed a transaction whereby approximately
50% of the merger consideration would be payable in cash and approximately 50%
would be payable in DCB Common Stock. Following further discussions regarding
the DCB proposal, the FIBC Board authorized FIBC's management, together with
Sandler O'Neill and FIBC's legal counsel, to negotiate the terms of a business
combination transaction with DCB and to provide DCB an opportunity to conduct
a comprehensive due diligence review of FIBC.
DCB commenced its due diligence review on July 11, 1998. During and
following the due diligence period, FIBC's management, together with its legal
and financial advisors, held discussions with DCB's management and its legal
and financial advisors concerning the terms of a proposed business combination
between the parties. On July 16, 1998, the DCB Board met to consider the terms
of the proposed definitive agreement and the financial terms of the
transaction, receiving presentations from its legal and financial advisors.
After further negotiation later that day and the next, on July 17, 1998, the
DCB Board approved the execution of the Merger Agreement, subject to such
changes as senior management determined to be appropriate. On July 18, 1998,
the terms of the Merger Agreement and the Stock Option Agreement to be
presented to the FIBC Board were finalized.
At a meeting held on July 18, 1998, the FIBC Board reviewed the terms of the
DCB proposal and compared it to the other two proposals received by Sandler
O'Neill. The FIBC Board then reviewed and discussed, with
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the assistance of its legal counsel and Sandler O'Neill, the Merger Agreement
and the Stock Option Agreement. Management and FIBC's financial advisors also
reviewed with the FIBC Board their due diligence findings concerning DCB.
Representatives of Sandler O'Neill reviewed financial information concerning
DCB, FIBC and the proposed transaction and delivered to the FIBC Board Sandler
O'Neill's oral opinion (which was subsequently confirmed in writing) that, as
of such date, the Merger Consideration was fair, from a financial point of
view, to the holders of FIBC Common Stock. See "-- Opinion of FIBC's Financial
Advisor." Based upon the FIBC Board's review and discussion of the definitive
terms of the transaction, the opinion of Sandler O'Neill and other relevant
factors, the FIBC Board, by unanimous vote of all directors, authorized and
approved the execution of the Merger Agreement and the Stock Option Agreement.
Following the FIBC Board meeting, the Merger Agreement and the Stock Option
Agreement were executed by the parties, and, on July 20, 1998, a joint press
release was issued announcing the proposed Merger.
REASONS FOR THE MERGER; RECOMMENDATION OF THE FIBC BOARD
FIBC. The FIBC Board believes that the Merger is fair to, and in the best
interests of, FIBC and its stockholders. ACCORDINGLY, THE FIBC BOARD HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT THE HOLDERS OF
FIBC COMMON STOCK VOTE "FOR" THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT
AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY. See "--
Background of the Merger" above and "-- Opinion of FIBC's Financial Advisor"
below.
The terms of the Merger, including the Merger Consideration, are the result
of arm's-length negotiations between representatives of FIBC and DCB. In
reaching its decision to approve the Merger Agreement and the Stock Option
Agreement, the FIBC Board, without assigning any relative or specific weights,
considered a number of factors, both from a short-term and long-term
perspective, including, without limitation, the following:
(a) the FIBC Board's familiarity with and review of FIBC's business,
financial condition, results of operations and prospects, including,
without limitation, its potential growth and profitability and the business
risks associated therewith;
(b) the current and prospective environment in which FIBC operates,
including national and local economic conditions, the competitive
environment for savings banks and other financial institutions generally,
the increasing consolidation in the financial services industry and the
competitive effects of such increased consolidation on smaller financial
institutions such as FIBC;
(c) information concerning the business, financial condition, results of
operations and prospects of DCB, including the historical performance of
DCB Common Stock prior to the execution of the Merger Agreement, the
historical financial data of DCB, customary statistical measurements of
DCB's financial performance and the future prospects for DCB Common Stock
following the Merger;
(d) the value to be received by holders of FIBC Common Stock pursuant to
the Merger Agreement in relation to the historical trading prices of FIBC
Common Stock;
(e) the information presented by Sandler O'Neill to the FIBC Board with
respect to the Merger and the opinion of Sandler O'Neill that, as of the
date of such opinion, the Merger Consideration was fair to the holders of
FIBC Common Stock from a financial point of view (see "-- Opinion of FIBC's
Financial Advisor" below);
(f) the process conducted by FIBC's management and its financial advisor
in exploring and determining the potential value which could be realized by
FIBC stockholders in a business combination transaction, including the
contacts between FIBC's financial advisor and certain financial
institutions, the fact that each of such financial institutions which
expressed interest in a business combination transaction with FIBC was
afforded an opportunity to submit a proposal for such a transaction to
FIBC, the terms of the proposals received by FIBC from such financial
institutions and the fact that the indicated value of the proposed per
share consideration in the DCB proposal was higher than the indicated
values of the per share consideration offered in the other proposals
submitted to FIBC (see "-- Background of the Merger");
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(g) the financial and other significant terms of the proposed Merger with
DCB, and the review by FIBC with its legal and financial advisors of the
provisions of the Merger Agreement and the Stock Option Agreement;
(h) the expected impact of the Merger on FIBC's business, employees,
customers and communities, and the expectation that DCB will continue to
provide quality service to the customers and the communities served by
FIBC;
(i) the FIBC Board's belief that the receipt of DCB Common Stock in the
Merger generally will permit holders of FIBC Common Stock to defer any
federal income tax liability associated with the increase in the value of
their stock for which DCB Common Stock is received pursuant to the Merger
(see "-- Material Federal Income Tax Consequences" below) and to become
stockholders of DCB, an institution with strong operations, dividends and
share liquidity; and
(j) the alternative strategic courses available to FIBC, including
remaining independent and exploring other potential business combination
transactions.
DCB. The DCB Board has unanimously approved and adopted the Merger
Agreement. In negotiating the terms of the Merger and in considering its
recommendation for the approval of the Merger Agreement, the DCB Board
considered a number of factors including, without limitation, the following:
(a) the Merger Consideration to be paid to the FIBC stockholders in
relation to the market value, book value and earnings per share of FIBC
Common Stock;
(b) the DCB Board's review, based in part on presentations by Merrill
Lynch & Co., Inc., its financial advisor, and management, of the business,
operations and financial condition of FIBC, the prospects of the combined
institution and the increased market presence, economies of scale, cost
savings opportunities and enhanced opportunities for growth made possible
by the Merger;
(c) the DCB Board's recognition of the complementary nature of the
markets served and products offered by DCB and FIBC and expectation that
the Merger would provide it with opportunities for additional growth;
(d) the expectation of DCB's management that as a result of the combined
impact of incremental income arising from the deployment of excess capital
and anticipated cost savings, the Merger would be accretive to earnings per
share in the fiscal year ending June 30, 2000;
(e) the positive impact of the Merger on depositors, employees, customers
and communities served by DCB and FIBC;
(f) the expectation that the Merger will generally be a tax-free
transaction to DCB and that the Merger will be accounted for under the
purchase method of accounting. See "-- Material Federal Income Tax
Consequences" and "-- Accounting Treatment;"
(g) the Merger is consistent with DCB's ongoing strategy of growth
through acquisitions; and
(h) the terms of the Merger Agreement and the Stock Option Agreement and
the other documents executed in connection with the Merger.
The DCB Board did not assign any specific or relative weights to the factors
under consideration.
OPINION OF FIBC'S FINANCIAL ADVISOR
Pursuant to an engagement letter dated as of June 8, 1998 (the "Sandler
O'Neill Agreement"), FIBC retained Sandler O'Neill as an independent financial
advisor in connection with FIBC's consideration of possible business
combinations with a second party. Sandler O'Neill is a nationally recognized
investment banking firm whose principal business specialty is financial
institutions. In the ordinary course of its investment banking business,
Sandler O'Neill is regularly engaged in the valuation of such businesses and
their securities in connection with mergers and acquisitions and other
corporate transactions.
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Pursuant to the terms of the Sandler O'Neill Agreement, Sandler O'Neill
acted as financial advisor to FIBC in connection with the Merger. In
connection therewith, the FIBC Board requested Sandler O'Neill to render its
opinion as to the fairness of the Merger Consideration to the stockholders of
FIBC Common Stock from a financial point of view. On July 18, 1998, Sandler
O'Neill delivered to the FIBC Board its oral opinion, subsequently confirmed
in writing, that, as of such date, the Merger Consideration was fair to the
holders of shares of FIBC Common Stock from a financial point of view. Sandler
O'Neill has also delivered to the FIBC Board a written opinion, dated the date
of this Proxy Statement-Prospectus, which is substantially identical to the
July 18, 1998 opinion. THE FULL TEXT OF THE SANDLER O'NEILL FAIRNESS OPINION,
WHICH SETS FORTH THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED
AND QUALIFICATIONS AND LIMITATIONS ON THE REVIEW UNDERTAKEN IN CONNECTION WITH
SUCH OPINION, IS ATTACHED AS APPENDIX C TO THIS PROXY STATEMENT-PROSPECTUS AND
IS INCORPORATED HEREIN BY REFERENCE. THE DESCRIPTION OF THE OPINION SET FORTH
HEREIN IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO APPENDIX C. HOLDERS OF
SHARES OF FIBC COMMON STOCK ARE URGED TO READ THE SANDLER O'NEILL FAIRNESS
OPINION IN ITS ENTIRETY IN CONNECTION WITH THEIR CONSIDERATION OF THE PROPOSED
MERGER.
THE SANDLER O'NEILL FAIRNESS OPINION WAS PROVIDED TO THE FIBC BOARD FOR ITS
INFORMATION AND IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF
VIEW, OF THE MERGER CONSIDERATION TO HOLDERS OF SHARES OF FIBC COMMON STOCK.
IT DOES NOT ADDRESS THE UNDERLYING BUSINESS DECISION OF FIBC TO ENGAGE IN THE
MERGER OR ANY OTHER ASPECT OF THE MERGER AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY HOLDER OF SHARES OF FIBC COMMON STOCK AS TO HOW SUCH
STOCKHOLDER SHOULD VOTE AT THE SPECIAL MEETING WITH RESPECT TO THE MERGER OR
ANY OTHER MATTER RELATED THERETO.
In connection with rendering its July 18, 1998 opinion, Sandler O'Neill
performed a variety of financial analyses. The following is a summary of the
material analyses performed by Sandler O'Neill, but does not purport to be a
complete description of all the analyses underlying the Sandler O'Neill
Fairness Opinion. The preparation of a fairness opinion is a complex process
involving subjective judgments and is not necessarily susceptible to a partial
analysis or summary description. Sandler O'Neill believes that its analyses
must be considered as a whole and that selecting portions of such analyses and
the factors considered therein, without considering all factors and analyses,
could create an incomplete view of the analyses and processes underlying its
opinion. In performing its analyses, Sandler O'Neill made numerous assumptions
with respect to industry performance, business and economic conditions and
various other matters, many of which cannot be predicted and are beyond the
control of FIBC, DCB and Sandler O'Neill. Any estimates contained in Sandler
O'Neill's analyses are not necessarily indicative of future results or values,
which may be significantly more or less favorable than such estimates.
Estimates on the values of companies do not purport to be appraisals or
necessarily reflect the prices at which such companies or their securities may
actually be sold. Because such estimates are inherently subject to
uncertainty, neither FIBC, DCB nor Sandler O'Neill assumes responsibility for
their accuracy.
Summary of Proposal. Sandler O'Neill reviewed the financial terms of the
proposed transaction. Based upon an implied transaction value of $40.50 and
FIBC's March 31, 1998 financial information, Sandler O'Neill calculated the
price to tangible book value and price to last twelve months' normalized
earnings. This analysis yielded a price to tangible book value multiple of
2.48x and a price to last twelve months' earnings multiple of 24.4x.
Stock Trading History. Sandler O'Neill reviewed the history of the reported
trading prices and volume of FIBC Common Stock and DCB Common Stock, and the
relationship between the movements in the prices of FIBC Common Stock and DCB
Common Stock, respectively, to movements in certain stock indices, including
the Standard & Poor's 500 Index (the "S&P Index"), the NASDAQ Bank Index (the
"Bank Index") and selected composite groups of publicly traded savings
institutions (in the case of FIBC) and larger publicly traded savings
institutions (in the case of DCB), identified below. During the one-year
period ended July 17, 1998, FIBC Common Stock outperformed each of the indices
to which it was compared and DCB Common Stock outperformed each of the indices
to which it was compared.
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Comparable Company Analysis. Sandler O'Neill used publicly available
information to compare selected financial and market trading information,
including balance sheet composition, asset quality ratios, loan loss reserve
levels, profitability, capital adequacy, dividends and trading multiples, for
FIBC and two different groups of savings institutions. The first group
consisted of FIBC and the following 14 publicly traded regional savings
institutions (the "Regional Group"): 1st Bergen Bancorp, Catskill Financial
Corp., Chester Valley Bancorp Inc., Elmira Savings Bank, Equitable Federal
Savings Bank, Harbor Federal Bancorp Inc., Harleysville Savings Bank,
Independence Federal Savings Bank, Little Falls Bancorp Inc., Pittsburgh Home
Financial Corp, Skaneateles Bancorp Inc., Washington Savings Bank FSB, WVS
Financial Corp., and Yonkers Financial Corp. Sandler O'Neill also compared
FIBC to a group of 11 publicly traded savings institutions which had a return
on average equity (based on last twelve months' earnings) of greater than 14%
and a price to tangible book value of greater than 210% (the "Highly Valued
Group"). The Highly Valued Group included the following institutions:
Equitable Federal Savings Bank, First Citizens Corp., First Mutual Savings
Bank, Harleysville Savings Bank, Home Port Bancorp Inc., Ipswich Savings Bank,
KSB Bancorp Inc., Progress Financial Corp., PVF Capital Corp., Warren Bancorp
Inc., and Winton Financial Corp. The analysis compared publicly available
financial information for FIBC and the median data for each of the Regional
Group and the Highly Valued Group as of and for each of the years ended
December 31, 1993 through December 31, 1997 and as of and for the twelve
months ended March 31, 1998.
Sandler O'Neill also used publicly available information to perform a
similar comparison of selected financial and market trading information for
DCB and two different groups of savings institutions. The first group
consisted of Dime and the following 14 publicly traded savings institutions
(the "Peer Group"): Commonwealth Bancorp Inc., First Source Bancorp Corp.,
Flushing Financial Corp., Haven Bancorp Inc., JSB Financial Inc., Ocean
Financial Corp., PennFed Financial Services Inc., Queens County Bancorp Inc.,
Reliance Bancorp Inc., Richmond County Financial Corp., Roslyn Bancorp Inc.,
Staten Island Bancorp Inc., WSFS Financial Corp., and York Financial Corp.
Sandler O'Neill also compared DCB to a group of 12 publicly traded savings
institutions which had a return on average equity (based on last twelve
months' earnings) of greater than 14.6% and a price to tangible book value of
greater than 206% (the "Larger Highly Valued Group"). The Larger Highly Valued
Group included: Anchor BanCorp Wisconsin, BankAtlantic Bancorp Inc., CFSB
Bancorp Inc., D&N Financial Corp., First Federal Capital Corp., Flagstar
Bancorp Inc., InterWest Bancorp Inc., Metropolitan Financial Corp., Ocwen
Financial Corp., Parkvale Financial Corp., People's Bancshares Inc., and WSFS
Financial Corp. The analysis compared publicly available financial information
for DCB and the median data for each of the Peer Group and the Larger Highly
Valued Group as of and for each of the years ended December 31, 1993 through
December 31, 1997 and as of and for the twelve months ended March 31, 1998.
Analysis of Selected Merger Transactions. Sandler O'Neill reviewed 65
transactions announced from January 1, 1998 to July 17, 1998 involving
publicly traded savings institutions nationwide as acquired institutions with
transaction values greater than $15 million ("Nationwide Transactions") and 11
transactions announced from January 1, 1998 through July 17, 1998 involving
public savings institutions in the Mid-Atlantic Region (New Jersey, New York,
Maryland and Pennsylvania) as acquired institutions with transaction values
greater than $15 million ("Regional Transactions"). Sandler O'Neill reviewed
the ratios of transaction value to last four quarters' earnings, transaction
value to book value, transaction value to tangible book value, tangible book
premium to core deposits, transaction value to total deposits and transaction
value to total assets and computed high, low, mean, and median ratios and
premiums for the respective groups of transactions. These multiples were
applied to FIBC's financial information as of and for the twelve months ended
March 31, 1998. Based upon the median multiples for Nationwide Transactions,
Sandler O'Neill derived an imputed range of values per share of FIBC Common
Stock of $37.32 to $46.30. Based upon the median multiples for Regional
Transactions, Sandler O'Neill derived an imputed range of values per share of
FIBC Common Stock of $33.50 to $49.58.
No company involved in the transactions included in the above analysis is
identical to FIBC or DCB and no transaction included in the above analysis is
identical to the Merger. Accordingly, an analysis of the results of the
foregoing analysis is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the
public trading value of FIBC and DCB and the companies to which they are being
compared.
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Discounted Dividend Stream and Terminal Value Analysis. Sandler O'Neill also
performed an analysis which estimated the future stream of after-tax dividend
flows of FIBC through the fiscal year ending September 30, 2003 under various
circumstances, assuming FIBC performed in accordance with earnings forecasts
of its management and certain variations thereof. To approximate the terminal
value of FIBC Common Stock at September 30, 2003, Sandler O'Neill applied
price to earnings multiples ranging from 12x to 27x and applied multiples of
tangible book value ranging from 100% to 350%. The dividend income streams and
terminal values were then discounted to present values using different
discount rates (ranging from 9% to 15%) chosen to reflect different
assumptions regarding required rates of return of holders or prospective
buyers of FIBC Common Stock. This analysis, assuming the current dividend
payout ratio and management's earning forecasts, indicated an imputed range of
values per share of FIBC Common Stock of between $12.30 and $34.54 when
applying the price to earnings multiples, and an imputed range of values per
share of FIBC Common Stock of between $10.82 and $46.26 when applying
multiples of tangible book value. In connection with its analysis, Sandler
O'Neill used sensitivity analyses to consider the effects changes in the
underlying assumptions (including variations with respect to the growth rate
of assets, net interest rate spread, non-interest income, non-interest expense
and dividend payout ratio) would have on the resulting present value and
discussed these effects with the FIBC Board. Sandler O'Neill noted that the
discounted dividend stream and terminal value analysis is a widely used
valuation methodology, but the results of such methodology are highly
dependent upon the numerous assumptions that must be made, and the results
thereof are not necessarily indicative of actual values or actual future
results.
Pro Forma Merger Analysis. Sandler O'Neill analyzed certain potential pro
forma effects of the Merger through December 31, 2005, based upon a
transaction value of $40.50 per share with the Merger Consideration being 50%
cash and 50% DCB Common Stock and assuming the Average Closing Price of DCB
Common Stock was $26.38 per share, FIBC's and DCB's current and projected
income statements and balance sheets, and assumptions regarding the economic
environment, accounting and tax treatment of the Merger, charges associated
with the Merger, operating efficiencies and other adjustments discussed with
senior managements of FIBC and DCB. This analysis indicated that in the first
full fiscal year following consummation of the Merger, the Merger would be
dilutive to DCB's earnings per share (determined under GAAP), accretive to
DCB's cash earnings per share and dilutive to tangible book value per share of
DCB's Common Stock.
In connection with rendering its July 18, 1998 opinion, Sandler O'Neill
reviewed, among other things: (i) the Merger Agreement and exhibits thereto;
(ii) the Stock Option Agreement; (iii) certain publicly available financial
statements of FIBC and other historical financial information provided by FIBC
that Sandler O'Neill deemed relevant; (iv) certain publicly available
financial statements of DCB and other historical financial information
provided by DCB that Sandler O'Neill deemed relevant; (v) certain financial
analyses and forecasts of FIBC prepared by and reviewed with management of
FIBC and the views of senior management of FIBC regarding FIBC's past and
current business, operations, results thereof, financial condition and future
prospects; (vi) certain financial analyses and forecasts of DCB prepared by
and reviewed with management of DCB and the views of senior management of DCB
regarding DCB's past and current business, operations, results thereof,
financial condition and future prospects; (vii) the pro forma impact of the
Merger on DCB; (viii) the publicly reported historical price and trading
activity for FIBC's and DCB's Common Stock, including a comparison of certain
financial and stock market information for FIBC and DCB with similar publicly
available information for certain other companies the securities of which are
publicly traded; (ix) the financial terms of recent business combinations in
the savings institution industry, to the extent publicly available; (x) the
current market environment generally and the banking environment in
particular; and (xi) such other information, financial studies, analyses and
investigations and financial, economic and market criteria as Sandler O'Neill
considered relevant.
In connection with rendering the Sandler O'Neill Fairness Opinion, Sandler
O'Neill confirmed the appropriateness of its reliance on the analyses used to
render its July 18, 1998 opinion by performing procedures to update certain of
such analyses and by reviewing the assumptions upon which such analyses were
based and the factors considered in connection therewith.
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In performing its reviews and analyses, Sandler O'Neill assumed and relied
upon, without independent verification, the accuracy and completeness of all
the financial information, analyses and other information that was publicly
available or otherwise furnished to, reviewed by or discussed with it, and
Sandler O'Neill does not assume any responsibility or liability therefor.
Sandler O'Neill did not make an independent evaluation or appraisal of the
specific assets, the collateral securing assets or the liabilities (contingent
or otherwise) of FIBC or DCB or any of their respective subsidiaries, or the
collectibility of any such assets, nor was it furnished with any such
evaluations or appraisals. Sandler O'Neill is not an expert in the evaluation
of allowances for loan losses and it has not made an independent evaluation of
the adequacy of the allowance for loan losses of FIBC or DCB, nor has it
reviewed any individual credit files relating to FIBC or DCB. With FIBC's
consent, Sandler O'Neill has assumed that the respective aggregate allowances
for loan losses for both FIBC and DCB are adequate to cover such losses and
will be adequate on a pro forma basis for the combined entity. In addition,
Sandler O'Neill has not conducted any physical inspection of the properties or
facilities of FIBC or DCB. With respect to all financial information and
projections reviewed with each company's management, Sandler O'Neill assumed
that they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the respective managements of the
respective future financial performances of FIBC and DCB and that such
performances will be achieved. Sandler O'Neill expressed no opinion as to such
financial projections or the assumptions on which they were based.
Sandler O'Neill's opinion was necessarily based upon market, economic and
other conditions as they existed on, and could be evaluated as of, the date of
such opinion. Sandler O'Neill assumed, in all respects material to its
analysis, that all of the representations and warranties contained in the
Merger Agreement and all related agreements are true and correct, that each
party to such agreements will perform all of the covenants required to be
performed by such party under such agreements and that the conditions
precedent in the Merger Agreement are not waived. Sandler O'Neill also
assumed, with FIBC's consent, that there has been no material change in FIBC's
or DCB's assets, financial condition, results of operations, business or
prospects since the date of the last publicly filed financial statements
available to them, that FIBC and DCB will remain as going concerns for all
periods relevant to its analyses, and that the Merger will be accounted for as
a purchase and will qualify as a tax-free reorganization for federal income
tax purposes.
Under the Sandler O'Neill Agreement, FIBC will pay Sandler O'Neill a
transaction fee in connection with the Merger, a substantial portion of which
is contingent upon the consummation of the Merger. Under the terms of the
Sandler O'Neill Agreement, FIBC will pay Sandler O'Neill a transaction fee
equal to 2% of the aggregate purchase price up to $5.0 million, plus 1.5% of
the aggregate purchase in excess of $5.0 million but less than $15 million,
plus 1.0% of the aggregate purchase price in excess of $15 million. Based on
the closing price of DCB Common Stock on October 30, 1998 (the latest
practicable date prior to the date of this Proxy Statement- Prospectus), FIBC
would pay Sandler O'Neill a transaction fee of approximately $836,188, of
which approximately $203,981 has been paid and the balance of which will be
paid when the Merger is consummated. Sandler O'Neill has also received a fee
of $75,000 for rendering its fairness opinion. FIBC has also agreed to
reimburse Sandler O'Neill for its reasonable out-of-pocket expenses incurred
in connection with its engagement and to indemnify Sandler O'Neill and its
affiliates and their respective partners, directors, officers, employees,
agents, and controlling persons against certain expenses and liabilities,
including liabilities under securities laws.
Sandler O'Neill has in the past provided certain other investment banking
services to FIBC and has received compensation for such services. Sandler
O'Neill has also in the past provided certain financial advisory services to
DCB and has received compensation for such services. In the ordinary course of
its business as a broker dealer, Sandler O'Neill may purchase securities from
and sell securities to FIBC and DCB and may actively trade the equity
securities of FIBC and DCB for its own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
PROCEDURES FOR EXCHANGE OF FIBC CERTIFICATES
At or prior to the Effective Time, DCB shall deposit, or shall cause to be
deposited, with the Exchange Agent, for the benefit of the holders of FIBC
Certificates, certificates representing the shares of DCB Common
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Stock, the cash in lieu of fractional shares and an amount of cash sufficient
to pay the Aggregate Cash Consideration (such cash and certificates for shares
of DCB Common Stock, together with any dividends or distributions with respect
thereto, being hereinafter referred to as the "Exchange Fund") to be issued or
paid pursuant to the Merger Agreement in exchange for shares of FIBC Common
Stock.
As soon as practicable after the Effective Time, and in no event more than
five business days thereafter, the Exchange Agent shall mail, to each holder
of record of an FIBC Certificate who has not previously surrendered such FIBC
Certificate with an Election Form, a Letter of Transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
FIBC Certificates shall pass, only upon delivery of the FIBC Certificates to
the Exchange Agent) and instructions for use in effecting the surrender of the
FIBC Certificates in exchange for the Merger Consideration into which the
shares of FIBC Common Stock represented by such FIBC Certificate shall have
been converted pursuant to the Merger Agreement. Upon surrender of an FIBC
Certificate for exchange and cancellation to the Exchange Agent, together with
a duly executed Letter of Transmittal, the holder of such FIBC Certificate
shall be entitled to receive in exchange therefor the Merger Consideration to
which such holder of FIBC Common Stock shall have become entitled pursuant to
the Merger, and the FIBC Certificate so surrendered shall forthwith be
canceled. No interest will be paid or accrued on any cash constituting Merger
Consideration (including the cash in lieu of fractional shares) and any unpaid
dividends and distributions, if any, payable to holders of FIBC Certificates.
No dividends or other distributions declared after the Effective Time with
respect to DCB Common Stock and payable to the holders of record thereof shall
be paid to the holder of any unsurrendered FIBC Certificate with respect to
the shares of DCB Common Stock represented thereby, and no cash payment in
lieu of any fractional shares shall be paid to any such holder, until the
holder shall surrender such FIBC Certificate. After the surrender of any such
FIBC Certificate, the holder thereof 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 DCB Common Stock, if
any, represented by such FIBC Certificate.
After the Effective Time, there shall be no transfers on the stock transfer
books of FIBC of the shares of FIBC Common Stock which were issued and
outstanding immediately prior to the Effective Time. If, after the Effective
Time, FIBC Certificates representing such shares are presented for transfer to
the Exchange Agent, they shall be canceled and exchanged for Merger
Consideration as provided herein and pursuant to the Merger Agreement.
Notwithstanding anything to the contrary contained herein, no certificates
or scrip representing fractional shares of DCB Common Stock shall be issued
upon the surrender for exchange of FIBC Certificates, no dividend or
distribution with respect to DCB Common Stock shall be payable on or with
respect to any fractional share, and such fractional share interests shall not
entitle the owner thereof to vote or to any other rights of a stockholder of
DCB. In lieu of the issuance of any such fractional share, DCB shall pay to
each former stockholder of FIBC who otherwise would be entitled to receive a
fractional share of DCB Common Stock an amount in cash determined by
multiplying (i) the Average Closing Price by (ii) the fraction of a share of
DCB Common Stock which such holder would otherwise be entitled to receive
pursuant to the Merger Agreement.
Any portion of the Exchange Fund that remains unclaimed by the stockholders
of FIBC for 12 months after the Effective Time shall be paid to DCB. Any
stockholders of FIBC who have not theretofore exchanged their FIBC
Certificates shall thereafter look only to DCB for payment of the cash, shares
of DCB Common Stock, cash in lieu of fractional shares and unpaid dividends
and distributions on the DCB Common Stock deliverable in respect of each share
of FIBC Common Stock such stockholder holds as determined pursuant to the
Merger Agreement, in each case, without any interest thereon. If outstanding
FIBC Certificates are not surrendered or the payment for them is not claimed
prior to the date on which such payments would otherwise escheat to or become
the property of any governmental unit or agency, the unclaimed items shall, to
the extent permitted by abandoned property and any other applicable law,
become the property of DCB (and to the extent not in its possession shall be
paid over to it), free and clear of all claims or interest of any person
previously entitled to such claims. Notwithstanding the foregoing, none of
DCB, FIBC, the Exchange Agent or any other person shall
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be liable to any former holder of shares of FIBC Common Stock for any amount
properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
In the event any FIBC Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such FIBC
Certificate to be lost, stolen or destroyed and, if required by DCB, the
posting by such person of a bond in such amount as DCB may direct as indemnity
against any claim that may be made against it with respect to such FIBC
Certificate, the Exchange Agent will issue in exchange for such lost, stolen
or destroyed FIBC Certificate the cash and/or shares of DCB Common Stock and
cash in lieu of fractional shares deliverable in respect thereof pursuant to
the Merger Agreement.
REGULATORY APPROVALS
The Merger and Bank Merger are subject to the approval of the OTS pursuant
to the Home Owners' Loan Act, Section 1467a(s) of Title 12 of the United
States Code, and the Bank Merger Act, Section 1828(c) of Title 12 of the
United States Code, respectively, and Sections 552.13 and 563.22 of Title 12
of the Code of Federal Regulations promulgated thereunder. DCB and FIBC filed
an application for approval of the Merger and the Bank Merger with the OTS on
September 25, 1998. This application is currently under review by the OTS. The
OTS is required under these statutes to evaluate the applications by taking
into consideration, among other things, the capital level of the resulting
institution, the financial and managerial resources and future prospects of
the institutions involved, the convenience and needs of the communities to be
served and the conformity of the transaction to applicable law, regulation and
supervisory policies. In addition, the OTS may not approve any proposed
acquisition (i) which would result in a monopoly or which would be in
furtherance of any combination or conspiracy to monopolize or to attempt to
monopolize the savings and loan business in any part of the United States, or
(ii) which in any section of the country may have the effect of substantially
lessening competition or tending to create a monopoly or which in any other
manner would be in restraint of trade, unless the OTS finds that the anti-
competitive effects of the proposed acquisition are clearly outweighed in the
public interest by the probable effect of the acquisition in meeting the
convenience and needs of the community to be served. The OTS also considers,
among other things, the fairness and disclosure of the Merger Agreement and
the Plan of Bank Merger (including compensation to officers, directors and
controlling persons of the disappearing association by the surviving
association), the justification, need for and compensation to be paid to any
advisory board, fees paid to each person or firm rendering legal or other
professional services in connection with a merger, and the accounting and tax
treatment of the merger. The OTS will also consider an assessment of each
party's Year 2000 compliance efforts and the impact of the Merger on such
efforts.
Under the Community Reinvestment Act of 1977 ("CRA"), the OTS must take into
account Dime of Williamsburgh's and Financial Federal's respective records of
performance in meeting the credit needs of the entire communities, including
low- and moderate-income neighborhoods, served by Dime of Williamsburgh and
Financial Federal, respectively. The regulations of the OTS also require the
publication of notice and the opportunity for public comments relating to the
application for approval, and the OTS may hold formal or informal meetings, if
deemed appropriate to consider these comments. Any such comments or meetings
could prolong the period during which the applications are subject to review
by the OTS.
In addition, under federal law, a period of 30 days must expire following
approval by the OTS within which period the Department of Justice may file
objections to the Merger under the federal antitrust laws. The post- approval
waiting period may be reduced by the OTS to 15 days, with the concurrence of
the Department of Justice. The Department of Justice could take such action
under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the Merger and Bank Merger unless
divestiture of an acceptable number of branches to a competitively suitable
purchaser could be made. While DCB believes that the likelihood of such action
by the Department of Justice is remote in this case, there can be no assurance
that the Department of Justice will not initiate such proceeding, or that the
Attorney General of the State of New York will not challenge the Merger, or if
such proceeding is instituted or challenge is made, as to the result thereof.
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The Merger cannot proceed in the absence of the requisite regulatory
approvals. See "-- Conditions to the Consummation of the Merger" and "--
Termination." There can be no assurance that such regulatory approvals will
be obtained, and if obtained, there can be no assurance as to the date of any
such approval. There can also be no assurance that any such approvals will not
contain a condition or requirement which causes such approvals to fail to
satisfy the conditions set forth in the Merger Agreement and described below
under "-- Conditions to the Consummation of the Merger."
CONDITIONS TO THE CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to various conditions. While it is
anticipated that all such conditions will be satisfied, there can be no
assurance that all of such conditions will be satisfied or waived.
The respective obligations of DCB and FIBC to cause the Merger to be
consummated are subject to certain conditions, including the following:
(i) the Merger Agreement shall have been approved and adopted by the
requisite vote of the holders of the outstanding shares of FIBC Common
Stock under applicable law;
(ii) the shares of DCB Common Stock which shall be issued to the
stockholders of FIBC upon consummation of the Merger shall have been
authorized for listing for quotation on the Nasdaq National Market;
(iii) all necessary regulatory or governmental approvals, consents or
waivers required to consummate the transactions contemplated by the Merger
Agreement shall have been obtained and shall remain in full force and
effect and all statutory waiting periods in respect thereof shall have
expired; and all other consents, waivers and approvals of any third parties
which are necessary to permit the consummation of the Merger and the other
transactions contemplated by the Merger Agreement shall have been obtained
or made, except for those which the failure to obtain would not have a
Material Adverse Effect (as defined herein) on FIBC or DCB, and none of
such approvals or waivers shall contain any term or condition which would
have a Material Adverse Effect on DCB and its subsidiaries, taken as a
whole, after giving effect to the Merger;
(iv) the DCB Registration Statement shall have become effective under the
Securities Act and no stop order suspending the effectiveness of the DCB
Registration Statement shall have been issued and no proceedings for that
purpose shall have been initiated or threatened by the Commission;
(v) no order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger shall be in effect and no statute, rule,
regulation, order, injunction or decree shall have been enacted, entered,
promulgated or enforced by any governmental entity which prohibits,
restricts or makes illegal consummation of the Merger;
(vi) the representations and warranties of the other party in the Merger
Agreement being true and correct as of the date of the Merger Agreement and
as of the Closing Date, except for certain representations and warranties
the failure of which to be true and correct would not have a Material
Adverse Effect (as defined below) with respect to the party making such
representation or warranty, and the performance by the other party in all
material respects of all obligations required by the Merger Agreement to be
performed by it at or prior to the Closing Date;
(vii) the receipt by DCB of the opinion of Thacher Proffitt & Wood, and
the receipt by FIBC of the opinion of Skadden, Arps, Slate, Meagher & Flom
LLP, each dated as of the Effective Time and each substantially to the
effect that on the basis of the facts, representations and assumptions set
forth in such opinion which are consistent with the state of facts existing
at the Effective Time, the Merger will be treated as a reorganization
within the meaning of Section 368(a) of the Code and that, accordingly, for
federal income tax purposes: (i) no gain or loss will be recognized by DCB
or FIBC as a result of the Merger; (ii) no gain or loss will be recognized
by the stockholders of FIBC who exchange all of their FIBC Common Stock
solely for DCB Common Stock pursuant to the Merger (except with respect to
cash received in lieu of a fractional share interest in DCB Common Stock);
and (iii) the aggregate tax basis of the DCB Common Stock received by
stockholders who exchange all of their FIBC Common Stock solely for DCB
Common
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Stock pursuant to the Merger will be the same as the aggregate tax basis of
the FIBC Common Stock surrendered in exchange therefor (reduced by any
amount allocable to a fractional share interest for which cash is
received);
(viii) FIBC and DCB shall have caused to be delivered to the other "cold
comfort" letters or letters of procedures from their respective independent
certified public accountants, dated (i) the date of the mailing of this
Proxy Statement-Prospectus to FIBC's stockholders and (ii) a date not
earlier than five business days preceding the Closing Date concerning such
matters as are customarily covered in transactions of the type contemplated
by the Merger Agreement; and
(ix) the delivery to each of DCB and FIBC of various letters,
certificates and other documents.
REPRESENTATIONS AND WARRANTIES
Each of FIBC and DCB have made certain representations and warranties to the
other in the Merger Agreement as to, among other things, the authorization,
validity, binding effect and enforceability of the Merger Agreement, various
corporate matters, capital structure, consents and approvals, regulatory
reports, financial statements, certain fees payable in connection with the
Merger, the absence of material adverse changes, the absence of certain legal
proceedings, taxes, employee benefit plans, compliance with applicable law,
agreements with regulatory agencies, environmental matters, loan portfolio and
property. FIBC has also made certain representations and warranties to DCB
with respect to among other things, its material contracts, the
inapplicability of antitakeover provisions, its insurance, its investment
securities and borrowings, and certain other matters. DCB has also made
representations and warranties to FIBC with respect to the shares of DCB
Common Stock to be issued in connection with the Merger.
None of the representations and warranties of the parties, with the
exception of those relating to such party's corporate organization, insurance
of deposit accounts, capitalization, absence of certain changes or events,
taxes and financial advisor opinion, will be deemed to be untrue or incorrect
for any purpose under the Merger Agreement, and neither DCB nor FIBC will be
deemed to have breached a representation or warranty for any purpose under the
Merger Agreement, in any case as a result of the existence or absence or any
fact, circumstance or event unless such fact, circumstance or event,
individually or taken together with all other facts, circumstances or events
inconsistent with any representations or warranties of such party contained in
the Merger Agreement, has had a Material Adverse Effect with respect to such
party. The term "Material Adverse Effect" means, with respect to either party,
any material adverse effect on (i) the business, results of operations or
financial condition of such party and its subsidiaries taken as a whole, other
than any such effect attributable to or resulting from (a) any change in
banking or similar laws, rules or regulations of general applicability or
interpretations thereof by courts or governmental authorities, (b) any change
in GAAP or regulatory accounting principles applicable to banks, thrifts or
their holding companies generally, or (c) any action or omission of FIBC or
DCB or any subsidiary of either of them taken with the prior written consent
of the other party hereto or (ii) the ability of such party and its
subsidiaries to consummate the transactions contemplated by the Merger
Agreement.
FIBC STOCK OPTION PLANS
DCB has agreed in the Merger Agreement that, at the Effective Time, each
option to purchase shares of FIBC Common Stock that has been issued by FIBC
and is outstanding immediately prior to the Effective Time (each, an "FIBC
Option"), pursuant to the FIBC 1995 Incentive Stock Option Plan or the 1995
Stock Option Plan for Outside Directors (the "FIBC Option Plans"), whether or
not then vested or exercisable, will be canceled and all rights thereunder
will be extinguished. As consideration for such cancellation, FIBC will make
payment, immediately prior to the Effective Time, to each holder of an FIBC
Option of an amount determined by multiplying (a) the number of shares of FIBC
Common Stock underlying each FIBC Option by (b) an amount equal to the excess
(if any) of (i) the Per Share Consideration over (ii) the exercise price per
share of such FIBC Option, provided, that no payment will be made to an FIBC
Option holder unless and until the holder has executed and delivered to FIBC
an instrument accepting such payment in full settlement of his or her rights
under the outstanding FIBC Option. Notwithstanding the foregoing, the Merger
Agreement provides that at the
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Effective Time, FIBC Options held by Messrs. Latawiec, O'Gorman, Calamari,
Hickey, Russo and Segrete and Ms. Swaya ("Continuing Option Holders") which
are outstanding and unexercised immediately prior thereto may, at the election
of the holder thereof, be converted automatically into an option to purchase
shares of DCB Common Stock (a "Converted Option") in an amount and at an
exercise price determined as provided below (and, unless otherwise agreed to
between DCB and a Continuing Option Holder, otherwise subject to the terms of
the applicable FIBC Option Plan, the agreements evidencing grants thereunder
and any other agreements between FIBC and the relevant optionee regarding FIBC
Options, other than stock appreciation rights or limited stock appreciation
rights or other rights to receive cash payments under the FIBC Option Plans):
(1) the number of shares to be subject to the new option shall be equal
to the product of the number of shares of FIBC Common Stock subject to the
original option and the Final Exchange Ratio, provided that any fractional
shares of DCB Common Stock resulting from such multiplication shall be
rounded down to the nearest whole share; and
(2) the exercise price per share of DCB Common Stock under the new option
shall be equal to the exercise price per share of FIBC Common Stock under
the original option divided by the Final Exchange Ratio, provided that such
exercise price shall be rounded up to the nearest cent.
Unless otherwise agreed to between DCB and a Continuing Option Holder, all
Converted Options will be exercisable for the same period and have the same
terms and conditions applicable to the FIBC Option which they replace. DCB has
agreed in the Merger Agreement to reserve for future issuance a sufficient
number of additional shares of DCB Common Stock to provide for the
satisfaction of its obligation with respect to the Converted Options.
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Merger Agreement, each of FIBC and DCB has agreed to, during
the period from the date of the Merger Agreement to the Effective Time (except
as expressly provided in the Merger Agreement or the Stock Option Agreement),
use commercially reasonable efforts to, and shall cause each of its respective
subsidiaries to use commercially reasonable efforts to, (i) conduct its
business in the ordinary and usual course consistent with past practices and
prudent banking practice; (ii) maintain and preserve intact its business
organization, properties, leases, employees and advantageous business
relationships and retain the services of its officers and key employees, (iii)
take no action which would adversely affect or delay the ability of FIBC,
Financial Federal, DCB or Dime of Williamsburgh to perform its covenants and
agreements on a timely basis under the Merger Agreement and (iv) take no
action which would adversely affect or delay the ability of FIBC, Financial
Federal, DCB or Dime of Williamsburgh to obtain any necessary approvals,
consents or waivers of any governmental authority required for the
transactions contemplated by the Merger Agreement or which would reasonably be
expected to result in any such approvals, consents or waivers containing any
material condition or restriction.
