<PAGE>
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 21, 1994
REGISTRATION NO. 33-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
UJB FINANCIAL CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW JERSEY 6711 22-1903313
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION INDUSTRIAL IDENTIFICATION NO.)
OF INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
301 CARNEGIE CENTER
P.O. BOX 2066
PRINCETON, NEW JERSEY 08543-2066
(609) 987-3200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
RICHARD F. OBER, JR., ESQ.
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
301 CARNEGIE CENTER, P.O. BOX 2066
PRINCETON, NEW JERSEY 08543-2066
(609) 987-3430
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
RONALD F. DAITZ, ESQ. JOHN J. GORMAN, ESQ.
WEIL, GOTSHAL & MANGES LUSE LEHMAN GORMAN POMERENK & SCHICK
767 FIFTH AVENUE 1300 I STREET, N.W. -- SUITE 220 EAST
NEW YORK, NEW YORK 10153 WASHINGTON, D.C. 20005
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement and upon
consummation of the merger of VSB Bancorp, Inc. with and into the Registrant as
described herein.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF OFFERING AGGREGATE AMOUNT OF
SECURITIES AMOUNT TO BE PRICE PER OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(3) FEE
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Common Stock, par value
$1.20....................... 3,530,041 $20.8125 $76,498,300 $26,379
</TABLE>
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(1) Based upon the number of shares of VSB Bancorp, Inc. common stock
outstanding on March 16, 1994 plus the estimated number of such shares that
could be issued prior to the consummation of the Merger, for an aggregate
of 3,675,594 shares, multiplied by .9604, the maximum exchange ratio
presently provided for by the Merger Agreement (as defined herein) for
issuance of Registrant's Common Stock in the Merger.
(2) Based upon the average of the high and low prices of VSB Bancorp, Inc.
common stock on March 16, 1994 as reported on NASDAQ, pursuant to Rules
457(f)(1) and 457(c).
(3) Based upon the price of VSB Bancorp, Inc. common stock referred to in
footnote (2) hereof multiplied by the number of shares of VSB Bancorp, Inc.
common stock referred to in footnote (1) hereof.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
UJB FINANCIAL CORP.
CROSS-REFERENCE SHEET
FOR
REGISTRATION STATEMENT ON FORM S-4 AND PROSPECTUS
<TABLE>
<CAPTION>
ITEM
NUMBER CAPTION CAPTION IN PROSPECTUS
- ------ ------- ---------------------
A. INFORMATION ABOUT THE TRANSACTION
<C> <S> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus.... Facing Page of Registration Statement;
Cross Reference Sheet; Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus............................. Incorporation of Certain Documents by
Reference; Available Information; Table
of Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information............. Summary; Introduction; Selected
Financial Data; Pro Forma Financial
Information
4. Terms of the Transaction................... Summary; Introduction; The Merger; The
Merger Agreement; Description of UJB
Capital Stock; Description of VSB
Capital Stock
5. Pro Forma Financial Information............ Selected Financial Data; Pro Forma
Financial Information
6. Material Contracts with the Company Being
Acquired.................................. The Merger; The Merger Agreement
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters........................ Not Applicable
8. Interests of Named Experts and Counsel..... Legal Matters
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................... Not Applicable
<CAPTION>
B. INFORMATION ABOUT THE REGISTRANT
<C> <S> <C>
10. Information with Respect to S-3
Registrants............................... Incorporation of Certain Documents by
Reference; UJB Financial Corp.;
Description of UJB Capital Stock
11. Incorporation of Certain Information by
Reference................................. Incorporation of Certain Documents by
Reference
12. Information with Respect to S-2 or S-3
Registrants............................... Not Applicable
13. Incorporation of Certain Information by
Reference................................. Not Applicable
14. Information with Respect to Registrants
Other Than S-2 or S-3 Registrants......... Not Applicable
</TABLE>
<PAGE>
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
<TABLE>
<CAPTION>
ITEM
NUMBER CAPTION CAPTION IN PROSPECTUS
- ------ ------- ---------------------
<C> <S> <C>
15. Information with Respect to S-3 Companies.. Not Applicable
16. Information with Respect to S-2 or S-3
Companies................................. Incorporation of Certain Documents by
Reference; VSB Bancorp, Inc.;
Description of VSB Capital Stock
17. Information with Respect to Companies Other
Than S-2 or S-3 Companies................. Not Applicable
<CAPTION>
D. VOTING AND MANAGEMENT INFORMATION
<C> <S> <C>
18. Information if Proxies, Consents or
Authorizations are to be Solicited ....... Incorporation of Certain Documents by
Reference; Summary; Introduction; VSB
Annual Meeting; The Merger; UJB
Financial Corp.; VSB Bancorp, Inc.;
Proposal II--Election of Directors
19. Information if Proxies, Consents or
Authorizations are not to be Solicited or
in an Exchange Offer...................... Not Applicable
</TABLE>
<PAGE>
[LOGO OF VALLEY SAVINGS BANK APPEARS HERE]
March , 1994
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of VSB
Bancorp, Inc., the holding company for Valley Savings Bank, to be held at the
Ramada Inn, 100 Chestnut Ridge Road, Montvale, New Jersey, on May 12, 1994, at
10:00 a.m., and at any adjournments thereof.
At the Annual Meeting, stockholders will be asked to elect three directors
and to approve the Agreement and Plan of Merger dated December 16, 1993, as
amended, between VSB Bancorp and UJB Financial Corp., which provides for the
merger of VSB Bancorp with and into UJB Financial and the conversion of each
outstanding share of common stock of VSB Bancorp into shares of common stock of
UJB Financial, based on an exchange ratio to be determined in accordance with
the Agreement and Plan of Merger, all as more fully described in the
accompanying Proxy Statement-Prospectus. Consummation of the merger is subject
to certain conditions, including the approval of the Agreement and Plan of
Merger by shareholders at this Annual Meeting. We urge you to read the Proxy
Statement-Prospectus carefully.
Also enclosed is our 1993 Annual Report to Stockholders and our Quarterly
Report on Form 10-Q for the quarter ended December 31, 1993, both of which
contain financial statements and other information relating to VSB Bancorp and
Valley Savings Bank.
YOUR VOTE IS IMPORTANT. The Proxy is your opportunity as a stockholder to
vote on corporate matters. Please separate the Proxy Card from the other
enclosed material and follow the instructions for its completion. You are urged
to sign, date and mail the enclosed Proxy Card promptly in the postage-paid
envelope provided. If you attend the Annual Meeting, you may vote in person
even if you have already mailed in your Proxy Card.
On behalf of the Board of Directors, officers and employees of VSB Bancorp
and Valley Savings Bank, I thank you for your continued support and interest in
our Company.
Sincerely yours,
/s/ Allen S. Greene
Allen S. Greene
Chairman of the Board
Chief Executive Officer and President
<PAGE>
VSB BANCORP, INC.
15 VER VALEN STREET
CLOSTER, NEW JERSEY 07624
(201) 768-4600
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 12, 1994
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of VSB
Bancorp, Inc. will be held at the Ramada Inn, 100 Chestnut Ridge Road,
Montvale, New Jersey, on Thursday, May 12, 1994, at 10:00 a.m.
A Proxy Statement and Proxy Card for this Annual Meeting are enclosed
herewith. The Annual Meeting is for the purpose of considering and voting upon
the following matters:
1. A proposal to approve the Agreement and Plan of Merger dated December
16, 1993, as amended, between VSB Bancorp, Inc. and UJB Financial Corp.,
which provides for the merger of VSB Bancorp, Inc. with and into UJB
Financial Corp. and for the conversion of outstanding shares of the common
stock, par value $.01 per share, of VSB Bancorp, Inc. into shares of the
common stock, par value $1.20 per share, of UJB Financial Corp. (subject to
certain anti-dilution adjustments) based on an exchange ratio to be
determined subsequent to the date of the Annual Meeting, as more fully
described in the accompanying Proxy Statement-Prospectus.
2. The election of three directors to serve for a term of three years or
until consummation of the merger provided for in the Agreement and Plan of
Merger, as amended, between VSB Bancorp, Inc. and UJB Financial Corp.