In addition, pursuant to the Merger Agreement, except as otherwise
specifically provided by the Merger Agreement, the Stock Option Agreement or
consented to in writing by DCB, FIBC has agreed that it will not, and it will
not permit any of its subsidiaries to, take certain actions, including the
following:
(i) declare or pay any dividends on, or make other distributions in
respect of, any of its capital stock, other than normal quarterly dividends
not in excess of $0.125 per share of FIBC Common Stock; provided, however,
that, prior to the closing of the Merger, FIBC may pay the Special Dividend
(see "-- Special Dividend");
(ii) (a) repurchase, redeem or otherwise acquire any shares of the
capital stock of FIBC or any subsidiary of FIBC, or any securities
convertible into or exercisable for any shares of the capital stock of FIBC
or any subsidiary of FIBC, (b) split, combine or reclassify any shares of
its capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for shares of
its capital stock, or (c) issue, deliver or sell, or authorize or propose
the issuance, delivery or sale of, any shares of its capital stock or any
securities convertible into or exercisable for, or any rights, warrants or
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options to acquire, any such shares, or enter into any agreement with
respect to any of the foregoing, except, in the case of clauses (b) and
(c), for the issuance of FIBC Common Stock upon the exercise or fulfillment
of rights or options issued or existing pursuant to the Option Agreement,
FIBC Option Plans or any employee benefit plans, programs or arrangements,
all to the extent outstanding and in existence on the date of the Merger
Agreement;
(iii) amend its Certificate of Incorporation, Bylaws or other similar
governing documents;
(iv) make any capital expenditures other than those which (i) are made in
the ordinary course of business or are necessary to maintain existing
assets in good repair and (ii) in any event are in an amount of no more
than $50,000 in the aggregate;
(v) enter into any new line of business;
(vi) acquire or agree to acquire, by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof
or otherwise acquire any assets, which would be material, individually or
in the aggregate, to FIBC, other than in connection with foreclosures,
settlements in lieu of foreclosure or troubled loan or debt restructurings
in the ordinary course of business consistent with past practices;
(vii) take any action that is intended or may reasonably be expected to
result in any of the conditions to the Merger not being satisfied;
(viii) change its methods of accounting in effect at March 31, 1998,
except as required by changes in GAAP or regulatory accounting principles
as concurred in writing by its independent auditors;
(ix) (a) except as otherwise provided in the Merger Agreement, as
required by applicable law or as required to maintain qualification
pursuant to the Code, adopt, amend, or terminate any employee benefit plan
or any agreement, arrangement, plan, trust, other funding arrangement or
policy between FIBC or any subsidiary of FIBC and one or more of its
current or former directors, officers, employees or independent contractors
except as required pursuant to irrevocable commitments existing on the date
of the Merger Agreement, change any trustee or custodian of the assets of
any plan or transfer plan assets among trustees or custodians, except that
FIBC may adopt the severance policy and pay retention bonuses as provided
in the Merger Agreement, (b) except for normal salary increases in the
ordinary course of business consistent with past practice, which increases
do not exceed 5% of annual rate of base salary in effect on the date of the
Merger Agreement in any individual case or except as required by applicable
law, increase or accelerate payment of in any manner the compensation or
fringe benefits of any director, officer or employee or pay any benefit not
required by any employee benefit plan or agreement as in effect as of the
date hereof; provided, however, that nothing contained herein shall
prohibit FIBC from (x) committing to pay certain specified retention
bonuses, or (y) paying, on or immediately prior to the Closing Date,
discretionary bonuses in respect of fiscal 1998 such that the aggregate
amount of all such bonuses in respect of fiscal 1998 does not exceed
$291,000 and in individual amounts to be mutually agreed upon by DCB and
the FIBC Board, provided, however, that DCB's agreement shall not be
unreasonably withheld or (c) grant or award any stock options, stock
appreciation rights, restricted stock, restricted stock units or
performance units or shares;
(x) other than activities in the ordinary course of business consistent
with past practice, sell, lease, encumber, assign or otherwise dispose of,
or agree to sell, lease, encumber, assign or otherwise dispose of, any of
its material assets, properties or other rights or agreements except as
otherwise specifically contemplated by the Merger Agreement;
(xi) other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money or assume, guarantee,
endorse or otherwise as an accommodation become responsible for the
obligations of any other individual, corporation or other entity;
(xii) file any application to relocate or terminate the operations of any
banking office of it or any of its subsidiaries;
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(xiii) create, renew, amend or terminate or give notice of a proposed
renewal, amendment or termination of, any material contract, agreement or
lease for goods, services or office space to which FIBC or any of its
subsidiaries is a party or by which FIBC or any of its subsidiaries or
their respective properties is bound, other than the renewal in the
ordinary course of business of any lease the term of which expires prior to
the Closing Date;
(xiv) other than in the ordinary course of business consistent with past
practice, in individual amounts not to exceed $25,000, make any investment
either by purchase of stock or securities, contributions to capital,
property transfers or purchase of any property or assets of any other
individual, corporation or other entity;
(xv) make any investment in any debt security, including mortgage-backed
and mortgage related securities, other than U.S. government and U.S.
government agency securities with final maturities not greater than five
years or mortgage-backed or mortgage related securities which would not be
considered "high risk" securities pursuant to Thrift Bulletin Number 52
issued by the OTS, that are purchased in the ordinary course of business
with past practice;
(xvi) enter into or terminate any contract or agreement, or make any
change in any of its leases or contracts, other than with respect to those
involving aggregate payments of less than, or the provision of goods or
services with a market value of less than, $50,000 per annum;
(xvii) settle any claim, action or proceeding involving any liability of
FIBC or any of its subsidiaries for money damages in excess of $50,000 or
involving any material restrictions upon the operations of FIBC or any of
its subsidiaries;
(xviii) except in the ordinary course of business and in amounts less
than $100,000, waive or release any material right or collateral or cancel
or compromise any extension of credit or other debt or claim;
(xix) make, renegotiate, renew, increase, extend, modify or purchase any
(i) loan, lease (credit equivalent), advance, credit enhancement or other
extension of credit, or make any commitment in respect of any of the
foregoing, except in accordance with the guidelines specified in the Merger
Agreement, (ii) unsecured commercial loans or (iii) loans, advances or
commitments to employees, directors, officer or other affiliated parties of
FIBC or any of its subsidiaries;
(xx) incur any additional borrowings other than short-term (with a final
maturity of two years or less) Federal Home Loan Bank borrowings and
reverse repurchase agreements consistent with past practice, or pledge any
of its assets to secure any borrowings other than as required pursuant to
the terms of borrowings of FIBC or any subsidiary in effect at the date
hereof or in connection with borrowings or reverse repurchase agreements
permitted hereunder;
(xxi) except for advances in the ordinary course to fund the carrying
costs of certain specified properties up to $50,000 in the aggregate, make
any investment or commitment to invest in real estate or in any real estate
development project, other than real estate acquired in satisfaction of
defaulted mortgage loans and investments or commitments approved by the
FIBC Board prior to the date of the Merger Agreement and disclosed in
writing to DCB;
(xxii) except pursuant to commitments existing at the date of the Merger
Agreement which have previously been disclosed in writing to DCB, make any
real estate loans secured by undeveloped land or real estate located
outside the State of New York or make any construction loan;
(xxiii) establish or make any commitment relating to the establishment of
any new branch or other office facilities other than those for which all
regulatory approvals have been obtained; with respect to any such new
branch or other office facility for which regulatory approval has been
received, make any capital expenditures that in the aggregate would exceed
$50,000;
(xxiv) except for advances in the ordinary course to fund the carrying
costs of certain specified properties up to $50,000 in the aggregate,
organize, capitalize, lend to or otherwise invest in any subsidiary, or
invest in or acquire a 10% or greater equity or voting interest in any
firm, corporation or business enterprise; or
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(xxv) elect to the FIBC Board any person who was not a member of the FIBC
Board as of the date of the Merger Agreement.
In addition, pursuant to the Merger Agreement, except as otherwise
specifically provided by the Merger Agreement or consented to in writing by
FIBC, DCB has agreed that it will not, and it will not permit any of its
subsidiaries to, take certain actions, including the following:
(i) declare or pay any dividends on or make any other distributions in
respect of any of its capital stock other than its current quarterly
dividends; provided, however, that DCB may increase the quarterly cash
dividend on DCB Common Stock up to $0.15 per share;
(ii) take any action that is intended or may reasonably be expected to
result in any of the conditions to the Merger not being satisfied; or
(iii) change its methods of accounting in effect at March 31, 1998,
except in accordance with changes in GAAP or regulatory accounting
principles as concurred to by its independent auditors.
At or before the Effective Time, upon the request of DCB, FIBC shall,
consistent with GAAP, cause Financial Federal to modify and change its loan,
litigation and real estate valuation policies and practices (including loan
classifications and levels of reserves) so as to be applied consistently on a
mutually satisfactory basis with those of Dime of Williamsburgh and establish
such accruals and reserves as shall be necessary to reflect Merger-related
expenses and costs incurred by FIBC; provided, however, that FIBC is not
required to take such action (x) more than five days prior to the Effective
Time or (y) unless DCB agrees in writing that all conditions to closing set
forth in the Merger Agreement have been satisfied or waived (other than those
conditions relating to the delivery of documents on the Closing Date).
NO SOLICITATION
FIBC has agreed not to (i) solicit or encourage, directly or indirectly, any
inquiries or the making of any proposal or offer (including, without
limitation, any proposal or offer to FIBC's stockholders) with respect to a
merger, consolidation or similar transaction involving, or any purchase of,
all or more than 10% of the assets or any equity securities of FIBC or any of
its material subsidiaries (any such proposal or offer being hereinafter
referred to as an "Acquisition Proposal") or, (ii) engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to an Acquisition Proposal; provided,
however, that nothing contained in the Merger Agreement shall prevent FIBC or
the FIBC Board from (i) complying with Rule 14e-2 promulgated under the
Exchange Act with regard to an Acquisition Proposal or (ii)(A) providing
information in response to a request therefor by a person who has made an
unsolicited bona fide written Acquisition Proposal if the FIBC Board receives
from the person so requesting such information an executed confidentiality
agreement on terms substantially equivalent to those contained in the
confidentiality agreement between DCB and FIBC; or (B) engaging in any
negotiations or discussions with any person who has made an unsolicited bona
fide written Acquisition Proposal, if and only to the extent that, in each
such case referred to in clause (A) or (B) above, (i) the FIBC Board, after
consultation with outside legal counsel, in good faith deems such action to be
legally necessary for the proper discharge of its fiduciary duties under
applicable law and (ii) the FIBC Board determines in good faith (after
consultation with its financial advisor) that such Acquisition Proposal, if
accepted, is reasonably likely to be consummated, taking into account all
legal, financial and regulatory aspects of the proposal and the person making
the proposal and would, if consummated, result in a more favorable transaction
than the transaction contemplated by the Merger Agreement; provided further,
however, that FIBC may communicate information about any such Acquisition
Proposal to its stockholders if, in the judgment of the FIBC Board, based upon
the advice of outside counsel, such communication is required under applicable
law. FIBC must notify DCB immediately if any such inquiries, proposals or
offers are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with FIBC
and the identity of the person making such inquiry, proposal or offer and the
substance thereof and must keep DCB informed of any developments with respect
thereto immediately upon occurrence thereof. FIBC has agreed to immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing.
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AMENDMENT AND WAIVER
Subject to compliance with applicable law, the Merger Agreement may be
amended by DCB and FIBC at any time before or after approval of the Merger
Agreement by FIBC's stockholders except that, after such approval, no
amendment may be made which reduces the amount or changes the form of the
consideration to be delivered to FIBC's stockholders other than as
contemplated by the Merger Agreement. Subject to applicable law, the parties
may extend the time for the performance of any of the obligations or other
acts of the other party to the Merger Agreement, may waive any inaccuracies in
the representations and warranties of the other party contained in the Merger
Agreement or in any document delivered pursuant thereto and may waive
compliance with any of the agreements or conditions of the other party
contained in the Merger Agreement.
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, either before or after its approval by the stockholders of FIBC, as
follows:
(i) by the mutual consent of DCB and FIBC, if the Board of Directors of
each so determines by a vote of a majority of the members of its entire
Board;
(ii) by either DCB or FIBC upon written notice to the other party (a) 60
days after the date on which any request or application for the approval,
consent or waiver of a governmental agency required to permit consummation
of the transactions contemplated by the Merger shall have been denied or
withdrawn at the request or recommendation of the governmental entity which
must grant such approval, consent or waiver, unless within the 60-day
period following such denial or withdrawal a petition for rehearing or an
amended application has been filed with the applicable governmental entity,
unless such denial or request or recommendation for withdrawal shall be due
to the failure of the party seeking to terminate the Merger Agreement to
perform or observe the covenants and agreements of such party set forth
therein or (b) if any governmental entity of competent jurisdiction shall
have issued a final nonappealable order enjoining or otherwise prohibiting
the Merger;
(iii) by either DCB or FIBC, if its Board of Directors so determines by a
vote of a majority of the members of its entire Board, if the Merger shall
not have been consummated on or before March 31, 1999, unless the failure
of the closing to occur by such date shall be due to the failure of the
party seeking to terminate the Merger Agreement to perform or observe the
covenants and agreements of such party set forth therein;
(iv) by either DCB or FIBC, if its Board of Directors so determines by a
vote of a majority of the members of its entire Board, if any approval of
FIBC's stockholders required for the consummation of the Merger shall not
have been obtained by reason of the failure to obtain the required vote at
a duly held meeting of such stockholders or at any adjournment or
postponement thereof (provided that if FIBC is the terminating party, it
shall not be in material breach of any of its obligations under the Merger
Agreement to take all necessary steps to give notice of, convene and hold
the Special Meeting and to recommend to the approval of the Merger
Agreement and the transactions contemplated thereby to its stockholders);
(v) by either DCB or FIBC, if its Board of Directors so determines by a
vote of a majority of the members of its entire Board, (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained in the Merger Agreement) if
there shall have been a material breach of any of the representations or
warranties set forth in the Merger Agreement on the part of the other
party, which breach is not cured within 30 days following written notice to
the party committing such breach, or which breach, by its nature, cannot be
cured prior to the closing of the Merger, and if such breach, together with
all other such breaches, would entitle the party receiving such
representation not to consummate the transactions contemplated by the
Merger Agreement;
(vi) by either DCB or FIBC, if its Board of Directors so determines by a
vote of a majority of the members of its entire Board (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained in the Merger Agreement) if
there shall have been a material breach of any of the covenants or
agreements set forth in the Merger Agreement on
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the part of the other party, which breach shall not have been cured within
30 days following receipt by the breaching party of written notice of such
breach from the other party hereto, or which breach, by its nature, cannot
be cured prior to the closing of the Merger; or
(vii) by FIBC, if the FIBC Board so determines by a vote of a majority of
the members of the entire FIBC Board, if the Average Closing Price is less
than or equal to $20.25, subject, however, to the following three
sentences. If FIBC makes such an election to terminate the Merger
Agreement, it shall give 10 days prior written notice thereof to DCB
(provided that such notice of election may be withdrawn at any time within
the aforementioned 10-day period). During the seven-day period commencing
with its receipt of such notice, DCB shall have the option to increase the
value of the cash, the DCB Common Stock or a combination thereof being
offered to FIBC's stockholders (through an increase in the Aggregate Cash
Consideration and/or Preliminary Stock Ratio) such that the Per Share
Consideration is at least $38.12 per share (provided that DCB shall be
limited in its ability to elect to increase the Aggregate Cash
Consideration to the extent necessary to allow the Merger to qualify as a
reorganization within the meaning of Section 368 of the Code). If DCB so
elects within such seven-day period, it shall give prompt written notice to
FIBC of such election and the increase in the Merger Consideration
whereupon no termination shall have occurred and the Merger Agreement shall
remain in effect in accordance with its terms (except as the Aggregate Cash
Consideration and/or the Preliminary Stock Ratio, and all amounts derived
therefrom, shall have been so modified). See "-- Merger Consideration and
Election, Allocation and Proration Procedures."
In the event of termination of the Merger Agreement by either DCB or FIBC as
set forth above, the Merger Agreement shall become void and have no effect,
except that the provisions of the Merger Agreement relating to confidentiality
of information, expenses and the payment of a termination fee in certain
circumstances (see "-- Termination Fee" below) shall survive any such
termination. Notwithstanding the foregoing, neither DCB nor FIBC shall be
relieved or released from any liabilities or damages arising out of its
willful breach of any provision of the Merger Agreement.
TERMINATION FEE
In recognition of the efforts and expense of DCB in structuring and
negotiating the terms of the Merger, the Merger Agreement provides that FIBC
shall pay to DCB a termination fee of $1.0 million in cash upon the occurrence
of any of the following:
(i) any person other than DCB or any subsidiary of DCB shall have
acquired beneficial ownership of 10% or more of the outstanding shares of
FIBC Common Stock, provided that such acquisition shall have required prior
regulatory approval (including waiver of such approval);
(ii) (A) the holders of FIBC Common Stock shall not have approved the
Merger Agreement and the transactions contemplated thereby at the meeting
of such stockholders held for the purpose of voting on the Merger
Agreement, (B) such meeting shall not have been held or shall have been
canceled, (C) the FIBC Board shall have publicly withdrawn or modified, or
publicly announced its intent to withdraw or modify, in any manner adverse
to DCB, its recommendation that its stockholders approve the transactions
contemplated by the Merger Agreement, or (D) FIBC shall have breached any
covenant or obligation contained in the Merger Agreement and such breach
would entitle DCB to terminate the Merger Agreement, in each case after it
shall have been publicly announced that any person other than DCB or any
subsidiary of DCB shall have made a bona fide proposal by public
announcement or written communication that becomes the subject of public
disclosure to engage in a merger, consolidation or similar transaction
with, or a purchase or other acquisition of all or substantially all of the
assets of FIBC or 10% or more of the outstanding shares of FIBC Common
Stock; or
(iii) an FIBC Purchase Event (as defined below under "CERTAIN RELATED
TRANSACTIONS -- Stock Option Agreement") shall have occurred prior to the
occurrence of an Exercise Termination Event (as defined in the Stock Option
Agreement).
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EXPENSES
All costs and expenses incurred in connection with the Merger Agreement, the
Stock Option Agreement and the transactions contemplated thereby shall be paid
by the party incurring such costs and expenses.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following summary sets forth the anticipated material federal income tax
consequences of the Merger to FIBC stockholders who hold shares of FIBC Common
Stock as a capital asset at the Effective Time. The tax treatment of each FIBC
stockholder will depend in part upon such stockholder's particular situation
and the consideration received by such stockholder pursuant to the Merger.
This summary is based on the provisions of the Code, the Treasury Regulations
promulgated thereunder and administrative and judicial interpretations
thereof, all as in effect as of the date hereof. Such laws, regulations and
interpretations are subject to change (possibly with retroactive effect). The
federal income tax discussion set forth below may not be applicable to certain
classes of taxpayers, including insurance companies, securities dealers,
financial institutions, tax exempt organizations or trusts, foreign persons,
persons who hold shares of FIBC Common Stock as part of a hedge, straddle or
conversion transaction and persons who acquired shares of FIBC Common Stock
pursuant to the exercise of employee stock options or rights or otherwise as
compensation. In addition, this discussion does not address the tax
consequences of transactions effectuated prior to or after the Merger, whether
or not such transactions are in connection with the Merger, including, without
limitation, the receipt of the Special Dividend, if any, and the exercise of
options or rights to purchase shares of FIBC stock in anticipation of the
Merger. FIBC stockholders are urged to consult their tax advisors as to the
specific tax consequences to them of the Merger, including the applicability
and effect of federal, state, local and other tax laws.
Tax Opinions. It is intended that the Merger will be treated as a
reorganization within the meaning of Section 368(a) of the Code. Consummation
of the Merger is conditioned upon receipt by DCB of an opinion of Thacher
Proffitt & Wood, and receipt by FIBC of an opinion of Skadden, Arps, Slate,
Meagher & Flom LLP (the "Tax Opinions"), each dated as of the Effective Time
and each substantially to the effect that on the basis of the facts,
representations and assumptions set forth in such opinion which are consistent
with the state of facts at the Effective Time, the Merger will be treated as a
reorganization within the meaning of Section 368(a) of the Code and that,
accordingly, for federal income tax purposes:
(i) no gain or loss will be recognized by DCB or FIBC as a result of the
Merger;
(ii) no gain or loss will be recognized by the stockholders of FIBC who
exchange all of their FIBC Common Stock solely for DCB Common Stock
pursuant to the Merger (except with respect to cash received in lieu of a
fractional share interest in DCB Common Stock); and
(iii) the aggregate tax basis of the DCB Common Stock received by
stockholders who exchange all of their FIBC Common Stock solely for DCB
Common Stock pursuant to the Merger will be the same as the aggregate tax
basis of the FIBC Common Stock surrendered in exchange therefor (reduced by
any amount allocable to a fractional share interest for which cash is
received).
The Tax Opinions will not be binding on the Internal Revenue Service (the
"IRS"), and there can be no assurance that the IRS will not contest the
conclusions expressed therein. The Tax Opinions will be based in part upon
certain factual assumptions and upon certain representations and covenants,
including those contained in certificates of officers of DCB, Dime of
Williamsburgh, FIBC, Financial Federal and others, which representations and
covenants Thacher Proffitt & Wood and Skadden, Arps, Slate, Meagher & Flom LLP
will assume to be true, correct and complete. If such assumptions,
representations or covenants are inaccurate, the Tax Opinions could be
adversely affected. In the event the parties waive receipt of the Tax Opinions
and the material federal income tax consequences are materially different for
stockholders than as described herein, FIBC will resolicit its voting
stockholders prior to completing the Merger.
Tax Consequences; General. As discussed below, the federal income tax
consequences of the Merger to a stockholder of FIBC Common Stock generally
will depend on whether the stockholder receives cash, DBC
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Common Stock or a combination thereof in exchange for such stockholder's FIBC
Common Stock. In addition, the discussion below assumes the correctness of the
Tax Opinions and does not consider the receipt of the Special Dividend, if
any. See "-- Special Dividend."
Exchange of FIBC Common Stock Solely for DCB Common Stock. No gain or loss
will be recognized by an FIBC stockholder who receives solely DCB Common Stock
in exchange for all of such stockholder's shares of FIBC Common Stock pursuant
to the Merger (except to the extent such a stockholder receives cash in lieu
of a fractional share interest in DCB Common Stock). Such stockholder's
aggregate tax basis in the DCB Common Stock received pursuant to the Merger
will equal such stockholder's aggregate tax basis in the shares of FIBC Common
Stock exchanged therefor, reduced by any amount allocable to a fractional
share interest of DCB Common Stock for which cash is received. The holding
period of DCB Common Stock received will include the holding period of the
shares of FIBC Common Stock exchanged therefor.
Exchange of FIBC Common Stock for DCB Common Stock and Cash. An FIBC
stockholder who receives both DCB Common Stock and Cash Consideration in
exchange for all of the shares of FIBC Common Stock actually owned by such
stockholder pursuant to the Merger will generally recognize gain, but not
loss, to the extent of the lesser of:
(i) the excess of (A) the sum of the aggregate fair market value of the
DCB Common Stock received and the amount of cash received over (B) the
stockholder's aggregate tax basis for the shares of FIBC Common Stock
exchanged; and
(ii) the amount of cash received by such stockholder.
For this purpose, gain or loss must be calculated separately for each
identifiable block of shares surrendered in the exchange, and a loss realized
on one block of shares may not be used to offset gain realized on another
block of shares. Any such gain will be long-term capital gain if the shares of
FIBC Common Stock exchanged were held for more than one year, unless the
receipt of cash has the effect of a distribution of a dividend within the
meaning of Section 356(a)(2) of the Code, in which case such gain will be
treated as a dividend to the extent of such stockholder's ratable share of the
undistributed accumulated earnings and profits of FIBC. The following is a
brief discussion of such potential tax treatment; however, FIBC stockholders
should consult their tax advisors as to the possibility that all or a portion
of any cash received in exchange for their FIBC Common Stock will be treated
as a dividend.
The stock redemption provisions of Section 302 of the Code apply in
determining whether cash received by an FIBC stockholder pursuant to the
Merger has the effect of a distribution of a dividend under Section 356(a)(2)
of the Code (the "Hypothetical Redemption Analysis"). Under the Hypothetical
Redemption Analysis, an FIBC stockholder will be treated as if the portion of
the shares of FIBC Common Stock exchanged for cash in the Merger had been
instead exchanged for shares of DCB Common Stock (the "Hypothetical Shares"),
followed immediately by a redemption of the Hypothetical Shares by DCB for
cash. Under the principles of Section 302 of the Code, an FIBC stockholder
will recognize capital gain rather than dividend income with respect to the
cash received if the hypothetical redemption is "not essentially equivalent to
a dividend" or is "substantially disproportionate" with respect to such FIBC
stockholder. In applying the principles of Section 302, the constructive
ownership rules of Section 318 of the Code will apply in comparing an FIBC
stockholder's ownership interest in DCB both immediately before the
hypothetical redemption and after the hypothetical redemption. In applying the
constructive ownership rules of Section 318, a stockholder is deemed to own
stock owned and, in some cases, constructively owned by certain family
members, by certain estates and trusts of which the stockholder is a
beneficiary, and by certain affiliated entities, as well as stock subject to
an option actually or constructively owned by the stockholder or such other
persons. As these rules are complex, stockholders of FIBC Common Stock should
consult their tax advisors regarding the applicability of these rules to them.
Whether the hypothetical redemption by DCB of the Hypothetical Shares for
cash is "not essentially equivalent to a dividend" with respect to an FIBC
stockholder will depend upon such stockholder's particular
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circumstances. However, the hypothetical redemption must, in any event, result
in a "meaningful reduction" in such FIBC stockholder's percentage ownership of
DCB stock. In determining whether the hypothetical redemption by DCB results
in a meaningful reduction in an FIBC stockholder's percentage ownership of DCB
stock, and therefore, does not have the effect of a distribution of a
dividend, an FIBC stockholder should compare his or her share interest in DCB
(including interests owned actually, hypothetically and constructively)
immediately before the hypothetical redemption to his or her share interest
after the hypothetical redemption. The IRS has indicated that a stockholder in
a publicly-held corporation whose relative stock interest in the corporation
is minimal and who exercises no "control" over corporate affairs is generally
treated as having had a meaningful reduction in his or her stock after a
redemption transaction if his or her percentage stock ownership in the
corporation has been reduced to any extent, taking into account the
stockholder's actual and constructive ownership before and after the
redemption.
The hypothetical redemption transaction would be "substantially
disproportionate," and therefore, would not have the effect of a distribution
of a dividend with respect to an FIBC stockholder who owns less than 50% of
the voting power of the outstanding DCB Common Stock if the percentage of DCB
Common Stock actually and constructively owned by such stockholder immediately
after the hypothetical redemption is less than 80% of the percentage of DCB
Common Stock actually, hypothetically and constructively owned by the FIBC
stockholder immediately before the hypothetical redemption.
Such stockholder's aggregate tax basis in the DCB Common Stock received
pursuant to the Merger will equal such stockholder's aggregate tax basis in
the shares of FIBC Common Stock exchanged therefor, reduced by any amount
allocable to a fractional share interest of DCB Common Stock for which cash is
received and by the amount of any Cash Consideration received, and increased
by the amount of gain, if any, recognized by such stockholder in the Merger
(including any portion of such gain that is treated as a dividend). The
holding period of DCB Common Stock received will include the holding period of
the shares of FIBC Common Stock exchanged therefor.
Exchange of FIBC Common Stock Solely for Cash. An FIBC stockholder who
receives solely cash in exchange for all of such stockholder's shares of FIBC
Common Stock pursuant to the Merger will generally recognize capital gain or
loss in an amount equal to the difference between the amount of cash received
and the stockholder's aggregate tax basis for such shares of FIBC Common
Stock, which gain or loss will be long-term capital gain or loss if such
shares of FIBC Common Stock were held for more than one year. If, however, any
such FIBC stockholder constructively owns shares of FIBC Common Stock that are
exchanged for shares of DBC Common Stock in the Merger or owns shares of DBC
Common Stock actually or constructively after the Merger, the consequences to
such stockholder may be similar to the consequences described above under the
heading "Exchange of FIBC Common Stock for DBC Common Stock and Cash," except
that the amount of consideration, if any, treated as a dividend may not be
limited to the amount of such stockholder's gain. FIBC stockholders should
consult their tax advisors as to the possibility that all or a portion of any
cash received in exchange for their shares of FIBC Common Stock will be
treated as a dividend.
Fractional Shares of DCB Common Stock. No fractional shares of DCB Common
Stock will be issued in the Merger. Based upon the current ruling position of
the IRS, an FIBC stockholder who receives cash in lieu of such a fractional
share will be treated as having received such fractional share pursuant to the
Merger and then as having exchanged such fractional share for cash in a
redemption by DCB subject to Section 302 of the Code. Such a deemed redemption
will be treated as a sale of the fractional share, provided that it is not
"essentially equivalent to a dividend." See "-- Exchange of FIBC Common Stock
for DCB Common Stock and Cash." An FIBC stockholder will generally recognize
capital gain or loss on such a deemed redemption of the fractional share in an
amount determined by the excess of the amount of cash received therefor and
the stockholder's tax basis in the fractional share. Any such capital gain or
loss will be long-term capital gain or loss if the FIBC Common Stock exchanged
was held for more than one year.
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ACCOUNTING TREATMENT
DCB will record the Merger using the purchase method of accounting. Under
the purchase method of accounting, assets acquired and liabilities assumed are
recorded at their fair value.
APPRAISAL RIGHTS
Any holder of record of FIBC Common Stock who follows the procedures
specified in Section 262 of the DGCL is entitled to have such stockholder's
shares of FIBC Common Stock appraised by the Delaware Court of Chancery (the
"Court") and to receive the "fair value" of such shares as of the Effective
Time as determined by the Court in lieu of the Merger Consideration. The
following is a summary of Section 262 of the DGCL and is qualified in its
entirety by reference to Section 262 of the DGCL, a copy of which is attached
hereto as Appendix D. Stockholders should carefully review Section 262 of the
DGCL as well as information discussed below to determine their rights to
appraisal.
If a stockholder of FIBC elects to exercise the right to an appraisal under
Section 262 of the DGCL, such stockholder must do ALL of the following:
(1) the stockholder must file with FIBC at its main office in Long Island
City, New York, a written demand for appraisal of the FIBC Common Stock
held (which demand must identify the stockholder and expressly request an
appraisal) before the vote is taken on the Merger Agreement at the Special
Meeting (this written demand for appraisal must be in addition to and
separate from any proxy or vote against the Merger Agreement; neither
voting against, abstaining from voting nor failing to vote on the Merger
Agreement will constitute a demand for appraisal within the meaning of
Section 262 of the DGCL);
(2) the stockholder must not vote in favor of the Merger Agreement (a
failure to vote or abstaining from voting will satisfy this requirement,
but a vote in favor of the Merger Agreement, by proxy or in person, or the
return of a signed proxy which does not specify a vote against approval and
adoption of the Merger Agreement, will constitute a waiver of such
stockholder's right of appraisal and will nullify any previously filed
written demand for appraisal); and
(3) the stockholder must continuously hold such shares of FIBC Common
Stock through the Effective Time.
All written demands for appraisal should be addressed to: Robert E. Adamec,
Senior Vice President and Corporate Secretary, Financial Bancorp, Inc., 42-25
Queens Boulevard, Long Island City, New York 11104, before the vote is taken
on the Merger Agreement at the Special Meeting, and should be executed by, or
on behalf of, the holder of record. Such demand must reasonably inform FIBC of
the identity of the stockholder and that such stockholder is thereby demanding
appraisal of his or her shares.
Within 10 days after the Effective Time, DCB will give written notice of the
Effective Time to each stockholder of FIBC who has satisfied the requirements
of Section 262 of the DGCL and has not voted for, or consented to, the
proposal to approve and adopt the Merger Agreement and the transactions
contemplated thereby (a "Dissenting Stockholder"). Within 120 days after the
Effective Time, DCB or any Dissenting Stockholder may file a petition in the
Court demanding a determination of the fair value of the shares of FIBC Common
Stock of all Dissenting Stockholders. Any Dissenting Stockholder desiring the
filing of such petition is advised to file such petition on a timely basis
unless such Dissenting Stockholder receives notice that such a petition has
been filed by DCB or another Dissenting Stockholder.
If a petition for appraisal is timely filed, the Court will determine which
stockholders are entitled to appraisal rights and thereafter will determine
the fair value of FIBC Common Stock held by Dissenting Stockholders, exclusive
of any element of value arising from the accomplishment or expectations of the
Merger, but together with a fair rate of interest, if any, to be paid on the
amount determined to be fair value. In determining such fair value, the Court
shall take into account all relevant factors. Such fair value may be
determined by the Court to be more than, less than or equal to the
consideration that such Dissenting Stockholder would otherwise be entitled to
receive pursuant to the Merger Agreement. If a petition for appraisal is not
timely
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filed, then the right to an appraisal shall cease. The costs of the appraisal
proceeding shall be determined by the Court and taxed against the parties as
the Court determines to be equitable under the circumstances. Upon the
application of any stockholder, the court may determine the amount of
interest, if any, to be paid upon the value of the stock of stockholders
entitled thereto. Upon application of a stockholder, the court may order all
or a portion of the expenses incurred by any stockholder in connection with
the appraisal proceeding, including, without limitation, reasonable attorneys'
fees and the fees and expenses of experts, to be charged pro rata against the
value of all shares entitled to appraisal.
From and after the Effective Time, no Dissenting Stockholder shall have any
rights of an FIBC stockholder with respect to such holder's FIBC Common Stock
for any purpose, except to receive payment of its fair value and to receive
payment of dividends or other distributions on such holder's FIBC Common
Stock, if any, payable to FIBC stockholders of record as of a date prior to
the Effective Time. If a Dissenting Stockholder delivers to DCB a written
withdrawal of the demand for an appraisal within 60 days after the Effective
Time or thereafter with the written approval of DCB, or if no petition for
appraisal is filed within 120 days after the Effective Time, then the right of
such Dissenting Stockholder to an appraisal will cease and such Dissenting
Stockholder will be entitled to receive only the Merger Consideration.
A STOCKHOLDER OF FIBC WHO FAILS TO COMPLY WITH SECTION 262 OF THE DGCL IS
BOUND BY THE TERMS OF THE MERGER.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of FIBC's management and the FIBC Board may be deemed to
have certain interests in the Merger that are in addition to or potentially
different from the interests of the stockholders of FIBC generally. The FIBC
Board was aware of these interests and considered them, among other matters,
in approving the Merger Agreement and the transactions contemplated thereby.
Indemnification; Directors' and Officers' Insurance. The Merger Agreement
provides that DCB will, for the six-year period following the Effective Time,
indemnify and hold harmless, to the fullest extent that FIBC is permitted to
indemnify (including advancement of expenses) its directors and officers under
the corporate governance documents of FIBC and applicable law, each present
and former director, officer and employee of FIBC or any of its subsidiaries
(the "Indemnified Parties") against any losses, claims, damages, liabilities,
costs, expenses (including reasonable attorneys' fees and expenses in advance
of the final disposition of any claim, suit, proceeding or investigation to
each Indemnified Party) judgments, fines and amounts paid in settlement in
connection with any such threatened or actual claim, action, suit, proceeding
or investigation, and in the event of any such threatened or actual claim,
action, suit, proceeding or investigation (whether asserted or arising before
or after the Effective Time), the Indemnified Parties may retain counsel
reasonably satisfactory to them after consultation with DCB, subject to
certain exceptions as provided in the Merger Agreement.
Pursuant to the Merger Agreement, DCB will cause the persons serving as
officers and directors of FIBC immediately prior to the Effective Time to be
covered for a period of three years from the Effective Time by the directors'
and officers' liability insurance policy maintained by FIBC (provided that,
subject to certain limitations in the Merger Agreement, DCB may substitute
policies of at least the same coverage and amounts containing terms and
conditions which are not less advantageous than such policy or single premium
tail coverage with policy limits equal to FIBC's existing annual coverage
limits) with respect to acts or omissions occurring prior to the Effective
Time which were committed by such officers and directors in their capacity as
such, subject to certain exceptions as provided in the Merger Agreement.
Employment/Salary and Benefit Continuation Agreements. FIBC has in effect
Employment Agreements with each of Messrs. Adamec and O'Gorman which provide,
among other things, for severance and other benefits to be paid in the event
of a qualifying termination of the executive's employment with FIBC during the
term of the Employment Agreement and following a change in control (as defined
in the Employment Agreements). In addition to cash severance payments, the
executive is entitled under his Employment Agreement to continued
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welfare-type benefits for the 36-month period following the date of such
termination of employment, and to receive benefits due to him or contributed
on his behalf to any retirement, incentive, profit sharing, bonus, performance
disability or other employee benefit plan maintained by FIBC or Financial
Federal on the executive's behalf. In connection with the Merger, DCB has
entered into a letter agreement with each of Messrs. Adamec and O'Gorman
whereby such executives will receive on the Closing Date in full settlement of
their rights to severance pay under the Employment Agreement a lump sum in
cash equal to, for Mr. Adamec, $319,958; and Mr. O'Gorman, $462,747 (each
executive will still be entitled to continued welfare-type benefits as
described above). Consummation of the Merger will constitute a change in
control for purposes of the Employment Agreements.
FIBC has in effect Salary Continuation Agreements with each of Mr. Latawiec
and Ms. Swaya which provide for salary continuation and other benefits to be
paid in the event of a change in control (as defined in the Salary
Continuation Agreements). In addition to salary continuation payments, the
executive is entitled under his or her Salary Continuation Agreement to
continued welfare-type benefits for the two-year period following the date of
such change in control. Each Salary Continuation Agreement provides that the
aggregate benefits to be received by the executive under such agreement will
be reduced in order to avoid any portion of such benefits being treated as an
"excess parachute payment" (within the meaning of Section 280G of the Code).
In connection with the Merger, DCB and each of Mr. Latawiec and Ms. Swaya have
entered into a letter agreement whereby such executives will receive in full
settlement of their rights to salary continuation payments under the
Employment Agreement the lesser of (i) the maximum amount which may be paid
without any portion of such amount being treated as an excess parachute
payment and (ii) a lump sum in cash equal to, for Mr. Latawiec, $240,032; and
for Ms. Swaya, $130,416 (each executive will still be entitled to continued
welfare-type benefits as described above). The Merger will constitute a change
in control for purposes of the Salary Continuation Agreements.
In exchange for the receipt of severance or salary continuation payments, as
applicable, on the Closing Date, each executive has agreed to execute a
general release of FIBC, Financial Federal, DCB and Dime of Williamsburgh from
any claims which the executive has or may have with respect to the Employment
Agreement or Salary Continuation Agreement, as applicable (except for claims
with respect to continued welfare benefits).
Equity-Based Incentive Awards. Pursuant to the terms of the FIBC Option
Plans and the Financial Federal Savings Bank Recognition and Retention Plan
(together, the "FIBC Stock Plans"), upon consummation of the Merger, each FIBC
Option will become fully vested and exercisable and each award of restricted
shares of FIBC Common Stock will immediately vest. As of October 30, 1998, the
executive officers of FIBC held FIBC Options at the indicated weighted average
exercise price: Mr. Latawiec, 38,000 shares at $17.17 (29,400 of which are
currently unvested); Mr. Adamec, 7,244 shares at $11.53 (3,697 of which are
currently unvested); Mr. O'Gorman, 29,648 shares at $15.59 (20,658 of which
are currently unvested); and Ms. Swaya, 4,000 shares at $17.00 (3,200 of which
are currently unvested). As of such date, such executive officers held shares
of restricted stock, as follows: Mr. Latawiec, 9,003 shares; Mr. Adamec, 2,671
shares; Mr. O'Gorman, 7,531 shares; and Ms. Swaya, 4,361 shares. As of October
30, 1998, the directors of FIBC held FIBC Options at the indicated weighted
average exercise price: Mr. Calamari, 5,000 shares at $14.25; Mr. Hickey,
16,850 shares at $12.10; Mr. Russo, 16,850 shares at $12.10; and Mr. Segrete,
10,925 shares at $9.44.
ESOP. The Merger Agreement provides that FIBC will take any actions
necessary to cause the FIBC ESOP to be terminated as of the Effective Time and
for the balances in all FIBC ESOP accounts to be fully vested as of such time.
In connection with such termination, FIBC will use its best efforts to cause
the FIBC ESOP trustee to elect cash under the Merger Agreement sufficient to
repay any remaining FIBC ESOP loan balance, and to cause the shares of FIBC
Common Stock and any cash remaining in the FIBC ESOP suspense account
following such loan repayment to be allocated to the accounts of all FIBC ESOP
participants who have account balances as of the Closing Date. Amounts will be
distributed as soon as possible after receipt of a favorable determination
letter from the Internal Revenue Service. As of September 30, 1998, the
executive officers of FIBC held the following amount of shares of FIBC Common
Stock within their ESOP Account: Mr. O'Gorman, 4,424 shares (fully vested);
Mr. Adamec, 3,322 shares (fully vested); Ms. Swaya, 1,844 shares (1,475 of
which are currently unvested) and Mr. Latawiec, 0 shares. As of October 30,
1998, 54,626 shares were
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allocated under the FIBC ESOP and the percentage of the total number of
allocated shares for each of the executive officers (based on their account
balances at October 30, 1998) was approximately 8.10% for Mr. O'Gorman, 6.08%
for Mr. Adamec and 3.38% for Ms. Swaya. At December 31, 1998, an additional
17,143 shares will be allocated, leaving 71,993 unallocated shares in the FIBC
ESOP, and the sale of approximately 22,171 shares would be necessary to repay
the remaining balance of the FIBC ESOP loan of $809,259 (as of December 31,
1998) assuming a price per share for FIBC Common Stock of $36.50 (the closing
price per share on October 30, 1998). The remaining 49,822 shares of FIBC
Common Stock which would not have been allocated under the FIBC ESOP as of
December 31, 1998 under the foregoing assumptions will be allocated among the
participants in accordance with each of their respective ownership percentage
of the total allocated shares, and, based on the assumptions described above,
it is estimated that the executive officers would receive allocations of
additional shares as follows: Mr. O'Gorman, 4,036; Mr. Adamec, 3,029; and Ms
Swaya, 1,684 shares. The estimated value of the allocation of additional
shares, based on a $36.50 per share value, would be as follows: Mr. O'Gorman,
$147,299; Mr. Adamec, $110,565; and Ms. Swaya, $61,465. Mr. Latawiec did not
have an account balance as of October 30, 1998 but is expected to have an
account balance as of December 31, 1998 and is expected to participate in the
allocation of additional shares to a lesser extent than the other executive
officers.
Outside Directors' Consultation and Retirement Plan. Financial Federal
maintains the Outside Directors' Consultation and Retirement Plan ("Financial
Federal Directors' Retirement Plan") under which a non-employee director of
FIBC and Financial Federal with at least seven years of service may retire
from the Financial Federal Board and, if he agrees to perform consulting
services and observe certain restrictions on competition, receive annual
compensation equal to the compensation actually paid to him for attendance at
twelve regular directors' meetings, determined as of the date such director's
service is terminated. The period during which such consulting and
compensation arrangements are in effect may not exceed the lesser of 10 years
or one-half the number of years that such director served as an outside
director. The Financial Federal Directors' Retirement Plan provides that, in
the event of a change of control of either FIBC or Financial Federal, any
requirement for the performance of consulting services is waived, and the
compensation that would have been payable to each currently serving, eligible
outside director in the event of his retirement will be paid in a single lump
sum without discount for early payment. Consummation of the Merger will result
in a change of control of FIBC and Financial Federal for purposes of the
Financial Federal Directors' Retirement Plan. Assuming a closing date of
February 1, 1999, the following lump sum amounts would be payable as of the
Effective Time to the following current directors: Mr. Russo, $195,417; Mr.
Segrete, $250,000; and Mr. Hickey, $129,167.
Advisory Board. DCB has agreed in the Merger Agreement to cause Messrs.
Calamari, Hickey, Russo and Segrete, if such persons are willing to so serve,
to be elected or appointed as members of the Advisory Board to advise DCB with
respect to deposit and lending activities in FIBC's former market area and to
maintain and develop customer relationships. The members of the Advisory Board
may serve for up to three successive one-year terms and will be compensated
for such service through a retainer at an annual rate of $25,000.
EFFECT ON FIBC EMPLOYEE BENEFIT PLANS
The Merger Agreement provides that, as of or as soon as practicable
following the Effective Time, employees of FIBC and its subsidiaries ("FIBC
Employees") will be eligible to participate in the employee benefit plans of
DCB or Dime of Williamsburgh in which, and to the same extent that, similarly
situated employees of DCB and Dime of Williamsburgh participate. The inclusion
of FIBC Employees in such employee benefit plans may occur at different times
with respect to different plans, and the participation of FIBC Employees shall
continue in the plans of FIBC or its subsidiaries until such time. Under the
Merger Agreement, FIBC will take any necessary actions to cease benefit
accruals under any plan that is a tax-qualified defined benefit plan as of the
Effective Date.
With respect to each DCB employee benefit plan, for purposes of determining
eligibility to participate, vesting and entitlement to benefits, including
severance benefits and vacation entitlement (but not for accrual of pension
benefits), service with FIBC (or predecessor employers to the extent FIBC
provides past service credit)
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shall be treated as service with DCB, except that such service will not be
recognized to the extent that such recognition would result in a duplication
of benefits. Such service also will apply for purposes of satisfying any
waiting periods, evidence of insurability requirements or the application of
any pre-existing condition limitations. Each DCB employee benefit plan will
waive pre-existing condition limitations to the same extent waived under the
applicable plan. FIBC Employees will be given credit for amounts paid under a
corresponding benefit plan during the same period for purposes of applying
deductibles, copayments and out-of-pocket maximums as though such amounts had
been paid in accordance with the terms and conditions of the DCB plan.
In the Merger Agreement, DCB has agreed to cause Dime of Williamsburgh to
amend its Severance Pay Plan to designate Financial Federal and FIBC as
"acquired companies." Under Dime of Williamsburgh's Severance Pay Plan, this
amendment would provide severance payments to employees of FIBC and Financial
Federal who have at least one year of service and whose employment is
terminated in an "involuntary termination." The severance benefits are (i) for
officers of Financial Federal or FIBC, two weeks' salary for each whole year
of service, up to 39 weeks of severance pay, and (ii) for other full-time
salaried employees, one week's salary for each whole year of service, up to 26
weeks of severance pay. The employees will also be entitled to certain
benefits and outplacement services under Dime of Williamsburgh's Severance Pay
Plan. Individuals covered by Employment Agreements are not eligible for
benefits under Dime of Williamsburgh's Severance Pay Plan.
OPERATIONS AFTER THE MERGER
At the Effective Time, FIBC will merge with and into DCB, with DCB being the
surviving entity. DCB, as the resulting entity, will operate under the
policies, practices and procedures currently in place. All assets and property
(real, personal and mixed, tangible and intangible, choices in actions, rights
and credits) owned by FIBC shall immediately become the property of DCB.
Pursuant to the Plan of Bank Merger, immediately following consummation of the
Merger, Financial Federal will merge with and into Dime of Williamsburgh, with
Dime of Williamsburgh surviving the Bank Merger. DCB and Dime of Williamsburgh
do not currently anticipate closing or consolidating any of Dime of
Williamsburgh's or Financial Federal's branches. The Merger will result in a
greater number of branches and the addition of new market areas for DCB. DCB
will also recognize cost savings through consolidation of back office
functions. See "-- Management of DCB after the Merger."
MANAGEMENT OF DCB AFTER THE MERGER
The Merger Agreement provides that, at the Effective Time, the directors and
officers of DCB will consist of the directors and officers of DCB immediately
prior to the Effective Time. The directors and officers of Dime of
Williamsburgh following the Bank Merger will consist of the directors and
officers of Dime of Williamsburgh immediately prior to the Effective Time.
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CERTAIN RELATED TRANSACTIONS
STOCK OPTION AGREEMENT
General. As a condition to entering into the Merger Agreement, DCB required
that FIBC enter into the Stock Option Agreement, which allows DCB to purchase
FIBC Common Stock under certain circumstances. Pursuant to the Stock Option
Agreement, FIBC granted to DCB an option (the "DCB Option") to purchase
339,627 shares of FIBC Common Stock (representing approximately 19.9% of the
issued and outstanding shares of the FIBC Common Stock on July 18, 1998)
(subject to adjustment such that in no event may DCB acquire shares of FIBC
Common Stock representing more than 19.9% of the issued and outstanding shares
of such stock) at an exercise price of $32.00 per share (subject to
adjustment). The DCB Option may only be exercised upon the occurrence of
certain "FIBC Purchase Events" which are described herein (none of which has
occurred to the best of DCB's or FIBC's knowledge as of the date of this Proxy
Statement-Prospectus).
Effect of Stock Option Agreement. The Stock Option Agreement is intended to
increase the likelihood that the Merger will be consummated in accordance with
the terms of the Merger Agreement. Consequently, certain aspects of the Stock
Option Agreement may have the effect of discouraging persons who might now or
prior to the consummation of the Merger be interested in acquiring all of or a
significant interest in FIBC from considering or proposing such an
acquisition, even if such persons were prepared to pay a higher price per
share for the FIBC Common Stock than the value per share contemplated by the
Merger Agreement. The acquisition of FIBC, a significant portion of its
consolidated assets or an interest in FIBC, or an agreement to do so, could
cause the DCB Option to become exercisable. The existence of such DCB Option
could significantly increase the cost to a potential acquiror of acquiring
FIBC compared to its cost had the Stock Option Agreement not been executed.
Such increased costs might discourage a potential acquiror from considering or
proposing an acquisition or might result in a potential acquiror proposing to
pay a lower per share price to acquire FIBC than it might otherwise have
proposed to pay. The management of FIBC believes that the exercise of the DCB
Option is likely to prohibit any acquiror of FIBC from accounting for any
acquisition of FIBC using the pooling-of-interests accounting method for a
period of two years. This could discourage or preclude an acquisition by other
banking organizations.
Terms of Stock Option Agreement. The following is a brief summary of certain
provisions of the Stock Option Agreement, which is attached hereto as Appendix
B. The following summary is qualified in its entirety by reference to the
Stock Option Agreement.
If DCB is not in material breach of the Stock Option Agreement or the Merger
Agreement and if no injunction or other court order against delivery of the
shares covered by the DCB Option is in effect, DCB may exercise the DCB
Option, in whole or in part, at any time and from time to time upon the
occurrence of the following (each an "FIBC Purchase Event"):
(i) Without DCB's prior written consent, FIBC shall have recommended,
publicly proposed or publicly announced an intention to authorize,
recommend or propose, or FIBC shall have entered into an agreement with any
person (other than DCB or any subsidiary of DCB) to effect (A) a merger,
consolidation or similar transaction involving FIBC or any of its
significant subsidiaries, (B) the disposition, by sale, lease, exchange or
otherwise, of assets or deposits of FIBC or any of its significant
subsidiaries representing in either case all or substantially all of the
consolidated assets or deposits of FIBC and its subsidiaries or (C) the
issuance, sale or other disposition by FIBC of (including by way of merger,
consolidation, share exchange or any similar transaction) securities
representing 20% or more of the voting power of FIBC or any of its
significant subsidiaries (each of (A), (B) or (C), an "Acquisition
Transaction"); provided, however, that in no event shall any merger,
consolidation, purchase or similar transaction involving only FIBC and one
or more of the subsidiaries of FIBC or involving only any two or more of
such subsidiaries be deemed to be an Acquisition Transaction, provided that
any such transaction is not entered into in violation of the terms of the
Merger Agreement; or
(ii) Any person (other than DCB or any subsidiary of DCB) shall have
acquired beneficial ownership (as such term is defined in Rule 13d-3
promulgated under the Exchange Act) of, or the right to acquire
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beneficial ownership of, or any "group" (as such term is defined in Section
13(d)(3) of the Exchange Act), other than a group of which DCB or any
subsidiary of DCB is a member, shall have been formed which beneficially
owns or has the right to acquire beneficial ownership of, 20% or more of
the voting power of FIBC or any of its significant subsidiaries.
provided, that the DCB Option will terminate upon the earliest to occur of the
following (each an "Exercise Termination Event"): (i) the Effective Time; (ii)
termination of the Merger Agreement in accordance with the terms thereof prior
to the occurrence of an FIBC Purchase Event or an FIBC Preliminary Purchase
Event (as defined herein) other than a termination thereof by DCB as a result
of a material breach by FIBC of any of its covenants or agreements set forth
in the Merger Agreement (a "Default Termination"); (iii) 12 months after a
Default Termination; or (iv) 12 months after termination of the Merger
Agreement (other than a Default Termination) following the occurrence of an
FIBC Purchase Event or an FIBC Preliminary Purchase Event.
The term "FIBC Preliminary Purchase Event" means any of the following
events:
(i) Any person (other than DCB or any subsidiary of DCB) shall have
commenced (as such term is defined in Rule 14d-2 promulgated under the
Exchange Act) or shall have filed a registration statement under the
Securities Act with respect to a tender offer or exchange offer to purchase
any shares of FIBC Common Stock such that, upon consummation of such offer,
such person would own or control 10% or more of the then outstanding shares
of FIBC Common Stock (such an offer being referred to herein as a "Tender
Offer" or an "Exchange Offer," respectively); or
(ii) The stockholders of FIBC shall not have approved the Merger
Agreement by the requisite vote at the Special Meeting, the Special Meeting
shall not have been held or shall have been canceled prior to termination
of the Merger Agreement or the FIBC Board shall have publicly withdrawn or
modified in a manner adverse to DCB the recommendation of the FIBC Board
with respect to the Merger Agreement, in each case after it shall have been
publicly announced that any person (other than DCB or any subsidiary of
DCB) shall have (A) made, or disclosed an intention to make, a bona fide
proposal to engage in an Acquisition Transaction (which shall have the same
meaning as set forth above, except that when used with respect to a
Preliminary Purchase Event the 20% shall be changed to 10%) or (B) filed an
application (or given a notice), whether in draft or final form, under the
Home Owners' Loan Act of 1933, as amended, the Bank Holding Company Act, as
amended, the Bank Merger Act, as amended or the Change in Bank Control Act
of 1978, as amended, for approval to engage in an Acquisition Transaction;
or
(iii) Any person (other than DCB or any subsidiary of DCB) shall have
made a bona fide proposal to FIBC or its stockholders by public
announcement, or written communication that is or becomes the subject of
public disclosure, to engage in an Acquisition Transaction; or
(iv) After a proposal is made by a third party to FIBC or its
stockholders to engage in an Acquisition Transaction, or such third party
states its intention to FIBC to make such a proposal if the Merger
Agreement terminates, FIBC shall have breached any covenant or agreement
contained in the Merger Agreement and such breach would entitle DCB to
terminate the Merger Agreement.
In the event that FIBC shall enter into an agreement (i) to consolidate with
or merge into any person, other than DCB or one of its subsidiaries, and FIBC
shall not be the continuing or surviving corporation of such consolidation or
merger, (ii) to permit any person, other than DCB or one of its subsidiaries,
to merge into FIBC and FIBC shall be the continuing or surviving corporation,
but, in connection with such merger, the then outstanding shares of FIBC
Common Stock shall be changed into or exchanged for stock or other securities
of FIBC or any other person or cash or any other property, or the outstanding
shares of FIBC Common Stock immediately prior to such merger shall after such
merger represent less than 50% of the outstanding shares and share equivalents
of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets or deposits to any person, other than DCB or
one of its subsidiaries, then, and in each such case, the agreement governing
such transaction shall make proper provisions so that the DCB Option shall,
upon the consummation
68
<PAGE>
of any such transaction and upon the terms and conditions set forth in the
Stock Option Agreement, be converted into, or exchanged for, an option (the
"Substitute Option"), at the election of DCB, of either (A) the Acquiring
Corporation (as defined in the Stock Option Agreement), (B) any person that
controls the Acquiring Corporation or (C) in the case of a merger described in
clause (ii), FIBC.
The Stock Option Agreement contains a provision that limits the aggregate
realizable profit to DCB from the DCB Option to $4 million.
RESALES OF DCB COMMON STOCK
The shares of DCB Common Stock issued pursuant to the Merger Agreement will
be freely transferable under the Securities Act except for shares issued to
any stockholder who may be deemed to be an "affiliate" of FIBC for purposes of
Rule 145 under the Securities Act as of the date of the Special Meeting.
Affiliates may not sell their shares of DCB Common Stock acquired in
connection with the Merger except pursuant to an effective registration
statement under the Securities Act covering such shares or in compliance with
Rule 145 under the Securities Act or another applicable exemption from the
registration requirements of the Securities Act. Persons who may be deemed to
be affiliates of FIBC generally include individuals or entities that control,
are controlled by or are under common control with FIBC and may include
certain officers and directors of FIBC as well as principal stockholders of
FIBC.
FIBC agreed in the Merger Agreement to cause each affiliate of FIBC to enter
into an agreement with DCB providing that such persons will not sell, transfer
or otherwise dispose of shares of FIBC Common Stock owned by such person or
DCB Common Stock to be received by such person in the Merger except in
compliance with the applicable provisions of the Securities Act and the rules
and regulations thereunder. FIBC has delivered these agreements to DCB.
OTHER MATTERS
The Bylaws of FIBC require that no business be transacted and no corporate
action be taken at a special meeting of FIBC's stockholders other than that
stated in the Notice of Meeting. The FIBC Board is not aware of any other
business that may properly come before the Special Meeting. In the event
matters incident to the conduct of the Special Meeting properly come before
such meeting, including, without limitation, a motion to adjourn the Special
Meeting to another time or place for the purpose of soliciting additional
proxies in order to approve and adopt the Merger Agreement, the persons named
in the Proxy Card enclosed herewith and acting thereunder will have
discretionary authority to vote on such matters in accordance with their best
judgment; provided, however, that no proxy which is voted against the proposal
to approve the Merger Agreement will be voted in favor of any such
adjournment; and provided further, that such discretionary authority will only
be exercised to the extent permitted under applicable federal and state
securities and corporation laws.
69
<PAGE>
BENEFICIAL OWNERSHIP OF FIBC COMMON STOCK
PRINCIPAL SECURITY OWNERSHIP
As of October 30, 1998, management of FIBC knew of no person, other than
those below, who is the beneficial owner of more than 5% of FIBC Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ------------------------------------ -------------------- ----------------
<S> <C> <C>
Financial Federal Savings and Loan 143,762(1) 8.4%
Association Employee....................
Stock Ownership Plan
42-25 Queens Boulevard
Long Island City, New York 11104
Bear, Stearns & Co., Inc................. 88,800(2) 5.2%
245 Park Avenue
New York, New York 10167
</TABLE>
- --------
(1) Shares of FIBC Common Stock were acquired by the FIBC ESOP in Financial
Federal's conversion from mutual to stock form. The FIBC Compensation
Committee administers the FIBC ESOP. First Bankers Trust Company, National
Association, has been appointed as the corporate trustee for the FIBC ESOP
("FIBC ESOP Trustee"). The FIBC ESOP Trustee must vote all allocated
shares held in the FIBC ESOP in accordance with the instructions of the
participants. At October 30, 1998, 54,626 shares had been allocated under
the FIBC ESOP. Unallocated shares will be voted by the FIBC ESOP Trustee
in a manner calculated to most accurately reflect the instructions
received from participants regarding the allocated stock so long as such
vote is in accordance with the provisions of the Employee Retirement
Income Security Act of 1974, as amended.
(2) Based on information filed in a Schedule 13D by Bear, Stearns & Co., Inc.
on September 3, 1998. Bear, Stearns & Co., Inc. has sole voting and
dispositive power over all shares indicated.
70
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information with respect to the shares of
FIBC Common Stock beneficially owned by each director of FIBC, by the Chief
Executive Officer and each of the four most highly compensated officers of
FIBC other than the Chief Executive Officer, and all directors and executive
officers of FIBC or Financial Federal as a group as of October 30, 1998.
Except as otherwise indicated, each person and each group shown in the table
has sole voting and investment power with respect to the shares of FIBC Common
Stock indicated.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
POSITION WITH OF BENEFICIAL COMMON STOCK
NAME THE COMPANY(1) OWNERSHIP(2)(3)(4)(5) OUTSTANDING
- ---- -------------- --------------------- ------------
<S> <C> <C> <C>
Frank S. Latawiec................ Director, President and 30,956(2)(5) 1.8%
Chief Executive Officer
Peter S. Russo................... Director and Chairman of the 53,760(3) 3.12%
Board
Raymond M. Calamari.............. Director 8,000(4) .47%
Richard J. Hickey................ Director 22,354(3) 1.30%
Dominick L. Segrete.............. Director 69,262(3) 4.03%
P. James O'Gorman................ Executive Vice President, 40,518(2)(5) 2.36%
Chief Financial Officer and
Treasurer
All directors and executive
officers as a group
(9 persons)..................... 250,194(5)(6) 14.07%
</TABLE>
- --------
(1) Each person effectively exercises sole (or shares with spouse or other
immediate family members) voting or dispositive power as to shares
reported herein (except as noted).
(2) Includes 3,002, 4,002 and 2,001 unvested shares held by Mr. Latawiec under
Part I, Part II and Part III, respectively, of the Financial Federal
Savings Bank Recognition and Retention Plan ("Financial Federal RRP")
which will vest in equal annual installments until September 24, 2001,
February 18, 2002 and June 17, 2002, respectively. Includes 3,117, 2,801
and 1,613 unvested shares held by Mr. O'Gorman under Part I, Part II and
Part III, respectively, of the Financial Federal RRP which will vest in
equal annual installments until January 26, 2000, February 18, 2002 and
June 17, 2002, respectively.
(3) Includes 10,925, 16,850 and 16,850 shares subject to options held by Mr.
Segrete, Mr. Russo and Mr. Hickey, respectively, under the FIBC, Inc. 1995
Stock Option Plan for Outside Directors ("FIBC Directors' Option Plan"),
which are currently exercisable.
(4) Includes 1,000 shares subject to options held by Mr. Calamari under the
FIBC Directors' Option Plan, which became exercisable on October 22, 1997
and 1000 shares subject to options held by Mr. Calamari which became
exercisable on October 22, 1998. Does not include the remaining 3,000
shares subject to options granted to Mr. Calamari under the FIBC
Directors' Option Plan, which will continue to vest in equal annual
installments on October 22, 1999, 2000 and 2001, respectively.
(5) Includes 4,590, 3,200 and 1,200 shares subject to options held by Mr.
O'Gorman under Part I, Part II and Part III, respectively, of the FIBC
1995 Incentive Stock Option Plan ("FIBC Incentive Option Plan"), which
became exercisable in equal annual installments beginning January 26,
1996, February 18, 1998 and June 17, 1998. Does not include the remaining
3,058, 12,800 and 4,800 shares subject to options granted to Mr. O'Gorman
under the FIBC Incentive Option Plan which will continue to vest in equal
annual installments until January 26, 2000, February 18, 2002 and June 17,
2002, respectively. Includes 3,000, 4,800 and 1,800 shares subject to
options held by Mr. Latawiec under the FIBC Directors' Option Plan and
Part II and Part III, respectively, of the FIBC Incentive Stock Option
Plan which became exercisable in equal annual installments beginning
December 21, 1996, February 18, 1998 and June 17, 1998. Does not include
2,000, 19,200 and 7,200 shares subject to options granted to Mr. Latawiec
under the FIBC Directors' and Incentive Option Plan which will continue to
vest in equal annual installments until December 21, 2000, February 18,
2002 and June 17, 2002, respectively.
(6) Includes 49,625 shares which may be acquired through the exercise of stock
options granted under the FIBC Directors' Option Plan, 19,937 shares with
respect to all executive officers which may be acquired through the
exercise of stock options under the FIBC Incentive Stock Option Plan, and
23,568 unvested shares awarded to executive officers under the Financial
Federal RRP.
71
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED
CONSOLIDATED FINANCIAL INFORMATION
The following statements set forth certain condensed combined consolidated
financial information for DCB and FIBC on an unaudited pro forma combined
basis giving effect to the Merger as if the Merger had become effective on
June 30, 1998, in the case of financial condition information presented, and
as if the Merger had become effective at the beginning of the period
indicated, in the case of operations information presented. The pro forma
information in the statements assumes that the Merger is accounted for using
the purchase method of accounting. See "THE MERGER -- Accounting Treatment."
The unaudited pro forma statements of operations for the year ended June 30,
1998 have been derived from the historical statements of operations of DCB for
the year ended June 30, 1998 and for FIBC for the twelve months ended June 30,
1998. These statements should be read in conjunction with, and are qualified
in their entirety by, the historical financial statements, including the notes
thereto, of DCB and FIBC incorporated by reference herein. See "INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE."
The pro forma condensed combined consolidated financial information set
forth in the following tables do not give effect to anticipated cost savings
and revenue enhancement opportunities that could result from the Merger or any
other items of income or expense which may result from the Merger.
Additionally, the pro forma financial information does not give effect to any
anticipated asset growth of DCB's pro forma assets. The unaudited pro forma
condensed combined consolidated financial information is presented for
informational purposes only and is not necessarily indicative of the combined
financial position or results of operations that would have occurred had the
Merger been consummated on June 30, 1998 or at the beginning of the period
indicated or which may occur in the future.
72
<PAGE>
DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARY
FINANCIAL BANCORP, INC. AND SUBSIDIARY
PRO FORMA CONDENSED COMBINED CONSOLIDATED
STATEMENT OF FINANCIAL CONDITION
(UNAUDITED)
<TABLE>
<CAPTION>
AT JUNE 30, 1998(A)
-----------------------------------------------------
DIME COMMUNITY
BANCSHARES, FINANCIAL PRO FORMA PRO FORMA
INC. BANCORP, INC. ADJUSTMENTS COMBINED
-------------- ------------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Cash and due from
banks.................. $ 16,266 $ 3,034 $ -- $ 19,300
Investment securities
held-to-maturity....... 78,091 44,235 83 D 122,409
Investment securities
available-for-sale..... 85,706 5,903 (480)D 91,129
Mortgage-backed
securities held-to-
maturity............... 46,714 30,851 331 D 77,896
Mortgage-backed
securities available-
for-sale............... 363,875 23,046 -- 386,921
Federal funds sold and
securities purchased
under agreements to
resell................. 9,329 29,375 -- 38,704
Loans receivable:
Real estate............ 943,864 192,850 (231)D 1,136,483
Other loans............ 5,716 653 -- 6,369
Less: allowance for
loan losses........... 12,075 1,681 -- 13,756 B
---------- -------- -------- ----------
Loans, net.............. 937,505 191,822 (231)D 1,129,096
---------- -------- -------- ----------
Loans held for sale..... 541 -- -- 541
Investment in real
estate, net............ -- 3,599 -- 3,599 B
Premises and fixed
assets................. 10,742 2,288 2,132 D 15,162
Federal Home Loan Bank
of New York capital
stock.................. 10,754 2,110 -- 12,864
Other real estate owned,
net.................... 825 731 -- 1,556
Goodwill................ 24,028 -- 42,249 E 66,277 B
Core deposit premium.... -- 114 2,791 D 2,905
Receivable for
securities sold........ 18,008 -- -- 18,008
Other assets............ 21,542 3,891 1,145 D 26,578 B
---------- -------- -------- ----------
TOTAL ASSETS............ $1,623,926 $340,999 $ 48,020 $2,012,945
========== ======== ======== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
LIABILITIES:
Due to depositors...... $1,038,342 $229,027 $ 1,667 D $1,269,036
Escrow and other
deposits.............. 15,395 1,396 -- 16,791
Securities sold under
agreement to
repurchase............ 256,601 72,000 -- 328,601
Federal Home Loan Bank
of New York advances.. 103,505 6,000 40,866 CD 150,371
Payable for securities
purchased............. 12,062 -- -- 12,062
Accrued post-retirement
benefit obligation.... 2,721 -- -- 2,721
Other liabilities...... 8,951 3,845 -- 12,796
---------- -------- -------- ----------
TOTAL LIABILITIES....... $1,437,577 $312,268 $ 42,533 $1,792,378
========== ======== ======== ==========
STOCKHOLDERS' EQUITY:
Preferred stock........ -- -- -- --
Common stock........... $ 145 $ 22 $ (22)F $ 145
Additional paid-in
capital............... 143,322 20,415 (20,415)F 147,364
4,042 C
Unallocated common
stock held by ESOP.... (9,175) (890) 890 F (9,175)
Unearned common stock
held by RRP........... (6,963) (282) 282 F (6,963)
Common stock held by
Benefit Maintenance
Plan.................. (431) -- -- (431)
Treasury stock......... (48,470) (6,382) 6,382 F (18,236)
30,234 C
Retained earnings...... 105,158 15,766 B (15,766)F 105,158
Net unrealized gains on
securities available
for sale, net of
deferred taxes........ 2,763 82 (140)DF 2,705
---------- -------- -------- ----------
TOTAL STOCKHOLDERS'
EQUITY................. 186,349 28,731 B 5,487 220,567
---------- -------- -------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY... $1,623,926 $340,999 B $ 48,020 $2,012,945
========== ======== ======== ==========
</TABLE>
See "Notes to Pro Forma Condensed Combined Consolidated Financial Statements
(Unaudited)."
73
<PAGE>
DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARY
FINANCIAL BANCORP, INC. AND SUBSIDIARY
PRO FORMA CONDENSED COMBINED
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JUNE 30, 1998(A)
------------------------------------------------------
DIME COMMUNITY FINANCIAL PRO FORMA PRO FORMA
BANCSHARES, INC. BANCORP, INC. ADJUSTMENTS COMBINED
---------------- ------------- ----------- ----------
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C>
Interest income......... $ 106,464 $ 21,562 $ (149)G $ 127,877
Interest expense........ 56,935 11,448 1,507 G 69,890
---------- --------- ------- ----------
Net interest income.... 49,529 10,114 (1,656) 57,987
Provision for loan
losses................. 1,635 433 -- 2,068
---------- --------- ------- ----------
Net interest income
after provision for
loan losses........... 47,894 9,681 (1,656) 55,919
---------- --------- ------- ----------
Non-interest income:
Service charges and
other fees............ 2,352 757 -- 3,109
Gain (loss) on sales of
securities and other
assets................ 2,873 193 -- 3,066
Net gain (loss) on
sales of loans........ 108 3 -- 111
Other.................. 1,674 73 -- 1,747
---------- --------- ------- ----------
Total non-interest
income................ 7,007 1,026 -- 8,033
---------- --------- ------- ----------
Non-interest expense:
Salaries and employee
benefits.............. 12,748 2,463 -- 15,211
ESOP and RRP benefits.. 5,378 458 -- 5,836
Occupancy and
equipment............. 3,011 804 53 G 3,868
Federal deposit
insurance premiums.... 350 124 -- 474
Data processing........ 1,169 379 -- 1,548
Provision for losses on
other real estate
owned................. 114 29 -- 143
Amortization of
goodwill.............. 2,405 -- 2,113 H 4,518 B
Amortization of core
deposit premium....... -- -- 581 G 581
Other.................. 4,762 1,402 -- 6,164
---------- --------- ------- ----------
Total non-interest
expense............... 29,937 5,659 2,747 38,343
---------- --------- ------- ----------
Income before income
taxes expense.......... 24,964 5,048 (4,403) 25,609
Income tax expense...... 11,866 2,162 (984) I 13,044
---------- --------- ------- ----------
Net income............. $ 13,098 $ 2,886 $(3,419) $ 12,565
========== ========= ======= ==========
Earnings per Share:
Basic.................. $ 1.19 $ 1.79 $ 1.01
Diluted................ $ 1.09 $ 1.71 $ 0.93
Weighted average number
of shares outstanding.. 11,000,740 1,612,440 12,481,995 J
Weighted average number
of shares and common
stock equivalents...... 12,040,730 1,682,910 13,521,980 J
</TABLE>
See "Notes to Pro Forma Condensed Combined Consolidated Financial Statements
(Unaudited)."
74
<PAGE>
DIME COMMUNITY BANCSHARES, INC. AND SUBSIDIARY
AND FINANCIAL BANCORP, INC. AND SUBSIDIARY
NOTES TO PRO FORMA CONDENSED COMBINED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)
(A) Basis of Presentation
The unaudited Pro Forma Condensed Combined Consolidated Statement of
Financial Condition of DCB and subsidiary and FIBC and subsidiary at June 30,
1998 has been prepared as if the Merger had been consummated on that date. The
unaudited Pro Forma Condensed Combined Consolidated Statement of Operations
for the year ended June 30, 1998 has been prepared as if the Merger had been
consummated on July 1, 1997. The unaudited pro forma condensed combined
consolidated financial statements are based on the historical financial
statements of DCB and FIBC after giving effect to the Merger under the
purchase method of accounting and the assumptions and adjustments in the notes
that follow.
(i) Estimated fair values -- Estimated fair values for securities held-to-
maturity, mortgage-backed securities held-to-maturity, loans and
borrowings were calculated in accordance with the methodology of
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments." The estimated fair value amounts
have been determined by DCB using available market information and
appropriate valuation methodologies. The resulting net discount/premium
on securities held-to-maturity, mortgage-backed securities held-to-
maturity and loans, respectively, for purposes of these pro forma
financial statements, is being accreted/amortized to interest income on
a straight-line basis over 0.5, 3.5 and 8 years, respectively. The
resulting net premium on borrowings is being amortized into interest
expense on a straight-line basis over the remaining estimated life of 3
years. The fair value of Financial Federal's premises was estimated by
a certified appraiser with the resulting premium being amortized into
depreciation expense over an estimated life of 40 years. The estimated
fair value of certificates of deposit was determined by a third party
consulting firm and the resulting premium is being amortized into
interest expense over an estimated life of 2 years. Additionally, an
evaluation analysis of core deposit intangible was performed by a third
party consulting firm and the resulting core deposit premium is being
amortized into non-interest expense on a straight-line basis over 5
years.
(ii) Income taxes -- A deferred tax was recorded equal to the deferred tax
consequences associated with the differences between the tax basis and
book basis of the assets acquired and liabilities assumed, using an
effective tax rate of 43%, which reflects DCB's current effective tax
rate.
(B) The Merger Agreement requires FIBC, at the written request of DCB, to
modify and change certain of its policies and practices, including loan
and real estate policies and practices (including loan classifications and
levels of reserves), before the Effective Time so as to be applied
consistently on a mutually satisfactory basis with those of DCB, subject
to compliance with GAAP. FIBC is not obligated to take any such action
more than five days prior to the Effective Time. DCB has advised FIBC that
it expects to make such a request and that it currently expects that
compliance with such requirement will result in an additional provision
for loan losses of $1,300,000. Differences in policies and practices of
FIBC and DCB which give rise to the additional provision for loan losses
include, but are not limited to, evaluation of current and future economic
trends, estimation of fair value, particularly for collateral dependent
loans, designation of non-accrual loans and underwriting standards. In
addition, pursuant to the Merger Agreement, DCB expects to request that
FIBC reduce its investment in real estate, net by $1,700,000. The
reduction in investment in real estate, net, reflects DCB's expected
treatment of a specific real estate investment of FIBC (currently held
through an investment in a joint venture) in the event the investment is
not disposed of by FIBC prior to the Closing. In the event this investment
is disposed of prior to the Closing consistent with certain terms set
forth in the Merger Agreement, FIBC will be permitted to pay a Special
Dividend of up to $1.00 per share prior to the Closing. See "The Merger--
Special Dividend." These transactions would result in a reduction in
investment in real estate, net, a corresponding increase in cash and a
reduction in retained earnings to the extent of the Special Dividend. The
amount of these adjustments will depend on the amount of cash
consideration received on the disposition of the investment relative to
the book value of the real estate investment. Neither the provision for
loan losses nor the reduction in investment in real estate, net,
75
<PAGE>
is reflected in the Pro Forma Condensed Combined Consolidated Financial
Statements. However, when booked, this additional provision and the
reduction in investment in real estate, net, will have the effect of
increasing the total goodwill by $1.6 million and increasing the annual
goodwill expense by $81,000. A corresponding deferred tax asset of
$1,380,000 will be recorded in other assets using DCB's historical
statutory tax rate of 46%.
(C) Under the terms of the Merger Agreement, holders of FIBC Common Stock will
receive either shares of DCB Common Stock or cash for each share of FIBC
Common Stock held, subject to the allocation and proration procedures set
forth in the Merger Agreement. Assuming an Average Closing Price of $23.14
(assuming the Pricing Period ended on October 30, 1998), 50% of the shares
of FIBC Common Stock would be converted into the right to receive shares
of DCB Common Stock having a value of $40.50, or 1.7502 shares of DCB
Common Stock, and the remaining 50% would be converted into the right to
receive $40.50 in cash. Based on these assumptions, the total cost of the
transaction is summarized as follows:
<TABLE>
<CAPTION>
50% CASH 50% STOCK TOTAL
-------- --------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
FIBC's total common shares
outstanding(i)........................... $34,276 $34,276(v) $68,552
FIBC total stock options, net of tax(ii).. 2,757 2,757
Estimated transaction costs(iii).......... 3,542 3,542
------- ------- -------
Totals.................................. $40,575(iv) $34,276 $74,851
======= ======= =======
</TABLE>
--------
(i) Based on 1,692,669 shares of FIBC Common Stock outstanding, which
represents 1,708,632 shares of FIBC Common Stock outstanding as of
October 30, 1998 less (i) 963 unallocated shares of FIBC Common Stock
held in the Financial Federal Recognition and Retention Plan and (ii)
15,000 shares of FIBC Common Stock held directly by DCB.
(ii) Assumes that none of the holders of FIBC stock options elect to
exercise or exchange such options for DCB's options. As of October 30,
1998, there were 169,800 outstanding options to purchase FIBC Common
Stock with a weighted average exercise price of $14.24.
(iii) Estimated transaction costs of $3,542,000 consist of the following:
<TABLE>
<CAPTION>
IN THOUSANDS
------------
<S> <C>
Merger related compensation and severance....................... $ 792
Directors Plan.................................................. 320
Professional fees............................................... 2,228
Other expenses.................................................. 202
------
Total estimated transaction costs............................. $3,542
======
</TABLE>
(iv) It is assumed that the cash portion of the transaction will be
financed through 5-year FHLB advances. At June 30, 1998, the rate on
the 5-year FHLB advances was 6.01%.
(v) Assumes the reissuance of DCB's Common Stock through its treasury
account with an average cost per share of $20.41. For accounting
purposes, the fair market value of DCB Common Stock was $23.14 per
share for determination of total stock consideration.
76
<PAGE>
(D) Purchase accounting adjustments are estimated as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
FIBC's net assets -- historical at June 30, 1998.............. $28,731
Elimination of FIBC's core deposit premium.................... (114)
Elimination of DCB's investment in FIBC Common Stock.......... (373)
Fair value adjustments:(i)
Securities held-to-maturity............................... 83
Mortgage-backed securities held-to-maturity............... 331
Loans receivable.......................................... (231)
Bank premises............................................. 2,132
Deposits.................................................. (1,667)
Borrowings................................................ (291)
-------
Subtotal -- net fair value adjustments........................ 357
Tax effects of fair value adjustments at 43%.................. 154
-------
Core deposit premium.......................................... 2,905
Deferred tax on core deposit premium.......................... 1,250
-------
Total core deposit and deferred tax on core deposit........... 4,155
-------
Total net adjustments to net assets acquired.................. 3,871
-------
Adjusted net assets acquired.................................. $32,602
=======
</TABLE>
--------
(i) Fair value adjustments in accordance with purchase accounting under
generally accepted accounting principles.
(E) The excess of cost over the fair value of net assets acquired is set forth
below:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Total cost:
Cash portion................................................ $40,575
Stock portion............................................... 34,276
-------
74,851
Net assets acquired......................................... 32,602
-------
Total excess of cost over the fair value of net assets
acquired................................................... $42,249
=======
</TABLE>
(F) Purchase accounting adjustments to eliminate FIBC's stockholders' equity
accounts.
77
<PAGE>
(G) Pro forma adjustments to interest income, interest expense and non-
interest expense were calculated as follows:
<TABLE>
<CAPTION>
FOR THE FISCAL
YEAR ENDED
JUNE 30, 1998
--------------
(IN THOUSANDS)
<S> <C>
Amortization of premium on securities (0.5 years)........... $ (83)
Amortization of premium on mortgage-backed securities (3.5
years)..................................................... (95)
Accretion of discount on loans (8 years).................... 29
------
Total net adjustments -- interest income.................. $ (149)
======
Increase in interest expense on borrowings to fund acquisi-
tion (i)................................................... $2,438
Amortization of premium on deposits (2 years)............... (834)
Amortization of premium on borrowings (3 years)............. (97)
------
Total net adjustments -- interest expense................. $1,507
======
Amortization of premium on bank premises (40 years)......... $ 53
Amortization of core deposit premium (5 years).............. 581
------
Total net adjustments -- non-interest expense............. $ 634
======
</TABLE>
- --------
(i) It is assumed that the cash portion of the transaction will be
financed through 5-year FHLB advances. At June 30, 1998, the rate on
5-year FHLB advances was 6.01%, resulting in annual interest expense
of $2.4 million. A 0.125% change in the interest rate would have a
$50,719 pre-tax effect upon the DCB's pro forma results of operations.
(H) The excess of cost over the fair value of assets acquired is being
amortized, straight-line, over a period of twenty years, which
approximates the average life to maturity of the long-term interest-
earning assets.
(I) Income tax expense was calculated using an effective tax rate of 43%.
(J) Basic and diluted weighted average number of common stock and common stock
equivalents utilized for the calculation of earnings per share for the
year ended June 30, 1998 were calculated using DCB's historical weighted
average common and common stock equivalents plus 1,481,255 shares expected
to be issued to FIBC stockholders under the terms of the Merger Agreement
based on the assumptions discussed in Note (C) above.
(K) The following table summarizes the estimated impact of the amortization
and accretion of the purchase accounting adjustments made in connection
with the Merger on DCB's results of operations for the next five years:
<TABLE>
<CAPTION>
FUTURE AMOUNTS
FOR THE EXCESS OF COST NET CORE NET EFFECT OF NET DECREASE
FISCAL YEARS OVER FAIR VALUE DEPOSIT FAIR VALUE IN INCOME
ENDING JUNE 30, OF ASSETS ACQUIRED AMORTIZATION ADJUSTMENTS BEFORE TAXES
--------------- ------------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
1999........... $ 2,113 $ 581 $ (729) $ 1,965
2000........... 2,113 581 (812) 1,882
2001........... 2,113 581 22 2,716
2002........... 2,113 581 72 2,766
2003........... 2,113 581 24 2,718
2004 and there-
after......... 31,684 -- 1,780 33,464
------- ------ ------ -------
$42,249 $2,905 $ 357 $45,511
======= ====== ====== =======
</TABLE>
78
<PAGE>
DESCRIPTION OF DCB CAPITAL STOCK
GENERAL
DCB is authorized to issue 45,000,000 shares of DCB Common Stock having a
par value of $0.01 per share and 9,000,000 shares of preferred stock having a
par value of $0.01 per share (the "DCB Preferred Stock"). As of October 30,
1998, there were 12,176,513 shares of DCB Common Stock issued and outstanding
and no shares of DCB Preferred Stock issued and outstanding. Each share of DCB
Common Stock has the same relative rights as, and is identical in all respects
with, each other share of DCB Common Stock. The DCB Board has the power from
time to time to issue additional shares of DCB Common Stock or DCB Preferred
Stock, in one or more series, authorized by DCB's Certificate of Incorporation
without obtaining approval of DCB's stockholders. The rights, qualifications,
limitations and restrictions on each series of DCB Preferred Stock issued will
be determined by the DCB Board and approved as required by the DGCL or
otherwise, at the time of issuance and may include, among other things, rights
in liquidation, rights to participating dividends, voting rights and
convertibility to DCB Common Stock. The DCB Board has the power to increase
(but not above or below the total number of authorized shares of that class)
or decrease (but not below the number of shares of the series then
outstanding) the number of shares of DCB Preferred Stock of a series
subsequent to the issue of shares of that series. The following descriptions
of DCB capital stock are qualified in their entirety by reference to DCB's
Certificate of Incorporation.
DCB COMMON STOCK
Dividends. DCB can pay dividends out of statutory surplus or from certain
net profits if, as and when declared by the DCB Board. The payment of
dividends by DCB is subject to limitations that are imposed by law and
applicable regulations. The holders of DCB Common Stock are entitled to
receive and share equally in such dividends as may be declared by the DCB
Board out of funds legally available therefor. Holders of DCB Preferred Stock
that may be issued in the future may have a priority over the holders of DCB
Common Stock with respect to dividends. See "-- DCB Preferred Stock."
Voting Rights. The holders of DCB Common Stock possess exclusive voting
rights in DCB. Such holders elect the DCB Board and act on such other matters
as are required to be presented to them under the DGCL or DCB's Certificate of
Incorporation or as are otherwise presented to them by the DCB Board. Except
as discussed in "-- Limitation on Voting Rights," each holder of DCB Common
Stock is entitled to one vote per share of DCB Common Stock and will not have
any right to cumulate votes in the election of directors. Holders of DCB
Preferred Stock will not have voting rights except in certain limited
circumstances although the DCB Board may provide voting rights for any newly
created series of DCB Preferred Stock that may be issued in the future. See
"-- DCB Preferred Stock."