3. Such other matters as may properly come before the Annual Meeting or
any adjournments thereof.
Pursuant to the Bylaws of VSB Bancorp, Inc., the Board of Directors has fixed
March 25, 1994 as the record date for the determination of stockholders
entitled to notice of and to vote at the Annual Meeting and any adjournments
thereof. Only record holders of the Common Stock of VSB Bancorp, Inc. as of the
close of business on that date will be entitled to notice of and to vote at the
Annual Meeting or any adjournments thereof. A list of stockholders entitled to
vote at the Annual Meeting will be available at 15 Ver Valen Street, Closter,
New Jersey for a period of ten days prior to the Annual Meeting.
EACH STOCKHOLDER, WHETHER HE OR SHE PLANS TO ATTEND THE ANNUAL MEETING, IS
REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED WHITE PROXY CARD WITHOUT DELAY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
By Order of the Board of Directors
/s/ William J. Durkin Secretary
-----------------------------------
William J. Durkin Secretary
Closter, New Jersey March , 1994
THE BOARD OF DIRECTORS OF VSB BANCORP, INC. RECOMMENDS THAT ITS STOCKHOLDERS
VOTE TO APPROVE THE AGREEMENT AND PLAN OF MERGER BETWEEN VSB BANCORP, INC. AND
UJB FINANCIAL CORP. AND TO ELECT THE THREE DIRECTOR NOMINEES NAMED HEREIN.
<PAGE>
<TABLE>
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<S> <C>
[LOGO OF [LOGO OF
VSB BANCORP, INC. UJB FINANCIAL CORP.
APPEARS HERE] APPEARS HERE]
PROXY STATEMENT PROSPECTUS
VSB BANCORP, INC. UJB FINANCIAL CORP.
15 VER VALEN STREET 301 CARNEGIE CENTER
CLOSTER, NEW JERSEY 07624 PRINCETON, NEW JERSEY 08543-2066
(201) 768-4600 (609) 987-3200
</TABLE>
3,530,041 SHARES OF
COMMON STOCK (PAR VALUE $1.20 PER SHARE)
This Proxy Statement-Prospectus is being furnished to the holders of common
stock, par value $.01 per share, of VSB Bancorp, Inc., a Delaware corporation
and registered bank holding company ("VSB"), in connection with the
solicitation of proxies by the Board of Directors of VSB (the "VSB Board") for
use at the annual meeting of VSB's stockholders to be held at the Ramada Inn,
100 Chestnut Ridge Road, Montvale, New Jersey, on May 12, 1994, at 10:00 a.m.,
and at any adjournments or postponements thereof (the "VSB Annual Meeting" or
the "Annual Meeting").
This Proxy Statement-Prospectus relates to up to 3,530,041 shares of common
stock, par value $1.20 per share ("UJB Stock"), of UJB Financial Corp., a New
Jersey corporation and registered bank holding company ("UJB"), to be issued
upon the merger (the "Merger") of VSB with and into UJB, pursuant to an
Agreement and Plan of Merger dated December 16, 1993, as amended by an
Amendment dated March 17, 1994 (the "Merger Agreement"). In the Merger, each
outstanding share of VSB's common stock, par value $.01 per share ("VSB
Stock"), will be converted into shares of UJB Stock (subject to certain anti-
dilution adjustments) based on an exchange ratio to be determined subsequent to
the date of the VSB Annual Meeting (the "Exchange Ratio"). The Exchange Ratio
will be fixed based on the "Average Price" of UJB Stock over a period ending on
the "Determination Date" (as both terms are defined herein). The Exchange Ratio
will not be lower than .7727 and will not be higher than .9444 except in
certain circumstances more fully described herein. See "THE MERGER AGREEMENT--
Determination of Exchange Ratio" for further discussion of the Exchange Ratio.
This Proxy Statement-Prospectus constitutes (1) the Proxy Statement of VSB
relating to the solicitation of proxies by the VSB Board for use at the VSB
Annual Meeting to be held for the purpose of considering and voting upon (a) a
proposal to approve the Merger Agreement and the transactions contemplated
thereby and (b) the election of three directors to serve for a term of three
years or until the Effective Time (as defined herein) of the Merger, and (2)
the Prospectus of UJB with respect to the UJB Stock to be issued in the Merger.
Consummation of the Merger is subject to various conditions, including the
approvals of the stockholders of VSB, the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") and the Commissioner of Banking of
the State of New Jersey (the "New Jersey Commissioner of Banking").
All information contained in this Proxy Statement-Prospectus with respect to
UJB has been supplied by UJB, and all information with respect to VSB has been
supplied by VSB.
The Proxy Statement-Prospectus is first being mailed to VSB stockholders on
or about March , 1994.
----------------
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 SECURITIES 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.
----------------
The date of this Proxy Statement-Prospectus is March , 1994.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................
AVAILABLE INFORMATION......................................................
SUMMARY....................................................................
The Companies............................................................
VSB Annual Meeting.......................................................
Federal Income Tax Consequences..........................................
Regulatory Approvals.....................................................
Conditions of the Merger.................................................
Stock Option Agreement...................................................
Exchange of Certificates.................................................
The Merger...............................................................
Market Prices and Dividends..............................................
Summary of Comparative Financial Information.............................
INTRODUCTION...............................................................
VSB ANNUAL MEETING.........................................................
Record Date; Vote Required...............................................
Holders of VSB Voting Securities.........................................
Proxies; Revocation; Solicitation........................................
SELECTED FINANCIAL DATA....................................................
Selected Financial Data..................................................
PRO FORMA FINANCIAL INFORMATION............................................
Pro Forma Combined Condensed Balance Sheet...............................
Pro Forma Combined Condensed Statements of Income........................
MARKET PRICE AND DIVIDEND MATTERS..........................................
Market Price and Dividend History........................................
Coordination of Dividends and Limitations Under Merger Agreement.........
Dividend Limitations.....................................................
PROPOSAL I--APPROVAL OF THE MERGER AGREEMENT...............................
THE MERGER.................................................................
Recommendation of VSB Board of Directors and Reasons for the Merger......
Background...............................................................
Opinion of VSB's Financial Advisor.......................................
Charter and By-Laws of Surviving Corporation.............................
Board of Directors and Officers of Surviving Corporation.................
No Dissenters' Rights....................................................
New York Stock Exchange Listing..........................................
Accounting Treatment.....................................................
Certain Federal Income Tax Consequences..................................
Differences in Stockholders' Rights......................................
THE MERGER AGREEMENT.......................................................
Effective Time...........................................................
Closing of the Merger....................................................
Determination of Exchange Ratio..........................................
Conversion and Exchange of VSB Stock.....................................
VSB Stock Option Plans...................................................
Interest of Certain Persons in the Merger................................
Covenants................................................................
Regulatory Approvals.....................................................
Conditions to the Merger; Termination....................................
Expenses.................................................................
Issuance of Stock Option.................................................
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
UJB FINANCIAL CORP...................................................
Description of Business............................................
Recent Developments................................................
DESCRIPTION OF UJB CAPITAL STOCK.....................................
Common Stock.......................................................
Series B Preferred Stock...........................................
Shareholder Rights Plan............................................
VSB BANCORP, INC.....................................................
Description of Business............................................
DESCRIPTION OF VSB CAPITAL STOCK.....................................
Common Stock.......................................................
Preferred Stock....................................................
PROPOSAL II--ELECTION OF DIRECTORS...................................
Certain Information Regarding the Directors........................
Board of Directors Meetings and Committees.........................
Directors Compensation.............................................
Transactions with Certain Related Persons..........................
Executive Compensation.............................................
Compensation Committee Report......................................
Performance Graph..................................................
INDEPENDENT AUDITORS.................................................
STOCKHOLDER PROPOSALS................................................
ADVANCE NOTICE OF CERTAIN MATTERS TO BE CONDUCTED AT
AN ANNUAL MEETING...................................................
LEGAL MATTERS........................................................
EXPERTS..............................................................
OTHER MATTERS........................................................