Limitation on Voting Rights. DCB's Certificate of Incorporation provides
that any record owner of any outstanding DCB Common Stock that is beneficially
owned, directly or indirectly, by a person who beneficially owns in excess of
10% of the then-issued and outstanding shares of DCB Common Stock (the
"Limit") shall be entitled to cast only one one-hundredth ( 1/100) of one vote
per share for each share in excess of the Limit. Beneficial ownership is
determined pursuant to Rule 13d-3 of the General Rules and Regulations
promulgated pursuant to the Exchange Act, and includes shares beneficially
owned by such person or any of his or her affiliates (as defined in DCB's
Certificate of Incorporation), shares that such person or his or her
affiliates have the right to acquire upon the exercise of conversion rights or
options and shares as to which such person and his or her affiliates have or
share investment or voting power, but shall not include (i) shares
beneficially owned by any pension, profit-sharing, stock bonus, ESOP or other
compensation plan maintained by DCB or Dime of Williamsburgh, or by any trust
or custodial arrangement established in connection with any such plan, which
shares are not specifically allocated to a person's personal account, or (ii)
shares that are subject to a revocable proxy and that are not otherwise
beneficially owned or deemed by DCB to be beneficially owned by such person
and his or her affiliates. The Certificate of Incorporation of DCB further
provides that this provision limiting
79
<PAGE>
voting rights may only be amended upon the vote of two-thirds of the votes
eligible to be cast by holders of all outstanding shares of voting stock
(after giving effect to the limitation on voting rights).
Liquidation Rights. In the event of any liquidation, dissolution or winding
up of Dime of Williamsburgh, DCB, as the holder of Dime of Williamsburgh
capital stock, would be entitled to receive, after payment or provision for
payment of all debts and liabilities of Dime of Williamsburgh (including all
deposit accounts and accrued interest thereon) and after distribution of the
balance in the special liquidation accounts established for the benefit of
certain account holders of Dime of Williamsburgh in connection with its
conversion to stock form, all assets of Dime of Williamsburgh available for
distribution. In the event of liquidation, dissolution or winding up of DCB,
the holders of DCB Common Stock would be entitled to receive, after payment or
provision for payment of all its debts and liabilities, all of the assets of
DCB available for distribution. If DCB Preferred Stock is issued, the holders
thereof may have a priority over the holders of DCB Common Stock in the event
of liquidation or dissolution.
Preemptive Rights. Holders of DCB Common Stock will not be entitled to
preemptive rights with respect to any shares which may be issued. DCB Common
Stock is not subject to redemption.
Issuance of Stock. In certain instances, the issuance of authorized but
unissued shares of DCB Common Stock or DCB Preferred Stock may have an anti-
takeover effect. The authority of the DCB Board to issue DCB Preferred Stock
with rights and privileges, including voting rights, as it may deem
appropriate, may enable the DCB Board to prevent a change of control despite a
shift in ownership of DCB Common Stock. In addition, the DCB Board's authority
to issue additional shares of DCB Common Stock may help deter or delay a
change of control by increasing the number of shares needed to gain control.
Certain Anti-takeover Provisions. DCB's Certificate of Incorporation and
Bylaws contain a number of provisions that may be deemed to have the effect of
discouraging or delaying attempts to gain control of DCB, including provisions
(i) classifying the DCB Board into three classes with each class to serve for
three years with one class being elected annually; (ii) providing the DCB
Board with the exclusive power to fix from time to time the size of the DCB
Board; (iii) authorizing a majority vote of the DCB Board then in office to
fill vacancies in the DCB Board; (iv) providing that a director may be removed
prior to the expiration of his or her term only for cause, upon the vote of
80% of the shares entitled to be voted in the election of directors; (v)
allowing the DCB Board to give due consideration to constituencies other than
DCB's stockholders in evaluating acquisition or merger proposals; (vi)
requiring the approval of the holders of at least 80% of DCB's outstanding
shares of voting stock to approve certain business combinations; (vii)
prohibiting cumulative voting for any purpose; (vii) providing that any action
required or permitted to be taken by DCB stockholders may be taken only at an
annual or special meeting and prohibiting stockholder action by written
consent in lieu of a meeting; (ix) providing that special meetings of
stockholders may be called only by the DCB Board; and (x) providing that
certain of the foregoing provisions may be amended only by the affirmative
vote of at least two-thirds of the outstanding stock entitled to vote or by a
majority of the authorized number of directors of the DCB Board.
The foregoing provisions could impede a change of control of DCB. In
particular, classification of the DCB Board has the effect of decreasing the
number of directors that could be elected in a single year by any person who
seeks to elect its designees to a majority of the seats on the DCB Board.
Furthermore, allowing the DCB Board to consider nonstockholder constituencies
may have the effect of increasing the DCB Board's discretion to reject
acquisition or merger proposals.
DCB PREFERRED STOCK
As of October 30, 1998, no shares of DCB Preferred Stock have been issued by
DCB. DCB Preferred Stock may be issued with such preferences and designations
as the DCB Board may determine from time to time. The DCB Board may issue,
without stockholder approval, DCB Preferred Stock with voting, dividend,
liquidation and conversion rights that could dilute the voting strength of the
holders of DCB Common Stock and may assist DCB's management in impeding an
unfriendly takeover or an attempted change in control.
80
<PAGE>
Although DCB has not issued shares of DCB Preferred Stock and has no
arrangements, understandings or plans at the present time for the issuance or
use of the shares of DCB Preferred Stock authorized, the DCB Board believes
that the availability of such shares will provide DCB and Dime of
Williamsburgh with increased flexibility in structuring possible future
financing and acquisitions and in meeting other corporate needs that may
arise. In the event of a proposed merger, tender offer, or other attempt to
gain control of DCB of which DCB management does not approve, the DCB Board
may be able to authorize the issuance of one or more series of DCB Preferred
Stock with rights and preferences that could impede the completion of such a
hostile transaction. The issuance of DCB Preferred Stock, therefore, may deter
future takeover attempts. The DCB Board does not intend to issue any DCB
Preferred Stock except on terms that it deems to be in the best interests of
both Dime of Williamsburgh and DCB's then existing stockholders.
COMPARISON OF CERTAIN RIGHTS OF STOCKHOLDERS
GENERAL
Both DCB and FIBC are Delaware corporations subject to the provisions of the
DGCL. At the Effective Time, stockholders of FIBC, whose rights are governed
by FIBC's Certificate of Incorporation, FIBC's Bylaws and the DGCL and who are
allocated stock under the exchange procedures set forth herein, will, upon
consummation of the Merger, become stockholders of DCB, and their rights as
stockholders will be determined by DCB's Certificate of Incorporation, DCB's
Amended and Restated Bylaws and the DGCL.
The following is a summary of the material differences in the rights of
stockholders of FIBC under FIBC's Certificate of Incorporation and FIBC's
Bylaws, and the rights of stockholders of DCB under DCB's Certificate of
Incorporation, and DCB's Amended and Restated Bylaws. The following discussion
does not purport to be a complete discussion of, and is qualified in its
entirety by reference to, the governing laws, FIBC's Certificate of
Incorporation, FIBC's Bylaws, DCB's Certificate of Incorporation and DCB's
Amended and Restated Bylaws.
AMENDMENT OF THE CERTIFICATE OF INCORPORATION
DCB. DCB's Certificate of Incorporation requires the affirmative vote of a
majority of directors then in office and by the affirmative vote of the holder
of a majority of the total votes eligible to be cast by the holders of all
outstanding shares of capital stock entitled to vote thereon; provided
however, that if (1) any change relates to Section 13 of Article X or Articles
V, VI, VII or XI of the Certificate of Incorporation, such change must also be
approved either (i) by not less than a majority of the disinterested directors
or (ii) by the affirmative vote of the holders of not less than two-thirds of
the total votes eligible to be cast by the holders of all outstanding shares
of capital stock entitled to vote thereon; (2) any change that relates to
Article VIII must also be approved by either (i) a majority of the
disinterested directors or (ii) the affirmative vote of not less than eighty
percent (80%) of the total number of votes eligible to be cast by the holders
of all outstanding shares of the voting stock, voting together as a single
class, together with the affirmative vote of not less than fifty percent (50%)
of the total number of votes eligible to be cast by the holders of all
outstanding shares of the voting stock not beneficially owned by any
interested stockholder or affiliate or associate thereof, voting together as a
single class; and (3) any change that relates to Article IX must also be
approved by the affirmative vote of the holders of not less than eighty
percent (80%) of the total number of votes eligible to be cast by the holders
of all outstanding shares of capital stock entitled to vote thereon.
FIBC. FIBC's Certificate of Incorporation requires the affirmative vote of
the holders of at least 80% of the voting power of all of the then-outstanding
shares of capital stock of FIBC entitled to vote generally in the election of
FIBC's directors, voting together as a single class, to amend, repeal or adopt
Section C of Article IV, Section C and D of Article V, Article VI, Article
VII, Article VIII, Article X and Article XII of FIBC's Certificate of
Incorporation. FIBC has the right to amend or repeal any other provision in
FIBC's Certificate of Incorporation in the manner prescribed by the DGCL.
81
<PAGE>
SPECIAL MEETINGS OF STOCKHOLDERS
DCB. Under DCB's Amended and Restated Bylaws, special meetings of DCB
stockholders may be called at any time only by resolution of at least three-
fourths of the DCB directors then in office or by the Chairman of the Board.
FIBC. Under FIBC's Bylaws, special meetings of FIBC stockholders may be
called only by the FIBC Board pursuant to a resolution adopted by a majority
of the total number of authorized FIBC directors (whether or not there exist
any vacancies in previously authorized directorships at the time any such
resolution is presented to the FIBC Board for adoption).
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the DGCL, a Delaware corporation may indemnify fully
its directors, officers, employees, and agents if such persons have acted in
good faith and in a manner that such persons reasonably believed was in, or
not opposed to, the best interests of the corporation. A Delaware corporation
also may indemnify fully such individuals with respect to criminal actions or
proceedings, provided that such individual had no reasonable cause to believe
such conduct was unlawful.
DCB. DCB's Certificate of Incorporation provides that DCB shall indemnify,
to the fullest extent authorized by the DGCL, any person who is or was or has
agreed to become a director, officer, employee or agent of DCB against all
expense, liability and loss reasonably incurred or suffered by such indemnitee
in connection therewith; provided, however, that except as provided in DCB's
Certificate of Incorporation with respect to proceedings to enforce rights to
indemnification, DCB shall indemnify any such indemnitee in connection with a
proceeding initiated by such indemnitee only if such proceeding was authorized
or consented by the DCB Board. DCB's Certificate of Incorporation further
permits DCB to maintain insurance on behalf of any director, officer,
employee, or agent of DCB.
FIBC. FIBC's Certificate of Incorporation provides substantially similar
indemnification as DCB's Certificate of Incorporation for FIBC's directors,
officers, employees and agents. FIBC's Certificate of Incorporation also
permits FIBC to maintain insurance on behalf of any director, officer,
employee, or agent of FIBC.
OTHER CONSTITUENCIES
DCB. DCB's Certificate of Incorporation provides that the DCB Board, when
evaluating acquisition proposals, may, in determining what is in the best
interests of DCB and DCB's stockholders, give due consideration (to the extent
permitted by law) not only to price or other consideration being offered, but
also to all other relevant factors including, without limitation, the
financial and managerial resources and future prospects of the other party,
the possible effects on the business of DCB and its subsidiaries and on the
employees, customers, suppliers and creditors of DCB and its subsidiaries, and
the effects on the communities in which DCB's and its subsidiaries' facilities
are located.
FIBC. FIBC's Certificate of Incorporation provides that the FIBC Board, when
evaluating proposals to make a tender or exchange offer, merge or consolidate
FIBC, or purchase or otherwise acquire all or substantially all of the assets
and properties of FIBC may, in determining what is in the best interests of
FIBC and FIBC's stockholders, give due consideration to all relevant factors,
including, without limitation, those factors that directors of FIBC or any
subsidiary of FIBC may consider in evaluating any action that may result in a
change in control of the subsidiary, and the social and economic effect of
acceptance of such offer on: (i) FIBC's and any of FIBC's subsidiaries'
present and future customers and employees, (ii) the communities in which FIBC
and any subsidiary of FIBC operates or is located, (iii) the ability of FIBC
to fulfill its corporate objective as a savings and loan holding company, and
(iv) the ability of Financial Federal to fulfill the objective of a federally
chartered stock savings bank.
The DGCL does not address what factors a board of directors may consider in
evaluating acquisition proposals. However, pursuant to case law interpreting
the provisions of the DGCL, the board of directors of a
82
<PAGE>
Delaware corporation generally may consider the impact of such a proposal on
DCB's other constituencies; provided that doing so bears some reasonable
relationship to general stockholder interests.
STOCKHOLDER RIGHTS PLANS
DCB. The DCB Rights Agreement, dated as of April 9, 1998, contains
provisions intended to protect stockholders in the event of unsolicited offers
or attempts to acquire DCB. The DCB Rights Agreement provides that attached to
each share of DCB Common Stock is a DCB Right, which constitutes a right to
purchase one one-hundredth of a share of Series A Junior Participating
Preferred Stock ("DCB Junior Preferred Stock") at a price of $100, subject to
adjustment. The DCB Rights will expire at the close of business on May 1,
2008, unless extended or unless the DCB Rights are earlier redeemed by DCB, in
each case as described below.
The DCB Rights will separate from the DCB Common Stock and become
exercisable for DCB Junior Preferred Stock within a specified period of time
after (i) a person or group (a "DCB Acquiring Person") other than DCB or its
affiliates acquires "beneficial ownership" of 10% or more of the outstanding
DCB Common Stock or (ii) the commencement of, or the public announcement of an
intention to commence, a tender or exchange offer which could result in the
beneficial ownership by a person or group (other than DCB or its affiliates)
of 10% or more of the outstanding DCB Common Stock (the "DCB Distribution
Date"). The DCB Rights Agreement provides that, until the DCB Distribution
Date, the DCB Rights will be transferred with and only with the transfer of
DCB Common Stock and will not become exercisable. In the event that any person
or group becomes a DCB Acquiring Person pursuant to the terms of the DCB
Rights Agreement, each holder of DCB Rights, other than the DCB Acquiring
Person (whose rights will thereafter be void), will thereafter have the right
to receive upon exercise that number of shares of DCB Common Stock having a
market value of two times the purchase price of a DCB Right.
In the event that any time after a person becomes a DCB Acquiring Person,
DCB is acquired in a merger or other business combination transaction or 50%
or more of its consolidated assets or earning power are sold, pursuant to the
terms of the DCB Rights, proper provision must be made so that each holder of
DCB Rights will thereafter have the right to receive, upon exercise thereof at
the then current purchase price of a DCB Right, that number of shares of
common stock of the acquiring company which at the time of such transaction
will have a market value of two times the purchase price of a DCB Right.
At any time after a person or group becomes a DCB Acquiring Person and prior
to the acquisition by such person or group of 50% or more of the outstanding
DCB Common Stock, the DCB Board may exchange the DCB Rights (other than the
DCB Rights owned by such person or group which have become void), in whole or
in part, at an exchange ratio of one share of DCB Common Stock, or one one-
hundredth of a share of DCB Junior Preferred Stock (or equivalent class of
securities), per DCB Right, subject to adjustment.
At any time prior to a person or group becoming a DCB Acquiring Person, the
DCB Board may redeem the DCB Rights in whole, but not in part, at a price of
$0.01 per DCB Right.
The terms of the DCB Rights may be amended by the DCB Board without the
consent of the holders thereof. Until a DCB Right is exercised, the holder
thereof, as such, will have no rights as a stockholder of DCB, including,
without limitation, the right to vote or receive dividends.
The DCB Rights will not prevent a takeover of DCB. However, the DCB Rights
may cause substantial dilution to a person or group that acquires 10% or more
of the DCB Common Stock without receiving the prior approval of the DCB Board.
Accordingly, the DCB Rights may result in DCB being less attractive to a
potential acquiror and, in the event that the existence of the DCB Rights
deter certain potential acquirors, such DCB Rights could result in the holders
of DCB Common Stock receiving less in the event of a takeover. The DCB Rights
should not interfere with any merger or other business combination approved by
the DCB Board.
Each share of DCB Common Stock issued in the Merger will have attached
thereto a DCB Right.
FIBC. FIBC does not have a stockholder rights plan.
83
<PAGE>
LEGAL MATTERS
The validity of the Merger Shares will be passed upon for DCB by Thacher
Proffitt & Wood, New York, New York.
EXPERTS
The consolidated financial statements of DCB incorporated in this Proxy
Statement-Prospectus by reference from DCB's Annual Report on Form 10-K for
the fiscal year ended June 30, 1998 have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report which is incorporated
herein by reference (which report expresses an unqualified opinion and
includes an explanatory paragraph relating to DCB's change in its method of
accounting for post retirement benefits other than pensions), and have been so
incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The consolidated financial statements of FIBC and subsidiaries as of
September 30, 1997 and 1996 and for each of the years in the three-year period
ended September 30, 1997, included in FIBC's Form 10-K for the year ended
September 30, 1997 and incorporated by reference into this Proxy Statement-
Prospectus, have been incorporated by reference herein and in the Registration
Statement of which this Proxy Statement-Prospectus is a part in reliance upon
the report of Radics & Co., LLC, independent auditors, included in FIBC's 1997
Form 10-K and incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
STOCKHOLDER PROPOSALS
The Merger may be consummated prior to the 1999 Annual Meeting of
Stockholders of FIBC, in which event there would be no 1999 Annual Meeting. If
FIBC holds a 1999 Annual Meeting, unless such 1999 meeting is delayed, any
proposal which an FIBC stockholder sought to have included in FIBC's proxy
materials must have been received by the Secretary of FIBC at 42-25 Queens
Boulevard, Long Island City, New York 11104 not later than August 25, 1998. No
such proposal was received prior to August 25, 1998. If the 1999 Annual
Meeting is held after February 21, 1999, any proposal which an FIBC
stockholder wishes to have included in FIBC's proxy materials must be received
by the Secretary of FIBC no later than ten days following the date on which
notice of such meeting is first given to stockholders. Any such proposal will
be subject to 17 C.F.R. (S) 240.14a-8 promulgated by the Commission under the
Exchange Act.
84
<PAGE>
APPENDIX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BETWEEN
DIME COMMUNITY BANCSHARES, INC.
AND
FINANCIAL BANCORP, INC.
DATED AS OF JULY 18, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
THE MERGER
<S> <C>
1.1 The Merger............................................................. A-1
1.2 Effective Time......................................................... A-1
1.3 Effects of the Merger.................................................. A-1
1.4 Conversion of Company Common Stock..................................... A-1
1.5 Election Procedures.................................................... A-3
1.6 Stock Options.......................................................... A-4
1.7 Parent Common Stock.................................................... A-5
1.8 Shares of Dissenting Stockholders...................................... A-5
1.9 Tax Opinion Adjustment................................................. A-6
1.10 Certificate of Incorporation.......................................... A-6
1.11 By-Laws............................................................... A-6
1.12 Directors and Officers................................................ A-6
1.13 Tax Consequences...................................................... A-6
1.14 Bank Merger........................................................... A-6
ARTICLE II
EXCHANGE OF SHARES
2.1 Parent to Make Shares Available........................................ A-6
2.2 Exchange of Shares..................................................... A-6
ARTICLE III
DISCLOSURE SCHEDULES; STANDARDS FOR REPRESENTATIONS AND WARRANTIES
3.1 Disclosure Schedules................................................... A-8
3.2 Standards.............................................................. A-8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
4.1 Corporate Organization................................................. A-9
4.2 Capitalization......................................................... A-9
4.3 Authority; No Violation................................................ A-10
4.4 Consents and Approvals................................................. A-10
4.5 Reports................................................................ A-11
4.6 Financial Statements................................................... A-11
4.7 Broker's Fees.......................................................... A-12
4.8 Absence of Certain Changes or Events................................... A-12
4.9 Legal Proceedings...................................................... A-12
4.10 Taxes................................................................. A-12
4.11 Employees............................................................. A-13
4.12 SEC Reports........................................................... A-14
4.13 Company Information................................................... A-14
4.14 Compliance with Applicable Law........................................ A-14
4.15 Certain Contracts..................................................... A-14
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
4.16 Agreements with Regulatory Agencies................................... A-15
4.17 Environmental Matters................................................. A-15
4.18 Opinion............................................................... A-16
4.19 Approvals............................................................. A-16
4.20 Loan Portfolio........................................................ A-16
4.21 Property.............................................................. A-17
4.22 Reorganization........................................................ A-17
4.23 Antitakeover Provisions Inapplicable.................................. A-17
4.24 Insurance............................................................. A-17
4.25 Investment Securities; Borrowings; Deposits........................... A-17
4.26 Indemnification....................................................... A-18
4.27 Liquidation Account................................................... A-18
4.28 Year 2000 Matters..................................................... A-18
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
5.1 Corporate Organization................................................. A-18
5.2 Capitalization......................................................... A-19
5.3 Authority; No Violation................................................ A-19
5.4 Consents and Approvals................................................. A-20
5.5 Reports................................................................ A-20
5.6 Financial Statements................................................... A-20
5.7 Broker's Fees.......................................................... A-21
5.8 Absence of Certain Changes or Events................................... A-21
5.9 Legal Proceedings...................................................... A-21
5.10 Taxes................................................................. A-21
5.11 Employees............................................................. A-22
5.12 SEC Reports........................................................... A-22
5.13 Parent Information.................................................... A-23
5.14 Compliance with Applicable Law........................................ A-23
5.15 Ownership of Company Common Stock; Affiliates and Associates.......... A-23
5.16 Agreements with Regulatory Agencies................................... A-23
5.17 Environmental Matters................................................. A-23
5.18 Opinion............................................................... A-24
5.19 Approvals............................................................. A-24
5.20 Loan Portfolio........................................................ A-24
5.21 Property.............................................................. A-24
5.22 Reorganization........................................................ A-25
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1 Covenants of the Company............................................... A-25
6.2 Covenants of Parent................................................... A-29
</TABLE>
iii
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ARTICLE VII
ADDITIONAL AGREEMENTS
<TABLE>
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PAGE
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<S> <C>
7.1 Regulatory Matters..................................................... A-30
7.2 Access to Information.................................................. A-30
7.3 Stockholder Meeting.................................................... A-31
7.4 Legal Conditions to Merger............................................. A-31
7.5 Affiliates............................................................. A-31
7.6 Stock Exchange Listing................................................. A-31
7.7 Employee Benefit Plans; Existing Agreements............................ A-31
7.8 Indemnification........................................................ A-33
7.9 Additional Agreements.................................................. A-34
7.10 Coordination of Dividends............................................. A-34
7.11 Parent Rights Agreement............................................... A-34
7.12 Notification of Certain Matters....................................... A-34
7.13 Certain Matters, Certain Revaluations, Changes and Adjustments........ A-34
7.14 Advisory Board........................................................ A-35
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligation To Effect the Merger............. A-35
8.2 Conditions to Obligations of Parent.................................... A-35
8.3 Conditions to Obligations of the Company............................... A-36
ARTICLE IX
TERMINATION AND AMENDMENT
9.1 Termination............................................................ A-37
9.2 Effect of Termination.................................................. A-38
9.3 Amendment.............................................................. A-39
9.4 Extension; Waiver...................................................... A-39
9.5 Termination Fee........................................................ A-39
ARTICLE X
GENERAL PROVISIONS
10.1 Closing............................................................... A-39
10.2 Nonsurvival of Representations, Warranties and Agreements............. A-40
10.3 Expenses.............................................................. A-40
10.4 Notices............................................................... A-40
10.5 Interpretation........................................................ A-40
10.6 Counterparts.......................................................... A-41
10.7 Entire Agreement...................................................... A-41
10.8 Governing Law......................................................... A-41
10.9 Severability.......................................................... A-41
10.10 Publicity............................................................ A-41
10.11 Assignment; No Third Party Beneficiaries............................. A-41
</TABLE>
iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 18, 1998, between Dime
Community Bancshares, Inc., a Delaware corporation ("Parent"), and Financial
Bancorp, Inc., a Delaware corporation (the "Company"). (Parent and the Company
are sometimes collectively referred to herein as the "Constituent
Corporations".)
WHEREAS, the Boards of Directors of Parent and the Company have determined
that it is in the best interests of their respective companies and their
stockholders to consummate the business combination transaction provided for
herein in which the Company will, subject to the terms and conditions set
forth herein, merge (the "Merger") with and into Parent;
WHEREAS, concurrently with the execution and delivery of this Agreement, and
as a condition and inducement to Parent's willingness to enter into this
Agreement, Parent and the Company have entered into a Stock Option Agreement
(the "Stock Option Agreement"), pursuant to which the Company has granted to
Parent an option to purchase shares of the Company's common stock, par value
$0.01 per share (the "Company Common Stock"), upon the terms and conditions
therein contained; and
WHEREAS, the parties desire to make certain representations, warranties and
agreements in connection with the Merger and also to prescribe certain
conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement, in
accordance with the Delaware General Corporation Law (the "DGCL"), at the
Effective Time (as defined in Section 1.2 hereof), the Company shall merge
with and into Parent. Parent shall be the surviving corporation (hereinafter
sometimes called the "Surviving Corporation") in the Merger, and shall
continue its corporate existence under the laws of the State of Delaware. The
name of the Surviving Corporation shall continue to be Dime Community
Bancshares, Inc. Upon consummation of the Merger, the separate corporate
existence of the Company shall terminate.
1.2 Effective Time. The Merger shall become effective as set forth in the
certificate of merger (the "Certificate of Merger") which shall be filed with
the Secretary of State of the State of Delaware (the "Secretary") on the
Closing Date (as defined in Section 10.1 hereof). The term "Effective Time"
shall be the date and time when the Merger becomes effective, as set forth in
the Certificate of Merger.
1.3 Effects of the Merger. At and after the Effective Time, the Merger shall
have the effects set forth in Sections 259 and 261 of the DGCL.
1.4 Conversion of Company Common Stock. (a) At the Effective Time, subject
to Section 1.8, Section 2.2(e) and Section 9.1(g) hereof, each share of
Company Common Stock issued and outstanding immediately prior to the Effective
Time (other than (i) shares of Company Common Stock held in the Company's
treasury, (ii) unallocated shares of Company Common Stock held in the
Company's Recognition and Retention Plans and related trusts, and (iii) shares
of Company Common Stock held directly or indirectly by Parent or the Company
or any of their respective Subsidiaries (as defined below) (except for Trust
Account Shares and DPC Shares, as such terms are defined in Section 1.4(b)
hereof), shall by virtue of this Agreement and without any action on the part
of the Company, Parent or the holder thereof, cease to be outstanding and
shall be converted into and become the right to receive, at the election of
the holder thereof as provided in Section 1.5, either:
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(i) a number of shares of common stock, par value $0.01 per share, of
Parent ("Parent Common Stock") (together with the number of Parent Rights
(as defined in Section 5.2 hereof) associated therewith) equal to the Final
Exchange Ratio, or
(ii) cash in an amount equal to the Per Share Consideration.
(b) At the Effective Time, (i) all shares of Company Common Stock that are
owned by the Company as treasury stock, (ii) all unallocated shares of Company
Common Stock held in the Company's Recognition and Retention Plans and related
trusts, and (iii) all shares of Company Common Stock that are owned directly
or indirectly by Parent or the Company or any of their respective Subsidiaries
(other than shares of Company Common Stock (x) held directly or indirectly in
trust accounts, managed accounts and the like or otherwise held in a fiduciary
capacity for the benefit of third parties (any such shares, and shares of
Parent Common Stock which are similarly held, whether held directly or
indirectly by Parent or the Company, as the case may be, being referred to
herein as "Trust Account Shares") and (y) held by Parent or the Company or any
of their respective Subsidiaries in respect of a debt previously contracted
(any such shares of Company Common Stock, and shares of Parent Common Stock
which are similarly held, being referred to herein as "DPC Shares"), shall be
cancelled and shall cease to exist and no stock of Parent or other
consideration shall be delivered in exchange therefor. All shares of Parent
Common Stock that are owned by the Company or any of its Subsidiaries (other
than Trust Account Shares and DPC Shares) shall become treasury stock of
Parent,
(c) On and after the Effective Time, holders of certificates which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock (the "Certificates") shall cease to have any rights as
stockholders of the Company, except the right to receive the consideration set
forth in this Article I (the "Merger Consideration") for each such share held
by them.
(d) If, between the date of this Agreement and the Effective Time, the
shares of Parent Common Stock shall be changed into a different number or
class of shares by reason of any reclassification, recapitalization, split-up,
combination, exchange of shares or readjustment, or a stock dividend thereon
shall be declared with a record date within said period, appropriate
adjustments shall be made to the Preliminary Stock Ratio, the Minimum Stock
Ratio, the Maximum Stock Ratio and the Final Exchange Ratio.
(e) For purposes of this Agreement the following terms shall (subject to
Section 9.1(g)) have the meanings indicated:
"Aggregate Cash Consideration" shall mean the product obtained by
multiplying (x) the Outstanding Shares Number by (y) $20.25.
"Aggregate Merger Consideration" shall mean the sum of (x) the Aggregate
Cash Consideration and (y) the Aggregate Stock Consideration.
"Aggregate Stock Consideration" shall mean (w) 0.5 multiplied by (x) the
Outstanding Shares Number multiplied by (y) the Average Closing Price
multiplied by (z) the Preliminary Stock Ratio.
"Average Closing Price" shall mean the average of the closing sale prices
per share for Parent Common Stock as reported on the National Association
of Securities Dealers Automated Quotation/National Market System ("NASDAQ/
NMS") (as reported by The Wall Street Journal, or, if not reported thereby,
another authoritative source, during the ten (10) consecutive trading-day
period during which the shares of Parent Common Stock are traded on the
Nasdaq Stock Market National Market System ("Nasdaq") ending on the tenth
business day immediately prior to the anticipated Effective Time.
"Final Exchange Ratio" shall mean the quotient, rounded to the nearest
ten- thousandth, obtained by dividing the Per Share Consideration by the
Average Closing Price.
"Outstanding Shares Number" shall mean shares of Company Common Stock
issued and outstanding immediately prior to the Effective Time.
"Per Share Consideration" shall mean the quotient obtained by dividing
the Aggregate Merger Consideration by the Outstanding Shares Number.
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"Preliminary Stock Ratio" shall mean the quotient, rounded to the nearest
ten-thousandth obtained by dividing $40.50 by the Average Closing Price
provided, that (i) if the Average Closing Price is equal to or greater than
$31.05, the Preliminary Stock Ratio shall be 1.3043 (the "Minimum Stock
Ratio"), and (ii) if the Average Closing Price is equal to or less than
$22.95, the Preliminary Stock Ratio shall be 1.7647 (the "Maximum Stock
Ratio").
1.5 Election Procedures. (a) An election form and other appropriate and
customary transmittal materials (which shall specify that delivery shall be
effected, and risk of loss and title to Certificates shall pass, only upon
proper delivery of such Certificates to a bank or trust company designated by
Parent and reasonably satisfactory to the Company (the "Exchange Agent")) in
such form as the Company and Parent shall mutually agree (the "Election
Form"), shall be mailed 30 days prior to the anticipated Effective Time or on
such earlier date as Parent and the Company shall mutually agree (the "Mailing
Date") to each holder of record of Company Common Stock as of five business
days prior to the Mailing Date ("Election Form Record Date"); provided,
however, that the Mailing Date shall not occur prior to the receipt of the
shareholder approval contemplated by Section 8.1(a) hereof.
Each Election Form shall permit a holder (or the beneficial owner through
appropriate and customary documentation and instructions) of outstanding
Company Common Stock to elect, subject to provisions of this Section 1.5, to
receive, on a per share basis, with respect to such holder's Company Common
Stock (i) cash (shares as to which such election is made, the "Cash Election
Shares") or (ii) Parent Common Stock (shares as to which such election is
made, the "Stock Election Shares"). Notwithstanding the foregoing, no holder
of Company Common Stock may elect to receive Parent Common Stock pursuant to
the election procedures provided herein with respect to fewer than 50 shares
of Company Common Stock. To be effective, a properly completed Election Form
shall be submitted to the Exchange Agent on or before 5:00 p.m., New York City
time, on the 20th day following the Mailing Date (or such other time and date
as Parent and the Company may mutually agree) (the "Election Deadline");
provided, however, that the Election Deadline may not occur on or after the
Closing Date (as defined in Section 10.1 hereof).
Parent shall make available up to two separate Election Forms, or such
additional Election Forms as Parent may permit, to all persons who become
holders (or beneficial owners) of Company Common Stock between the Election
Form Record Date and close of business on the business day prior to the
Election Deadline. The Company shall provide to the Exchange Agent all
information reasonably necessary for it to perform as specified herein. An
election shall have been properly made only if the Exchange Agent shall have
actually received a properly completed Election Form by the Election Deadline.
An Election Form shall be deemed properly completed only if accompanied by one
or more Certificates (or customary affidavits and indemnification regarding
the loss or destruction of such Certificates or the guaranteed delivery of
such Certificates) representing all shares of Company Common Stock covered by
such Election Form, together with duly executed transmittal materials included
with the Election Form. If a stockholder either (i) does not submit a properly
completed Election Form in a timely fashion, or (ii) revokes its Election Form
prior to the Election Deadline, the shares of Company Common Stock held by
such stockholder shall be designated "No Election Shares." Parent shall cause
the Certificates described in clause (ii) of the preceding sentence to be
promptly returned without charge to the person submitting the Election Form
upon written request to that effect from the person who submitted the Election
Form. Subject to the terms of this Agreement and of the Election Form, the
Exchange Agent shall have reasonable discretion to determine whether any
election, revocation or change has been properly or timely made and to
disregard immaterial defects in any Election Form, and any good faith
decisions of the Exchange Agent regarding such matters shall be binding and
conclusive. Neither Parent nor the Exchange Agent shall be under any
obligation to notify any person of any defect in an Election Form.
(b) The "Cash Election Amount" shall be equal to the Per Share Consideration
multiplied by the total number of Cash Election Shares. Within five business
days after the Election Deadline, unless the Effective Time has not yet
occurred, in which case as soon thereafter as practicable, Parent shall cause
the Exchange Agent to effect the allocation among the holders of Company
Common Stock of rights to receive Parent Common Stock or cash in the Merger in
accordance with the Election Forms as follows:
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<PAGE>
(i) If the Aggregate Cash Consideration is greater than the Cash Election
Amount, then
(A) all Cash Election Shares shall be converted into the right to
receive an amount of cash equal to the Per Share Consideration,
(B) the Exchange Agent will select, on a pro rata basis, first from
among the holders of No Election Shares and then, if necessary, from
among the holders of Stock Election Shares, a sufficient number of such
shares ("Cash Designee Shares") such that the sum of Cash Designee
Shares and Cash Election Shares multiplied by the Per Share
Consideration equals as closely as practicable the Aggregate Cash
Consideration (the Cash Designee Shares shall be converted into the
right to receive an amount of cash equal to the Per Share
Consideration), and
(C) any Stock Election Shares and any No Election Shares, in each
case, not so selected as Cash Designee Shares shall be converted into
the right to receive Parent Common Stock at the Final Exchange Ratio.
(ii) If the Aggregate Cash Consideration is less than the Cash Election
Amount, then
(A) all Stock Election Shares and all No Election Shares shall be
converted into the right to receive Parent Common Stock at the Final
Exchange Ratio,
(B) the Exchange Agent will select, on a pro rata basis from among
the holders of Cash Election Shares, a sufficient number of such shares
("Stock Designee Shares") such that the number of Stock Designee Shares
multiplied by the Per Share Consideration equals as closely as
practicable the difference between the Cash Election Amount and the
Aggregate Cash Consideration (the Stock Designee Shares shall be
converted into the right to receive Parent Common Stock at the Final
Exchange Ratio), and
(C) any Cash Election Shares not so selected as Stock Designee Shares
shall be converted into the right to receive an amount of cash equal to
the Per Share Consideration.
The pro rata selection process to be used by the Exchange Agent shall
consist of such equitable pro ration processes as shall be mutually determined
by the Company and Parent.
1.6 Stock Options. (a) At the Effective Time, each option granted by the
Company to purchase shares of Company Common Stock (each a "Company Option"),
which is outstanding and unexercised immediately prior thereto, whether or not
then vested or exercisable, shall be cancelled and all rights thereunder shall
be extinguished. As consideration for such cancellation, the Company shall
make payment immediately prior to the Effective Time to each holder of a
Company Option of an amount determined by multiplying (x) the number of shares
of Company Common Stock underlying such Company Option by (y) an amount equal
to the excess (if any) of (i) the Per Share Consideration, over (ii) the
exercise price per share of such Company Option, provided, however, that no
such payment shall be made to a holder unless and until such holder has
executed and delivered to the Company an instrument in such form prescribed by
the Parent and reasonably satisfactory to the Company accepting such payment
in full settlement of his rights relative to the Company Option. Prior to the
Effective Time, the Company shall take or cause to be taken all actions
required under the Company Option Plans to provide for the foregoing.
(b) Notwithstanding the provisions of Section 1.6(a) above, at the Effective
Time, each Company Option held by the individuals previously designated by
Parent and set forth on Schedule 1.6(b) hereto ("Continuing Option Holders")
which is outstanding and unexercised immediately prior thereto shall at the
election of the holder thereof be converted automatically into an option to
purchase shares of Parent Common Stock in an amount and at an exercise price
determined as provided below (and otherwise subject to the terms of the
Company's 1995 Incentive Stock Option Plan and the Company's 1995 Stock Option
Plan for Outside Directors, as the case may be (collectively, the "Company
Option Plans"), the agreements evidencing grants thereunder and any other
agreements between the Company and an optionee regarding Company Options which
have been delivered to Parent prior to the date of this Agreement, other than
stock appreciation rights or limited stock appreciation rights or other rights
to receive cash payments under the Company Option Plans):
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(1) the number of shares to be subject to the new option shall be equal
to the product of the number of shares of Company Common Stock subject to
the original option and the Final Exchange Ratio, provided that any
fractional shares of Parent Common Stock resulting from such multiplication
shall be rounded down to the nearest whole share; and
(2) the exercise price per share of Parent Common Stock under the new
option shall be equal to the exercise price per share of Company Common
Stock under the original option divided by the Final Exchange Ratio,
provided that such exercise price shall be rounded up to the nearest cent.
The adjustment provided herein with respect to any options which are
"incentive stock options" (as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code")) shall be and is intended to be effected
in a manner which is consistent with Section 424(a) of the Code and, to the
extent it is not so consistent, such Section 424(a) shall override anything to
the contrary contained herein. The duration and other terms of the new option
shall be the same as the original option except that all references to the
Company shall be deemed to be references to Parent. In order for any
Continuing Option Holder to have his or her Company Options converted into an
option to purchase Parent Common Stock as set forth in this Section 1.6(b),
such Continuing Option Holder shall have executed a written election with
respect to such conversion no later than five (5) business days prior to the
Closing Date, which written election shall be in such form as shall be
prescribed by Parent and reasonably satisfactory to the Company.
(c) Prior to the Effective Time, Parent shall reserve for issuance the
number of shares of Parent Common Stock necessary to satisfy Parent's
obligations under Section 1.6(b) hereof. Promptly after the Effective Time
(but in no event later than three business days thereafter), Parent shall file
with the Securities and Exchange Commission (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 Parent Common Stock
subject to options to acquire Parent Common Stock issued pursuant to Section
1.6(b) hereof, and shall use its best efforts to maintain the current status
of the prospectus contained therein, as well as comply with applicable state
securities or "blue sky" laws, for so long as such options remain outstanding.
1.7 Parent Common Stock. Except for shares of Parent Common Stock owned by
the Company or any of its Subsidiaries (other than Trust Account Shares and
DPC Shares), which shall be converted into treasury stock of Parent as
contemplated by Section 1.4 hereof, the shares of Parent Common Stock issued
and outstanding immediately prior to the Effective Time shall be unaffected by
the Merger and such shares shall remain issued and outstanding.
1.8 Shares of Dissenting Stockholders. Notwithstanding anything in this
Agreement to the contrary, any shares of Company Common Stock that are issued
and outstanding as of the Effective Time and that are held by a stockholder
who has properly exercised his appraisal rights (the "Dissenting Shares")
under the DGCL shall not be converted into the right to receive the Merger
Consideration unless and until the holder shall have failed to perfect, or
shall have effectively withdrawn or lost, his right to dissent from the Merger
under the DGCL and to receive such consideration as may be determined to be
due with respect to such Dissenting Shares pursuant to and subject to the
requirements of the DGCL. If any such holder shall have failed to perfect or
shall have effectively withdrawn or lost such right, each share of such
holder's Company Common Stock shall thereupon be deemed to have been converted
into and to have become, as of the Effective Time, the right to receive,
without any interest thereon, the Merger Consideration as provided in Section
1.4 and as allocated pursuant to Section 1.5 upon surrender of the Certificate
or Certificates representing such Dissenting Shares. The Company shall give
Parent (i) prompt notice of any notice or demands for appraisal or payment for
shares of Company Common Stock received by the Company and (ii) the
opportunity to participate in and direct all negotiations and proceedings with
respect to any such demands or notices. The Company shall not, without the
prior written consent of Parent, make any payment with respect to, or settle,
offer to settle or otherwise negotiate, any such demands. Dissenting Shares
shall be deemed to be No Election Shares for purposes of Section 1.5 hereof.
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1.9 Tax Opinion Adjustment. If either (i) the tax opinion referred to in
Section 8.2(d) cannot be rendered (as reasonably determined by Thacher
Proffitt & Wood) or (ii) the tax opinion referred to in Section 8.3(d) cannot
be rendered (as reasonably determined by Skadden, Arps, Slate, Meagher & Flom
LLP), in either case as a result of the Merger potentially failing to qualify
as a reorganization under Section 368(a) of the Code, then Parent shall reduce
the Aggregate Cash Consideration to the minimum extent necessary to enable the
relevant tax opinion or opinions, as the case may be, to be rendered, and
correspondingly increase the Aggregate Stock Consideration.
1.10 Certificate of Incorporation. At the Effective Time, the Certificate of
Incorporation of Parent, as in effect at the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation.
1.11 By-Laws. At the Effective Time, the By-Laws of Parent, as in effect
immediately prior to the Effective Time, shall be the By-Laws of the Surviving
Corporation until thereafter amended in accordance with applicable law.
1.12 Directors and Officers. The directors and officers of Parent
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and By-Laws of the Surviving Corporation until
their respective successors are duly elected or appointed and qualified.
1.13 Tax Consequences. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a) of the Code and that this
Agreement shall constitute a "plan of reorganization" for purposes of Section
368 of the Code.
1.14 Bank Merger. Promptly following the execution of the Agreement, the
Parent Bank (as defined below) and the Company Bank (as defined below) shall
enter into the Plan of Bank Merger (the "Bank Merger") in the form annexed
hereto as Exhibit A (which shall qualify as a reorganization under Section
368(a) of the Code) pursuant to which the Bank Merger will be effected
pursuant to and with the effect set forth in the rules and regulations of the
Office of Thrift Supervision ("OTS"). The parties hereto intend that the Bank
Merger shall become effective on the Effective Date following the Effective
Time of the Merger. The documentation relating to the Bank Merger shall
provide that the directors of the Parent Bank as the surviving entity of the
Bank Merger shall be all of the respective directors of the Parent Bank
immediately prior to such merger.