AGREEMENT AND PLAN OF MERGER (without exhibits) and
AMENDMENT DATED MARCH 17, 1994...................................... Appendix A
OPINION OF RYAN, BECK & CO., INC. ................................... Appendix B
</TABLE>
(ii)
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are hereby incorporated by reference into this Proxy Statement-
Prospectus and made a part hereof the following documents filed with the
Securities and Exchange Commission (the "Commission"): (1) the Annual Report on
Form 10-K for the fiscal year ended December 31, 1992, the Quarterly Reports on
Form 10-Q for the quarters ended March 31, 1993, June 30, 1993 and September
30, 1993, and the Current Reports on Form 8-K dated January 19, 1993, March 5,
1993, December 15, 1993 and March 18, 1994 filed by UJB, (2) the Annual Report
on Form 10-K for the fiscal year ended September 30, 1993 as amended by Form
10-K/A filed January 31, 1994, the Quarterly Report on Form 10-Q for the
quarter ended December 31, 1993 and the Current Report on Form 8-K dated
December 16, 1993 filed by VSB and (3) the description of the UJB Stock
contained in UJB's Registration Statement on Form 10 filed pursuant to Section
12(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
dated August 31, 1970, including all amendments thereto and reports filed under
the Exchange Act for the purpose of updating such description. All documents
filed by UJB and VSB pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this Proxy Statement-Prospectus and prior to the
date of the VSB Annual Meeting shall be deemed to be incorporated by reference
into this Proxy Statement-Prospectus and to be a part hereof from the
respective dates of filing of such documents.
This Proxy Statement-Prospectus is accompanied by VSB's 1993 Annual Report to
Stockholders and VSB's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1993.
Any statement contained 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 other subsequently filed document which is also
incorporated or deemed 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.
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. UJB AND VSB EACH HEREBY UNDERTAKES,
WITH RESPECT TO THE DOCUMENTS LISTED ABOVE FILED BY IT WITH THE SEC, TO PROVIDE
WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS
PROXY STATEMENT-PROSPECTUS HAS BEEN DELIVERED, UPON THE WRITTEN OR ORAL REQUEST
OF SUCH PERSON, A COPY OF ANY OR ALL OF THE DOCUMENTS REFERRED TO ABOVE WHICH
HAVE BEEN OR MAY BE INCORPORATED INTO THIS PROXY STATEMENT-PROSPECTUS AND
DEEMED TO BE PART HEREOF, OTHER THAN EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH
EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS. REQUESTS
FOR DOCUMENTS FILED BY UJB SHOULD BE DIRECTED TO RICHARD F. OBER, JR.,
SECRETARY, UJB FINANCIAL CORP., 301 CARNEGIE CENTER, P.O. BOX 2066, PRINCETON,
NEW JERSEY 08543-2066 (TELEPHONE (609) 987-3442). REQUESTS FOR DOCUMENTS FILED
BY VSB SHOULD BE DIRECTED TO MARY CONIGLIO, VSB BANCORP, INC., 15 VER VALEN
STREET, CLOSTER, NEW JERSEY 07624 (TELEPHONE (201) 768-4600, EXTENSION 256). IN
ORDER TO ENSURE TIMELY DELIVERY OF DOCUMENTS PRIOR TO THE VSB ANNUAL MEETING,
ANY REQUEST SHOULD BE MADE BY APRIL , 1994.
AVAILABLE INFORMATION
Each of UJB and VSB is subject to the informational requirements of the
Exchange Act and, in accordance therewith, files reports, proxy statements and
other information with the Commission relating to its businesses, financial
statements and other matters. The Registration Statement discussed below and
the exhibits thereto as well as such reports, proxy statements and other
information filed by UJB and VSB may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and at the following regional offices of the
Commission: Chicago Regional Office, CitiCorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60621-2511 and New York Regional Office, 7 World
Trade Center, 13th Floor, New York, New York 10048. Copies of such materials
may be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W.,
1
<PAGE>
Washington, D.C. 20549, at prescribed rates. UJB Stock is listed on the New
York Stock Exchange ("NYSE") and reports, proxy statements and other
information concerning UJB are available for inspection at the offices of the
NYSE, 20 Broad Street, New York, New York 10005. VSB Stock is quoted in the
National Market System of the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") and reports, proxy statements and other
information concerning VSB are available for inspection at the offices of the
National Association of Securities Dealers, Inc. ("NASD"), 1735 K Street, N.W.,
Washington, D.C. 20006.
UJB has filed with the Commission a registration statement on Form S-4 under
the Securities Act of 1933, as amended (the "Securities Act"), in respect of
the UJB Stock to be issued in the Merger (the "Registration Statement"). As
permitted by the rules and regulations of the Commission, this Proxy Statement-
Prospectus omits certain information, exhibits and undertakings contained in
the Registration Statement. For such information, reference is made to the
Registration Statement and the exhibits filed as a part thereof or incorporated
by reference therein.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROXY STATEMENT-PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES OFFERED BY THIS
PROXY STATEMENT-PROSPECTUS OR THE SOLICITATION OF A PROXY IN ANY JURISDICTION
IN WHICH, OR TO ANY PERSON TO WHOM, IT WOULD BE UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION OF AN OFFER OR PROXY SOLICITATION. NEITHER THE DELIVERY OF THIS
PROXY STATEMENT-PROSPECTUS NOR ANY DISTRIBUTION OF THE SECURITIES TO WHICH THIS
PROXY STATEMENT-PROSPECTUS RELATES SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF UJB OR VSB OR IN
THE INFORMATION SET FORTH HEREIN SINCE THE DATE OF THIS PROXY STATEMENT-
PROSPECTUS.
2
<PAGE>
SUMMARY
The following constitutes a brief summary, for the convenience of the
stockholders of VSB, of the information contained in this Proxy Statement-
Prospectus, relating principally to the proposal to approve the Merger
Agreement, including Appendices A and B hereto. The summary is necessarily
selective and is qualified in its entirety by the more extensive discussion
contained elsewhere in this Proxy Statement-Prospectus and the documents
incorporated by reference herein relating to the proposal to approve the Merger
Agreement. VSB stockholders are encouraged to read carefully this Proxy
Statement-Prospectus, including Appendices A and B.
THE COMPANIES
UJB
UJB Financial Corp., a New Jersey corporation and registered bank holding
company with its principal executive offices at 301 Carnegie Center, Princeton,
New Jersey, through its wholly-owned subsidiary banks, United Jersey Bank,
United Jersey Bank/Central, N.A., United Jersey Bank/South, N.A., First Valley
Bank, The Hazleton National Bank and Hanover Bank operated, as of January 31,
1994, 258 banking offices located in New Jersey and eastern Pennsylvania. The
subsidiary banks of UJB are engaged in a general banking business. They offer
demand and interest bearing deposit accounts, make business, real estate and
personal and instalment loans, and provide lease financing and trust and
fiduciary services. In addition, UJB owns nine active non-bank subsidiaries
which are engaged primarily in discount brokerage, venture capital investment,
commercial finance lending, lease financing and reinsuring credit life and
disability insurance policies related to consumer loans made by the bank
subsidiaries.
VSB
VSB Bancorp, Inc., a Delaware corporation and registered bank holding company
with its principal executive offices at 15 Ver Valen Street, Closter, New
Jersey, through its wholly-owned subsidiary bank, Valley Savings Bank,
operated, as of January 31, 1994, six banking offices located in northeast
Bergen County, New Jersey. Valley Savings Bank's primary business consists of
attracting deposits from the general public and originating permanent loans
which are secured by residential properties, as well as originating residential
construction, commercial mortgage and consumer loans.
VSB ANNUAL MEETING
Time, Date, Place and Purpose
The VSB Annual Meeting will be held on May 12, 1994 at 10:00 a.m., local
time, at the Ramada Inn, 100 Chestnut Ridge Road, Montvale, New Jersey, to
consider and vote upon (1) a proposal to approve the Merger Agreement and the
transactions contemplated thereby and (2) the election of three directors to
serve for a term of three years or until the Effective Time of the Merger. A
copy of the Merger Agreement is attached hereto as Appendix A.
Record Date; Vote Required
The record date for determining the VSB stockholders entitled to notice of
and to vote at the VSB Annual Meeting is March 25, 1994. An affirmative vote of
a majority of the shares of VSB Stock outstanding and entitled to vote at the
VSB Annual Meeting is necessary to approve the Merger Agreement. A plurality of
votes cast at the Annual Meeting is necessary to elect director nominees to the
VSB Board.
3
<PAGE>
Stock Held by Affiliates
The directors and executive officers of VSB and their affiliates beneficially
owned an aggregate of 20.37% of the shares of VSB Stock outstanding as of March
25, 1994.
THE MERGER
Determination of Exchange Ratio
The Exchange Ratio has not yet been fixed. The Merger Agreement provides for
the Exchange Ratio to be set on a date (i.e., the "Determination Date") not
more than five business days prior to the Closing Date of the Merger. The
Exchange Ratio will be based upon the average price of UJB Stock over a ten
trading-day period ending on the Determination Date (i.e., the "Average Price")
and will be fixed according to the following criteria:
<TABLE>
<CAPTION>
"AVERAGE PRICE" OF UJB STOCK
ON THE "DETERMINATION DATE" EXCHANGE RATIO
---------------------------- --------------
<S> <C>
greater than $27.50................... .7727
equal to or greater than $22.50 and
equal to or less than $27.50......... $21.25 / Average Price
less than $22.50 and greater than or
equal to $20.65...................... .9444
less than $20.65...................... VSB may terminate Merger Agreement
unless UJB agrees to an exchange
ratio equal to $19.50 / Average Price
</TABLE>
In the event the Closing of the Merger occurs subsequent to July 20, 1994,
the exchange ratios described or set forth above would be increased to those as
set forth below:
<TABLE>
<CAPTION>
AVERAGE PRICE (AP) ON DETERMINATION
DATE
-----------------------------------
Greater Less
Than $27.50- $22.50- Than
DATE OF CLOSING $27.50 $22.50 $20.65 $20.65
--------------- ------- --------- ------- ---------
<S> <C> <C> <C> <C>
7/21/94--8/20/94......................... .7749 $21.31/AP .9471 $19.56/AP
8/21/94--9/20/94......................... .7793 $21.43/AP .9524 $19.68/AP
9/21/94--9/30/94......................... .7858 $21.61/AP .9604 $19.86/AP
</TABLE>
The Exchange Ratio is also subject to certain anti-dilution adjustments. See
"THE MERGER AGREEMENT--Determination of Exchange Ratio."
Conversion of Outstanding VSB Stock
Upon the date and time specified in the Certificate of Merger filed with the
Office of the Secretary of State of the State of New Jersey, or, if filed
later, the date of filing of the Certificate of Merger with the Office of the
Secretary of State of the State of Delaware (the "Effective Time"), VSB will be
merged with and into UJB. It is presently contemplated that the Effective Time
will occur late in the second quarter or early in the third quarter of 1994 due
to the need to obtain the regulatory approvals described herein. At the
Effective Time, each outstanding share of VSB Stock, other than shares of VSB
Stock beneficially owned by UJB, if any, and shares of VSB Stock held in the
treasury of VSB, if any, will be converted into and represent a number of
shares of UJB Stock (subject to certain anti-dilution adjustments) equal to the
Exchange Ratio. The Exchange Ratio has not yet been fixed and will not be fixed
until a date subsequent to the scheduled date of the Annual Meeting. See "THE
MERGER AGREEMENT--Determination of Exchange Ratio." As soon as practicable
after the Effective Time, VSB stockholders will be notified and requested to
exchange certificates representing VSB Stock for certificates representing
whole shares of UJB Stock and cash in lieu of fractional shares of UJB Stock.
See "THE MERGER AGREEMENT--Conversion and Exchange of VSB Stock."
4
<PAGE>
Conversion of Outstanding VSB Stock Options
Rights to purchase VSB Stock under outstanding VSB stock options (the
"Director Options") granted in accordance with the VSB Stock Option Plan for
Outside Directors (the "Director Option Plan") will, at the Effective Time, be
converted into rights to purchase UJB Stock. Such converted options will be
subject to the same terms and conditions provided for in the Director Options
and Director Option Plan other than number of shares and exercise price which
will be set based on the Exchange Ratio.
Also currently outstanding are stock options (the "Incentive Plan Options")
granted under the VSB 1988 Incentive Stock Option Plan (the "Incentive Plan")
and limited rights granted in tandem with the Incentive Plan Options (the
"Limited Rights"). The Limited Rights become exercisable upon a "Change in
Control" of VSB (as defined in the Incentive Plan) and give the holder thereof
the right upon exercise to receive cash equal to the difference between the
exercise price of the related Incentive Plan Option and the fair market value
of VSB Stock on the date of exercise. The Merger will constitute a "Change in
Control" under the Incentive Plan rendering the Limited Rights exercisable. VSB
has agreed to use its best efforts to enter into agreements with holders of
Incentive Plan Options and Limited Rights ("Amending Agreements") providing for
the conversion of Incentive Plan Options and related Limited Rights (the
"Tandem Options") into stock options and limited rights relating to UJB Stock,
identical in terms and conditions to the Tandem Options, except that holders
would be entitled to receive UJB Stock rather than cash upon exercise of the
converted limited right. UJB's obligation to consummate the Merger is
conditioned upon VSB's obtaining Amending Agreements in sufficient number to
permit the Merger to be accounted for as a pooling-of-interests. Tandem Options
will, at the Effective Time, be converted into stock options and limited rights
with respect to UJB Stock and be subject to the same terms and conditions
provided for in the Tandem Options and Incentive Plan, other than with respect
to number of shares and exercise price which will be based on the Exchange
Ratio and other than as may be provided in an Amending Agreement. See "THE
MERGER AGREEMENT--VSB Stock Option Plans."
Recommendation of VSB Board
THE VSB BOARD UNANIMOUSLY RECOMMENDS THAT VSB STOCKHOLDERS VOTE TO APPROVE
THE MERGER AGREEMENT.
Opinion of VSB's Financial Advisor
VSB engaged Ryan, Beck & Co., Inc. ("Ryan, Beck") to render financial
advisory and investment banking services in connection with VSB management's
decision to explore various methods to enhance VSB stockholder value. Pursuant
to such engagement Ryan, Beck has evaluated the financial terms of the Merger.
Ryan, Beck has delivered to VSB an opinion dated April , 1994 stating that,
based on the review and assumptions and subject to the limitations described
therein, the terms of the Merger are fair, from a financial point of view, to
VSB stockholders. A copy of Ryan, Beck's opinion is attached as Appendix B to
this Proxy Statement-Prospectus and should be read in its entirety. See "THE
MERGER--Opinion of Financial Advisor."
No Dissenters' Rights
Under Delaware law, there are no dissenters' rights of appraisal available to
holders of VSB Stock in connection with the Merger.
5
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
The Merger is expected to qualify as a "tax-free" reorganization under
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code").
VSB's counsel has advised VSB that, among other things, no gain or loss will be
recognized for federal income tax purposes to VSB stockholders upon the
conversion of their VSB Stock into UJB Stock pursuant to the Merger, except
with respect to cash received in lieu of fractional shares. See "THE MERGER--
Certain Federal Income Tax Consequences."
REGULATORY APPROVALS
Consummation of the Merger requires, and is conditioned upon receipt of, the
approval of the Merger by the Federal Reserve Board and the New Jersey
Commissioner of Banking. The Merger may not be consummated until after the
expiration of a 30-day statutory waiting period following receipt of Federal
Reserve Board approval without objection to the Merger by the United States
Department of Justice (the "Justice Department"). See "THE MERGER AGREEMENT--
Regulatory Approvals." Applications to the Federal Reserve Board and the New
Jersey Commissioner of Banking have been filed but have not yet been approved.
CONDITIONS OF THE MERGER
Consummation of the Merger is subject, among other things, to the approval of
the Merger Agreement by the requisite vote of VSB stockholders and the receipt
of all requisite regulatory approvals. See "THE MERGER AGREEMENT--Conditions to
the Merger; Termination."
STOCK OPTION AGREEMENT
Concurrently with the execution of the Merger Agreement, UJB and VSB entered
into a Stock Option Agreement (the "Stock Option Agreement"), and pursuant
thereto, VSB granted to UJB the option to purchase up to an aggregate of
841,704 shares of VSB Stock for a purchase price of $18.125 per share (the
"Stock Option").