ARTICLE II
EXCHANGE OF SHARES
2.1 Parent to Make Shares Available. At or prior to the Effective Time,
Parent shall deposit, or shall cause to be deposited, with the Exchange Agent,
for the benefit of the holders of Certificates, for exchange in accordance
with this Article II, certificates representing the shares of Parent Common
Stock, the cash in lieu of fractional shares and an amount of cash sufficient
to pay the Aggregate Cash Consideration (such cash and certificates for shares
of Parent Common Stock, together with any dividends or distributions with
respect thereto, being hereinafter referred to as the "Exchange Fund") to be
issued pursuant to Section 1.4 and paid pursuant to Section 2.2(a) in exchange
for outstanding shares of Company Common Stock.
2.2 Exchange of Shares. (a) As soon as practicable after the Effective Time,
and in no event more than five business days thereafter, the Exchange Agent
shall mail to each holder of record of a Certificate or Certificates who has
not previously surrendered such Certificate or Certificates with a Form of
Election a form letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon delivery of the Certificates to the Exchange Agent) and instructions for
use in effecting the surrender of the Certificates in exchange for the Merger
Consideration into which the shares of Company Common Stock represented by
such Certificate or Certificates shall have been converted pursuant to this
Agreement. The Company shall have the right to review both the letter of
transmittal and the instructions prior
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to the Effective Time and provide reasonable comments thereon. Upon surrender
of a Certificate for exchange and cancellation to the Exchange Agent, together
with such letter of transmittal, duly executed, the holder of such Certificate
shall be entitled to receive in exchange therefor the Merger Consideration to
which such holder of Company Common Stock shall have become entitled pursuant
to the provisions of Article I hereof, and the Certificate so surrendered
shall forthwith be cancelled. No interest will be paid or accrued on any cash
constituting Merger Consideration (including the cash in lieu of fractional
shares) and any unpaid dividends and distributions, if any, payable to holders
of Certificates.
(b) No dividends or other distributions declared after the Effective Time
with respect to Parent Common Stock and payable to the holders of record
thereof shall be paid to the holder of any unsurrendered Certificate until the
holder thereof shall surrender such Certificate in accordance with this
Article II. After the surrender of a Certificate in accordance with this
Article II, the record holder thereof 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 Parent Common Stock,
if any, represented by such Certificate.
(c) If any certificate representing shares of Parent Common Stock is to be
issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of the issuance
thereof that the Certificate so surrendered shall be properly endorsed (or
accompanied by an appropriate instrument of transfer) and otherwise in proper
form for transfer, and that the person requesting such exchange shall pay to
the Exchange Agent in advance any transfer or other taxes required by reason
of the issuance of a certificate representing shares of Parent Common Stock in
any name other than that of the registered holder of the Certificate
surrendered, or required for any other reason, or shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of the Company of the shares of Company Common Stock which were
issued and outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates representing such shares are presented for
transfer to the Exchange Agent, they shall be canceled and exchanged for
Merger Consideration as determined in accordance with Article I and this
Article II.
(e) Notwithstanding anything to the contrary contained herein, no
certificates or scrip representing fractional shares of Parent Common Stock
shall be issued upon the surrender for exchange of Certificates, no dividend
or distribution with respect to Parent Common Stock shall be payable on or
with respect to any fractional share, and such fractional share interests
shall not entitle the owner thereof to vote or to any other rights of a
stockholder of Parent. In lieu of the issuance of any such fractional share,
Parent shall pay to each former stockholder of the Company who otherwise would
be entitled to receive a fractional share of Parent Common Stock an amount in
cash determined by multiplying (i) the Average Closing Price by (ii) the
fraction of a share of Parent Common Stock which such holder would otherwise
be entitled to receive pursuant to Section 1.4 hereof.
(f) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of the Company for twelve months after the Effective Time shall
be paid to Parent. Any stockholders of the Company who have not theretofore
complied with this Article II shall thereafter look only to Parent for payment
of the cash, shares of Parent Common Stock, cash in lieu of fractional shares
and unpaid dividends and distributions on the Parent Common Stock deliverable
in respect of each share of Company Common Stock such stockholder holds as
determined pursuant to this Agreement, in each case, without any interest
thereon. If outstanding Certificates are not surrendered or the payment for
them is not claimed prior to the date on which such payments would otherwise
escheat to or become the property of any governmental unit or agency, the
unclaimed items shall, to the extent permitted by abandoned property and any
other applicable law, become the property of Parent (and to the extent not in
its possession shall be paid over to it), free and clear of all claims or
interest of any person previously entitled to such claims. Notwithstanding the
foregoing, none of Parent, the Company, the Exchange Agent or any other person
shall be liable to any former holder of shares of Company Common Stock for any
amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
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(g) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by Parent, the
posting by such person of a bond in such amount as Parent may direct as
indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen
or destroyed Certificate the cash and/or shares of Parent Common Stock and
cash in lieu of fractional shares deliverable in respect thereof pursuant to
this Agreement.
ARTICLE III
DISCLOSURE SCHEDULES; STANDARDS
FOR REPRESENTATIONS AND WARRANTIES
3.1 Disclosure Schedules. Prior to the execution and delivery of this
Agreement, the Company has delivered to Parent, and Parent has delivered to
the Company, a schedule (in the case of the Company, the "Company Disclosure
Schedule," and in the case of Parent, the "Parent Disclosure Schedule")
setting forth, among other things, items the disclosure of which is necessary
or appropriate either in response to an express disclosure requirement
contained in a provision hereof or as an exception to one or more of such
party's representations or warranties contained in Article IV, in the case of
the Company, or Article V, in the case of Parent, or to one or more of such
party's covenants contained in Article VI; provided, however, that
notwithstanding anything in this Agreement to the contrary (a) no such item is
required to be set forth in the Disclosure Schedule as an exception to a
representation or warranty if its absence would not result in the related
representation or warranty being deemed untrue or incorrect under the standard
established by Section 3.2, 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 material fact, event or circumstance or that such item has had or
would have a Material Adverse Effect (as defined herein) with respect to
either the Company or Parent, respectively.
3.2 Standards. (a) No representation or warranty of the Company contained in
Article IV (other than the representations set forth in the first and third
sentences of Section 4.1(a), the second sentence of Section 4.1(b) and
Sections 4.2, 4.6, 4.8(a), 4.10 and 4.18) or of Parent contained in Article V
(other than the representations set forth in the first and third sentences of
Section 5.1(a), the second sentence of Section 5.1(b) and Sections 5.2, 5.6,
5.8(a), 5.10 and 5.18) shall be deemed untrue or incorrect for any purpose
under this Agreement, and no party hereto shall be deemed to have breached a
representation or warranty for any purpose under this Agreement, in any case
as a consequence of the existence or absence of any fact, circumstance or
event unless such fact, circumstance or event, individually or when taken
together with all other facts, circumstances or events inconsistent with any
representations or warranties contained in Article IV, in the case of the
Company, or Article V, in the case of Parent, has had a Material Adverse
Effect with respect to the Company or Parent, respectively.
(b) As used in this Agreement, the term "Material Adverse Effect" means,
with respect to Parent or the Company, as the case may be, a material adverse
effect on (i) the business, results of operations or financial condition of
such party and its Subsidiaries taken as a whole, other than any such effect
attributable to or resulting from (x) any change in banking or similar laws,
rules or regulations of general applicability or interpretations thereof by
courts or governmental authorities, (y) any change in GAAP (as defined herein)
or regulatory accounting principles applicable to banks, thrifts or their
holding companies generally, or (z) any action or omission of the Company or
Parent or any Subsidiary of either of them taken with the prior written
consent of the other party hereto or (ii) the ability of such party and its
Subsidiaries to consummate the transactions contemplated hereby. As used in
this Agreement, the word "Subsidiary" when used with respect to any party
means any corporation, partnership or other organization, whether incorporated
or unincorporated, which is consolidated with such party for financial
reporting purposes.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Subject to Article III, the Company hereby represents and warrants to Parent
as follows:
4.1 Corporate Organization. (a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
The Company has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary. The Company is duly registered as a
unitary savings and loan holding company under the Home Owners' Loan Act, as
amended (the "HOLA"). The Certificate of Incorporation and By-laws of the
Company, copies of which have previously been made available to Parent, are
true and correct copies of such documents as in effect as of the date of this
Agreement.
(b) Financial Federal Savings Bank (the "Company Bank") is a stock savings
bank duly organized, validly existing and in good standing under the laws of
the United States of America. The deposit accounts of the Company Bank are
insured by the Federal Deposit Insurance Corporation (the "FDIC") through the
Savings Association Insurance Fund to the fullest extent permitted by law, and
all premiums and assessments required to be paid in connection therewith have
been paid when due. Each of the Company's other Subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization. Each of the Company's
Subsidiaries has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being
conducted and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or the location of the properties and assets owned or leased by it
makes such licensing or qualification necessary. The certificate of
incorporation, by-laws and similar governing documents of each Subsidiary of
the Company, copies of which have previously been made available to Parent,
are true and correct copies of such documents as in effect as of the date of
this Agreement.
(c) The minute books of the Company and each of its Subsidiaries contain
true and correct records of all meetings and other corporate actions held or
taken since December 31, 1995 of their respective stockholders and Boards of
Directors (including committees of their respective Boards of Directors).
4.2 Capitalization. (a) The authorized capital stock of the Company consists
of 6,000,000 shares of Company Common Stock and 2,500,000 shares of preferred
stock, par value $.01 per share (the "Company Preferred Stock"). As of July
15, 1998, there were 1,706,666 shares of Company Common Stock outstanding and
478,334 shares of Company Common Stock held by the Company as treasury stock.
As of July 15, 1998, there were (i) no shares of Company Common Stock reserved
for issuance upon exercise of outstanding stock options or otherwise except
for (x) 171,766 shares of Company Common Stock reserved for issuance pursuant
to the Company Option Plans and described in Section 4.2(a) of the Company
Disclosure Schedule and (y) 339,627 shares of Company Common Stock reserved
for issuance upon exercise of the option to be issued to Parent pursuant to
the Stock Option Agreement and (ii) no shares of Company Preferred Stock
issued or outstanding, held in the Company's treasury or reserved for issuance
upon exercise of outstanding stock options or otherwise. All of the issued and
outstanding shares of Company Common Stock have been duly authorized and
validly issued and are fully paid, nonassessable and free of preemptive
rights, with no personal liability attaching to the ownership thereof. Except
as referred to above or reflected in Section 4.2(a) of the Company Disclosure
Schedule, and except for the Stock Option Agreement, the Company does not have
and is not bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase or
issuance of any shares of Company Common Stock or Company Preferred Stock or
any other equity security of the Company or any securities representing the
right to purchase or otherwise receive any shares of Company Common Stock or
any other equity security of the Company. The names of the optionees, the date
of each option to purchase Company Common Stock granted, the number of shares
subject to each such
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option, the expiration date of each such option, and the price at which each
such option may be exercised under the Company Option Plans are set forth in
Section 4.2(a) of the Company Disclosure Schedule.
(b) Section 4.2(b) of the Company Disclosure Schedule sets forth a true and
correct list of all of the Subsidiaries of the Company. Except as set forth in
Section 4.2(b) of the Company Disclosure Schedule, the Company owns, directly
or indirectly, all of the issued and outstanding shares of the capital stock
of each of such Subsidiaries, free and clear of all liens, charges,
encumbrances and security interests whatsoever, and all of such shares are
duly authorized and validly issued and are fully paid, nonassessable and free
of preemptive rights, with no personal liability attaching to the ownership
thereof. No Subsidiary of the Company has or is bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of capital stock
or any other equity security of such Subsidiary or any securities representing
the right to purchase or otherwise receive any shares of capital stock or any
other equity security of such Subsidiary. Assuming compliance by Parent with
Section 1.5 hereof, at the Effective Time, there will not be any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character by which the Company or any of its Subsidiaries will be bound
calling for the purchase or issuance of any shares of the capital stock of the
Company or any of its Subsidiaries.
4.3 Authority; No Violation. (a) The Company has full corporate power and
authority to execute and deliver this Agreement and the Option Agreement and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the Option Agreement and the consummation
of the transactions contemplated hereby and thereby have been duly and validly
approved by the Board of Directors of the Company. The Board of Directors of
the Company has directed that this Agreement and the transactions contemplated
hereby be submitted to the Company's stockholders for approval at a meeting of
such stockholders and, except for the adoption of this Agreement by the
requisite vote of the Company's stockholders, no other corporate proceedings
on the part of the Company are necessary to approve this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by the Company and (assuming due
authorization, execution and delivery by Parent) this Agreement constitutes a
valid and binding obligation of the Company, enforceable against the Company
in accordance with its terms, except as enforcement may be limited by general
principles of equity whether applied in a court of law or a court of equity
and by bankruptcy, insolvency and similar laws affecting creditors' rights and
remedies generally.
(b) Except as set forth in Section 4.3(b) of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement by the Company,
nor the consummation by the Company of the transactions contemplated hereby,
nor compliance by the Company with any of the terms or provisions hereof, will
(i) violate any provision of the Certificate of Incorporation or By-Laws of
the Company or the certificate of incorporation, by-laws or similar governing
documents of any of its Subsidiaries, or (ii) assuming that the consents and
approvals referred to in Section 4.4 hereof are duly obtained, (x) violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to the Company or any of its Subsidiaries, or any of
their respective properties or assets, or (y) violate, conflict with, result
in a breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the respective properties or assets of the Company or
any of its Subsidiaries under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license, lease, agreement
or other instrument or obligation to which the Company or any of its
Subsidiaries is a party, or by which they or any of their respective
properties or assets may be bound or affected.
4.4 Consents and Approvals. Except for (a) the filing of applications and
notices, as applicable, with the OTS under the HOLA, Bank Merger Act, Federal
Deposit Insurance Act and the rules and regulations of the OTS and approval of
such applications and notices, (b) the filing of such applications, filings,
authorizations, orders and approvals as may be required under applicable state
law (the "State Banking Approvals"), (c) the filing with the SEC of a proxy
statement in definitive form relating to the meeting of the Company's
stockholders
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to be held in connection with this Agreement and the transactions contemplated
hereby (the "Proxy Statement") and the filing and declaration of effectiveness
of the registration statement on Form S-4 (the "S-4") in which the Proxy
Statement will be included as a prospectus, (d) the approval of this Agreement
by the requisite vote of the stockholders of the Company, (e) the filing of
the Certificate of Merger with the Secretary pursuant to the DGCL, (f)
approval of the listing of the Parent Common Stock to be issued in the Merger
on the NASDAQ/NMS, and (g) such filings, authorizations or approvals as may be
set forth in Section 4.4 of the Company Disclosure Schedule, no consents or
approvals of or filings or registrations with any court, administrative agency
or commission or other governmental authority or instrumentality (each a
"Governmental Entity") or with any third party are necessary in connection
with (1) the execution and delivery by the Company of this Agreement and (2)
the consummation by the Company of the Merger and the other transactions
contemplated hereby.
4.5 Reports. The Company and each of its Subsidiaries have timely filed all
reports, registrations and statements, together with any amendments required
to be made with respect thereto, that they were required to file since
December 31, 1995 with (i) the OTS, (ii) the FDIC, (iii) any state banking
commissions or any other state regulatory authority (each a "State Regulator")
and (iv) any other self-regulatory organization ("SRO") (collectively with the
Federal Reserve Board, the "Regulatory Agencies"), and have paid all fees and
assessments due and payable in connection therewith. Except for normal
examinations conducted by a Regulatory Agency in the regular course of the
business of the Company and its Subsidiaries, and except as set forth in
Section 4.5 of the Company Disclosure Schedule, no Regulatory Agency has
initiated any proceeding or, to the knowledge of the Company, investigation
into the business or operations of the Company or any of its Subsidiaries
since December 31, 1995. There is no unresolved violation, criticism, or
exception by any Regulatory Agency with respect to any report or statement
relating to any examinations of the Company or any of its Subsidiaries.
4.6 Financial Statements. The Company has previously made available to
Parent copies of (a) the consolidated statements of financial condition of the
Company and its Subsidiaries as of September 30, for the fiscal years 1996 and
1997, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the fiscal years 1995 through 1997,
inclusive, as reported in the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1997 filed with the SEC under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), in each case
accompanied by the audit report of Radics & Co., LLC, independent public
accountants with respect to the Company, and (b) the unaudited consolidated
statements of financial condition of the Company and its Subsidiaries as of
March 31, 1998 and March 31, 1997 and the related unaudited consolidated
statements of income, cash flows and changes in stockholders' equity for the
six-month periods then ended as reported in the Company's Quarterly Report on
Form 10-Q for the period ended March 31, 1998 filed with the SEC under the
Exchange Act. The September 30, 1997 consolidated statement of financial
condition of the Company (including the related notes, where applicable)
fairly presents the consolidated financial position of the Company and its
Subsidiaries as of the date thereof, and the other financial statements
referred to in this Section 4.6 (including the related notes, where
applicable) fairly present, and the financial statements to be filed with the
SEC after the date hereof will fairly present (subject, in the case of the
unaudited statements, to recurring audit adjustments normal in nature and
amount), the results of the consolidated operations and consolidated financial
position of the Company and its Subsidiaries for the respective fiscal periods
or as of the respective dates therein set forth; each of such statements
(including the related notes, where applicable) complies, and the financial
statements to be filed with the SEC after the date hereof will comply, with
applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto; and each of such statements
(including the related notes, where applicable) has been, and the financial
statements to be filed with the SEC after the date hereof will be, prepared in
accordance with generally accepted accounting principles ("GAAP") consistently
applied during the periods involved, except as indicated in the notes thereto
or, in the case of unaudited statements, as permitted by Form 10-Q. The books
and records of the Company and its Subsidiaries have been, and are being,
maintained in accordance with GAAP and any other applicable legal and
accounting requirements.
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4.7 Broker's Fees. Neither the Company nor any Subsidiary of the Company nor
any of their respective officers or directors has employed any broker or
finder or incurred any liability for any broker's fees, commissions or
finder's fees in connection with any of the transactions contemplated by this
Agreement, except that the Company has engaged, and will pay a fee or
commission to, Sandler O'Neill & Partners, L.P. ("Sandler O'Neill") in
accordance with the terms of a letter agreement between Sandler O'Neill and
the Company, a true and correct copy of which has been previously made
available by the Company to Parent.
4.8 Absence of Certain Changes or Events. (a) Except as disclosed in any
Company Report (as defined in Section 4.12) filed with the SEC prior to the
date of this Agreement, since September 30, 1997, there has been no change or
development or combination of changes or developments which, individually or
in the aggregate, has had a Material Adverse Effect on the Company.
(b) Except as disclosed in any Company Report filed with the SEC prior to
the date of this Agreement, since September 30, 1997, the Company and its
Subsidiaries have carried on their respective businesses in the ordinary
course consistent with their past practices.
(c) Except as set forth in Section 4.8(c) of the Company Disclosure
Schedule, since March 31, 1998, neither the Company nor any of its
Subsidiaries has (i) increased the wages, salaries, compensation, pension, or
other fringe benefits or perquisites payable to any executive officer,
employee, or director from the amount thereof in effect as of March 31, 1998
(which amounts have been previously disclosed to Parent), granted any
severance or termination pay, entered into any contract to make or grant any
severance or termination pay, or paid any bonus (except (x) for salary
increases and bonus payments made in the ordinary course of business
consistent with past practices following the date hereof and (y) the Company
may adopt the severance plan described in Section 6.1(j) of the Company
Disclosure Schedule), (ii) suffered any strike, work stoppage, slow-down, or
other labor disturbance, (iii) been a party to a collective bargaining
agreement, contract or other agreement or understanding with a labor union or
organization, or (iv) had any union organizing activities.
4.9 Legal Proceedings. (a) Except as set forth in Section 4.9(a) of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries
is a party to any, and there are no pending or, to the Company's knowledge,
threatened, legal, administrative, arbitral or other proceedings, claims,
actions or governmental or regulatory investigations of any nature against the
Company or any of its Subsidiaries or challenging the validity or propriety of
the transactions contemplated by this Agreement.
(b) Except as set forth in Section 4.9(b) of the Company Disclosure
Schedule, there is no injunction, order, judgment, decree, or regulatory
restriction imposed upon the Company, any of its Subsidiaries or the assets of
the Company or any of its Subsidiaries.
4.10 Taxes. (a) Except as set forth in Section 4.10(a) of the Company
Disclosure Schedule, each of the Company and its Subsidiaries has (i) duly and
timely filed (including applicable extensions granted without penalty) all
material Tax Returns (as hereinafter defined) required to be filed at or prior
to the Effective Time, and such Tax Returns are true and correct in all
material respects, and (ii) paid in full or made adequate provision in the
financial statements of the Company (in accordance with GAAP) for all material
Taxes (as hereinafter defined) shown to be due on such Tax Returns. Except as
set forth in Section 4.10(a) of the Company Disclosure Schedule, (i) as of the
date hereof neither the Company nor any of its Subsidiaries has requested any
extension of time within which to file any Tax Returns in respect of any
fiscal year which have not since been filed and no request for waivers of the
time to assess any Taxes are pending or outstanding, and (ii) as of the date
hereof, with respect to each taxable period of the Company and its
Subsidiaries, the federal and state income Tax Returns of the Company and its
Subsidiaries have been audited by the Internal Revenue Service or appropriate
state tax authorities or the time for assessing and collecting income Tax with
respect to such taxable period has closed and such taxable period is not
subject to review. Except as set forth in Section 4.10(a) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries (i) has
made an election under Section 341(f) of the Code, (ii) has made any payment,
is obligated to make any payment, or is a party to any agreement that could
obligate it to make any payment that would not be deductible under Section
280G of the Code, (iii) has issued or
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assumed any obligation under Section 279 of the Code, any high yield discount
obligation as described in Section 163(i) of the Code or any registration-
required obligation within the meaning of Section 163(f)(2) of the Code that
is not in registered form, or (iv) is or has been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the
Code.
(b) For the purposes of this Agreement, "Taxes" shall mean all taxes,
charges, fees, levies, penalties or other assessments imposed by any United
States federal, state, local or foreign taxing authority, including, but not
limited to income, excise, property, sales, transfer, franchise, payroll,
withholding, social security or other taxes, including any interest, penalties
or additions attributable thereto. For purposes of this Agreement, "Tax
Return" shall mean any return, report, information return or other document
(including any related or supporting information) with respect to Taxes.
4.11 Employees. (a) Section 4.11(a) of the Company Disclosure Schedule sets
forth a true and correct list of each deferred compensation plan, incentive
compensation plan, equity compensation plan, "welfare" plan, fund or program
(within the meaning of section 3(1) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")); "pension" plan, fund or program (within
the meaning of section 3(2) of ERISA); each "stay in place" bonus, retention,
employment, consulting, independent contractor, termination or severance
agreement; and each other employee benefit plan, fund, program, agreement or
arrangement, in each case, that is sponsored, maintained or contributed to or
required to be contributed to by, or with respect to which an obligation or
liability exists of (the "Plans"), the Company, any of its Subsidiaries or by
any trade or business, whether or not incorporated (an "ERISA Affiliate"), all
of which together with the Company would be deemed a "single employer" within
the meaning of Section 4001 of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), for the benefit of any employee or director or
former employee or former director of the Company, any Subsidiary or any ERISA
Affiliate or any person who is an independent contractor or consultant to the
Company, any of its Subsidiaries or any ERISA Affiliate.
(b) The Company has heretofore made available to Parent with respect to each
of the Plans true and correct copies of each of the following documents if
applicable: (i) the Plan document and trust agreement or other funding
arrangement; (ii) the actuarial report for such Plan for each of the last two
years and any subsequent changes to actuarial assumptions; (iii) the most
recent determination letter from the Internal Revenue Service for such Plan;
(iv) the most recent Form 5500, summary plan description and related summaries
of material modifications and (v) with respect to any employee stock ownership
plan, all loan documents and repayment schedules.
(c) Except as set forth in Section 4.11(c) of the Company Disclosure
Schedule: each of the Plans is in compliance with applicable law, including
but not limited to, the Code and ERISA; each of the Plans intended to be
"qualified" within the meaning of section 401(a) of the Code has received a
favorable determination letter from the IRS; no Plan has an accumulated or
waived funding deficiency within the meaning of section 412 of the Code;
neither the Company nor any ERISA Affiliate has incurred, directly or
indirectly, any liability to or on account of a Plan pursuant to Title IV of
ERISA (other than PBGC premiums); to the knowledge of the Company no
proceedings have been instituted to terminate any Plan that is subject to
Title IV of ERISA; no "reportable event," as such term is defined in section
4043(c) of ERISA, has occurred with respect to any Plan (other than a
reportable event with respect to which the thirty day notice period has been
waived); and no condition exists that presents a material risk to the Company
of incurring a liability to or on account of a Plan pursuant to Title IV of
ERISA; no Plan is a multiemployer plan (within the meaning of section
4001(a)(3) of ERISA and no Plan is a multiple employer plan as defined in
Section 413 of the Code; there are no pending, or to the knowledge of the
Company, threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any of the Plans or any trusts related
thereto; the fair market value of the assets of each Plan subject to Title IV
of ERISA exceeds the present value of the benefit liabilities (as defined in
Section 4001(a)(16) of ERISA) under such Plan as of the most recent plan year
end prior to the date hereof, calculated using the actuarial assumptions used
in the most recent actuarial valuation of such Plan as of the date hereof;
with respect to each qualified plan which is an employee stock ownership plan
(as defined in Section 4975(e)(7) of the Code), any assets of any such plan
that are not allocated to participants' individual accounts are pledged as
security for, and may be
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applied to satisfy, any securities acquisition indebtedness; and there is not
currently any legally binding commitment by the Company or any ERISA Affiliate
to create an additional Plan or amend any Plan (except amendments to comply
with law which do not materially increase the cost of such Plan) and the
Company and its Subsidiaries do not have any obligations for post-retirement
or post employment welfare benefits that cannot be amended or terminated upon
sixty days' notice or less without incurring any liability thereunder, except
for coverage required by Part 6 of Title 1 of ERISA of Section 4980B of the
Code, the premium cost of which is borne (to the extent permitted by law) by
the insured individuals.
4.12 SEC Reports. The Company has previously made available to Parent a true
and correct copy of each (a) final registration statement, prospectus, report,
schedule and definitive proxy statement filed since December 31, 1995 by the
Company with the SEC pursuant to the Securities Act or the Exchange Act (the
"Company Reports") and (b) communication mailed by the Company to its
stockholders since December 31, 1995, and no such registration statement,
prospectus, report, schedule, proxy statement or communication contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they were made, not
misleading, except that information as of a later date shall be deemed to
modify information as of an earlier date. The Company has timely filed all
Company Reports and other documents required to be filed by it under the
Securities Act and the Exchange Act, and, as of their respective dates, all
Company Reports complied with the published rules and regulations of the SEC
with respect thereto.
4.13 Company Information. The information relating to the Company and its
Subsidiaries which is provided to Parent by the Company for inclusion in the
Proxy Statement and the S-4, or in any other document filed with any other
regulatory agency in connection herewith, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances in which they are
made, not misleading. The Proxy Statement (except for such portions thereof
that relate only to the Parent or any of its Subsidiaries) will comply with
the provisions of the Exchange Act and the rules and regulations thereunder.
4.14 Compliance with Applicable Law. The Company and each of its
Subsidiaries hold, and have at all times held, all licenses, franchises,
permits and authorizations necessary for the lawful conduct of their
respective businesses under and pursuant to all, and have complied with and
are not in default in any respect under any, applicable law, statute, order,
rule, regulation, policy and/or guideline of any Governmental Entity relating
to the Company or any of its Subsidiaries, and neither the Company nor any of
its Subsidiaries has received notice of any violations of any of the above.
4.15 Certain Contracts. (a) Except as set forth in Section 4.15(a) of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries
is a party to or bound by any contract (whether written or oral) (i) with
respect to the employment of any directors or consultants, (ii) which, upon
the consummation of the transactions contemplated by this Agreement, will
(either alone or upon the occurrence of any additional acts or events) result
in any payment or benefits (whether of severance pay or otherwise) becoming
due, or the acceleration or vesting of any rights to any payment or benefits,
from Parent, the Company, the Surviving Corporation or any of their respective
Subsidiaries to any director or consultant thereof, (iii) which is a material
contract (as defined in Item 601(b)(10) of Regulation S-K of the SEC) to be
performed after the date of this Agreement that has not been filed or
incorporated by reference in the Company Reports, (iv) which is a consulting
agreement (including data processing, software programming and licensing
contracts) not terminable on 30 days or less notice involving the payment of
more than $25,000 per annum, or (v) which materially restricts the conduct of
any line of business by the Company or any of its Subsidiaries. Each contract,
arrangement, commitment or understanding of the type described in this Section
4.15(a), whether or not set forth in Section 4.15(a) of the Company Disclosure
Schedule, is referred to herein as a "Company Contract". The Company has
previously delivered or made available to Parent true and correct copies of
each Company Contract.
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(b) Except as set forth in Section 4.15(b) of the Company Disclosure
Schedule, (i) each Company Contract described in clause (iii) of Section
4.15(a) is valid and binding and in full force and effect, (ii) the Company
and each of its Subsidiaries has performed all obligations required to be
performed by it to date under each Company Contract described in clause (iii)
of Section 4.15(a), (iii) no event or condition exists which constitutes or,
after notice or lapse of time or both, would constitute, a default on the part
of the Company or any of its Subsidiaries under any Company Contract described
in clause (iii) of Section 4.15(a), and (iv) no other party to any Company
Contract described in clause (iii) of Section 4.15(a) is, to the knowledge of
the Company, in default in any respect thereunder.
(c) Section 4.15 of the Company Disclosure Schedule contains a schedule
showing the good faith estimated present value as of December 31, 1998 of the
monetary amounts payable (including any tax indemnification payments in
respect of income and/or excise taxes) and identifying the in-kind benefits
due under any Plan other than a tax-qualified plan for each director of the
Company and each officer of the Company with the position of vice president or
higher, specifying the assumptions in such schedule.
4.16 Agreements with Regulatory Agencies. Neither the Company nor any of its
Subsidiaries is subject to any cease-and-desist or other order issued by, or
is a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a recipient
of any extraordinary supervisory letter from, or has adopted any board
resolutions at the request of (each, whether or not set forth on Section 4.16
of the Company Disclosure Schedule, a "Regulatory Agreement"), any
Governmental Entity that restricts the conduct of its business or that in any
manner relates to its capital adequacy, its credit policies, its management or
its business, nor has the Company or any of its Subsidiaries been advised by
any Governmental Entity that it is considering issuing or requesting any
Regulatory Agreement.
4.17 Environmental Matters. Except as set forth in Section 4.17 of the
Company Disclosure Schedule:
(a) Each of the Company and its Subsidiaries, each of the Participation
Facilities and, to the knowledge of the Company, the Loan Properties (each as
hereinafter defined), are in compliance with all applicable federal, state and
local laws, including common law, regulations and ordinances, and with all
applicable decrees, orders and contractual obligations relating to pollution
or the discharge of, or exposure to, Hazardous Materials (as hereinafter
defined) in the environment or workplace ("Environmental Laws");
(b) There is no suit, claim, action or proceeding, pending or, to the
knowledge of the Company, threatened, before any Governmental Entity or other
forum in which the Company, any of its Subsidiaries, any Participation
Facility or any Loan Property, has been or, with respect to threatened
proceedings, may be, named as a defendant (x) for alleged noncompliance
(including by any predecessor) with any Environmental Laws, or (y) relating to
the release, threatened release or exposure to any Hazardous Material whether
or not occurring at or on a site owned, leased or operated by the Company or
any of its Subsidiaries, any Participation Facility or any Loan Property;
(c) To the knowledge of the Company, during the period of (x) the Company's
or any of its Subsidiaries' ownership or operation of any of their respective
current or former properties, (y) the Company's or any of its Subsidiaries'
participation in the management of any Participation Facility, or (z) the
Company's or any of its Subsidiaries' interest in a Loan Property, there has
been no release of Hazardous Materials in, on, under or affecting any such
property. To the knowledge of the Company, prior to the period of (x) the
Company's or any of its Subsidiaries' ownership or operation of any of their
respective current or former properties, (y) the Company's or any of its
Subsidiaries' participation in the management of any Participation Facility,
or (z) the Company's or any of its Subsidiaries' interest in a Loan Property,
there was no release of Hazardous Materials in, on, under or affecting any
such property, Participation Facility or Loan Property; and
(d) The following definitions apply for purposes of this Section 4.17: (x)
"Hazardous Materials" means any chemicals, pollutants, contaminants, wastes,
toxic substances, petroleum or other regulated substances or
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materials, (y) "Loan Property" means any property in which the Company or any
of its Subsidiaries holds a security interest, and, where required by the
context, said term means the owner or operator of such property; and (z)
"Participation Facility" means any facility in which the Company or any of its
Subsidiaries participates in the management and, where required by the
context, said term means the owner or operator of such property.
4.18 Opinion. Prior to the execution of this Agreement, the Company has
received an opinion from Sandler O'Neill to the effect that as of the date
thereof and based upon and subject to the matters set forth therein, the
Merger Consideration is fair to the stockholders of the Company from a
financial point of view. Such opinion has not been amended or rescinded as of
the date of this Agreement.
4.19 Approvals. As of the date of this Agreement, the Company knows of no
reason why all regulatory approvals required for the consummation of the
transactions contemplated hereby (including, without limitation, the Merger)
should not be obtained.
4.20 Loan Portfolio. (a) With respect to each loan owned by the Company or
its Subsidiaries in whole or in part (each, a "Loan"), to the best knowledge
of the Company:
(i) the note and the related security documents are each legal, valid and
binding obligations of the maker or obligor thereof, enforceable against
such maker or obligor in accordance with their terms;
(ii) neither the Company nor any of its Subsidiaries nor any prior holder
of a Loan has modified the note or any of the related security documents in
any material respect or satisfied, canceled or subordinated the note or any
of the related security documents except as otherwise disclosed by
documents in the applicable Loan file;
(iii) the Company or a Subsidiary is the sole holder of legal and
beneficial title to each Loan (or the Company's applicable participation
interest, as applicable), except as otherwise referenced on the books and
records of the Company;
(iv) the note and the related security documents, copies of which are
included in the Loan files, are true and correct copies of the documents
they purport to be and have not been suspended, amended, modified, canceled
or otherwise changed except as otherwise disclosed by documents in the
applicable Loan file;
(v) there is no pending or threatened condemnation proceeding or similar
proceeding affecting the property which serves as security for a Loan,
except as otherwise referenced on the books and records of the Company;
(vi) there is no pending or threatened litigation or proceeding relating
to the property which serves as security for a Loan; and
(vii) with respect to a Loan held in the form of a participation, the
participation documentation is legal, valid, binding and enforceable.
(b) Except as set forth in Section 4.20 of the Company Disclosure Schedule,
neither the Company nor any of its Subsidiaries is a party to any written or
oral (i) loan agreement, note or borrowing arrangement (including, without
limitation, leases, credit enhancements, commitments, guarantees and interest-
bearing assets) (collectively, "Loans"), under the terms of which the obligor
was, as of June 30, 1998, over 90 days delinquent in payment of principal or
interest or in default of any other provision, or (ii) Loan with any director,
executive officer or five percent or greater stockholder of the Company or any
of its Subsidiaries, or to the knowledge of the Company, any person,
corporation or enterprise controlling, controlled by or under common control
with any of the foregoing. Section 4.20 of the Company Disclosure Schedule
sets forth (i) all of the Loans of the Company or any of its Subsidiaries that
as of June 30, 1998, were classified by any bank examiner (whether regulatory
or internal) as "Other Loans Specially Mentioned", "Special Mention",
"Substandard", "Doubtful", "Loss", "Classified", "Criticized", "Credit Risk
Assets", "Concerned Loans", "Watch List" or words of similar import, together
with the principal amount of and accrued and unpaid interest on each such Loan
and the identity of the borrower thereunder, (ii) by category of Loan (i.e.,
commercial, consumer, etc.), all of the other Loans of
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the Company and its Subsidiaries that as of June 30, 1998, were classified as
such, together with the aggregate principal amount of and accrued and unpaid
interest on such Loans by category and (iii) each asset of the Company that as
of June 30, 1998, was classified as "Other Real Estate Owned" and the book
value thereof.
4.21 Property. Each of the Company and its Subsidiaries has good and
marketable title free and clear of all liens, encumbrances, mortgages,
pledges, charges, defaults or equitable interests to all of the properties and
assets, real and personal, tangible or intangible, which are reflected on the
consolidated statement of financial condition of the Company as of March 31,
1998 or acquired after such date, except (i) liens for taxes not yet due and
payable or contested in good faith by appropriate proceedings, (ii) pledges to
secure deposits and other liens incurred in the ordinary course of business,
(iii) such imperfections of title, easements and encumbrances, if any, as do
not interfere with the use of the respective property as such property is used
on the date of this Agreement, (iv) for dispositions and encumbrances of, or
on, such properties or assets in the ordinary course of business and (v)
mechanics', materialmen's, workmen's, repairmen's, warehousemen's, carrier's
and other similar liens and encumbrances arising in the ordinary course of
business. All leases pursuant to which the Company or any Subsidiary of the
Company, as lessee, leases real or personal property are valid and enforceable
in accordance with their respective terms and neither the Company nor any of
its Subsidiaries nor, to the knowledge of the Company, any other party
thereto, is in default thereunder. All material tangible properties of the
Company and each of its Subsidiaries are in good state of maintenance and
repair, conform with all applicable ordinances, regulations and zoning laws
and are considered by the Company to be adequate for the current business of
the Company and its Subsidiaries.
4.22 Reorganization. The Company has no reason to believe that the Merger
will fail to qualify as a reorganization under Section 368(a) of the Code.
4.23 Antitakeover Provisions Inapplicable. The Board of Directors of the
Company has approved the transactions contemplated by this Agreement, the Bank
Merger and the Option Agreement such that the provisions of Section 203 of the
DGCL and Article Eighth of the Company's Certificate of Incorporation will
not, assuming the accuracy of the representations contained in Section 5.15
hereof, apply to this Agreement, the Bank Merger, the Option Agreement or any
of the transactions contemplated hereby or thereby.
4.24 Insurance. The Company and its Subsidiaries are presently insured, and
since December 31, 1994, have been insured, for reasonable amounts with
financially sound and reputable insurance companies, against such risks as
companies engaged in a similar business would, in accordance with good
business practice, customarily be insured. All of the insurance policies and
bonds maintained by the Company and its Subsidiaries are in full force and
effect, the Company and its Subsidiaries are not in default thereunder and all
material claims thereunder have been filed in due and timely fashion.
4.25 Investment Securities; Borrowings; Deposits. (a) Except for investments
in Federal Home Loan Bank Stock and pledges to secure Federal Home Loan Bank
borrowings and reverse repurchase agreements entered into in arms-length
transactions pursuant to normal commercial terms and conditions and entered
into the ordinary course of business and restrictions that exist for
securities to be classified as "held to maturity," none of the investments
reflected in the consolidated balance sheet of the Company included in the
Company's Report on Form 10-Q for the quarter ended March 31, 1998 and none of
the investment securities held by it or any of its Subsidiaries since March
31, 1998 is subject to any restriction (contractual or statutory) that would
materially impair the ability of the entity holding such investment freely to
dispose of such investment at any time.
(b) Neither the Company nor any Subsidiary is a party to or has agreed to
enter into an exchange-traded or over the-counter equity, interest rate,
foreign exchange or other swap, forward, future, option, cap, floor or collar
or any other contract that is not included on the consolidated statements of
condition and is a derivative contract (including various combinations
thereof) (each, a "Derivatives Contract") or owns securities that (A) are
referred to generically as "structured notes," "high risk mortgage
derivatives," "capped floating rate notes" or "capped floating rate mortgage
derivatives" or (B) are likely to have changes in value as a result of
interest or
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exchange rate changes that significantly exceed normal changes in value
attributable to interest or exchange rate changes, except for those
Derivatives Contracts and other instruments legally purchased or entered into
in the ordinary course of business, consistent with regulatory requirements
and listed (as of the date hereof) in the Company Disclosure Schedule or
disclosed in any Company Reports filed on or prior to the date hereof.
(c) Set forth in the Company Disclosure Schedule is a true and correct list
of the Company's borrowed funds (excluding deposit accounts) as of the date
hereof.
(d) None of the deposits of the Company or any of its Subsidiaries is a
"brokered" deposit.
4.26 Indemnification. Except as provided in the Company Contracts or the
Certificate of Incorporation or by-laws of the Company, neither the Company
nor any Company Subsidiary is a party to any indemnification agreement with
any of its present or future directors, officers, employees, agents or other
persons who serve or served in any other capacity with any other enterprise at
the request of the Company (a "Covered Person"), and, to the best knowledge of
the Company, there are no claims for which any Covered Person would be
entitled to indemnification under the organization certificate or bylaws of
the Company or any Subsidiary of the Company, applicable law or regulation or
any indemnification agreement.
4.27 Liquidation Account. Neither the Merger nor the Bank Merger will result
in any payment or distribution payable out of the Liquidation Account of the
Company Bank.
4.28 Year 2000 Matters. Section 4.28 of the Company Disclosure Schedule
contains a true and correct copy of the Company's plan for addressing year
2000 computer issues (the "Year 2000 Plan"). The Company is in material
compliance with the Company's Year 2000 Plan. The Company has been examined by
the OTS with respect to being "Year 2000 Compliant" and the Company's Year
2000 Plan has been reviewed by the OTS and the Company has received a
"satisfactory" rating in connection therewith, and neither the Company nor the
Company Bank has received any written communication from the OTS commenting
adversely with respect to the ability of the Company to become Year 2000
compliant.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Subject to Article III, Parent hereby represents and warrants to the Company
as follows:
5.1 Corporate Organization. (a) Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Parent has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary. Parent is duly registered as a
savings and loan holding company under the HOLA. The Certificate of
Incorporation and By-laws of Parent, copies of which have previously been made
available to the Company, are true and correct copies of such documents as in
effect as of the date of this Agreement.
(b) Each Subsidiary of Parent that is a bank or savings institution (each a
"Parent Bank" and collectively, the "Parent Banks") is a bank or savings
institution, as the case may be, duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. The deposit
accounts of the Parent Banks are insured by the FDIC through the Savings
Association Insurance Fund to the fullest extent permitted by law, and all
premiums and assessments required in connection therewith have been paid when
due. Each of Parent's other Subsidiaries which is a "Significant Subsidiary"
(each a "Significant Subsidiary" and together the "Significant Subsidiaries")
as such term is defined in Regulation S-X promulgated by the SEC is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Each Significant Subsidiary of Parent has
the corporate power and authority to own or lease all of its properties and
assets and to carry on its
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business as it is now being conducted, and is duly licensed or qualified to do
business in each jurisdiction in which the nature of the business conducted by
it or the character or location of the properties and assets owned or leased
by it makes such licensing or qualification necessary. The articles of
incorporation, by-laws and other similar governing documents of the Parent
Banks, copies of which have previously been made available to the Company, are
true and correct copies of such documents as in effect as of the date of this
Agreement.