The Stock Option is exercisable only after the occurrence of a Purchase Event
(as defined in the Stock Option Agreement). A Purchase Event generally involves
the acquisition or proposed acquisition by a third party of a 25% or greater
interest in VSB. Under certain circumstances UJB has the right to require VSB
to repurchase the Stock Option or the shares of VSB Stock acquired by UJB upon
exercise of the Stock Option. See "THE MERGER AGREEMENT--Issuance of Stock
Option."
EXCHANGE OF CERTIFICATES
After the Effective Time of the Merger, VSB stockholders will receive in the
mail instructions for exchanging certificates representing shares of VSB Stock
for certificates representing the shares of UJB Stock to be issued therefor as
a result of the Merger. VSB STOCKHOLDERS SHOULD NOT SURRENDER THEIR
CERTIFICATES UNTIL THEY RECEIVE THESE INSTRUCTIONS.
In order to avoid delays and additional expense, holders of shares of VSB
Stock are urged to notify VSB now at (201) 768-4600, extension 256, if their
certificates are lost, stolen, destroyed or not properly registered, in order
to begin the process of issuing replacement certificates. See "THE MERGER
AGREEMENT--Conversion and Exchange of VSB Stock."
MARKET PRICES AND DIVIDENDS
UJB Stock is listed and traded on the NYSE. VSB Stock is traded in the over-
the-counter market and is quoted in the National Market System of NASDAQ. The
following table presents for the periods indicated
6
<PAGE>
(rounded to the nearest cent and adjusted for all stock splits and stock
dividends) the high and low sale prices of a share of UJB Stock and the high
and low sale prices of a share of VSB Stock and dividends declared per share
(rounded to the nearest tenth of a cent and adjusted for all stock splits and
stock dividends).
<TABLE>
<CAPTION>
UJB STOCK VSB STOCK
----------------------- -----------------------
SALE PRICES SALE PRICES
------------- DIVIDENDS ------------- DIVIDENDS
YEAR HIGH LOW PER SHARE HIGH LOW PER SHARE
- ---- ------ ------ --------- ------ ------ ---------
1991............................ $17.50 $ 6.88 $.600 $ 7.64 $ 2.17 $.187
<S> <C> <C> <C> <C> <C> <C>
1992............................ 24.50 14.00 .600 12.13 5.90 .205
1993............................ 33.25 21.63 .690 20.00 10.00 .244
1994 (through March 16)......... 27.75 23.50 .210 21.13 19.38 .070
</TABLE>
The following table presents (rounded to the nearest cent) for December 16,
1993, the last full trading day prior to the public announcement of the
execution of the Merger Agreement, and for March 16, 1994, the last sale price
of a share of UJB Stock, the last sale price of a share of VSB Stock and the
pro forma equivalent in UJB Stock of a share of VSB Stock computed by
multiplying the last sale price of UJB Stock on each of the above indicated
dates by an exchange ratio determined in accordance with the exchange ratio
criteria set forth in the Merger Agreement (see "THE MERGER AGREEMENT--
Determination of Exchange Ratio") assuming, solely for purposes of determining
the exchange ratios for use in this table, that the Determination Date was the
same as each of the indicated dates and that the Average Price of UJB Stock was
the last sale price of UJB Stock on each of the indicated dates.
<TABLE>
<CAPTION>
PRO FORMA EXCHANGE
UJB VSB VSB EQUIVALENT RATIO(1)
------ ------ -------------- --------
<S> <C> <C> <C> <C>
December 16, 1993...................... $24.25 $19.00 $21.25 .8763
March 16, 1994......................... 27.63 21.13 21.35 .7727
</TABLE>
ON THE DATE THE EXCHANGE RATIO IS FIXED AND ON THE DATE THE CERTIFICATES
REPRESENTING SHARES OF UJB STOCK TO BE EXCHANGED FOR CERTIFICATES REPRESENTING
SHARES OF VSB STOCK ARE ACTUALLY RECEIVED BY VSB STOCKHOLDERS, THE PRICE OF A
SHARE OF UJB STOCK, THE PRO FORMA VSB EQUIVALENT AND THE EXCHANGE RATIO
ACTUALLY IN EFFECT MAY DIFFER FROM THOSE SET FORTH ABOVE. STOCKHOLDERS SHOULD
OBTAIN CURRENT PRICE QUOTATIONS. SEE "MARKET PRICE AND DIVIDEND MATTERS."
The following table presents, as of March 16, 1994, the current annualized
dividend rate for a share of UJB Stock, for a share of VSB Stock, and (rounded
to the nearest cent) for the pro forma equivalent in UJB Stock of a share of
VSB Stock computed by multiplying the annualized dividend rate of a share of
UJB Stock by the exchange ratios set forth below and described above.
<TABLE>
<CAPTION>
PRO FORMA EXCHANGE
UJB VSB VSB EQUIVALENT RATIO(1)
---- ---- -------------- --------
<S> <C> <C> <C> <C>
March 16, 1994............................. $.84 $.28 $.65 .7727
.71 .8500
.79 .9444
</TABLE>
- --------
(1) The Exchange Ratio has not been fixed, will not be fixed until a date
subsequent to the scheduled date of the Annual Meeting, and may differ from
the exchange ratios set forth above for illustration purposes when fixed as
provided for in the Merger Agreement. The exchange ratios listed above
would apply in the following situations:
<TABLE>
<CAPTION>
LISTED EXCHANGE RATIO AVERAGE PRICE OF UJB STOCK ON DETERMINATION DATE
------------------------ ----------------------------------------------------
<S> <C>
.7727................... greater than $27.50
.8500................... $25.00
.9444................... less than $22.50 but greater than or equal to $20.65
</TABLE>
7
<PAGE>
The Merger Agreement provides that for Average Prices of UJB Stock on the
Determination Date of between $22.50 and $27.50, the exchange ratio would
vary from .9444 to .7727 (based on the formula of $21.25 / Average Price).
The exchange ratio of .8500 applies only if the Average Price of UJB on the
Determination Date is exactly $25.00, the mid-point between $22.50 and
$27.50.
The Exchange Ratio would differ from the hypothetical exchange ratios
presented in the table if the Average Price of UJB Stock on the
Determination Date were less than $20.65. In such case, VSB could terminate
the Merger Agreement unless UJB agreed to the exchange ratio determined by
dividing $19.50 by the Average Price.
In the event the Closing Date for the Merger is a date subsequent to July
20, 1994, all of the exchange ratios described or set forth above for
illustration purposes would be increased by amounts set forth in the Merger
Agreement. See "THE MERGER AGREEMENT--Determination of the Exchange Ratio."
8
<PAGE>
SUMMARY OF COMPARATIVE FINANCIAL INFORMATION
The following summary presents, for the periods indicated, selected
comparative financial and per share data for both UJB Stock and VSB Stock on an
historical basis and, assuming that the Merger had been effective at the
beginning of the periods presented for UJB, on a pro forma combined basis and
pro forma equivalent basis. Such data are computed on a pro forma equivalent
basis with respect to a share of VSB Stock by multiplying the pro forma
combined amount by certain exchange ratios provided for in the Merger
Agreement. As previously described, the exchange ratio has not yet been fixed
and will not be fixed until a date subsequent to the Annual Meeting. When so
fixed, the exchange ratio may differ from any of the exchange ratios set forth
below for illustration purposes. See "THE MERGER AGREEMENT--Determination of
Exchange Ratio." The summary also presents, for the periods indicated, selected
historical comparative financial information for UJB and VSB and selected
combined pro forma financial information for UJB, accounting for the Merger as
a pooling-of-interests. The pro forma information combines (i) historical
consolidated balance sheets of UJB at December 31 of each of the years 1989
through 1993 and of VSB at September 30 of each of the years 1989 through 1993
and (ii) historical results of operations of UJB for each of the years in the
five-year period ended December 31, 1993 and of VSB for each of the years in
the five fiscal year period ended September 30, 1993. The pro forma information
does not reflect anticipated expenses of the Merger. See "SELECTED FINANCIAL
DATA" and "PRO FORMA FINANCIAL INFORMATION."
<TABLE>
<CAPTION>
PRO FORMAS: YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1989(3) 1990 1991 1992 1993
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Comparative Financial
Information(1):
Net interest income
UJB................... $ 470,179 $ 485,140 $ 491,331 $ 538,225 $ 563,135
VSB................... 9,212 8,878 8,861 11,058 12,773
Pro Forma combined.... 479,391 494,018 500,192 549,283 575,908
Net income
UJB................... 118,540 (5,576) 22,435 53,824 78,055
VSB................... 2,999 (5,840) 1,817 2,964 4,363
Pro Forma combined.... 121,539 (11,416) 24,252 56,788 82,418
Total Assets
UJB................... 12,172,290 12,817,877 13,377,719 13,770,871 13,410,549
VSB................... 339,165 338,396 349,820 343,679 379,092
Pro Forma combined.... 12,511,455 13,156,273 13,727,539 14,114,550 13,789,641
Long-term debt
UJB................... 81,125 72,225 64,597 216,570 208,459
VSB................... 930 735 555 375 195
Pro Forma combined.... 82,055 72,960 65,152 216,945 208,654
Comparative Common Share
Data(1):
Net income per share
UJB................... $ 2.62 $ (.17) $ .45 $ 1.09 $ 1.49
VSB................... N/A (1.48) .47 .83 1.24
Pro Forma combined at
Exchange Ratio of
(2):
.7727................ N/A (.28) .46 1.09 1.50
.8500................ N/A (.28) .45 1.08 1.49
.9444................ N/A (.28) .45 1.08 1.48
Pro Forma VSB equiva-
lent at Exchange Ra-
tio of:
.7727................ N/A (.22) .36 .84 1.16
.8500................ N/A (.24) .38 .92 1.27
.9444................ N/A (.26) .42 1.02 1.40
Dividends per share
UJB................... 1.11 1.02 .60 .60 .69
VSB................... .22 .26 .18 .20 .23
Pro Forma combined.... 1.11 1.02 .60 .60 .69
Pro Forma VSB equiva-
lent at Exchange Ra-
tio of:
.7727................ .86 .79 .46 .46 .53
.8500................ .94 .87 .51 .51 .59
.9444................ 1.05 .96 .57 .57 .65
Book value per share
UJB................... 18.67 17.24 17.04 17.50 18.32
VSB................... 11.67 10.09 10.59 11.78 12.80
Pro Forma combined at
Exchange Ratio of:
.7727................ 18.44 16.98 16.84 17.39 18.24
.8500................ 18.32 16.88 16.74 17.31 18.15
.9444................ 18.18 16.75 16.63 17.21 18.05
Pro Forma VSB equiva-
lent at Exchange Ra-
tio of:
.7727................ 14.25 13.12 13.01 13.44 14.09
.8500................ 15.57 14.35 14.23 14.71 15.43
.9444................ 17.17 15.82 15.71 16.25 17.05
</TABLE>
- -------
(1) The financial information for UJB and VSB presented in these tables has
been restated to reflect all stock dividends and all stock splits. Balance
sheet data for UJB is presented as of December 31, and results of
operations for UJB are presented for the year ended December 31. Balance
sheet data for VSB is presented as of September 30, and the results of
operations for VSB are presented for the fiscal year ended September 30.
Certain reclassifications have been made to VSB's historical amounts to
conform to UJB's method of presentation.
(2) Pro forma combined net income per common share was computed based on pro
forma combined net income less preferred dividends divided by the weighted
average number of shares outstanding during the period.
(3) During 1989, VSB was formed in connection with the conversion of Valley
Savings Bank from a mutual association to a capital stock association. Net
income per common share for VSB is not presented for 1989 and is presented
on a fully diluted basis (net income less preferred dividends divided by
the weighted average number of shares outstanding and common stock
equivalents) for the years 1990 through 1993.
9
<PAGE>
INTRODUCTION
This Proxy Statement-Prospectus is being furnished to holders of shares of
VSB Stock ("VSB Stockholders") in connection with the solicitation of proxies
by the VSB Board for use at the VSB Annual Meeting to be held on May 12, 1994,
at the Ramada Inn, 100 Chestnut Ridge Road, Montvale, New Jersey, at 10:00
a.m., local time. The purpose of the VSB Annual Meeting is to consider and vote
upon (1) a proposal to approve the Merger Agreement and the transactions
contemplated thereby and (2) the election of three directors to serve for a
term of three years or until the Effective Time of the Merger.
THE BOARD OF DIRECTORS OF VSB HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND RECOMMENDS THAT VSB STOCKHOLDERS VOTE FOR ITS APPROVAL. THE BOARD OF
DIRECTORS OF VSB ALSO RECOMMENDS THAT ITS STOCKHOLDERS VOTE FOR THE THREE
DIRECTOR NOMINEES NAMED HEREIN.
The information contained herein with respect to UJB has been supplied by UJB
and the information contained herein with respect to VSB has been supplied by
VSB.
VSB ANNUAL MEETING
RECORD DATE; VOTE REQUIRED
The close of business on March 25, 1994 has been fixed as the record date and
time for determining stockholders who are entitled to notice of, and to vote
at, the VSB Annual Meeting (the "Record Date"). Except as disclosed below, each
such VSB Stockholder of record will be entitled to cast one vote per share with
regard to (1) the proposal to approve the Merger Agreement and transactions
contemplated thereby and (2) each Board of Director position to be filled at
the Annual Meeting. As of the Record Date there were 3,402,059 shares of VSB
Stock outstanding held by approximately stockholders of record.
The presence at the VSB Annual Meeting in person or by proxy of the holders
of a majority of the outstanding shares of VSB Stock will constitute a quorum
for the transaction of business. Under Delaware law and VSB's Certificate of
Incorporation and Bylaws, the approval of the Merger Agreement requires the
affirmative vote of a majority of the shares outstanding and entitled to vote
at the VSB Annual Meeting. Accordingly, abstentions and broker non-votes have
the effect of a vote against the Merger Agreement. The VSB Annual Meeting may
be adjourned from time to time if necessary to obtain a quorum or to obtain the
votes necessary to approve the Merger Agreement. The approval of the Merger
Agreement by the VSB Stockholders is a condition to the consummation of the
Merger. See "THE MERGER AGREEMENT--Conditions to the Merger; Termination."
As to the election of directors, the proxy card being provided by the VSB
Board enables a stockholder to vote for the election of the director nominees
proposed by the VSB Board, or to withhold authority to vote for one or more of
the proposed director nominees. Under Delaware law and VSB's Certificate of
Incorporation and Bylaws, directors are elected by a plurality of shares voted,
without regard to either (i) broker non-votes, or (ii) proxies as to which
authority to vote for one or more of the nominees being proposed is withheld.
Proxies solicited hereby will be returned to the VSB Board, and will be
tabulated by inspectors of election designated by the VSB Board, who will not
be employed by, or be a director of, VSB or any of its affiliates.
HOLDERS OF VSB VOTING SECURITIES
As provided in VSB's Certificate of Incorporation, record holders of VSB
Stock who beneficially own in excess of 10% of the outstanding shares of VSB
Stock (the "Limit") are not entitled to any vote in respect of the shares held
in excess of the Limit. A person or entity is deemed to beneficially own shares
owned by an affiliate of, as well as persons acting in concert with, such
person or entity. VSB's Certificate of Incorporation
10
<PAGE>
authorizes the VSB Board (i) to make all determinations necessary to implement
and apply the Limit, including determining whether persons or entities are
acting in concert, and (ii) to demand that any person who is reasonably
believed to beneficially own stock in excess of the Limit supply information to
VSB to enable the VSB Board to implement and apply the Limit.
Persons and groups owning 5% or more of the outstanding VSB Stock are
required to file certain reports regarding such ownership with VSB and with the
Commission in accordance with the Exchange Act. The following table sets forth
certain information, as of the Record Date, as to those persons or groups known
to VSB as having reported beneficial ownership of 5% or more of the outstanding
VSB Stock.