(c) The minute books of Parent and each of its Significant Subsidiaries
contain true and correct records of all meetings and other corporate actions
held or taken since December 31, 1995 of their respective stockholders and
Boards of Directors (including committees of their respective Boards of
Directors).
5.2 Capitalization. (a) As of the date of this Agreement, the authorized
capital stock of Parent consists of 45,000,000 shares of Parent Common Stock
and 9,000,000 shares of preferred stock, par value $0.01 per share ("Parent
Preferred Stock"). As of June 30, 1998, there were 12,176,513 shares of Parent
Common Stock and no shares of Parent Preferred Stock issued and outstanding,
and 2,374,587 shares of Parent Common Stock held in Parent's treasury. As of
the date of this Agreement, no shares of Parent Common Stock or Parent
Preferred Stock were reserved for issuance, except that (i) 1,451,150 shares
of Parent Common Stock were reserved for issuance upon the exercise of stock
options pursuant to the Dime Community Bancorp, Inc. 1996 Stock Option Plan
for Outside Directors, Officers and Employees (the "Parent Stock Plan"), and
(ii) 450,000 shares of Parent Series A Junior Participating Preferred Stock
were reserved for issuance upon exercise of the rights (the "Parent Rights")
distributed to holders of Parent Common Stock pursuant to the Shareholder
Rights Agreement, dated as of April 19, 1998, between Parent and ChaseMellon
Shareholder Services, L.L.C., as Rights Agent (the "Parent Rights Agreement").
All of the issued and outstanding shares of Parent Common Stock have been duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof. As of the date of this Agreement, except as referred to above or
reflected in Section 5.2(a) of the Parent Disclosure Schedule and the Parent
Rights Agreement, Parent does not have and is not bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of Parent Common
Stock or Parent Preferred Stock or any other equity securities of Parent or
any securities representing the right to purchase or otherwise receive any
shares of Parent Common Stock or Parent Preferred Stock. The shares of Parent
Common Stock to be issued pursuant to the Merger will be duly authorized and
validly issued and, at the Effective Time, all such shares will be fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof.
(b) Section 5.2(b) of the Parent Disclosure Schedule sets forth a true and
correct list of all of the Parent Subsidiaries as of the date of this
Agreement. Except as set forth in Section 5.2(b) of the Parent Disclosure
Schedule, as of the date of this Agreement, Parent owns, directly or
indirectly, all of the issued and outstanding shares of capital stock of each
of the Subsidiaries of Parent, free and clear of all liens, charges,
encumbrances and security interests whatsoever, and all of such shares are
duly authorized and validly issued and are fully paid, nonassessable and free
of preemptive rights, with no personal liability attaching to the ownership
thereof. As of the date of this Agreement, no Subsidiary of Parent has or is
bound by any outstanding subscriptions, options, warrants, calls, commitments
or agreements of any character with any party that is not a direct or indirect
Subsidiary of Parent calling for the purchase or issuance of any shares of
capital stock or any other equity security of such Subsidiary or any
securities representing the right to purchase or otherwise receive any shares
of capital stock or any other equity security of such Subsidiary.
5.3 Authority; No Violation. (a) Parent has full corporate power and
authority to execute and deliver this Agreement and the Option Agreement and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the Option Agreement and the consummation
of the transactions contemplated hereby and thereby have been duly and validly
approved by the Board of Directors of Parent, and no other corporate
proceedings on the part of Parent are necessary to approve this Agreement and
to consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by Parent and (assuming due
authorization, execution and delivery by the Company) this Agreement
constitutes a valid and binding obligation of Parent, enforceable against
Parent in accordance with its terms,
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except as enforcement may be limited by general principles of equity whether
applied in a court of law or a court of equity and by bankruptcy, insolvency
and similar laws affecting creditors' rights and remedies generally.
(b) Except as set forth in Section 5.3(b) of the Parent Disclosure Schedule,
neither the execution and delivery of this Agreement by Parent, nor the
consummation by Parent of the transactions contemplated hereby, nor compliance
by Parent with any of the terms or provisions hereof, will (i) violate any
provision of the Certificate of Incorporation or By-Laws of Parent, or the
articles of incorporation or by-laws or similar governing documents of any of
its Subsidiaries or (ii) assuming that the consents and approvals referred to
in Section 5.4 are duly obtained, (x) violate any statute, code, ordinance,
rule, regulation, judgment, order, writ, decree or injunction applicable to
Parent or any of its Subsidiaries or any of their respective properties or
assets, or (y) violate, conflict with, result in a breach of any provision of
or the loss of any benefit under, constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a default) under,
result in the termination of or a right of termination or cancellation under,
accelerate the performance required by, or result in the creation of any lien,
pledge, security interest, charge or other encumbrance upon any of the
respective properties or assets of Parent or any of its Subsidiaries under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which Parent or any of its Subsidiaries is a party, or by which
they or any of their respective properties or assets may be bound or affected.
5.4 Consents and Approvals. Except for (a) the filing of applications and
notices, as applicable, with the OTS under the HOLA, Bank Merger Act, Federal
Deposit Insurance Act and the rules and regulations of the OTS, and approval
of such applications and notices, (b) the State Banking Approvals, (c) the
filing with the SEC of the Proxy Statement and the filing and declaration of
effectiveness of the S-4, (d) the filing of the Certificate of Merger with the
Secretary pursuant to the DGCL, (e) such filings and approvals as are required
to be made or obtained under the securities or "Blue Sky" laws of various
states in connection with the issuance of the shares of Parent Common Stock
pursuant to this Agreement, (f) approval of the listing for quotation of the
Parent Common Stock to be issued in the Merger on the NASDAQ/NMS, and (g) such
filings, authorizations or approvals as may be set forth in Section 5.4 of the
Parent Disclosure Schedule, no consents or approvals of or filings or
registrations with any Governmental Entity or with any third party are
necessary in connection with (1) the execution and delivery by Parent of this
Agreement and (2) the consummation by Parent of the Merger and the other
transactions contemplated hereby.
5.5 Reports. Parent and each of its Subsidiaries have timely filed all
reports, registrations and statements, together with any amendments required
to be made with respect thereto, that they were required to file since
December 31, 1995 with any Regulatory Agency, and have paid all fees and
assessments due and payable in connection therewith. Except for normal
examinations conducted by a Regulatory Agency in the regular course of the
business of Parent and its Subsidiaries, and except as set forth in Section
5.5 of Parent Disclosure Schedule, no Regulatory Agency has initiated any
proceeding or, to the knowledge of Parent, investigation into the business or
operations of Parent or any of its Subsidiaries since December 31, 1995. There
is no unresolved violation, criticism, or exception by any Regulatory Agency
with respect to any report or statement relating to any examinations of Parent
or any of its Subsidiaries.
5.6 Financial Statements. Parent has previously made available to the
Company copies of (a) the consolidated balance sheets of Parent and its
Subsidiaries as of June 30 for the fiscal years 1996 and 1997 and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for the fiscal years 1995 through 1997, inclusive, as reported in
Parent's Annual Report on Form 10-K for the fiscal year ended June 30, 1997
filed with the SEC under the Exchange Act, in each case accompanied by the
audit report of Deloitte & Touche LLP independent public accountants with
respect to Parent, and (b) the unaudited consolidated balance sheet of Parent
and its Subsidiaries as of March 31, 1998 and March 31, 1997 and the related
unaudited consolidated statements of income, changes in stockholders' equity
and cash flows for the nine-month periods then ended as reported in Parent's
Quarterly Report on Form 10-Q for the period ended March 31, 1998 filed with
the SEC under the Exchange Act. The June 30, 1997 consolidated balance sheet
of Parent (including the related notes, where applicable) fairly presents the
consolidated financial position of Parent and its
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Subsidiaries as of the date thereof, and the other financial statements
referred to in this Section 5.6 (including the related notes, where
applicable) fairly present and the financial statements to be filed with the
SEC after the date hereof will fairly present (subject, in the case of the
unaudited statements, to recurring audit adjustments normal in nature and
amount), the results of the consolidated operations and changes in
stockholders' equity and consolidated financial position of Parent and its
Subsidiaries for the respective fiscal periods or as of the respective dates
therein set forth; each of such statements (including the related notes, where
applicable) complies, and the financial statements to be filed with the SEC
after the date hereof will comply, with applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto; and
each of such statements (including the related notes, where applicable) has
been, and the financial statements to be filed with the SEC after the date
hereof will be, prepared in accordance with GAAP consistently applied during
the periods involved, except as indicated in the notes thereto or, in the case
of unaudited statements, as permitted by Form 10-Q. The books and records of
Parent and its Significant Subsidiaries have been, and are being, maintained
in accordance with GAAP and any other applicable legal and accounting
requirements.
5.7 Broker's Fees. Neither Parent nor any Subsidiary of Parent, nor any of
their respective officers or directors, has employed any broker or finder or
incurred any liability for any broker's fees, commissions or finder's fees in
connection with any of the transactions contemplated by this Agreement, except
that Parent has engaged, and will pay a fee or commission to, Merrill Lynch &
Co. ("Merrill Lynch").
5.8 Absence of Certain Changes or Events. Except as may be set forth in
Section 5.8 of the Parent Disclosure Schedule, or as disclosed in any Parent
Report (as defined in Section 5.12) filed with the SEC prior to the date of
this Agreement, since June 30, 1997, there has been no change or development
or combination of changes or developments which, individually or in the
aggregate, has had a Material Adverse Effect on Parent.
5.9 Legal Proceedings. (a) Except as set forth in Section 5.9(a) of the
Parent Disclosure Schedule, neither Parent nor any of its Subsidiaries is a
party to any and there are no pending or, to Parent's knowledge, threatened,
legal, administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against Parent or any
of its Subsidiaries or challenging the validity or propriety of the
transactions contemplated by this Agreement.
(b) There is no injunction, order, judgment, decree, or regulatory
restriction imposed upon Parent, any of its Subsidiaries or the assets of
Parent or any of its Subsidiaries.
5.10 Taxes. Except as set forth in Section 5.10 of the Parent Disclosure
Schedule, each of Parent and its Subsidiaries has (i) duly and timely filed
(including applicable extensions granted without penalty) all material Tax
Returns required to be filed at or prior to the Effective Time, and such Tax
Returns are true and correct in all material respects, and (ii) paid in full
or made adequate provision in the financial statements of Parent (in
accordance with GAAP) for all material Taxes shown to be due on such Tax
Returns. Except as set forth in Section 5.10 of the Parent Disclosure
Schedule, (i) as of the date hereof, neither Parent nor any of its
Subsidiaries has requested any extension of time within which to file any Tax
Returns in respect of any fiscal year which have not since been filed and no
request for waivers of the time to assess any Taxes are pending or
outstanding, and (ii) as of the date hereof, with respect to each taxable
period of Parent and its Subsidiaries, the federal and state income Tax
Returns of Parent and its Subsidiaries have been audited by the Internal
Revenue Service or appropriate state tax authorities or the time for assessing
and collecting income Tax with respect to such taxable period has closed and
such taxable period is not subject to review. Except as set forth in Section
5.10 of the Parent Disclosure Schedule, neither the Parent nor any of its
Subsidiaries (i) has made an election under Section 341(f) of the Code, (ii)
has made any payment, is obligated to make any payment, or is party to any
agreement that could obligate it to make any payment that would not be
deductible under Section 280G of the Code, (iii) has issued or assumed any
obligation under Section 279 of the Code, any high yield discount obligation
as described in Section 163f(i) of the Code or any registration-required
obligation within the meaning of Section 163f(2) of the Code that is not in
registered form, or (iv) is or has been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code.
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5.11 Employees. (a) Section 5.11(a) of the Parent Disclosure Schedule sets
forth a true and correct list of each deferred compensation plan, incentive
compensation plan, equity compensation plan, "welfare" plan, fund or program
(within the meaning of section 3(1) of the ERISA); "pension" plan, fund or
program (within the meaning of section 3(2) of ERISA) that is sponsored,
maintained or contributed to or required to be contributed to as of the date
of this Agreement by, or with respect to which an obligation or liability
exists of (the "Parent Plans"), Parent, any of its Subsidiaries or any trade
or business, whether or not incorporated (a "Parent ERISA Affiliate"), all of
which together with Parent would be deemed a "single employer" within the
meaning of Section 4001 of ERISA, for the benefit of any employee or former
employee of Parent, any Subsidiary or any Parent ERISA Affiliate and includes
a true and correct copy of the plan document for the Severance Pay Plan of the
Parent currently in effect.
(b) Except as set forth in Section 5.11(b) of the Parent Disclosure
Schedule: each of the Parent Plans is in compliance with applicable law,
including but not limited to, the Code and ERISA; each of the Parent Plans
intended to be "qualified" within the meaning of section 401(a) of the Code
has received a favorable determination letter from the IRS; no Parent Plan has
an accumulated or waived funding deficiency within the meaning of section 412
of the Code; neither Parent nor any Parent ERISA Affiliate has incurred,
directly or indirectly, any liability to or on account of a Parent Plan
pursuant to Title IV of ERISA (other than PBGC premiums); to the knowledge of
Parent no proceedings have been instituted to terminate any Parent Plan that
is subject to Title IV of ERISA; no "reportable event," as such term is
defined in section 4043(c) of ERISA, has occurred with respect to any Parent
Plan (other than a reportable event with respect to which the thirty day
notice period has been waived); and no condition exists that presents a
material risk to Parent of incurring a liability to or on account of a Parent
Plan pursuant to Title IV of ERISA; no Parent Plan is a multiemployer plan
(within the meaning of section 4001(a)(3) of ERISA and no Parent Plan is a
multiple employer plan as defined in Section 413 of the Code; there are no
pending, or, to the knowledge of Parent, threatened or anticipated claims
(other than routine claims for benefits) by, on behalf of or against any of
the Parent Plans or any trusts related thereto; the fair market value of the
assets of each Plan subject to Title IV of ERISA exceeds the present value of
the benefit liabilities (as defined in Section 4001(a)(16) of ERISA) under
such Plan as of the most recent plan year end prior to the date hereof,
calculated using the actuarial assumptions used in the most recent actuarial
valuation of such Plan as of the date hereof; with respect to each qualified
plan which is an employee stock ownership plan (as defined in Section
4975(e)(7) of the Code), any assets of any such plan that are not allocated to
participants' individual accounts are pledged as security for, and may be
applied to satisfy, any securities acquisition indebtedness; and there is not
currently any legally binding commitment by the Parent or any ERISA Affiliate
to create an additional Plan or amend any Plan (except amendments to comply
with law which do not materially increase the cost of such Plan) and the
Parent and its subsidiaries do not have any obligations for post-retirement or
post-employment welfare benefits that cannot be amended or terminated upon
sixty days' notice or less without incurring any liability thereunder, except
for coverage required by Part 6 of Title 1 of ERISA or Section 4980B of the
Code, the premium cost of which is borne (to the extent permitted by law) by
the insured individuals.
5.12 SEC Reports. Parent has previously made available to the Company a true
and correct copy of each (a) final registration statement, prospectus, report,
schedule and definitive proxy statement filed since December 31, 1995 by
Parent with the SEC pursuant to the Securities Act or the Exchange Act (the
"Parent Reports") and (b) communication mailed by Parent to its stockholders
since December 31, 1995, and no such registration statement, prospectus,
report, schedule, proxy statement or communication contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances in which they were made, not misleading, except
that information as of a later date shall be deemed to modify information as
of an earlier date. Parent has timely filed all Parent Reports and other
documents required to be filed by it under the Securities Act and the Exchange
Act, and, as of their respective dates, all Parent Reports complied with the
published rules and regulations of the SEC with respect thereto.
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5.13 Parent Information. The information relating to Parent and its
Subsidiaries to be contained in the Proxy Statement and the S-4, or in any
other document filed with any other regulatory agency in connection herewith,
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading. The Proxy Statement
(except for such portions thereof that relate only to the Company or any of
its Subsidiaries) will comply with the provisions of the Exchange Act and the
rules and regulations thereunder. The S-4 will comply with the provisions of
the Securities Act and the rules and regulations thereunder.
5.14 Compliance with Applicable Law. Parent and each of its Subsidiaries
holds, and has at all times held, all licenses, franchises, permits and
authorizations necessary for the lawful conduct of their respective businesses
under and pursuant to all, and have complied with and are not in default in
any respect under any, applicable law, statute, order, rule, regulation,
policy and/or guideline of any Governmental Entity relating to Parent or any
of its Subsidiaries and neither Parent nor any of its Subsidiaries knows of,
or has received notice of violation of, any violations of any of the above.
5.15 Ownership of Company Common Stock; Affiliates and
Associates. (a) Neither Parent nor any of its affiliates or associates (as
such terms are defined under the Exchange Act) beneficially owns, directly or
indirectly, or is a party to any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or disposing of, any shares of
capital stock of the Company (other than Trust Account Shares and DPC Shares);
and
(b) Neither Parent nor any of its Subsidiaries is an "affiliate" (as such
term is defined in DGCL (S)203(c)(1)) or an "associate" (as such term is
defined in DGCL (S)203(c)(2)) of the Company or an "Interested Stockholder"
(as such term is defined in Article Eighth of the Company's Certificate of
Incorporation).
5.16 Agreements with Regulatory Agencies. Neither Parent nor any of its
Subsidiaries is subject to any cease-and-desist or other order issued by, or
is a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a recipient
of any extraordinary supervisory letter from, or has adopted any board
resolutions at the request of (each, whether or not set forth in Section 5.16
of the Parent Disclosure Schedule, a "Parent Regulatory Agreement"), any
Governmental Entity that restricts the conduct of its business or that in any
manner relates to its capital adequacy, its credit policies, its management or
its business, nor has Parent or any of its Subsidiaries been advised by any
Governmental Entity that it is considering issuing or requesting any Parent
Regulatory Agreement.
5.17 Environmental Matters. Except as set forth in Section 5.17 of the
Parent Disclosure Schedule:
(a) Each of Parent and its Subsidiaries, each of the Participation
Facilities and, to the knowledge of Parent, the Loan Properties (each as
hereinafter defined), are in compliance with all Environmental Laws;
(b) There is no suit, claim, action or proceeding, pending or, to the
knowledge of Parent, threatened, before any Governmental Entity or other forum
in which Parent, any of its Subsidiaries, any Participation Facility or any
Loan Property, has been or, with respect to threatened proceedings, may be,
named as a defendant (x) for alleged noncompliance (including by any
predecessor) with any Environmental Laws, or (y) relating to the release,
threatened release or exposure to any Hazardous Material whether or not
occurring at or on a site owned, leased or operated by Parent or any of its
Subsidiaries, any Participation Facility or any Loan Property;
(c) To the knowledge of Parent during the period of (x) Parent's or any of
its Subsidiaries' ownership or operation of any of their respective current or
former properties, (y) Parent's or any of its Subsidiaries' participation in
the management of any Participation Facility, or (z) Parent's or any of its
Subsidiaries' interest in a Loan Property, there has been no release of
Hazardous Materials in, on, under or affecting any such property. To the
knowledge of Parent, prior to the period of (x) Parent's or any of its
Subsidiaries' ownership or operation of any of their respective current or
former properties, (y) Parent's or any of its Subsidiaries' participation in
the
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management of any Participation Facility, or (z) Parent's or any of its
Subsidiaries' interest in a Loan Property, there was no release of Hazardous
Materials in, on, under or affecting any such property, Participation Facility
or Loan Property; and
(d) The following definitions apply for purposes of this Section 5.17: (x)
"Loan Property" means any property in which Parent or any of its Subsidiaries
holds a security interest, and, where required by the context, said term means
the owner or operator of such property; and (y) "Participation Facility" means
any facility in which Parent or any of its Subsidiaries participates in the
management and, where required by the context, said term means the owner or
operator of such property.
5.18 Opinion. Prior to the execution of this Agreement, Parent has received
an opinion from Merrill Lynch to the effect that as of the date thereof and
based upon and subject to the matters set forth therein, the Merger
Consideration pursuant to this Agreement is fair from a financial point of
view to Parent. Such opinion has not been amended or rescinded as of the date
of this Agreement.
5.19 Approvals. As of the date of this Agreement, Parent knows of no reason
why all regulatory approvals required for the consummation of the transactions
contemplated hereby (including, without limitation, the Merger) should not be
obtained.
5.20 Loan Portfolio. Except as set forth in Section 5.20 of Parent
Disclosure Schedule, neither Parent nor any of its Subsidiaries is a party to
any written or oral (i) Loan, other than Loans the unpaid principal balance of
which does not exceed $250,000, under the terms of which the obligor was, as
of June 30, 1998, over 90 days delinquent in payment of principal or interest
or in default of any other provision, or (ii) Loan with any director,
executive officer or five percent or greater stockholder of Parent or any of
its Subsidiaries, or to the knowledge of Parent, any person, corporation or
enterprise controlling, controlled by or under common control with any of the
foregoing. Section 5.20 of Parent Disclosure Schedule sets forth (i) all of
the Loans in original principal amount in excess of $250,000 of Parent or any
of its Subsidiaries that as of June 30, 1998, were classified by any bank
examiner (whether regulatory or internal) as "Other Loans Specially
Mentioned", "Special Mention", "Substandard", "Doubtful", "Loss",
"Classified", "Criticized", "Credit Risk Assets", "Concerned Loans", "Watch
List" or words of similar import, together with the principal amount of and
accrued and unpaid interest on each such Loan and the identity of the borrower
thereunder, (ii) by category of Loan (i.e., commercial, consumer, etc.), all
of the other Loans of Parent and its Subsidiaries that as of June 20, 1998,
were classified as such, together with the aggregate principal amount of and
accrued and unpaid interest on such Loans by category and (iii) each asset of
Parent that as of June 30, 1998, was classified as "Other Real Estate Owned"
and the book value thereof.
5.21 Property. Each of Parent and its Subsidiaries has good and marketable
title free and clear of all liens, encumbrances, mortgages, pledges, charges,
defaults or equitable interests to all of the properties and assets, real and
personal, tangible or intangible, and which are reflected on the consolidated
statement of financial condition of Parent as of March 31, 1998 or acquired
after such date, except (i) liens for taxes not yet due and payable or
contested in good faith by appropriate proceedings, (ii) pledges to secure
deposits and other liens incurred in the ordinary course of business, (iii)
such imperfections of title, easements and encumbrances, if any, as do not
interfere with the use of the respective property as such property is used on
the date of this Agreement, (iv) for dispositions and encumbrances of, or on,
such properties or assets in the ordinary course of business or (v)
mechanics', materialmen's, workmen's, repairmen's, warehousemen's, carrier's
and other similar liens and encumbrances arising in the ordinary course of
business. All leases pursuant to which Parent or any Subsidiary of Parent, as
lessee, leases real or personal property are valid and enforceable in
accordance with their respective terms and neither Parent nor any of its
Subsidiaries nor, to the knowledge of Parent, any other party thereto is in
default thereunder. All material tangible properties of the Parent and each of
its Subsidiaries are in good state of maintenance and repair, conform with all
applicable ordinances, regulations and zoning laws and are considered by the
Parent to be adequate for the current business of the Parent and its
Subsidiaries.
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5.22 Reorganization. Parent has no reason to believe that the Merger will
fail to qualify as a reorganization under Section 368(a) of the Code.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1 Covenants of the Company. Except as expressly provided in this Agreement
or the Stock Option Agreement, during the period from the date of this
Agreement to the Effective Time, the Company shall use commercially reasonable
efforts to, and shall cause its Subsidiaries to use commercially reasonable
efforts to, (i) conduct its business in the ordinary and usual course
consistent with past practices and prudent banking practice; (ii) maintain and
preserve intact its business organization, properties, leases, employees and
advantageous business relationships and retain the services of its officers
and key employees, (iii) take no action which would adversely affect or delay
the ability of Company, the Company Bank, the Parent or the Parent Bank to
perform its covenants and agreements on a timely basis under this Agreement,
and (iv) take no action which would adversely affect or delay the ability of
the Company, the Company Bank, the Parent or the Parent Bank to obtain any
necessary approvals, consents or waivers of any governmental authority
required for the transactions contemplated hereby or which would reasonably be
expected to result in any such approvals, consents or waivers containing any
material condition or restriction. Without limiting the generality of the
foregoing, and except as set forth in Section 6.1 of the Company Disclosure
Schedule or as otherwise specifically provided by this Agreement, the Stock
Option Agreement or consented to in writing by Parent, the Company shall not,
and shall not permit any of its Subsidiaries to:
(a) solely in the case of the Company, declare or pay any dividends on, or
make other distributions in respect of, any of its capital stock, other than
normal quarterly dividends not in excess of $0.125 per share of Company Common
Stock; provided, however, that if the joint venture known as AFT Associates,
of which the Company's indirect wholly owned subsidiary, FinFed Development
Corp., is a joint venture partner, sells 100% of its interest in the property
described in Exhibit 6.1(a) hereto or if FinFed Development Corp. sells 100%
of its interest in AFT Associates (in either case without recourse to the
Company or any of its Subsidiaries and without the Company or any of its
Subsidiaries providing any financing therefor) prior to the Closing, then the
Company may pay a special one-time dividend (the "Special Dividend") prior to
the Closing in the following amount: (i) if the cash proceeds (received in the
form of a certified check or immediately available funds) of such sale (net of
transaction expenses and transfer taxes, if any) are greater than or equal to
the book value of such assets on the Company's books and records, net of any
specific reserves established by either FinFed Development Corp. or the
Company Bank as of March 31, 1998, as set forth in Section 6.1(a) of the
Company Disclosure Letter ("Book Value"), the Special Dividend may be paid in
the aggregate amount of the product of the Outstanding Shares Number and
$1.00, or (ii) if the cash proceeds (received in the form of a certified check
or immediately available funds) of such sale are less than the Book Value,
then the Special Dividend may be paid in an aggregate amount equal to the
amount by which (A) the product of the Outstanding Shares Number and $1.00
exceeds (B) the difference between the Book Value and the cash proceeds of
such sale; provided, further that such sale may not occur without the prior
written consent of the Parent if such sale would result in the amount set
forth in (B) exceeding the amount set forth in (A).
(b) (i) repurchase, redeem or otherwise acquire (except for the acquisition
of Trust Account Shares and DPC Shares, as such terms are defined in Section
1.4(b) hereof) any shares of the capital stock of the Company or any
Subsidiary of the Company, or any securities convertible into or exercisable
for any shares of the capital stock of the Company or any Subsidiary of the
Company, (ii) split, combine or reclassify any shares of its capital stock or
issue or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock, or (iii)
issue, deliver or sell, or authorize or propose the issuance, delivery or sale
of, any shares of its capital stock or any securities convertible into or
exercisable for, or any rights, warrants or options to acquire, any such
shares, or enter into any agreement with respect to any of the foregoing,
except, in the case of clauses (ii) and (iii), for the issuance of Company
Common Stock upon the exercise or fulfillment of
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rights or options issued or existing pursuant to the Option Agreement, the
Company Option Plans or any employee benefit plans, programs or arrangements,
all to the extent outstanding and in existence on the date of this Agreement
and in accordance with their present terms;
(c) amend its Certificate of Incorporation, By-laws or other similar
governing documents;
(d) (i) initiate, solicit or encourage, directly or indirectly, any
inquiries or the making of any proposal or offer (including, without
limitation, any proposal or offer to stockholders of the Company) with respect
to a merger, consolidation or similar transaction involving, or any purchase
of, all or more than 10% of the assets or any equity securities of the Company
of any of its material Subsidiaries (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal") or, (ii) engage in any
negotiations concerning, or provide any confidential information or data to,
or have any discussions with, any person relating to an Acquisition Proposal;
provided, however, that nothing contained in this Agreement shall prevent the
Company or its Board of Directors from (i) complying with Rule 14e-2
promulgated under the Exchange Act with regard to an Acquisition Proposal or
(ii)(A) providing information in response to a request therefor by a person
who has made an unsolicited bona fide written Acquisition Proposal if the
Board of Directors receives from the person so requesting such information an
executed confidentiality agreement on terms substantially equivalent to those
contained in the confidentiality agreement between Parent and the Company,
dated as of June 17, 1998; or (B) engaging in any negotiations or discussions
with any person who has made an unsolicited bona fide written Acquisition
Proposal, if and only to the extent that, in each such case referred to in
clause (A) or (B) above, (i) the Board of Directors of the Company, after
consultation with outside legal counsel, in good faith deems such action to be
legally necessary for the proper discharge of its fiduciary duties under
applicable law and (ii) the Board of Directors of the Company determines in
good faith (after consultation with its financial advisor) that such
Acquisition Proposal, if accepted, is reasonably likely to be consummated,
taking into account all legal, financial and regulatory aspects of the
proposal and the person making the proposal and would, if consummated, result
in a more favorable transaction than the transaction contemplated by this
Agreement; provided further, however, that the Company may communicate
information about any such Acquisition Proposal to its stockholders if, in the
judgment of the Company's Board of Directors, based upon the advice of outside
counsel, such communication is required under applicable law. The Company will
notify Parent immediately orally (within one day) and in writing (within 3
days) if any such inquiries, proposals or offers are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with the Company after the date hereof,
and the identity of the person making such inquiry, proposal or offer and the
substance thereof and will keep Parent informed of any developments with
respect thereto immediately upon occurrence thereof. Subject to the foregoing,
the Company will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing. The Company and its Subsidiaries will
take the necessary steps to inform their respective officers, directors,
agents, and representatives (including, without limitation, any investment
banker, attorney or accountant retained by it) of the obligations undertaken
in this Section 6.1(d). The Company will promptly request each person (other
than Parent) that has executed a confidentiality agreement prior to the date
hereof in connection with its consideration of a business combination with the
Company or any of its Subsidiaries to return or destroy all confidential
information previously furnished to such person by or on behalf of the Company
or any of its Subsidiaries. The Company shall take all steps necessary to
enforce all such confidentiality agreements.
(e) make any capital expenditures other than those which (i) are made in the
ordinary course of business or are necessary to maintain existing assets in
good repair and (ii) in any event are in an amount of no more than $50,000 in
the aggregate;
(f) enter into any new line of business;
(g) acquire or agree to acquire, by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof or
otherwise acquire any assets, which would be material, individually or in the
aggregate, to the Company, other than in connection with foreclosures,
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settlements in lieu of foreclosure or troubled loan or debt restructurings in
the ordinary course of business consistent with past practices;
(h) take any action that is intended or may reasonably be expected to result
in any of the conditions to the Merger set forth in Article VIII not being
satisfied;
(i) change its methods of accounting in effect at March 31, 1998, except as
required by changes in GAAP or regulatory accounting principles as concurred
in writing by the Company's independent auditors;
(j)(i) except as set forth in Section 7.12 hereof, as required by applicable
law or as required to maintain qualification pursuant to the Code, adopt,
amend, or terminate any employee benefit plan (including, without limitation,
any Plan) or any agreement, arrangement, plan, trust, other funding
arrangement or policy between the Company or any Subsidiary of the Company and
one or more of its current or former directors, officers, employees or
independent contractors except as required pursuant to irrevocable commitments
existing on the date of this Agreement, change any trustee or custodian of the
assets of any plan or transfer plan assets among trustees or custodians except
that the Company may adopt the severance policy and pay retention bonuses, in
each case as described in Section 6.1(j) of the Company Disclosure Schedule,
(ii) except for normal salary increases in the ordinary course of business
consistent with past practice, which increases do not exceed 5% of annual rate
of base salary in effect on the date of this Agreement in any individual case
or except as required by applicable law, increase or accelerate payment of in
any manner the compensation or fringe benefits of any director, officer or
employee or pay any benefit not required by any Plan or agreement as in effect
as of the date hereof; provided, however, that nothing contained herein shall
prohibit the Company from (x) committing to pay retention bonuses as described
in Section 6.1(j) of the Company Disclosure Schedule, or (y) paying, on or
immediately prior to the Closing Date, discretionary bonuses in respect of
fiscal 1998 such that the aggregate amount of all such bonuses in respect of
fiscal 1998 does not exceed $291,000 and in individual amounts to be mutually
agreed upon by Parent and the Board of Directors of the Company, provided,
however, that Parent's agreement shall not be unreasonably withheld or (ii)
grant or award any stock options, stock appreciation rights, restricted stock,
restricted stock units or performance units or shares;
(k) other than activities in the ordinary course of business consistent with
past practice, sell, lease, encumber, assign or otherwise dispose of, or agree
to sell, lease, encumber, assign or otherwise dispose of, any of its material
assets, properties or other rights or agreements except as otherwise
specifically contemplated by this Agreement;
(l) other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money or assume, guarantee,
endorse or otherwise as an accommodation become responsible for the
obligations of any other individual, corporation or other entity;
(m) file any application to relocate or terminate the operations of any
banking office of it or any of its Subsidiaries;
(n) create, renew, amend or terminate or give notice of a proposed renewal,
amendment or termination of, any material contract, agreement or lease for
goods, services or office space to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
their respective properties is bound, other than the renewal in the ordinary
course of business of any lease the term of which expires prior to the Closing
Date;
(o) other than in the ordinary course of business consistent with past
practice, in individual amounts not to exceed $25,000, and other than
investments for the Company's portfolio made in accordance with Section
6.1(p), make any investment either by purchase of stock or securities,
contributions to capital, property transfers or purchase of any property or
assets of any other individual, corporation or other entity;
(p) make any investment in any debt security, including mortgage-backed and
mortgage related securities, other than US government and US government agency
securities with final maturities not greater than five years
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or mortgage-backed or mortgage related securities which would not be
considered "high risk" securities pursuant to Thrift Bulletin Number 52 issued
by the OTS, that are purchased in the ordinary course of business with past
practice;
(q) other than as set forth on Schedule 6.1(j), enter into or terminate any
contract or agreement, or make any change in any of its leases or contracts,
other than with respect to those involving aggregate payments of less than, or
the provision of goods or services with a market value of less than, $50,000
per annum and other than contracts or agreements covered by Section 6.1(t);
(r) settle any claim, action or proceeding involving any liability of the
Company or any of its Subsidiaries for money damages in excess of $50,000 or
involving any material restrictions upon the operations of the Company or any
of its Subsidiaries;
(s) except in the ordinary course of business and in amounts less than
$100,000, waive or release any material right or collateral or cancel or
compromise any extension of credit or other debt or claim;
(t) make, renegotiate, renew, increase, extend, modify or purchase any (i)
loan, lease (credit equivalent), advance, credit enhancement or other
extension of credit, or make any commitment in respect of any of the
foregoing, except (A) with respect to one- to four-family owner-occupied
residential mortgage loans, originations or refinancings of adjustable rate
loans with maturities not to exceed 30 years and fixed-rate loans with
maturities not to exceed 15 years, in each case made in strict compliance with
underwriting guidelines established by either the Federal National Mortgage
Association or the Federal Home Loan Mortgage Corporation; (B) with respect to
multi-family loans, originations or refinancing in amounts up to $400,000 in
accordance with the following lending policies: (I) collateral consisting of
multi-family buildings only within the 5 boroughs of New York City and Nassau
County, (II) debt service ratios not less than 1.2 based upon actual cash
flows at the time of underwriting (accounting for normal vacancy and
attributing no increase for potential future increases), (III) loan-to-value
ratios not greater than 75% based upon appraisals performed by licensed real
estate appraisers carrying the "MAI" designation, and based upon cash flows as
described above regarding computation of debt service ratios, (IV) personal
guarantees of the borrower and (V) verification of rents with the NYC
Department of Housing and Community Renewal where apartment rents are subject
to statutory control; (C) with respect to construction loans, only the
continuation of disbursements of proceeds in connection with existing loans in
process, but only subsequent to adequate due diligence regarding the stage of
project completion; (D) with respect to loans secured by mixed-use properties
or by commercial income-producing properties, originations or refinancings in
amounts up to $250,000 with valuations and debt service coverage ratios that
are based upon actual rent rolls made in strict compliance with the loan-to-
value ratios and debt service ratios set forth in the Company's current Board-
approved loan policy manual; (E) with respect to consumer loans, originations
or refinancings in the ordinary course of business upon terms and in aggregate
monthly volumes that do not differ materially from past practice; or (F) loans
or advances as to which the Company has a legally binding obligation to make
as of the date hereof and a description of which has been provided by the
Company in writing to Parent prior to the execution of this Agreement;
provided, that all new loan commitments made by the Company between the date
hereof and the Closing, as permitted by clauses (A) through (D) above, shall
not aggregate more than $8 million in any single month, and no more than $25
million in the aggregate; and provided further, however, that the Company may
not make, renegotiate, renew, increase, extend, modify or purchase any loan
that is underwritten based on either no or limited verification of income or
otherwise without full documentation customary for such a loan; (ii) unsecured
commercial loans; or (iii) loans, advances or commitments to employees,
directors, officer or other affiliated parties of the Company or any of its
Subsidiaries;
(u) incur any additional borrowings beyond those set forth in the Company
Disclosure Letter other than short-term (with a final maturity of two years or
less) Federal Home Loan Bank borrowings and reverse repurchase agreements
consistent with past practice, or pledge any of its assets to secure any
borrowings other than as required pursuant to the terms of borrowings of the
Company or any Subsidiary in effect at the date hereof or in connection with
borrowings or reverse repurchase agreements permitted hereunder. Deposits
shall not be deemed to be borrowings within the meaning of this paragraph;
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(v) except for advances in the ordinary course to fund the carrying costs of
the properties held in AFT Associates up to $50,000 in the aggregate, make any
investment or commitment to invest in real estate or in any real estate
development project, other than real estate acquired in satisfaction of
defaulted mortgage loans and investments or commitments approved by the Board
of Directors of the Company prior to the date of this Agreement and disclosed
in writing to Parent;
(w) except pursuant to commitments existing at the date hereof which have
previously been disclosed in writing to the Parent, make any real estate loans
secured by undeveloped land or real estate located outside the State of New
York or make any construction loan;
(x) establish or make any commitment relating to the establishment of any
new branch or other office facilities other than those for which all
regulatory approvals have been obtained; with respect to any such new branch
or other office facility for which regulatory approval has been received, make
any capital expenditures that in the aggregate would exceed $50,000;
(y) except for advances in the ordinary course to fund the carrying costs of
the properties held in AFT Associates up to $50,000 in the aggregate,
organize, capitalize, lend to or otherwise invest in any Subsidiary, or invest
in or acquire a 10% or greater equity or voting interest in any firm,
corporation or business enterprise;
(z) elect to the Board of Directors of the Company any person who is not a
member of the Board of Directors of the Company as of the last Company Report;
or
(aa) agree to do any of the foregoing.
6.2 Covenants of Parent. Except as expressly provided in this Agreement,
during the period from the date of this Agreement to the Effective Time, the
Parent shall use commercially reasonably efforts to, and shall cause its
Subsidiaries to use commercially reasonable efforts to, (i) conduct its
business in the ordinary and usual course consistent with past practices and
prudent banking practice, (ii) maintain and preserve intact its business
organization, properties, leases, employees and advantageous business
relationships and retain the services of its officers and key employees, (iii)
take no action which would adversely affect or delay the ability of the
Company or the Parent to perform it covenants and agreements on a timely basis
under this Agreement, and (iv) take no action which would adversely affect or
delay the ability of the Company, the Parent, the Company Bank or the Parent
Bank to obtain any necessary approvals, consents or waivers of any
governmental authority required for the transactions contemplated hereby or
which would reasonably be expected to result in any such approvals, consents
or waivers containing any material condition or restriction. Without limiting
the generality of the foregoing, and except as set forth in Section 6.2 of the
Parent Disclosure Schedule or as otherwise specifically provided by the
Agreement or consented to in writing by the Company, Parent shall not, and
shall not permit any of its Subsidiaries to:
(a) solely in the case of Parent, declare or pay any dividends on or make
any other distributions in respect of any of its capital stock other than its
current quarterly dividends; provided, however, that nothing contained herein
shall prohibit Parent from increasing the quarterly cash dividend on the
Parent Common Stock up to $0.15 per share;
(b) take any action that is intended or may reasonably be expected to result
in any of the conditions to the Merger set forth in Article VIII not being
satisfied;
(c) change its methods of accounting in effect at March 31, 1998, except in
accordance with changes in GAAP or regulatory accounting principles as
concurred to by Parent's independent auditors; or
(d) agree to do any of the foregoing.
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ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Regulatory Matters. (a) Parent and the Company shall promptly prepare
and file with the SEC the Proxy Statement and Parent shall promptly prepare
and file with the SEC the S-4, in which the Proxy Statement will be included
as a prospectus. Each of the Company and Parent shall use its reasonable best
efforts to have the S-4 declared effective under the Securities Act as
promptly as practicable after such filing, and the Company shall thereafter
mail the Proxy Statement to its stockholders. Parent shall also use its
reasonable best efforts to obtain all necessary state securities law or "Blue
Sky" permits and approvals required to carry out the transactions contemplated
by this Agreement.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Entities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including without limitation the Merger). The Company and Parent
shall have the right to review in advance, and to the extent practicable each
will consult the other on, in each case subject to applicable laws relating to
the exchange of information, all the information relating to the Company or
Parent, as the case may be, and any of their respective Subsidiaries, which
appears in any filing made with, or written materials submitted to, any third
party or any Governmental Entity in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right, each of the
parties hereto shall act reasonably and as promptly as practicable. The
parties hereto agree that they will consult with each other with respect to
the obtaining of all permits, consents, approvals and authorizations of all
third parties and Governmental Entities necessary or advisable to consummate
the transactions contemplated by this Agreement and each party will keep the
other apprised of the status of matters relating to completion of the
transactions contemplated herein.
(c) Parent and the Company shall, upon request, furnish each other with all
information concerning themselves, their Subsidiaries, directors, officers and
stockholders and such other matters as may be reasonably necessary or
advisable in connection with the Proxy Statement, the S-4 or any other
statement, filing, notice or application made by or on behalf of Parent, the
Company or any of their respective Subsidiaries to any Governmental Entity in
connection with the Merger and the other transactions contemplated by this
Agreement.
(d) Parent and the Company shall promptly furnish each other with copies of
written communications received by Parent or the Company, as the case may be,
or any of their respective Subsidiaries, Affiliates or Associates (as such
terms are defined in Rule 12b-2 under the Exchange Act as in effect on the
date of this Agreement) from, or delivered by any of the foregoing to, any
Governmental Entity in respect of the transactions contemplated hereby.