<TABLE>
<CAPTION>
AMOUNT AND
NAME AND ADDRESS OF NATURE OF PERCENT
BENEFICIAL OWNER OWNERSHIP OF CLASS
------------------- ------------------ --------
<S> <C> <C>
Brandes Investment Management, Inc................. 375,077 shares(1) 11.02%
12750 High Bluff Drive
Suite 420
San Diego, California 92130
Zohar Ben-Dov...................................... 332,640 shares 9.78%
Kinross Farm
P.O. Box 2040
Middleburg, Virginia 22117
Martin Spiro....................................... 330,820 shares(2) 9.72%
1224 N. Main Street
Allentown, Pennsylvania 18104
Allen S. Greene.................................... 200,104 shares(3) 5.71%
</TABLE>
15 Ver Valen Street
Closter, New Jersey 07624
- --------
(1) Brandes Investment Management, Inc. ("BIM") is a registered Investment
Adviser. BIM has sole voting power as to 2,577 shares, shared voting power
as to zero shares, sole dispositive power as to 2,577 shares and shared
dispositive power as to 372,500 shares.
(2) Mr. Spiro is a director of VSB.
(3) Mr. Greene is Chairman of the Board, President and Chief Executive Officer
of VSB. Includes 104,544 shares that Mr. Greene has the right to acquire
pursuant to presently exercisable options granted under VSB's Incentive
Plan and 3,000 shares subject to awards under the Valley Savings Bank
Management Recognition and Retention Plan and Trust ("MRP") and 12,938
shares held in a VSB Employee Stock Ownership Plan ("ESOP") account for the
benefit of Mr. Greene, as to all of which shares Mr. Greene may currently
direct the voting.
UJB, by reason of the Stock Option Agreement and its ownership of the Stock
Option to purchase up to an aggregate of 841,704 shares of VSB Stock granted by
the Stock Option Agreement, may be deemed under the rules of the Commission to
be the beneficial owner of approximately 19.8% of the VSB Stock outstanding on
the Record Date. See "THE MERGER AGREEMENT--Issuance of Stock Option."
PROXIES; REVOCATION; SOLICITATION
All properly executed proxies that are not revoked will be voted at the VSB
Annual Meeting in accordance with the instructions contained therein. PROPERLY
EXECUTED PROXIES CONTAINING NO INSTRUCTIONS REGARDING THE PROPOSAL TO APPROVE
THE MERGER AGREEMENT WILL BE VOTED FOR APPROVAL OF THE MERGER AGREEMENT AND
PROPERLY EXECUTED PROXIES CONTAINING NO INSTRUCTIONS REGARDING THE ELECTION OF
DIRECTORS WILL BE VOTED FOR THE THREE DIRECTOR NOMINEES SET FORTH IN THIS PROXY
STATEMENT-PROSPECTUS. No other matters are scheduled to be presented to the VSB
Annual Meeting, but if any other matters are properly brought before the VSB
Annual Meeting and submitted to a vote, all proxies will be voted in accordance
with the judgment of the persons authorized to vote the proxies. A VSB
Stockholder who has executed and returned a
11
<PAGE>
proxy may revoke it at any time before it is voted at the VSB Annual Meeting by
executing and returning a proxy bearing a later date or by filing written
notice of revocation with the Secretary of VSB prior to the voting of such
proxy. The presence in person at the VSB Annual Meeting of any VSB Stockholder
who has given a proxy shall not revoke such proxy unless the VSB Stockholder
shall submit at the Annual Meeting a proxy bearing a later date, or shall file
written notice of such revocation with the Secretary of VSB prior to the voting
of such proxy, or shall vote by written ballot at the Annual Meeting. If shares
are held in street name, a stockholder will need additional documentation from
the record holder of the shares to vote such shares at the Annual Meeting.
VSB will bear the costs of soliciting proxies from VSB Stockholders. In
addition to the use of the mails, proxies may be solicited by the directors,
officers and employees of VSB by personal contact, telephone or telegram. Such
directors, officers and employees will not receive additional compensation for
such solicitation but may be reimbursed for out-of-pocket expenses incurred in
connection therewith. Arrangements will be made with brokerage firms and other
custodians, nominees and fiduciaries to forward solicitation materials to the
beneficial owners of VSB Stock held of record by such persons, and VSB will
reimburse such brokerage firms, custodians, nominees and fiduciaries for
reasonable out-of-pocket expenses incurred by them in connection therewith.
If a VSB Stockholder is participating in VSB's Dividend Reinvestment and
Stock Purchase Plan ("DRP"), the stockholder will receive a single proxy both
for shares held by such stockholder in certificate form and for shares held by
the plan administrator for the stockholder's DRP account. The stockholder's
shares held under the DRP will not be voted if a proxy is not returned.
12
<PAGE>
SELECTED FINANCIAL DATA
The following table presents selected historical consolidated financial
information for UJB and VSB and selected unaudited combined pro forma financial
information for UJB, accounting for the Merger as a pooling-of-interests. The
historical data should be read in conjunction with the historical consolidated
financial statements and the notes thereto incorporated by reference herein.
The pro forma information combines (i) historical consolidated balance sheets
of UJB at December 31 for each of the years 1989 through 1993 and of VSB at
September 30 for each of the fiscal years 1989 through 1993 and (ii) historical
results of operations of UJB for each of the years in the five-year period
ended December 31, 1993 and of VSB for each of the years in the five fiscal
years ended September 30, 1993. The pro forma information should be read in
conjunction with the pro forma financial statements and the notes thereto
appearing elsewhere herein. The exchange ratio used in the pro forma
computations was .9444 shares of UJB Stock for each share of VSB Stock, the
highest and most dilutive of the fixed exchange ratios specifically provided
for in the Merger Agreement. (The Exchange Ratio would be higher if: the
Average Price of UJB Stock on the Determination Date is less than $20.65, VSB
sends notice terminating the Merger Agreement, and UJB nullifies such notice by
agreeing to an Exchange Ratio equal to $19.50 divided by the Average Price. A
Closing Date subsequent to July 20, 1994 would also result in an Exchange Ratio
higher than .9444.) See "THE MERGER AGREEMENT--Determination of Exchange Ratio"
and "PRO FORMA FINANCIAL INFORMATION." The pro forma information does not
reflect anticipated expenses of the Merger. The pro forma information does not
purport to be indicative of the results that would actually have been obtained
if the combined operations had been conducted during the periods indicated and
is not intended to be indicative of future results.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1989 1990 1991 1992 1993
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
UJB--HISTORICAL(1)
INCOME STATEMENT DATA:
Net interest income..... $ 470,179 $ 485,140 $ 491,331 $ 538,225 $ 563,135
Provision for loan loss-
es..................... 52,500 246,000 167,350 139,000 95,500
Net income (loss)....... 118,540 (5,576) 22,435 53,824 78,055
Net income (loss) per
share.................. 2.62 (.17) .45 1.09 1.49
Cash dividends declared
per common share....... 1.11 1.02 .60 .60 .69
Average common shares
outstanding (in thou-
sands)................. 43,785 44,601 45,650 47,769 51,288
BALANCE SHEET DATA:
Total assets............ $12,172,290 $12,817,877 $13,377,719 $13,770,871 $13,410,549
Investment securities... 2,605,319 2,950,762 3,380,107 3,536,782 3,648,536
Loans................... 8,334,646 8,665,064 8,768,973 8,782,409 8,607,094
Total deposits.......... 9,336,000 10,628,244 11,313,547 11,786,661 11,456,354
Long-term debt.......... 81,125 72,225 64,597 216,570 208,459
Shareholders' equity.... 852,757 807,303 811,799 920,270 976,074
Book value per common
share.................. 18.67 17.24 17.04 17.50 18.32
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------------
1989 1990 1991 1992 1993
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
VSB--HISTORICAL(1)
INCOME STATEMENT DATA:
Net interest income..... $ 9,212 $ 8,878 $ 8,861 $ 11,058 $ 12,773
Provision for loan
losses................. (545) 5,888 300 555 185
Net income (loss)....... 2,999 (5,840) 1,817 2,964 4,363
Net income (loss) per
share(3)............... N/A (1.48) .47 .83 1.24
Cash dividends declared
per common share....... .22 .26 .18 .20 .23
Average common shares
outstanding (in