7.2 Access to Information. (a) Upon reasonable notice and subject to
applicable laws relating to the exchange of information, each party shall, and
shall cause each of its Subsidiaries to, afford to the officers, employees,
accountants, counsel and other representatives of the other party, access,
during normal business hours during the period prior to the Effective Time, to
all its properties, books, contracts, commitments, records, officers,
employees, accountants, counsel and other representatives and, during such
period, it shall, and shall cause its Subsidiaries to, make available to the
other party all information concerning its business, properties and personnel
as the other party may reasonably request.
Neither party nor any of its 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 any attorney-
client privilege or contravene any law, rule, regulation, order, judgment,
decree, fiduciary duty or binding agreement entered into prior to the date of
this Agreement. The parties hereto will make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the preceding
sentence apply.
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(b) All information furnished pursuant to Section 7.2(a) shall be subject
to, and each of the Company and Parent shall hold all such information in
confidence in accordance with, the provisions of the confidentiality
agreement, dated June 17, 1998 (the "Confidentiality Agreement"), between
Parent and the Company.
(c) No investigation by either of the parties or their respective
representatives shall affect the representations, warranties, covenants or
agreements of the other set forth herein.
7.3 Stockholder Meeting. The Company shall take all steps necessary to duly
call, give notice of, convene and hold a meeting of its stockholders to be
held as soon as is reasonably practicable after the date on which the S-4
becomes effective for the purpose of voting upon the approval and adoption of
this Agreement and the consummation of the transactions contemplated hereby.
The Company will, through its Board of Directors, except to the extent legally
required for the discharge by the Board of Directors of its fiduciary duties
as advised by such Board's legal counsel subject to the fiduciary duties of
such board, recommend to its stockholders approval of this Agreement and the
transactions contemplated hereby and such other matters as may be submitted to
its stockholders in connection with this Agreement.
7.4 Legal Conditions to Merger. Each of Parent and the Company shall, and
shall cause its Subsidiaries to, use their reasonable best efforts (a) to
take, or cause to be taken, all actions necessary, proper or advisable to
comply promptly with all legal requirements which may be imposed on such party
or its Subsidiaries with respect to the Merger and, subject to the conditions
set forth in Article VIII hereof, to consummate the transactions contemplated
by this Agreement and (b) to obtain (and to cooperate with the other party to
obtain) any consent, authorization, order or approval of, or any exemption by,
any Governmental Entity and any other third party which is required to be
obtained by the Company or Parent or any of their respective Subsidiaries in
connection with the Merger and the other transactions contemplated by this
Agreement, and to comply with the terms and conditions of such consent,
authorization, order or approval.
7.5 Affiliates. Promptly, but in any event within two weeks after the
execution and delivery of this Agreement, the Company shall deliver to the
Parent a letter identifying all persons who, to the knowledge of the Company,
may be deemed to be "affiliates" of the Company under Rule 145 of the
Securities Act, including, without limitation, all directors and executive
officers of the Company, together with executed letter agreements, each
substantially in the form of Exhibit B hereto, executed by each such person so
identified as an affiliate of the Company agreeing (i) to comply with Rule 145
and (ii) to be present in person or by proxy and vote in favor of the Merger
at the Company's stockholders meeting.
7.6 Stock Exchange Listing. Parent shall use its reasonable best efforts to
cause the shares of Parent Common Stock to be issued in the Merger to be
approved for listing for quotation on the NASDAQ/NMS, subject to official
notice of issuance, as of the Effective Time.
7.7 Employee Benefit Plans; Existing Agreements. (a) As of or as soon as
practicable following the Effective Time, the employees of the Company and its
Subsidiaries (the "Company Employees") shall be eligible to participate in the
employee benefit plans of Parent and its Subsidiaries in which similarly
situated employees of Parent or Parent Bank participate, to the same extent as
similarly situated employees of Parent or Parent Bank (it being understood
that inclusion of Company Employees in such employee benefit plans may occur
at different times with respect to different plans and that participation of
Company employees in an analogous Company Plan shall be continued until such
time). The Company agrees to take any necessary actions to cease benefit
accruals under any Plan that is a tax-qualified defined benefit plan as of the
Effective Date.
(b) With respect to each Parent Plan, for purposes of determining
eligibility to participate, vesting, and entitlement to benefits, including
for severance benefits and vacation entitlement (but not for accrual of
pension benefits), service with the Company (or predecessor employers to the
extent the Company provides past service credit) shall be treated as service
with Parent; provided, however, that such service shall not be recognized to
the extent that such recognition would result in a duplication of benefits.
Such service also shall apply for purposes of satisfying any waiting periods,
evidence of insurability requirements, or the application of any preexisting
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condition limitations. Each Parent Plan shall waive pre-existing condition
limitations to the same extent waived under the applicable Plan. Company
Employees shall be given credit for amounts paid under a corresponding benefit
plan during the same period for purposes of applying deductibles, co-payments
and out-of-pocket maximums as though such amounts had been paid in accordance
with the terms and conditions of the Parent Plan.
(c) As of the Effective Time, Parent shall assume and honor and shall cause
the appropriate Subsidiaries of Parent to assume and to honor in accordance
with their terms all employment, severance and other compensation agreements,
plans and arrangements existing prior to the execution of this Agreement which
are between the Company or any of its Subsidiaries and any director, officer
or employee thereof and which have been disclosed in the Company Disclosure
Schedule. Parent acknowledges and agrees that (i) the Merger constitutes a
"Change of Control" for all purposes pursuant to such agreements and
arrangements and (ii) in light of Parent's plans relating to management
assignments and responsibilities with respect to the business of Parent from
and after the Effective Time, each director, officer or employee who is a
party to, or is otherwise subject to, any such agreement or arrangement will,
upon consummation of the Merger, be entitled to terminate employment
thereunder and receive the severance or other similar benefits that are
provided thereunder in the event of a termination of employment for "Good
Reason", constructive discharge, (including, but not limited to, demotion or
reduction in compensation) or other similar events. Any director, officer or
employee of the Company who is a party to an agreement set forth in Section
7.7(c) of the Company Disclosure Schedule who intends to terminate employment
as of the Effective Time, or who otherwise becomes entitled to benefits
thereunder, shall be entitled to receive the cash benefits payable under such
agreement on the Closing Date by wire transfer of immediately available funds
to an account designated by such employee in writing and delivered to Parent
not less than five (5) business days prior to the Closing Date; provided,
however, that (i) the amounts payable by such wire transfer shall not exceed,
individually or in the aggregate, the amounts reflected in Section 7.7(c) of
the Company Disclosure Schedule and (ii) the employee executes and delivers to
the Company an instrument in form and substance satisfactory to the Parent
releasing the Parent and its affiliates from any further liability for
monetary payments under such agreement. The provisions of this Section 7.7(c)
are intended to be for the benefit of, and shall be enforceable by, each such
director, officer or employee.
(d) Prior to the Effective Time, the Parent shall cause the Parent Bank to
amend its Severance Pay Plan in the form included in Section 5.11(a) of the
Parent Disclosure Schedule to designate the Company and the Company Bank as
"Acquired Companies."
(e) With respect to the Financial Federal Savings and Loan Association
Employee Stock Ownership Plan (the "ESOP"), the Company shall:
(i) take any actions necessary to cause the ESOP to be terminated and for
the balances in all Accounts (as defined in the ESOP) to become fully
vested and nonforfeitable as of the Closing Date;
(ii) use its best efforts to cause the Trustee of the ESOP to make such
elections under Sections 1.4 and 1.5 of this Agreement with respect to
unallocated Company Common Stock as are necessary to obtain cash at least
equal to the remaining ESOP indebtedness;
(ii) cause the Trustee to use such cash to repay in full all such
outstanding ESOP indebtedness;
(iv) cause the shares of Company Common Stock and/or any cash remaining
in the suspense account maintained under the ESOP, after giving effect to
the repayment of ESOP indebtedness referred to in subparagraph (iii) above,
to be allocated (as of the Closing Date) to the accounts of all ESOP
participants who have account balances as of the Closing Date, as
investment experience in accordance with Section 8.3 of the ESOP;
(v) cause the account balances of all ESOP participants to be distributed
in a lump sum (or transferred in accordance with Section 401(a)(31) of the
Code) as soon as practicable following the later of (A) the Closing Date or
(B) the date of receipt of a favorable determination letter from the
Internal Revenue Service (the "Service") regarding the qualified status of
the ESOP upon its termination; and
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(vi) adopt an amendment to the ESOP, in form and substance reasonably
satisfactory to Parent, which includes and provides for the actions
described in subparagraphs (i), (ii), (iii), (iv) and (v) above.
(f) As soon as practicable after the date hereof, the Company shall file a
request for a determination letter from the Service regarding the continued
qualified status of the ESOP upon its termination. Prior to the Effective
Time, the Company and, following the Effective Time, Parent shall use their
respective best efforts to obtain such favorable determination letter
(including, but not limited to, making such changes to the ESOP and the
proposed allocations described herein as may be requested by the Service as a
condition to its issuance of a favorable determination letter). Neither the
Company nor Parent shall implement any of the actions described in Section
7.7(e) (iv) and (v) above until receipt of such favorable determination
letter.
7.8 Indemnification. (a) It is understood and agreed that after the
Effective Time, Parent shall indemnify and hold harmless, to the fullest
extent that the Company is permitted to indemnify (including advancement of
expenses) its directors and officers under Delaware law or OTS regulations, as
applicable and the Certificate of Incorporation and Bylaws of the Company as
in effect at the Effective Time, any person who is now, or has been at any
time prior to the date of this Agreement, or who becomes prior to the
Effective Time, a director, officer or employee of the Company or any of its
Subsidiaries (the "Indemnified Parties") against any losses, claims, damages,
liabilities, costs, expenses (including reasonable attorney's fees and
expenses in advance of the final disposition of any claim, suit, proceeding or
investigation to each Indemnified Party) judgments, fines and amounts paid in
settlement in connection with any such threatened or actual claim, action,
suit, proceeding or investigation, and in the event of any such threatened or
actual claim, action, suit, proceeding or investigation (whether asserted or
arising before or after the Effective Time), the Indemnified Parties may
retain counsel reasonably satisfactory to them after consultation with Parent;
provided, however, that (1) Parent shall have the right to assume the defense
thereof and upon such assumption Parent shall not be liable to any Indemnified
Party for any legal expenses of other counsel or any other expenses
subsequently incurred by any Indemnified Party in connection with the defense
thereof, except that if Parent elects not to assume such defense or counsel
for the Indemnified Parties reasonably advises that there are issues which
raise conflicts of interest between Parent and the Indemnified Parties, the
Indemnified Parties may retain counsel reasonably satisfactory to them after
consultation with Parent, and Parent shall pay the reasonable fees and
expenses of such counsel for the Indemnified Parties, (2) Parent shall in all
cases be obligated pursuant to this paragraph to pay for only one firm of
counsel for all Indemnified Parties, (3) Parent shall not be liable for any
settlement effected without its prior written consent (which consent shall not
be unreasonably withheld) and (4) Parent shall have no obligation hereunder to
any Indemnified Party when and if a court of competent jurisdiction shall
ultimately determine, and such determination shall have become final and
nonappealable, that indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law. Any Indemnified Party
wishing to claim Indemnification under this Section 7.8, upon learning of any
such claim, action, suit, proceeding or investigation, shall promptly notify
Parent thereof, provided that the failure to so notify shall not affect the
obligations of Parent under this Section 7.8 except to the extent such failure
to notify materially prejudices Parent. Parent's obligations under this
Section 7.8 shall continue in full force and effect for a period of six years
from and after the Effective Time; provided, however, that all rights to
indemnification in respect of any claim asserted or made within such period
shall continue until the final disposition of such claim.
(b) Parent shall cause the persons serving as officers and directors of the
Company immediately prior to the Effective Time to be covered for a period of
three years from the Effective Time by the directors' and officers' liability
insurance policy maintained by the Company (provided that Parent may
substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are not less advantageous than such
policy or single premium tail coverage with policy limits equal to the
Company's existing annual coverage limits) with respect to acts or omissions
occurring prior to the Effective Time which were committed by such officers
and directors in their capacity as such; provided, however, that in no event
shall Parent be required to expend an aggregate premium in excess of 200% of
the current annual premiums expended by the Company (the "Insurance Amount")
to maintain or procure insurance coverage, and further provided that if Parent
is unable to maintain or obtain the insurance called for by this Section
7.8(b), Parent shall use all reasonable efforts to obtain as much comparable
insurance as is available for the Insurance Amount.
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(c) In the event Parent or any of its successors or assigns (i) consolidates
with or merges into any other person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger, or (ii)
transfers or conveys all or substantially all of its properties and assets to
any person, then, and in each such case, to the extent necessary, proper
provision shall be made so that the successors and assigns of Parent assume
the obligations set forth in this section.
(d) The provisions of this Section 7.8 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs
and representatives.
7.9 Additional Agreements. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of any of the
parties to the Merger, the proper officers and directors of each party to this
Agreement and their respective Subsidiaries shall take all such necessary
action as may be reasonably requested by Parent.
7.10 Coordination of Dividends. Subject to the proviso of Section 6.1(a),
after the date of this Agreement the Company shall coordinate the declaration
of any dividends in respect of the Company Common Stock and the record dates
and payment dates relating thereto with that of the Parent Common Stock, it
being the intention of the parties that the holders of Parent Common Stock or
Company Common Stock shall not receive more than one dividend, or fail to
receive one dividend, for any single calendar quarter with respect to their
shares of Parent Common Stock and/or Company Common Stock and any shares of
Parent Common Stock any holder of Company Common Stock receives in exchange
therefor in the Merger.
7.11 Parent Rights Agreement. Parent agrees that Parent Rights shall be
issued with respect to each share of Parent Common Stock issued pursuant to
the terms hereof regardless of whether there has occurred a "Distribution
Date" under the terms of the Parent Rights Agreement prior to the Effective
Time, and Parent shall take all action necessary or advisable to enable the
holder of each share of Parent Common Stock issued pursuant to this Agreement
to obtain the benefit of such Parent Rights notwithstanding their prior
distribution, including, without limitation, amendment of the Parent Rights
Agreement.
7.12 Notification of Certain Matters. Each party shall give prompt notice to
the others of (a) any event or notice of, or other communication relating to,
a default or event that, with notice or lapse of time or both, would become a
default, received by it or any of its Subsidiaries subsequent to the date of
this Agreement and prior to the Effective Time, under any contract material to
the financial condition, properties, businesses or results or operations of
the Company and its Subsidiaries taken as a whole to which the Company or any
Subsidiary is a party or is subject; and (b) any event, condition, change or
occurrence which individually or in the aggregate has, or which, so far as
reasonably can be foreseen at the time of its occurrence, is reasonably likely
to result in a Material Adverse Event. Each of the Company and the Parent
shall give prompt notice to the other party of any notice or other
communication from any third party alleging that the consent of such third
party is or may be required in connection with the transactions contemplated
by this Agreement.
7.13 Certain Matters, Certain Revaluations, Changes and Adjustments. At or
before the Effective Time, upon the request of Parent, the Company shall,
consistent with GAAP, modify and change its loan, litigation and real estate
valuation policies and practices (including loan classifications and levels of
reserves) so as to be applied consistently on a mutually satisfactory basis
with those of Parent and establish such accruals and reserves as shall be
necessary to reflect Merger-related expenses and costs incurred by the
Company, provided, however, that the Company shall not be required to take
such action (A) more than five days prior to the Effective Time; and (B)
unless Parent agrees in writing that all conditions to closing set forth in
Article VIII have been satisfied or waived (other than those conditions
relating to delivery of documents on the Closing Date); and provided further,
however, that no accrual or reserve made by the Company or any Company
Subsidiary pursuant to this Section 7.13 or any litigation or regulatory
proceeding arising out of any such accrual or reserve, shall constitute or be
deemed to be a breach, violation of or failure to satisfy any representation,
warranty, covenant, condition or other provision of this Agreement or
otherwise be considered in determining whether any such breach, violation or
failure to satisfy shall have occurred.
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7.14 Advisory Board. Parent shall, effective as of the Effective Time, cause
Raymond M. Calamari, Richard J. Hickey, Peter S. Russo and Dominick L.
Segrete, if such persons are willing to so serve, to be elected or appointed
as members of an advisory board ("Advisory Board") established by Parent, the
function of which shall be to advise Parent with respect to deposit and
lending activities in the Company's former market area and to maintain and
develop customer relationships. The members of the Advisory Board who are
willing to so serve initially shall be elected or appointed for a term of one
year. Parent agrees annually to re-elect or re-appoint each of the initial
members of the Advisory Board to two successive one-year terms following the
initial one-year term; provided, however, that Parent shall have no obligation
to re-elect or re-appoint any member if Parent reasonably determines that such
member has a conflict of interest that compromises such member's ability to
serve effectively as a member of the advisory board of any cause exists that
otherwise would allow for removal of such person as a director of Parent if
such person were a member of Parent's Board of Directors. Each member of the
Advisory Board shall receive a retainer fee for such service at an annual rate
of $25,000, which shall be payable in quarterly installments or in one lump
sum at any time in advance at the option of Parent.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligation To Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Stockholder Approval. This Agreement shall have been approved and
adopted by the requisite vote of the holders of the outstanding shares of
Company Common Stock under applicable law.
(b) Listing of Shares. The shares of Parent Common Stock which shall be
issued to the stockholders of the Company upon consummation of the Merger
shall have been authorized for listing for quotation on the NASDAQ/NMS,
subject to official notice of issuance.
(c) Other Approvals. All necessary regulatory or governmental approvals,
consents or waivers required to consummate the transactions contemplated
hereby shall have been obtained and shall remain in full force and effect and
all statutory waiting periods in respect thereof shall have expired; and all
other consents, waivers and approvals of any third parties which are necessary
to permit the consummation of the Merger and the other transactions
contemplated hereby shall have been obtained or made except for those the
failure to obtain would not have a Material Adverse Effect (i) on the Company
and its subsidiaries taken as a whole or (ii) on the Parent and its
Subsidiaries taken as a whole. None of the approvals or waivers referred to
herein shall contain any term or condition which would have a Material Adverse
Effect on the Surviving Corporation and its Subsidiaries, taken as a whole,
after giving effect to the Merger.
(d) S-4. The S-4 shall have become effective under the Securities Act and no
stop order suspending the effectiveness of the S-4 shall have been issued and
no proceedings for that purpose shall have been initiated or threatened by the
SEC.
(e) No Injunctions or Restraints; Illegality. No order, injunction or decree
issued by any court or agency of competent jurisdiction or other legal
restraint or prohibition (an "Injunction") preventing the consummation of the
Merger shall be in effect. No statute, rule, regulation, order, injunction or
decree shall have been enacted, entered, promulgated or enforced by any
Governmental Entity which prohibits, restricts or makes illegal consummation
of the Merger.
(f) Affiliate Letters. Parent shall have received the letter agreements
referred to in Section 7.5.
8.2 Conditions to Obligations of Parent. The obligation of Parent to effect
the Merger is also subject to the satisfaction or waiver by Parent at or prior
to the Effective Time of the following conditions:
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(a) Representations and Warranties. (i) Subject to Section 3.2, the
representations and warranties of the Company set forth in this Agreement
(other than those set forth in the first and third sentences of Section
4.1(a), the second sentence of Section 4.1(b) and Sections 4.2, 4.6, 4.8(a),
4.10 and 4.18) shall be true and correct as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an
earlier date) as of the Closing Date as though made on and as of the Closing
Date; and (ii) the representations and warranties of the Company set forth in
the first and third sentences of Section 4.1(a), the second sentence of
Section 4.1(b) and Sections 4.2, 4.6, 4.8(a), 4.10 and 4.18 of this Agreement
shall be true and correct in all material respects (without giving effect to
Section 3.2 of this Agreement) as of the date of this Agreement and (except to
the extent such representations and warranties speak as of an earlier date) as
of the Closing Date as though made on and as of the Closing Date. Parent shall
have received a certificate signed on behalf of the Company by the Chief
Executive Officer and the Chief Financial Officer of the Company to the
foregoing effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Parent shall have
received a certificate signed on behalf of the Company by the Chief Executive
Officer and the Chief Financial Officer of the Company to such effect.
(c) Federal Tax Opinion. Parent shall have received an opinion from Thacher
Proffitt & Wood, counsel to Parent ("Parent's Counsel"), in form and substance
reasonably satisfactory to Parent, dated the Effective Time, substantially to
the effect that, on the basis of facts, representations and assumptions set
forth in such opinion which are consistent with the state of facts existing at
the Effective Time, the Merger will be treated as a reorganization within the
meaning of Section 368(a) of the Code and that, accordingly, for federal
income tax purposes:
(i) No gain or loss will be recognized by Parent or the Company as a
result of the Merger;
(ii) No gain or loss will be recognized by the stockholders of the
Company who exchange all of their Company Common Stock solely for Parent
Common Stock pursuant to the Merger (except with respect to cash received
in lieu of a fractional share interest in Parent Common Stock); and
(iii) The aggregate tax basis of the Parent Common Stock received by
stockholders who exchange all of their Company Common Stock solely for
Parent Common Stock pursuant to the Merger will be the same as the
aggregate tax basis of the Company Common Stock surrendered in exchange
therefor (reduced by any amount allocable to a fractional share interest
for which cash is received).
In rendering such opinion, Parent's Counsel may require and rely upon
representations and covenants, including those contained in certificates of
officers of Parent, the Company and others, reasonably satisfactory in form
and substance to such counsel.
(d) Accountant's Letter. The Company shall have caused to be delivered to
the Parent "cold comfort" letters or letters of procedures from the Company's
independent certified public accountants, dated (i) the date of the mailing of
the Proxy Statement to the Company's stockholders and (ii) a date not earlier
than five business days preceding the date of the Closing and addressed to the
Parent, concerning such matters as are customarily covered in transactions of
the type contemplated hereby;
8.3 Conditions to Obligations of the Company. The obligation of the Company
to effect the Merger is also subject to the satisfaction or waiver by the
Company at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. (i) Subject to Section 3.2, the
representations and warranties of Parent set forth in this Agreement (other
than those set forth in the first and third sentences of Section 5.1(a), the
second sentence of Section 5.1(b) and Sections 5.2, 5.6, 5.8(a), 5.10 and
5.18) shall be true and correct as of the date of this Agreement and (except
to the extent such representations and warranties speak as of an earlier date)
as of the Closing Date as though made on and as of the Closing Date; and (ii)
the representations and warranties of Parent set forth in the first and third
sentences of Section 5.1(a), the second sentence of Section 5.1(b) and
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Sections 5.2, 5.6, 5.8(a), 5.10 and 5.18 of this Agreement shall be true and
correct in all material respects (without giving effect to Section 3.2 of this
Agreement) as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date. The Company shall have
received a certificate signed on behalf of Parent by the Chief Executive
Officer and the Chief Financial Officer of Parent to the foregoing effect.
(b) Performance of Obligations of Parent. Parent shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and the Company shall have received
a certificate signed on behalf of Parent by the Chief Executive Officer and
the Chief Financial Officer of Parent to such effect.
(c) Federal Tax Opinion. The Company shall have received an opinion from
Skadden, Arps, Slate, Meagher & Flom LLP (the "Company's Counsel"), in form
and substance reasonably satisfactory to the Company, dated the Effective
Time, substantially to the effect that, on the basis of facts, representations
and assumptions set forth in such opinion which are consistent with the state
of facts existing at the Effective Time, the Merger will be treated as a
reorganization within the meaning of Section 368(a) of the Code and that,
accordingly, for federal income tax purposes:
(i) No gain or loss will be recognized by Parent or the Company as a
result of the Merger;
(ii) No gain or loss will be recognized by the stockholders of the
Company who exchange all of their Company Common Stock solely for Parent
Common Stock pursuant to the Merger (except with respect to cash received
in lieu of a fractional share interest in Parent Common Stock); and
(iii) The aggregate tax basis of the Parent Common Stock received by
stockholders who exchange all of their Company Common Stock solely for
Parent Common Stock pursuant to the Merger will be the same as the
aggregate tax basis of the Company Common Stock surrendered in exchange
therefor (reduced by any amount allocable to a fractional share interest
for which cash is received).
In rendering such opinion, the Company's Counsel may require and rely upon
representations and covenants, including those contained in certificates of
officers of Parent, the Company and others, reasonably satisfactory in form
and substance to such counsel.
(d) Accountant's Letter. Parent shall have executed to be delivered to the
Company "cold comfort" letters or letters of procedures from the Parent's
independent certified public accountants, dated (i) the date of the mailing of
the Proxy Statement to the Company's stockholders and (ii) a date not earlier
than five business days preceding the date of the Closing and addressed to the
Company, concerning such matters as are customarily covered in transactions of
the type contemplated hereby.
ARTICLE IX
TERMINATION AND AMENDMENT
9.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the matters presented in
connection with the Merger by the stockholders of the Company:
(a) by mutual consent of the Company and Parent in a written instrument, if
the Board of Directors of each so determines by a vote of a majority of the
members of its entire Board;
(b) by either Parent or the Company upon written notice to the other party
(i) 60 days after the date on which any request or application for a Requisite
Regulatory Approval shall have been denied or withdrawn at the request or
recommendation of the Governmental Entity which must grant such Requisite
Regulatory Approval, unless within the 60-day period following such denial or
withdrawal a petition for rehearing or an amended application has been filed
with the applicable Governmental Entity, provided, however, that no party
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shall have the right to terminate this Agreement pursuant to this Section
9.1(b)(i) if such denial or request or recommendation for withdrawal shall be
due to the failure of the party seeking to terminate this Agreement to perform
or observe the covenants and agreements of such party set forth herein or (ii)
if any Governmental Entity of competent jurisdiction shall have issued a final
nonappealable order enjoining or otherwise prohibiting the Merger;
(c) by either Parent or the Company, if its Board of Directors so determines
by a vote of a majority of the members of its entire Board, if the Merger
shall not have been consummated on or before March 31, 1999, unless the
failure of the Closing to occur by such date shall be due to the failure of
the party seeking to terminate this Agreement to perform or observe the
covenants and agreements of such party set forth herein;
(d) by either Parent or the Company if its Board of Directors so determines
by a vote of a majority of the members of its entire Board (provided that if
the Company is the terminating party, it shall not be in material breach of
any of its obligations under Section 7.3) if any approval of the stockholders
of the Company required for the consummation of the Merger shall not have been
obtained by reason of the failure to obtain the required vote at a duly held
meeting of such stockholders or at any adjournment or postponement thereof;
(e) by either Parent or the Company, if its Board of Directors so determines
by a vote of a majority of the members of its entire Board, (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if there shall have
been a material breach of any of the representations or warranties set forth
in this Agreement on the part of the other party, which breach is not cured
within thirty days following written notice to the party committing such
breach, or which breach, by its nature, cannot be cured prior to the Closing;
provided, however, that neither party shall have the right to terminate this
Agreement pursuant to this Section 9.1(e) unless the breach of representation
or warranty, together with all other such breaches, would entitle the party
receiving such representation not to consummate the transactions contemplated
hereby under Section 8.2(a) (in the case of a breach of representation or
warranty by the Company) or Section 8.3(a) (in the case of a breach of
representation or warranty by Parent);
(f) by either Parent or the Company, if its Board of Directors so determines
by a vote of a majority of the members of its entire Board (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein), if there shall have
been a material breach of any of the covenants or agreements set forth in this
Agreement on the part of the other party, which breach shall not have been
cured within thirty days following receipt by the breaching party of written
notice of such breach from the other party hereto, or which breach, by its
nature, cannot be cured prior to the Closing; or
(g) by the Company, if its Board of Directors so determines by a vote of a
majority of the members of its entire Board, if the Average Closing Price is
less than or equal to $20.25, subject, however, to the following three
sentences. If the Company makes an election to terminate this Agreement under
this Section 9.1(g), it shall give ten (10) days prior written notice thereof
to Parent (provided that such notice of election may be withdrawn at any time
within the aforementioned ten-day period). During the seven-day period
commencing with its receipt of such notice, Parent shall have the option to
increase the value of the cash, the Parent Common Stock or a combination
thereof being offered to stockholders of the Company (through an increase in
the Aggregate Cash Consideration and/or Preliminary Stock Ratio) such that the
Per Share Consideration is at least $38.12 per share (provided that Parent
shall be limited in its ability to elect to increase the Aggregate Cash
Consideration to the extent necessary to allow the Merger to qualify as a
reorganization within the meaning of Section 368 of the Code). If Parent so
elects within such seven-day period, it shall give prompt written notice to
the Company of such election and the increase in the Merger Consideration
whereupon no termination shall have occurred and this Agreement shall remain
in effect in accordance with its terms (except as the Aggregate Cash
Consideration and/or the Preliminary Stock Ratio, and all amounts set forth in
Article I derived therefrom, shall have been so modified).
9.2 Effect of Termination. In the event of termination of this Agreement by
either Parent or the Company as provided in Section 9.1, this Agreement shall
forthwith become void and have no effect except (i) Sections
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7.2(b), 9.2 and 10.3 shall survive any termination of this Agreement and (ii)
that notwithstanding anything to the contrary contained in this Agreement, no
party shall be relieved or released from any liabilities or damages arising
out of its willful breach of any provision of this Agreement.
9.3 Amendment. Subject to compliance with applicable law, this Agreement may
be amended by the parties hereto, by action taken or authorized by their
respective Boards of Directors, at any time before or after approval of the
matters presented in connection with the Merger by the stockholders of the
Company; provided, however, that after any approval of the transactions
contemplated by this Agreement by the Company's stockholders, there may not
be, without further approval of such stockholders, any amendment of this
Agreement which reduces the amount or changes the form of the consideration to
be delivered to the Company stockholders hereunder other than as contemplated
by this Agreement. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
9.4 Extension; Waiver. At any time prior to the Effective Time, each of the
parties hereto, by action taken or authorized by its Board of Directors, may,
to the extent legally allowed, (a) extend the time for the performance of any
of the obligations or other acts of the other party hereto, (b) waive any
inaccuracies in the representations and warranties of the other party
contained herein or in any document delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions of the other party
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of such party, but such extension or waiver or failure to
insist on strict compliance with an obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
9.5 Termination Fee. In the event that at any time after the date of this
Agreement (i) any person (as defined in Sections 3(a)(9) and 13(d)(3) of the
Exchange Act, and the rules and regulations thereunder), other than Parent or
any Subsidiary of Parent, shall have acquired 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) provided that such acquisition shall have required prior
regulatory approval (including waiver of such approval), (ii) (A) the holders
of Company Common Stock shall not have approved this Agreement and the
transactions contemplated hereby at the meeting of such stockholders held for
the purpose of voting on this Agreement, (B) such meeting shall not have been
held or shall have been canceled, (C) the Board of Directors of the Company
shall have publicly withdrawn or modified, or publicly announced its intent to
withdraw or modify, in any manner adverse to Parent, its recommendation that
the stockholders of the Company approve the transactions contemplated by this
Agreement, or (D) the Company shall have breached any covenant or obligation
contained in this Agreement and such breach would entitle Parent to terminate
this Agreement, in each case after it shall have been publicly announced that
any person other than Parent or any Subsidiary of Parent shall have made a
bona fide proposal by public announcement or written communication that
becomes the subject of public disclosure to engage in a merger, consolidation
or similar transaction with, or a purchase or other acquisition of all or
substantially all of the assets or 10% or more of the outstanding shares of
Common Stock of, the Company, or (iii) a Purchase Event (as defined in the
Stock Option Agreement) shall have occurred prior to the occurrence of an
Exchange Termination Event (as defined in the Stock Option Agreement), then in
any such case the Company shall pay to Parent a termination fee of $1.0
million.
ARTICLE X
GENERAL PROVISIONS
10.1 Closing. Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") will take place at 10:00 a.m. on the
first day which is at least two and not more than five business days after the
satisfaction or waiver (subject to applicable law) of the latest to occur of
the conditions set forth in Article VIII hereof (other than those conditions
which relate to actions to be taken at the Closing) (the "Closing
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Date"), at the offices of Thacher Proffitt & Wood, unless another time, date
or place is agreed to in writing by the parties hereto; provided, however,
that the Closing shall occur no earlier than January 5, 1999, and shall not
occur until after the Election Deadline.
10.2 Nonsurvival of Representations, Warranties and Agreements. None of the
representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the
Effective Time, except for those covenants and agreements contained herein and
therein which by their terms apply in whole or in part after the Effective
Time.
10.3 Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses.
10.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt
requested) or delivered by an express courier (with confirmation) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Parent, to:
The Dime Savings Bank of Williamsburgh
209 Havermeyer Street
Brooklyn, NY 11211
Attention: Chief Executive Officer
with a copy to:
Thacher Proffitt & Wood
2 World Trade Center
New York, NY 10048, 39th Fl.
Attention: Robert C. Azarow, Esq.
and
(b) if to the Company, to:
Financial Federal Savings Bank
42-25 Queens Boulevard
Long Island City, NY 11104
Attention: Chief Executive Officer
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attn: William S. Rubenstein, Esq.
10.5 Interpretation. When a reference is made in this Agreement to Sections,
Exhibits or Schedules, such reference shall be to a Section of or Exhibit or
Schedule to this Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation". The phrases "the date of this Agreement", "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be
deemed to refer to July 18, 1998. No provision of this Agreement shall be
construed to require the Company, Parent or any of their respective
Subsidiaries or affiliates to take any action that would violate any
applicable law, rule or regulation.
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10.6 Counterparts. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
10.7 Entire Agreement. This Agreement (including the documents and the
instruments referred to herein), together with the Option Agreement and the
Confidentiality Agreement, constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof.
10.8 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York, without regard to any
applicable conflicts of law.
10.9 Severability. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
10.10 Publicity. Except as otherwise required by law or the rules of the
NASDAQ/NMS, so long as this Agreement is in effect, neither Parent nor the
Company shall, or shall permit any of its Subsidiaries to, issue or cause the
publication of any press release or other public announcement with respect to,
or otherwise make any public statement concerning, the transactions
contemplated by this Agreement without the consent of the other party, which
consent shall not be unreasonably withheld.
10.11 Assignment; No Third Party Beneficiaries. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns. Except
as otherwise expressly provided herein, this Agreement (including the
documents and instruments referred to herein) is not intended to confer upon
any person other than the parties hereto any rights or remedies hereunder.
IN WITNESS WHEREOF, Parent and the Company have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
Dime Community Bancshares, Inc.
/s/ Vincent F. Palagiano
By___________________________________
Name: Vincent F. Palagiano
Title: Chairman and Chief
Executive Officer
Financial Bancorp, Inc.
/s/ Frank S. Latawiec
By___________________________________
Name: Frank S. Latawiec
Title: President and Chief
Executive Officer
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APPENDIX B
THE TRANSFER OF THIS AGREEMENT IS
SUBJECT TO CERTAIN PROVISIONS CONTAINED
HEREIN AND MAY BE SUBJECT TO TRANSFER
RESTRICTIONS UNDER
FEDERAL AND STATE LAW
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of July 18, 1998 (the "Agreement"), by and
between Dime Community Bancshares, Inc., a Delaware corporation ("DCB"), and
Financial Bancorp, Inc., a Delaware corporation ("FBI").
RECITALS
A. THE PLAN. DCB and FBI have entered into an Agreement and Plan of Merger,
dated as of July 18, 1998 (the "Plan"), providing for, among other things, the
merger of FBI with and into DCB, with DCB being the surviving corporation.
B. CONDITION TO PLAN. As a condition and an inducement to DCB's execution and
delivery of the Plan, DCB has required that FBI agree, and FBI has agreed, to
grant DCB the Option (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Plan, and intending to be legally bound hereby, FBI and DCB agree as
follows:
1. DEFINED TERMS. Capitalized terms which are used but not defined herein
shall have the meanings ascribed to such terms in the Plan.
2. GRANT OF OPTION. Subject to the terms and conditions set forth herein,
FBI hereby grants to DCB an irrevocable option (the "Option") to purchase up
to 339,627 shares of common stock, par value $0.01 per share ("FBI Common
Stock"), of FBI (as adjusted as set forth herein, the "Option Shares," which
shall include the Option Shares before and after any transfer of such Option
Shares, but in no event shall the number of Option Shares for which this
Option is exercised exceed 19.9% of the issued and outstanding shares of FBI
Common Stock), at a purchase price per Option Share (as adjusted as set forth
herein, the "Purchase Price") equal to $32.00.
3. EXERCISE OF OPTION.
(a) Provided that (i) DCB or Holder (as hereinafter defined), as applicable,
shall not be in material breach of the agreements or covenants contained in
this Agreement or the Plan, and (ii) no preliminary or permanent injunction or
other order against the delivery of Option Shares issued by any court of
competent jurisdiction in the United States shall be in effect, the Holder may
exercise the Option, in whole or in part, at any time and from time to time,
following the occurrence of a Purchase Event (as hereinafter defined) which
occurs prior to the occurrence of an Exercise Termination Event (as
hereinafter defined); provided, that the Holder shall have sent written notice
of such exercise (as provided in subsection (e) of this Section 3) within 120
days after the first Purchase Event of which DCB has been notified. The Option
shall terminate and be of no further force or effect upon the earliest to
occur of the following (each an "Exercise Termination Event"): (A) the
Effective Time, (B) termination of the Plan in accordance with the terms
thereof prior to the occurrence of a Purchase Event or a Preliminary Purchase
Event other than a termination thereof by DCB pursuant to Section 9.1(f) of
the Plan (a termination of the Plan by DCB pursuant to such Section of the
Plan, being referred to herein as a "Default Termination"), (C) 12 months
after a Default Termination or (D) 12 months after termination of the Plan
(other than a Default Termination) following the occurrence of a Purchase
Event or a Preliminary Purchase Event; provided, however, that any purchase of
shares upon exercise of the Option shall be subject to compliance with
applicable law; provided further, however, that if the Option cannot be
exercised on any day because of an
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injunction, order or similar restraint issued by a court of competent
jurisdiction, the period during which the Option may be exercised shall be
extended so that the Option shall expire no earlier than the tenth business
day after such injunction, order or restraint shall have been dissolved or
when such injunction, order or restraint shall have become permanent and no
longer subject to appeal, as the case may be. The term "Holder" shall mean the
holder or holders of the Option from time to time, and which initially is DCB.
The rights set forth in Sections 8 and 9 of this Agreement shall terminate
when the right to exercise the Option and Substitute Option terminate (other
than as a result of a complete exercise of the Option or Substitute Option) as
set forth herein.
(b) As used herein, a "Purchase Event" means any of the following events
occurring after the date hereof:
(i) Without DCB's prior written consent, FBI shall have recommended,
publicly proposed or publicly announced an intention to authorize,
recommend or propose, or FBI shall have entered into an agreement with any
person (other than DCB or any subsidiary of DCB) to effect (A) a merger,
consolidation or similar transaction involving FBI or any of its
significant subsidiaries, (B) the disposition, by sale, lease, exchange or
otherwise, of assets or deposits of FBI or any of its significant
subsidiaries representing in either case all or substantially all of the
consolidated assets or deposits of FBI and its subsidiaries or (C) the
issuance, sale or other disposition by FBI of (including by way of merger,
consolidation, share exchange or any similar transaction) securities
representing 20% or more of the voting power of FBI or any of its
significant subsidiaries (each of (A), (B) or (C), an "Acquisition
Transaction"); provided, however, that in no event shall any merger,
consolidation, purchase or similar transaction involving only FBI and one
or more of the Subsidiaries of FBI, or involving only any two or more of
such Subsidiaries be deemed to be an Acquisition Transaction, provided that
any such transaction is not entered into in violation of the terms of the
Plan; or
(ii) Any person (other than DCB or any subsidiary of DCB) shall have
acquired beneficial ownership (as such term is defined in Rule 13d-3
promulgated under the Securities and Exchange Act of 1934 (the "Exchange
Act")) of, or the right to acquire beneficial ownership of, or any "group"
(as such term is defined in Section 13(d)(3) of the Exchange Act), other
than a group of which DCB or any subsidiary of DCB is a member, shall have
been formed which beneficially owns or has the right to acquire beneficial
ownership of, 20% or more of the voting power of FBI or any of its
significant subsidiaries.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) Any person (other than DCB or any subsidiary of DCB) shall have
commenced (as such term is defined in Rule 14d-2, promulgated under the
Exchange Act) or shall have filed a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to,
a tender offer or exchange offer to purchase any shares of FBI Common Stock
such that, upon consummation of such offer, such person would own or
control 10% or more of the then outstanding shares of FBI Common Stock
(such an offer being referred to herein as a "Tender Offer" or an "Exchange
Offer," respectively); or
(ii) The stockholders of FBI shall not have approved the Plan by the
requisite vote at the stockholders meeting of FBI called for that purpose
("Company Meeting"), the Company Meeting shall not have been held or shall
have been canceled prior to termination of the Plan or FBI's Board of
Directors shall have publicly withdrawn or modified in a manner adverse to
DCB the recommendation of FBI's Board of Directors with respect to the
Plan, in each case after it shall have been publicly announced that any
person (other than DCB or any subsidiary of DCB) shall have (A) made, or
disclosed an intention to make, a bona fide proposal to engage in an
Acquisition Transaction (which solely for purposes of this Section 3(c)
shall have the same meaning as set forth in Section 3(b) except that the
reference to 20% shall be changed to 10%) or (B) filed an application (or
given a notice), whether in draft or final form, under the Home Owners'
Loan Act of 1933, as amended, the Bank Holding Company Act, as amended, the
Bank Merger Act, as amended or the Change in Bank Control Act of 1978, as
amended, for approval to engage in an Acquisition Transaction; or
(iii) Any person (other than DCB or any subsidiary of DCB) shall have
made a bona fide proposal to FBI or its stockholders by public
announcement, or written communication that is or becomes the subject of
public disclosure, to engage in an Acquisition Transaction; or
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<PAGE>
(iv) After a proposal is made by a third party to FBI or its stockholders
to engage in an Acquisition Transaction, or such third party states its
intention to FBI to make such a proposal if the Plan terminates, FBI shall
have breached any covenant or agreement contained in the Plan and such
breach (x) would entitle DCB to terminate the Plan under Section 9.1(f)
thereof and (y) shall not have been cured prior to the Notice Date (as
defined below).
As used in this Agreement, the term "person" shall have the meaning
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) FBI shall notify DCB promptly in writing of the occurrence of any
Preliminary Purchase Event or Purchase Event of which it has knowledge, it
being understood that the giving of such notice by FBI shall not be a
condition to the right of Holder to exercise the Option.
(e) In the event Holder wishes to exercise the Option, it shall send to FBI
a written notice (the "Stock Exercise Notice," the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of Option
Shares it intends to purchase pursuant to such exercise and (ii) a place and
date not earlier than three business days nor later than 15 business days from
the Notice Date for the closing (the "Closing") of such purchase (such date as
it may be extended pursuant to the next sentence, the "Closing Date"). If
prior notification to or approval of any Regulatory Authority is required in
connection with any such purchase, FBI shall cooperate with the Holder in the
filing of the required notice of application for approval and the obtaining of
such approval, and the Closing shall occur promptly following such regulatory
approvals and any mandatory waiting periods. Any exercise of the Option shall
be deemed to occur on the Notice Date relating thereto.
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) On each Closing Date, Holder shall (i) pay to FBI, in immediately
available funds by wire transfer to a bank account designated by FBI, an
amount equal to the Purchase Price multiplied by the number of Option Shares
to be purchased on such Closing Date and (ii) present and surrender this
Agreement to FBI at the address of FBI specified in Section 13(f) of this
Agreement.
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a) of
this Agreement, (i) FBI shall deliver to Holder (A) a certificate or
certificates representing the Option Shares to be purchased at such Closing,
which Option Shares shall be free and clear of all Liens (as defined in the
Plan) and subject to no preemptive rights, and (B) if the Option is exercised
in part only, an executed new agreement with the same terms as this Agreement
evidencing the right to purchase the balance of the shares of FBI Common Stock
purchasable hereunder, and (ii) Holder shall deliver to FBI a letter agreeing
that Holder shall not offer to sell or otherwise dispose of such Option Shares
in violation of applicable federal and state law or of the provisions of this
Agreement.
(c) In addition to any other legend that is required by applicable law,
certificates for the Option Shares delivered at each Closing shall be endorsed
with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF JULY 18, 1998. A
COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE
UPON RECEIPT BY FINANCIAL BANCORP, INC. OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the portion of the above legend relating to
the Securities Act shall be removed by delivery of substitute certificate(s)
without such legend if Holder shall have delivered to FBI a copy of a letter
from the staff of the Securities Exchange Commission (the "SEC"), or an
opinion of counsel in form and substance reasonably satisfactory to FBI and
its counsel, to the effect that such legend is not required for purposes of
the Securities Act.
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(d) Upon the giving by Holder to FBI of the Stock Exercise Notice, the
tender of the applicable purchase price in immediately available funds and the
tender of this Agreement to FBI, Holder shall be deemed to be the holder of
record of the shares of FBI Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of FBI shall then be closed or
that certificates representing such shares of FBI Common Stock shall not then
be actually delivered to Holder. FBI 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 preparation, issuance and delivery of stock
certificates under this Section 4 in the name of Holder or its assignee,
transferee or designee.
(e) FBI agrees (i) that it shall at all times maintain, free from preemptive
rights, sufficient authorized but unissued or treasury shares of FBI Common
Stock so that the Option may be exercised without additional authorization of
FBI Common Stock after giving effect to all other options, warrants,
convertible securities and other rights to purchase FBI Common Stock, (ii)
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 FBI, (iii) promptly to take all action as may from time to time
be required (including (A) complying with all applicable premerger
notification, reporting and waiting period requirements and (B) in the event,
under any applicable federal or state banking law, prior approval of or notice
to any Regulatory Authority is necessary before the Option may be exercised,
cooperating fully with Holder in preparing such applications or notices and
providing such information to such Regulatory Authority as it may require) in
order to permit Holder to exercise the Option and FBI duly and effectively to
issue shares of FBI Common Stock pursuant hereto and (iv) promptly to take all
action provided herein to protect the rights of Holder against dilution.
5. REPRESENTATIONS AND WARRANTIES OF FBI. FBI hereby represents and warrants
to DCB (and Holder, if different than DCB) as follows:
(a) CORPORATE AUTHORITY. FBI 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 Board of Directors of FBI, and no other corporate
proceedings on the part of FBI are necessary to authorize this Agreement or
to consummate the transactions so contemplated; this Agreement has been
duly and validly executed and delivered by FBI.
(b) BENEFICIAL OWNERSHIP. To the best knowledge of FBI, as of the date of
this Agreement, no person or group has beneficial ownership of more than
10% of the issued and outstanding shares of FBI Common Stock.
(c) SHARES RESERVED FOR ISSUANCE; CAPITAL STOCK. FBI has taken all
necessary corporate action to authorize and reserve and permit it to issue,
and at all times from the date hereof through the termination of the Option
in accordance with Section 3(a) of this Agreement, will have reserved for
issuance upon the exercise of the Option, that number of shares of FBI
Common Stock equal to the maximum number of Option Shares at any time and
from time to time purchasable upon exercise of the Option, and all such
Option Shares, upon issuance pursuant to the Option, will be duly
authorized, validly issued, fully paid and nonassessable, and will be
delivered free and clear of all claims, liens, encumbrances and security
interests (other than those created by this Agreement) and not subject to
any preemptive rights.
(d) NO VIOLATIONS. The execution, delivery and performance of this
Agreement does not and will not, and the consummation by FBI of any of the
transactions contemplated hereby will not, constitute or result in (i) a
breach or violation of, or a default under, its certificate of
incorporation or bylaws, or the comparable governing instruments of any of
its subsidiaries, or (ii) a breach or violation of, or a default under, any
agreement, lease, contract, note, mortgage, indenture, arrangement or other
obligation of it or any of its subsidiaries (with or without the giving of
notice, the lapse of time or both) or under any governmental or non-
governmental permit or license to which it or any of its subsidiaries is
subject, that would, in any case, give any other person the ability to
prevent or enjoin FBI's performance under this Agreement in any material
respect.
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6. REPRESENTATIONS AND WARRANTIES OF DCB. (a) DCB hereby represents and
warrants to FBI that DCB has full corporate power and authority to enter into
this Agreement and, subject to obtaining the approvals referred to in this
Agreement, to consummate the transactions contemplated by this Agreement; the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of DCB; and this Agreement has been duly executed
and delivered by DCB.
(b) The Option is not being, and any shares of Common Stock or other
securities acquired by DCB upon exercise of the Option will not be, acquired
with a view to the public distribution thereof and will not be transferred or
otherwise disposed of except in a transaction registered or exempt from
registration under the Securities Act.
7. ADJUSTMENT UPON CHANGES IN FBI CAPITALIZATION, ETC.
(a) In the event of any change in FBI Common Stock by reason of a stock
dividend, stock split, split-up, recapitalization, combination, exchange of
shares, exercise of the Company Rights or similar transaction, the type and
number of shares or securities subject to the Option, and the Purchase Price
therefor, shall be adjusted appropriately, and proper provision shall be made
in the agreements governing any such transaction so that Holder shall receive,
upon exercise of the Option, the number and class of shares or other
securities or property that Holder would have received in respect of FBI
Common Stock if the Option had been exercised immediately prior to such event,
or the record date therefor, as applicable. If any additional shares of FBI
Common Stock are issued after the date of this Agreement (other than pursuant
to an event described in the first sentence of this Section 7(a), upon
exercise of any option to purchase FBI Common Stock outstanding on the date
hereof or upon conversion into FBI Common Stock of any convertible security of
FBI outstanding on the date hereof), the number of shares of FBI Common Stock
subject to the Option shall be adjusted so that, after such issuance, the
Option, together with any shares of FBI Common Stock previously issued
pursuant hereto, equals 19.9% of the number of shares of FBI Common Stock then
issued and outstanding, without giving effect to any shares subject to or
issued pursuant to the Option. No provision of this Section 7 shall be deemed
to affect or change, or constitute authorization for any violation of, any of
the covenants or representations in the Plan.
(b) In the event that FBI shall enter into an agreement (i) to consolidate
with or merge into any person, other than DCB or one of its subsidiaries, and
FBI shall not be the continuing or surviving corporation of such consolidation
or merger, (ii) to permit any person, other than DCB or one of its
subsidiaries, to merge into FBI and FBI shall be the continuing or surviving
corporation, but, in connection with such merger, the then outstanding shares
of FBI Common Stock shall be changed into or exchanged for stock or other
securities of FBI or any other person or cash or any other property, or the
outstanding shares of FBI Common Stock immediately prior to such merger shall
after such merger represent less than 50% of the outstanding shares and share
equivalents of the merged company, or (iii) to sell or otherwise transfer all
or substantially all of its assets or deposits to any person, other than DCB
or one of its subsidiaries, then, and in each such case, the agreement
governing such transaction shall make proper provisions 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 Holder, to purchase shares of
either (A) the Acquiring Corporation (as hereinafter defined), (B) any person
that controls the Acquiring Corporation or (C) in the case of a merger
described in clause (ii), FBI (such person being referred to as "Substitute
Option Issuer").
(c) The Substitute Option shall have the same terms as the Option; provided,
that, if the terms 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 Holder. Substitute Option Issuer shall also enter into an
agreement with Holder in substantially the same form as this Agreement, which
shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock (as hereinafter defined) as is equal to the Assigned
Value (as hereinafter defined) multiplied by the number of Option Shares for
which the Option was theretofore exercisable, divided by the Average Price (as
hereinafter defined).
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The exercise price of the Substitute Option per share of Substitute Common
Stock (the "Substitute Option Price") shall be equal to the Purchase Price
multiplied by a fraction in which the numerator is the number of shares of FBI
Common Stock for which the Option was theretofore exercisable and the
denominator is the number of shares of the Substitute Common Stock for which
the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (A) the continuing or surviving
corporation of a consolidation or merger with FBI (if other than FBI), (B)
FBI in a merger in which FBI is the continuing or surviving person, or (C)
the transferee of all or substantially all of FBI's assets (or a
substantial part of the assets of its subsidiaries taken as a whole).
(ii) "Substitute Common Stock" shall mean the shares of capital stock (or
similar equity interest) with the greatest voting power in respect of the
election of directors (or persons similarly responsible for the direction
of the business and affairs) of the Substitute Option Issuer.
(iii) "Assigned Value" shall mean the highest of (A) the price per share
of FBI Common Stock at which a Tender Offer or an Exchange Offer therefor
has been made, (B) the price per share of FBI Common Stock to be paid by
any third party pursuant to an agreement with FBI, (C) the highest closing
price for shares of FBI Common Stock within the sixty-day period
immediately preceding the consolidation, merger or sale in question and (D)
in the event of a sale of all or substantially all of FBI's assets or
deposits, an amount equal to (x) the sum of the price paid in such sale for
such assets (and/or deposits) and the current market value of the remaining
assets of FBI, as determined by a nationally recognized investment banking
firm selected by Holder, divided by (y) the number of shares of FBI Common
Stock outstanding at such time. In the event that a Tender Offer or an
Exchange Offer is made for FBI Common Stock or an agreement is entered into
for a merger or consolidation involving consideration other than cash, the
value of the securities or other property issuable or deliverable in
exchange for FBI Common Stock shall be determined by a nationally
recognized investment banking firm selected by Holder and reasonably
satisfactory to FBI.
(iv) "Average Price" shall mean the average closing price of a share of
Substitute Common Stock for the 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 FBI is the issuer of
the Substitute Option, the Average Price shall be computed with respect to
a share of common stock issued by FBI, the person merging into FBI or by
any company which controls such person, as Holder may elect.
(f) In no event, pursuant to any of the foregoing paragraphs, shall the
number of shares of Substitute Common Stock for which the Substitute Option is
exercisable exceed 19.9% of the issued and outstanding shares of Substitute
Common Stock immediately prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of
the issued and outstanding shares of Substitute Common Stock but for the
limitation in the first sentence of this Section 7(f), 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 the
first sentence of this Section 7(f) over (ii) the value of the Substitute
Option after giving effect to the limitation in the first sentence of this
Section 7(f). This difference in value shall be determined by a nationally
recognized investment banking firm selected by Holder.
(g) FBI shall not enter into any transaction described in Section 7(b) of
this Agreement unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assume in writing all the obligations of FBI
hereunder and take all other actions that may be necessary so that the
provisions of this Section 7 are given full force and effect (including,
without limitation, any action that may be necessary so that the holders of
the other shares of common stock issued by Substitute Option Issuer are not
entitled to exercise any rights by reason of the issuance or exercise of the
Substitute Option and the shares of Substitute Common Stock are otherwise in
no way distinguishable from or have lesser economic value (other than any
diminution in value resulting from the fact that the shares of Substitute
Common Stock are restricted securities, as defined in Rule 144, promulgated
under the Securities Act ("Rule 144"), or any successor provision) than other
shares of common stock issued by Substitute Option Issuer).
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(h) Notwithstanding anything herein to the contrary, in the event that FBI
completes a reorganization involving the formation of a holding company for
FBI, the agreement governing such transaction shall make proper provisions 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 granted by such holding company.
8. REPURCHASE AT THE OPTION OF HOLDER.
(a) Subject to the last sentence of Section 3(a) of this Agreement, at the
request of Holder at any time commencing upon the first occurrence of a
Repurchase Event (as defined in Section 8(d) hereof) and ending 12 months
immediately thereafter, FBI shall repurchase from Holder (i) the Option and
(ii) all shares of FBI Common Stock purchased by Holder pursuant hereto with
respect to which Holder then has beneficial ownership. The date on which
Holder exercises its rights under this Section 8 is referred to as the
"Section 8 Request Date." Such repurchase shall be at an aggregate price (the
"Section 8 Repurchase Consideration") equal to the sum of:
(i) The aggregate Purchase Price paid by Holder for any shares of FBI
Common Stock acquired pursuant to the Option with respect to which Holder
then has beneficial ownership;
(ii) The excess, if any, of (A) the Applicable Price (as defined below)
for each share of FBI Common Stock over (B) the Purchase Price (subject to
adjustment pursuant to Section 7 of this Agreement), multiplied by the
number of shares of FBI Common Stock with respect to which the Option has
not been exercised; and
(iii) The excess, if any, of the Applicable Price over the Purchase
Price (subject to adjustment pursuant to Section 7 of this Agreement) paid
(or, in the case of Option Shares with respect to which the Option has been
exercised but the Closing Date has not occurred, payable) by Holder for
each share of FBI Common Stock with respect to which the Option has been
exercised and with respect to which Holder then has beneficial ownership,
multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 8, FBI shall, within
10 business days after the Section 8 Request Date, pay the Section 8
Repurchase Consideration to Holder in immediately available funds, and
contemporaneously with such payment, Holder shall surrender to FBI the Option
and the certificates evidencing the Option Shares purchased thereunder with
respect to which Holder then has beneficial ownership, and Holder shall
warrant that it has sole record and beneficial ownership of such shares and
that the same are then free and clear of all Liens. Notwithstanding the
foregoing, to the extent that prior notification to or approval of any
Regulatory Authority is required in connection with the payment of all or any
portion of the Section 8 Repurchase Consideration, Holder shall have the
ongoing option to revoke its request for repurchase pursuant to this Section
8, in whole or in part, or to require that FBI deliver from time to time that
portion of the Section 8 Repurchase Consideration that it is not then so
prohibited from paying and promptly file the required notice or application
for approval and expeditiously process the same (and each party shall
cooperate with the other in the filing of any such notice or application and
the obtaining of any such approval). If any Regulatory Authority disapproves
of any part of FBI's proposed repurchase pursuant to this Section 8, FBI shall
promptly give notice of such fact to Holder and Holder shall have the right
(i) to revoke the repurchase request or (ii) to the extent permitted by such
Regulatory Authority, determine whether the repurchase should apply to the
Option and/or Option Shares and to what extent to each, and Holder shall
thereupon have the right to exercise the Option as to the number of Option
Shares for which the Option was exercisable at the Section 8 Request Date less
the number of shares covered by the Option in respect of which payment has
been made pursuant to Section 8(a)(ii) of this Agreement. Holder shall notify
FBI of its determination under the preceding sentence within five business
days of receipt of notice of disapproval of the repurchase. Notwithstanding
anything herein to the contrary, in the event that FBI delivers to the Holder
written notice accompanied by a certification of FBI's independent auditor
each stating that a requested repurchase of FBI Common Stock would result in
the recapture of FBI's bad debt reserves under the Internal Revenue Code of
1986, as amended, Holder's repurchase request shall be deemed to be
automatically revoked.
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Notwithstanding anything herein to the contrary, all of Holder's rights
under this Section 8 shall terminate on the date of termination of this Option
pursuant to Section 3(a) of this Agreement.
(c) For purposes of this Agreement, the "Applicable Price" means the highest
of (i) the highest price per share of FBI Common Stock paid for any such share
by the person or groups described in Section 8(d)(i) hereof, (ii) the price
per share of FBI Common Stock received by holders of FBI Common Stock in
connection with any merger, sale or other business combination transaction
described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) of this Agreement, or
(iii) the highest closing sales price per share of FBI Common Stock quoted on
The Nasdaq Stock Market ("Nasdaq") (or if FBI Common Stock is not quoted on
Nasdaq, the highest bid price per share as quoted on the principal trading
market or securities exchange on which such shares are traded as reported by a
recognized source chosen by Holder) during the 40 business days preceding the
Section 8 Request Date; provided, however, that in the event of a sale of less
than all of FBI's assets, the Applicable Price shall be the sum of the price
paid in such sale for such assets and the current market value of the
remaining assets of FBI as determined by a nationally recognized investment
banking firm selected by Holder, divided by the number of shares of the FBI
Common Stock outstanding at the time of such sale. If the consideration to be
offered, paid or received pursuant to either of the foregoing clauses (i) or
(ii) shall be other than in cash, the value of such consideration shall be
determined in good faith by an independent nationally recognized investment
banking firm selected by Holder and reasonably acceptable to FBI, which
determination shall be conclusive for all purposes of this Agreement.
(d) As used herein, "Repurchase Event" shall occur if (i) any person (other
than DCB or any subsidiary of DCB) shall have acquired beneficial ownership of
(as such term is defined in Rule 13d-3 promulgated under the Exchange Act), or
the right to acquire beneficial ownership of, or any "group" (as such term is
defined under the Exchange Act) shall have been formed which beneficially owns
or has the right to acquire beneficial ownership of, 50% or more of the then
outstanding shares of FBI Common Stock, or (ii) any of the transactions
described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) of this Agreement shall be
consummated.
9. REPURCHASE OF SUBSTITUTE OPTION.
(a) Subject to the last sentence of Section 3(a) of this Agreement, at the
request of Holder at any time commencing upon the first occurrence of a
Repurchase Event (as defined in Section 8(d) hereof) and ending 12 months
immediately thereafter, Substitute Option Issuer (or any successor entity
thereof) shall repurchase from Holder (i) the Substitute Option and (ii) all
shares of Substitute Common Stock purchased by Holder pursuant hereto with
respect to which Holder then has beneficial ownership. The date on which
Holder exercises its rights under this Section 9 is referred to as the
"Section 9 Request Date." Such repurchase shall be at an aggregate price (the
"Section 9 Repurchase Consideration") equal to the sum of:
(i) The aggregate Purchase Price paid by Holder for any shares of
Substitute Common Stock acquired pursuant to the Substitute Option with
respect to which Holder then has beneficial ownership;
(ii) The excess, if any, of (A) the Highest Closing Price (as defined
below) for each share of Substitute Common Stock over (B) the Purchase
Price (subject to adjustment pursuant to Section 7 of this Agreement),
multiplied by the number of shares of Substitute Common Stock with respect
to which the Substitute Option has not been exercised; and
(iii) The excess, if any, of the Highest Closing Price over the Purchase
Price (subject to adjustment pursuant to Section 7 of this Agreement) paid
(or, in the case of Substitute Option Shares with respect to which the
Substitute Option has been exercised but the Closing Date has not occurred,
payable) by Holder for each share of Substitute Common Stock with respect
to which the Substitute Option has been exercised and with respect to which
Holder then has beneficial ownership, multiplied by the number of such
shares.
(b) If Holder exercises its rights under this Section 9, Substitute Option
Issuer shall, within 10 business days after the Section 9 Request Date, pay
the Section 9 Repurchase Consideration to Holder in immediately available
funds, and contemporaneously with such payment, Holder shall surrender to
Substitute Option Issuer
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the Substitute Option and the certificates evidencing the shares of Substitute
Common Stock purchased thereunder with respect to which Holder then has
beneficial ownership, and Holder shall warrant that it has sole record and
beneficial ownership of such shares and that the same are then free and clear
of all Liens. Notwithstanding the foregoing, to the extent that prior
notification to or approval of any Regulatory Authority is required in
connection with the payment of all or any portion of the Section 9 Repurchase
Consideration, Holder shall have the ongoing option to revoke its request for
repurchase pursuant to this Section 9, in whole or in part, or to require that
Substitute Option Issuer deliver from time to time that portion of the Section
9 Repurchase Consideration that it is not then so prohibited from paying and
promptly file the required notice or application for approval and
expeditiously process the same (and each party shall cooperate with the other
in the filing of any such notice or application and the obtaining of any such
approval). If any Regulatory Authority disapproves of any part of Substitute
Option Issuer's proposed repurchase pursuant to this Section 9, Substitute
Option Issuer shall promptly give notice of such fact to Holder and Holder
shall have the right (i) to revoke the repurchase request or (ii) to the
extent permitted by such Regulatory Authority, determine whether the
repurchase should apply to the Substitute Option and/or Substitute Option
Shares and to what extent to each, and Holder shall thereupon have the right
to exercise the Substitute Option as to the number of Substitute Option Shares
for which the Substitute Option was exercisable at the Section 9 Request Date
less the number of shares covered by the Substitute Option in respect of which
payment has been made pursuant to Section 9(a)(ii) of this Agreement. Holder
shall notify Substitute Option Issuer of its determination under the preceding
sentence within five business days of receipt of notice of disapproval of the
repurchase. Notwithstanding anything herein to the contrary, in the event that
Substitute Option Issuer delivers to the Holder written notice accompanied by
a certification of Substitute Option Issuer's independent auditor each stating
that a requested repurchase of FBI Common Stock would result in the recapture
of Substitute Option Issuer's bad debt reserves under the Internal Revenue
Code of 1986, as amended, Holder's repurchase request shall be deemed to be
automatically revoked.
Notwithstanding anything herein to the contrary, all of Holder's rights
under this Section 9 shall terminate on the date of termination of this
Substitute Option pursuant to Section 3(a) of this Agreement.
(c) For purposes of this Agreement, the "Highest Closing Price" means the
highest of closing sales price for shares of Substitute Common Stock quoted on
Nasdaq (or if the Substitute Common Stock is not quoted on Nasdaq, on the
principal trading market on which such shares are traded as reported by a
recognized source) during the six-month period preceding the Section 9 Request
Date.
10. REGISTRATION RIGHTS.
(a) DEMAND REGISTRATION RIGHT. FBI shall, subject to the conditions of
Section 10(c) of this Agreement, if requested by any Holder, including DCB and
any permitted transferee ("Selling Shareholder"), promptly prepare and file a
registration statement under the Securities Act, if such registration is
necessary in order to permit the sale or other disposition of any or all
shares of FBI Common Stock or other securities that have been acquired by or
are issuable to the Selling Shareholder upon exercise of the Option in
accordance with the intended method of sale or other disposition stated by the
Selling Shareholder in such request, including without limitation a "shelf"
registration statement under Rule 415, promulgated under the Securities Act,
or any successor provision, and FBI shall use its reasonable best efforts to
qualify such shares or other securities for sale under any applicable state
securities laws. DCB shall be entitled to one demand registration pursuant to
this Section 10(a).
(b) ADDITIONAL REGISTRATION RIGHTS. If FBI at any time after the exercise of
the Option proposes to register any shares of FBI Common Stock under the
Securities Act, in connection with an underwritten public offering of such FBI
Common Stock, FBI will promptly give written notice to the Selling
Shareholders of its intention to do so and, upon the written request of any
Selling Shareholder given within 30 days after receipt of any such notice
(which request shall specify the number of shares of FBI Common Stock intended
to be included in such underwritten public offering by the Selling
Shareholder), FBI will cause all such shares for which a Selling Shareholder
requests participation in such registration, to be so registered and included
in such underwritten public offering; provided, however, that FBI may elect to
not cause any such shares to be so registered (i) if the
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underwriters in good faith object for valid business reasons, or (ii) in the
case of a registration solely to implement an employee benefit plan or a
registration filed on Form S-4 of the Securities Act or any equivalent or
successor Form. If some, but not all the shares of FBI Common Stock, with
respect to which FBI shall have received requests for registration pursuant to
this Section 10(b), shall be excluded from such registration, FBI shall make
appropriate allocation of shares to be registered among the Selling
Shareholders desiring to register their shares pro rata in the proportion that
the number of shares requested to be registered by each such Selling
Shareholder bears to the total number of shares requested to be registered by
all such Selling Shareholders then desiring to have FBI Common Stock
registered for sale.
(c) CONDITIONS TO REQUIRED REGISTRATION. FBI shall use all reasonable
efforts to cause each registration statement referred to in Section 10(a) of
this Agreement to become effective and to obtain all consents or waivers of
other parties which are required therefor and to keep such registration
statement effective, provided, however, that FBI shall not be required to
register Option Shares under the Securities Act pursuant to Section 10(a)
hereof:
(i) Prior to a Purchase Event;
(ii) On more than one occasion;
(iii) Within 90 days after the effective date of a registration referred
to in Section 9(b) of this Agreement pursuant to which the Selling
Shareholder or Selling Shareholders concerned were afforded the opportunity
to register such shares under the Securities Act and such shares were
registered as requested; and
(iv) Unless a request therefor is made to FBI by Selling Shareholders
that hold at least 25% or more of the aggregate number of Option Shares
(including shares of FBI Common Stock issuable upon exercise of the Option)
then outstanding.
Notwithstanding the foregoing, if, at the time of any request by DCB for
registration of the Option or Option Shares as provided above, Issuer is in
registration with respect to an underwritten public offering 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 inclusion of the Holder's Option or 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 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 (the "Cutback"); and provided further, however, that if such
reduction occurs, then the Issuer shall file a registration statement for the
balance of the Option Shares as promptly as practicable and no reduction shall
thereafter occur. Each such Holder shall provide all information reasonably
requested by Issuer for inclusion in any registration statement to be filed
hereunder.
In addition to the foregoing, FBI shall not be required to maintain the
effectiveness of any registration statement after the expiration of six months
from the effective date of such registration statement. FBI shall use all
reasonable efforts to make any filings, and take all steps, under all
applicable state securities laws to the extent necessary to permit the sale or
other disposition of the Option Shares so registered in accordance with the
intended method of distribution for such shares; provided, however, that FBI
shall not be required to consent to general jurisdiction or qualify to do
business in any state where it is not otherwise required to so consent to such
jurisdiction or to so qualify to do business.
(d) EXPENSES. Except where applicable state law prohibits such payments, FBI
will pay all expenses (including without limitation registration fees,
qualification fees, blue sky fees and expenses (including the fees and
expenses of counsel), legal expenses (not to exceed $5,000), including the
reasonable fees and expenses of one counsel to the holders whose Option Shares
are being registered, printing expenses and the costs of special audits or
"cold comfort" letters, expenses of underwriters, excluding discounts and
commissions, and the reasonable fees and expenses of any necessary special
experts) in connection with each registration pursuant to Section 10(a) or
10(b) of this Agreement (including the related offerings and sales by holders
of Option Shares) and all other qualifications, notifications or exemptions
pursuant to Section 10(a) or 10(b) of this Agreement.
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(e) INDEMNIFICATION. In connection with any registration pursuant to this
Section 10, Issuer and Grantee shall provide each other and the underwriter of
the offering with representations, warranties, covenants, indemnification and
contribution in connection with such registration customarily included in
secondary offering underwriting agreements.
(f) MISCELLANEOUS REPORTING. FBI shall use its reasonable best efforts to
comply with all reporting requirements and will do all such other things as
may be necessary to permit the expeditious sale at any time of any Option
Shares by the Selling Shareholders thereof in accordance with and to the
extent permitted by any rule or regulation promulgated by the SEC from time to
time, including, without limitation, Rule 144. FBI shall at its expense
provide the Selling Shareholders with any information necessary in connection
with the completion and filing of any reports or forms required to be filed by
them under the Securities Act or the Exchange Act, or required pursuant to any
state securities laws or the rules of any stock exchange.
(g) ISSUE TAXES. FBI will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will save the Selling Shareholders harmless, without
limitation as to time, against any and all liabilities, with respect to all
such taxes.
11. QUOTATION; LISTING. If FBI Common Stock or any other securities to be
acquired in connection with the exercise of the Option are then authorized for
quotation or trading or listing on Nasdaq or any securities exchange, FBI,
upon the request of Holder, will promptly file an application, if required, to
authorize for quotation or trading or listing the shares of FBI Common Stock
or other securities to be acquired upon exercise of the Option on Nasdaq or
such other securities exchange and will use its reasonable best efforts to
obtain approval, if required, of such quotation or listing as soon as
practicable.
12. DIVISION OF OPTION. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Holder, upon presentation and
surrender of this Agreement at the principal office of FBI for other
Agreements providing for Options of different denominations entitling the
holder thereof to purchase in the aggregate the same number of shares of FBI
Common Stock purchasable hereunder. The terms "Agreement" and "Option" as used
herein include any other Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
FBI 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, FBI will execute and deliver
a new Agreement of like tenor and date. Any such new Agreement executed and
delivered shall constitute an additional contractual obligation on the part of
FBI, whether or not the Agreement so lost, stolen, destroyed or mutilated
shall at any time be enforceable by anyone.
13. PROFIT LIMITATION. (a) Notwithstanding any other provision of this
agreement, in no event shall DCB's Total Profit (as hereinafter defined)
exceed $4 million, and, if it otherwise would exceed such amount, DCB, at its
sole election, shall either (a) deliver to FBI for cancellation Option Shares
previously purchased by DCB, (b) pay cash or other consideration to FBI or (c)
undertake any combination thereof, so that DCB's Total Profit shall not exceed
$4 million after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, this Option may
not be exercised for a number of Shares as would, as of the Notice Date,
result in a Notional Total Profit (as defined below) of more than $4 million,
and, if exercise of the Option otherwise would exceed such amount, DCB, at its
discretion, may increase the Purchase Price for that number of Option Shares
set forth in the Stock Exercise Notice so that the Notional Total Profit shall
not exceed $4 million; provided, that nothing in this sentence shall restrict
any exercise of the Option permitted hereby on any subsequent date at the
Purchase Price set forth in Section 2 hereof.
(c) As used herein, the term "Total Profit" shall mean the aggregate amount
(before taxes) of the following: (i) (x) the amount received by DCB pursuant
to the repurchase of Option Shares pursuant to Section 8 or Section 9 hereof,
less (y) DCB's purchase price for such Option Shares, (ii) (z) the net cash
amounts received by DCB pursuant to the sale of Option Shares (or any other
securities into which such Option Shares are converted or exchanged) to any
unaffiliated party, less (y) DCB's purchase price for such Option Shares,
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(iii) the amount received by DCB pursuant to the repurchase of the Option
pursuant to Section 8 or 9, (iv) any amounts received by DCB on the transfer
of the Option (or any portion thereof) to any unaffiliated party and (v) any
equivalent amount with respect to the Substitute Option.
(d) As used herein, the term "Notional Total Profit" with respect to any
number of Option Shares as to which DCB may propose to exercise this Option
shall be the Total Profit determined as of the date of the Stock Exercise
Notice assuming that this Option were exercised on such date for such number
of Shares and assuming that such Option Shares, together with all other Option
Shares held by DCB and its affiliates as of such date, were sold for cash at
the closing market price for the Common Stock as of the close of business on
the preceding trading day (less customary brokerage commissions).
14. MISCELLANEOUS.
(a) EXPENSES. Except to the extent expressly provided for 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.
(b) WAIVER AND AMENDMENT. Any provision of this Agreement may be waived at
any time by the party that is entitled to the benefits of such provision. This
Agreement may not be modified, amended, altered or supplemented except upon
the execution and delivery of a written agreement executed by the parties
hereto.
(c) ENTIRE AGREEMENT: NO THIRD-PARTY BENEFICIARIES; SEVERABILITY. This
Agreement, together with the Plan and the other documents and instruments
referred to herein and therein, between DCB and FBI (i) constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter hereof and
(ii) is not intended to confer upon any person other than the parties hereto
(other than the indemnified parties under Section 10(e) of this Agreement and
any transferees of the Option Shares or any permitted transferee of this
Agreement pursuant to Section 14(h) of this Agreement) any rights or remedies
hereunder. If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction or Regulatory Authority to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of 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 Authority determines that the Option does not
permit Holder to acquire, or does not require FBI to repurchase, the full
number of shares of FBI Common Stock as provided in Section 3 of this
Agreement (as may be adjusted herein), it is the express intention of FBI to
allow Holder to acquire or to require FBI to repurchase such lesser number of
shares as may be permissible without any amendment or modification hereof.
(d) GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of New York without regard to any
applicable conflicts of law rules.
(e) DESCRIPTIVE HEADINGS. The descriptive headings contained herein are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the addresses set forth in the Plan (or at such
other address for a party as shall be specified by like notice).
(g) COUNTERPARTS. This Agreement and any amendments hereto may be executed
in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed,
it being understood that both parties need not sign the same counterpart.
(h) ASSIGNMENT. Neither this Agreement nor any of the rights, interests or
obligations hereunder or under the Option shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party, except that Holder may assign this
Agreement to a wholly-owned
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subsidiary of Holder and Holder may assign its rights hereunder in whole or in
part after the occurrence of a Purchase Event. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
(i) FURTHER ASSURANCES. In the event of any exercise of the Option by the
Holder, FBI, and the Holder shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in
order to consummate the transactions provided for by such exercise.
(j) SPECIFIC PERFORMANCE. The parties hereto agree that this Agreement may
be enforced by either party through specific performance, injunctive relief
and other equitable relief. Both parties further agree to waive any
requirement for the securing or posting of any bond in connection with the
obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
IN WITNESS WHEREOF, FBI and DCB have caused this Stock Option Agreement to
be signed by their respective officers thereunto duly authorized, all as of
the day and year first written above.
FINANCIAL BANCORP, INC.
/s/ Frank S. Latawiec
By: _________________________________
Name:Frank S. Latawiec
Title:President and Chief
Executive Officer
DIME COMMUNITY BANCSHARES, INC.
/s/ Vincent F. Palagiano
By: _________________________________
Name:Vincent F. Palagiano
Title:Chairman and Chief
Executive Officer
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APPENDIX C
- -----------------------------------------------------------
Sandler O'Neill & Partners, L.P. Telephone: 212-466-7700
Investment Banking Group 800-635-6855
Two World Trade Center, 104th Floor Facsimile: 212-466-7711
New York, New York 10048
- ------------------------------------------------------------
Sandler O'Neill
November 6, 1998
Board of Directors
Financial Bancorp, Inc.
42-25 Queens Boulevard
Long Island City, NY 11104
Gentlemen:
Financial Bancorp, Inc. ("FIBC") and Dime Community Bancshares, Inc. ("DCB")
have entered into an Agreement and Plan of Merger, dated as of July 18, 1998
(the "Agreement"), pursuant to which FIBC will be merged with and into DCB (the
"Merger"). Upon consummation of the Merger, each share of FIBC common stock,
par value $.01 per share (the "FIBC Shares"), issued and outstanding
immediately prior to the Merger, other than certain shares specified in the
Agreement, will be converted into the right to receive, at the election of the
holder thereof, either shares of DCB's common stock, par value $.01 per share,
with a value of $40.50 (together with the rights attached thereto issued
pursuant to the Rights Agreement dated as of April 9, 1998 between DCB and
ChaseMellon Shareholder Services L.L.C., as Rights Agent) or $40.50 in cash,
subject to the allocation and proration procedures set forth in the Agreement
which generally provide, among other things, that 50% of the aggregate merger
consideration will be paid in cash and 50% will be paid in stock (the "Merger
Consideration"). The value of the Merger Consideration will remain fixed at
$40.50 if DCB's Average Closing Price (as defined in the Agreement) is between
$22.95 and $31.05. If DCB's Average Closing Price is less than $22.95 or
greater than $31.05, the value of the Merger Consideration will be adjusted as
set forth in the Agreement. The terms and conditions of the Merger are more
fully set forth in the Agreement. You have requested our opinion as to the
fairness, from a financial point of view, of the Merger Consideration to the
holders of FIBC Shares.
Sandler O'Neill & Partners, L.P., as part of its investment banking business,
is regularly engaged in the valuation of financial institutions and their
securities in connection with mergers and acquisitions and other corporate
transactions. In connection with this opinion, we have reviewed, among other
things: (i) the Agreement and exhibits thereto; (ii) the Stock Option
Agreement, dated July 18, 1998, by and between FIBC and DCB; (iii) certain
publicly available financial statements of FIBC and other historical financial
information provided by FIBC that we deemed relevant; (iv) certain publicly
available financial statements of DCB and other historical financial
information provided by DCB that we deemed relevant; (v) certain financial
analyses and forecasts of FIBC prepared by and reviewed with management of FIBC
and the views of senior management of FIBC regarding FIBC's past and current
business, operations, results thereof, financial condition and future
prospects; (vi) certain financial analyses and forecasts of DCB prepared by and
reviewed with management of DCB and the views of senior management of DCB
regarding DCB's past and current business, operations, results thereof,
financial condition and future prospects; (vii) the pro forma impact of the
Merger; (viii) the publicly reported historical price and trading activity for
FIBC's and DCB's common stock, including a comparison of certain financial and
stock market information for FIBC and DCB with similar publicly available
information for certain other companies the securities of which are publicly
traded; (ix) the financial terms of recent business
Sandler O'Neill & Partners, L.P., is a limited partnership, the sole general
partner of which is Sandler O'Neill & Partners Corp., New York Corporation.
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Board of Directors
Financial Bancorp, Inc.
November 6, 1998
Page 2
combinations in the savings institution industry, to the extent publicly
available; (x) the current market environment generally and the banking
environment in particular; and (xi) such other information, financial studies,
analyses and investigations and financial, economic and market criteria as we
considered relevant.
In performing our review, we have assumed and relied upon, without
independent verification, the accuracy and completeness of all the financial
information, analyses and other information that was publicly available or
otherwise furnished to, reviewed by or discussed with us, and we do not assume
any responsibility or liability for the accuracy or completeness thereof. We
did not make an independent evaluation or appraisal of the specific assets,
the collateral securing assets or the liabilities (contingent or otherwise) of
FIBC or DCB or any of their subsidiaries, or the collectibility of any such
assets, nor have we been furnished with any such evaluations or appraisals. We
did not make an independent evaluation of the adequacy of the allowance for
loan losses of FIBC or DCB nor have we reviewed any individual credit files
relating to FIBC or DCB. We have assumed that the respective aggregate
allowance for loan losses for both FIBC and DCB are adequate to cover such
losses and will be adequate on a pro forma basis for the combined entity. With
respect to the financial projections reviewed with management, we have assumed
that they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the respective managements of the
respective future financial performances of FIBC and DCB and that such
performances will be achieved, and we express no opinion as to such financial
projections or the assumptions on which they are based. We have also assumed
that there has been no material change in FIBC's or DCB's assets, financial
condition, results of operations, business or prospects since the date of the
most recent financial statements made available to us. We have assumed in all
respects material to our analysis that FIBC and DCB will remain as going
concerns for all periods relevant to our analyses, that all of the
representations and warranties contained in the Agreement and all related
agreements are true and correct, that each party to such agreements will
perform all of the covenants required to be performed by such party under such
agreements, that the conditions precedent in the Agreement are not waived and
that the Merger will qualify as a tax-free reorganization for federal income
tax purposes.
Our opinion is necessarily based on financial, economic, market and other
conditions as in effect on, and the information made available to us as of,
the date hereof. Events occurring after the date hereof could materially
affect this opinion. We have not undertaken to update, revise or reaffirm this
opinion or otherwise comment upon events occurring after the date hereof. We
are expressing no opinion herein as to what the value of DCB common stock will
be when issued to FIBC's shareholders pursuant to the Agreement or the prices
at which FIBC's or DCB's common stock will trade at any time.
We have acted as FIBC's financial advisor in connection with the Merger and
will receive a fee for our services, a significant portion of which is
contingent upon consummation of the Merger. We have also received a fee for
rendering this opinion. In the past, we have also provided certain other
investment banking services for FIBC and have received compensation for such
services. As we have previously advised you, in the past we have also provided
certain investment banking services for DCB and have received compensation for
such services.
In the ordinary course of our business as a broker-dealer, we may purchase
securities from and sell securities to FIBC and DCB. We may also actively
trade the equity securities of FIBC and DCB for our own account and for the
accounts of our customers and, accordingly, may at any time hold a long or
short position in such securities.
Our opinion is directed to the Board of Directors of FIBC in connection with
its consideration of the Merger and does not constitute a recommendation to
any stockholder of FIBC as to how such stockholder should vote at any meeting
of stockholders called to consider and vote upon the Merger. Our opinion is
not to be quoted or
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Board of Directors
Financial Bancorp, Inc.
November 6, 1998
Page 3
referred to, in whole or in part, in a registration statement, prospectus,
proxy statement or in any other document, nor shall this opinion be used for
any other purposes, without Sandler O'Neill's prior written consent; provided,
however, that we hereby consent to the inclusion of this opinion as an annex
to FIBC's and DCB's Proxy Statement/Prospectus dated the date hereof and to
the references to this opinion therein.
Based upon and subject to the foregoing, it is our opinion, as of the date
hereof, that the Merger Consideration is fair, from a financial point of view,
to the holders of FIBC Shares.
Very truly yours,
/s/ Sandler O'Neill & Partners, L.P.
Sandler O'Neill & Partners, L.P.
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APPENDIX D
DELAWARE GENERAL CORPORATION LAW
SECTION 262 APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has neither voted in
favor of the merger or consolidation nor consented thereto in writing pursuant
to (S)228 of this title shall be entitled to an appraisal by the Court of
Chancery of the fair value of the stockholder's share of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to (S)251 (other than a merger effected pursuant to
(S)251(g) of this title), (S)252, (S)254, (S)257, (S)258, (S)263 or (S)264 of
this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of (S)251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
(S)(S)251, 252, 254, 257, 258, 263 and 264 of this title to accept for such
stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S)253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
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(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsections (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporations,
and shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of his shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation,
a written demand for appraisal of his shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to (S)228 or
(S)253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation my fix, in advance, a record date that shall be not
more than 10 days prior to the date the notice is given, provided, that if
the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
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(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied
with subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger
or consolidation, any stockholder shall have the right to withdraw his demand
for appraisal and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which
demands for appraisal have been received and the aggregate number of holders
of such shares. Such written statement shall be mailed to the stockholder
within 10 days after his written request for such a statement is received by
the surviving or resulting corporation or within 10 days after expiration of
the period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court
may, in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on
the list filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted his certificates of stock
to the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that he is not entitled to
appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation
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of the certificates representing such stock. The Court's decree may be
enforced as other decrees in the Court of Chancery may be enforced, whether
such surviving or resulting corporation be a corporation of this State or of
any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal
of his demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any stockholder
without the approval of the Court, and such approval may be conditioned upon
such terms as the Court deems just.
(1) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation. (Last amended by Ch. 120, L.
"97, eff. 7-1-97.)
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