thousands)............. N/A 3,793 3,741 3,446 3,339
BALANCE SHEET DATA:
Total assets............ $ 339,165 $ 338,396 $ 349,820 $ 343,679 $ 379,092
Investment securities... 133,418 126,303 158,798 176,724 228,937
Loans................... 174,685 195,558 168,900 146,171 136,616
Total deposits.......... 287,498 284,495 306,700 300,667 295,144
Long-term debt.......... 930 735 555 375 195
Shareholders' equity.... 45,465 38,248 39,074 39,222 43,178
Book value per common
share.................. 11.67 10.09 10.59 11.78 12.80
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1989 1990 1991 1992 1993
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
COMBINED PRO FORMA
INCOME STATEMENT DATA:
Net interest income..... $ 479,391 $ 494,018 $ 500,192 $ 549,283 $ 575,908
Provisions for loan
losses................. 51,955 251,888 167,650 139,555 95,685
Net income (loss)....... 121,539 (11,416) 24,252 56,788 82,418
Net income (loss) per
share (2)(4)........... N/A (.28) .45 1.08 1.48
Cash dividends declared
per common share....... 1.11 1.02 .60 .60 .69
Average common shares
outstanding (in
thousands)(2).......... N/A 48,183 49,183 51,023 54,441
BALANCE SHEET DATA:
Total assets............ $12,511,455 $13,156,273 $13,727,539 $14,114,550 $13,789,641
Investment securities... 2,738,737 3,077,065 3,538,905 3,713,506 3,877,473
Loans................... 8,509,331 8,860,622 8,937,873 8,928,580 8,743,710
Total deposits.......... 9,623,498 10,912,739 11,620,247 12,087,328 11,751,498
Long-term debt.......... 82,055 72,960 65,152 216,945 208,654
Shareholders' equity.... 898,222 845,551 850,873 959,492 1,019,252
Book value per common
share (2).............. 18.18 16.75 16.63 17.21 18.05
</TABLE>
- --------
(1) The financial information for UJB and VSB presented in this table has been
restated to reflect stock dividends and all stock splits. Balance sheet
data for UJB is presented as of December 31, and results of operations for
UJB are presented for the year ended December 31. Balance sheet data for
VSB is presented as of September 30, and results of operations for VSB are
presented for the fiscal year ended September 30. Certain
reclassifications have been made to VSB's historical amounts to conform to
UJB's method of presentation.
(2) The exchange ratio used in the combined pro forma computations was .9444
shares of UJB Stock for each share of VSB Stock.
(3) During 1989, VSB was formed in connection with the conversion of Valley
Savings Bank from a mutual association to a capital stock association. Net
income per common share is not presented for 1989 and is presented on a
fully diluted basis (net income less preferred dividends divided by the
weighted average number of shares outstanding and common stock
equivalents) for the years 1990 through 1993.
(4) Pro Forma combined net income per common share was computed based on pro
forma combined net income less preferred dividends divided by the weighted
average number of shares outstanding during the period. Common stock
equivalents are not included in the pro forma calculation as they are not
material.
N/A Not Applicable.
14
<PAGE>
PRO FORMA FINANCIAL INFORMATION
PRO FORMA COMBINED CONDENSED BALANCE SHEET
The following unaudited pro forma condensed consolidated balance sheet
combines the historical audited consolidated balance sheets of UJB at December
31, 1993, as filed on Form 8-K dated March 18, 1994, and of VSB at September
30, 1993, as filed on Form 10-K for the fiscal year ended September 30, 1993.
The Pro Forma Combined Condensed Balance Sheet is based upon the assumptions
that the Merger was effective as of December 31, 1993, that the exchange ratio
was .9444 shares of UJB Stock for each share of VSB Stock, and that the Merger
is accounted for as a pooling-of-interests. The assumed exchange ratio is the
highest and most dilutive of the fixed exchange ratios specifically provided
for in the Merger Agreement. (The Exchange Ratio would be higher if: the
Average Price of UJB Stock on the Determination Date is less than $20.65, VSB
sends notice terminating the Merger Agreement, and UJB nullifies such notice by
agreeing to an Exchange Ratio equal to $19.50 divided by the Average Price. A
Closing Date subsequent to July 20, 1994 would also result in an Exchange Ratio
higher than .9444.) See "THE MERGER AGREEMENT--Determination of Exchange
Ratio." The pro forma information does not reflect anticipated expenses of the
Merger. The pro forma condensed balance sheet should be read in conjunction
with the accompanying notes, the pro forma combined statements of income
appearing elsewhere herein and the historical consolidated financial statements
and notes thereto incorporated herein by reference.
<TABLE>
<CAPTION>
DECEMBER 31, 1993
-----------------------------------------------
PRO FORMA
ADJUSTMENTS
INCREASE PRO FORMA
UJB VSB(1) (DECREASE)(2) COMBINED
----------- -------- ------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks..... $ 720,404 $ 4,770 $ $ 725,174
Interest bearing deposits
with banks................. 19,962 -- 19,962
Investment securities....... 3,648,536 228,937 3,877,473
Short-term investment secu-
rities..................... 99,500 -- 99,500
Loans....................... 8,607,094 136,616 8,743,710
Less: Allowance for loan 242,104 2,050 244,154
losses................... ----------- -------- ------- -----------
Net loans................ 8,364,990 134,566 8,499,556
Premises and equipment...... 167,477 3,962 171,439
Other real estate owned,
net........................ 72,275 2,505 74,780
Other assets................ 317,405 4,352 321,757
----------- -------- ------- -----------
Total Assets............ $13,410,549 $379,092 $ $13,789,641
=========== ======== ======= ===========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Deposits.................... $11,456,354 $295,144 $ $11,751,498
Other borrowed funds........ 582,808 36,879 619,687
Other liabilities........... 186,854 3,696 190,550
Long-term debt.............. 208,459 195 208,654
----------- -------- ------- -----------
Total liabilities....... 12,434,475 335,914 12,770,389
Shareholders' Equity..........
Preferred stock............. 30,008 -- 30,008
Common stock................ 61,958 34 (34) 65,813
3,855
Surplus..................... 384,229 18,198 (3,821) 398,606
Retained earnings........... 499,879 25,529 525,408
Common stock acquired by
MRP........................ -- (208) (208)
Common stock acquired by -- (375) (375)
ESOP....................... ----------- -------- ------- -----------
Total shareholders' equi- 976,074 43,178 1,019,252
ty....................... ----------- -------- ------- -----------
Total Liabilities and
Shareholders' Equity... $13,410,549 $379,092 $ $13,789,641
=========== ======== ======= ===========
</TABLE>
- --------
(1) Certain reclassifications have been made to VSB's historical amounts to
conform to UJB's method of presentation.
(2) To record the exchange of 3,402,059 shares of VSB Stock outstanding at
December 31, 1993 into 3,212,905 shares of UJB Stock.
15
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
The following unaudited pro forma condensed consolidated statements of
income combine the historical results of operations of UJB for each of the
years in the three-year period ended December 31, 1993 and of VSB for each of
the years in the three-year fiscal period ended September 30, 1993. The pro
forma condensed statements of income are presented on a pooling-of-interests
basis assuming the companies had been combined at January 1, 1991 and assuming
an exchange ratio of .9444, the highest and most dilutive of the fixed
exchange ratios specifically provided for in the Merger Agreement. (The
Exchange Ratio would be higher if: the Average Price of UJB Stock on the
Determination Date is less than $20.65, VSB sends notice terminating the
Merger Agreement, and UJB nullifies such notice by agreeing to an Exchange
Ratio equal to $19.50 divided by the Average Price. A Closing Date subsequent
to July 20, 1994 would also result in an Exchange Ratio higher than .9444.)
See "THE MERGER AGREEMENT--Determination of Exchange Ratio." The pro forma
results of operations should be read in conjunction with the pro forma
condensed balance sheet and notes thereto appearing elsewhere herein and the
historical consolidated financial statements and notes thereto incorporated
herein by reference. The pro forma information does not reflect anticipated
expenses of the Merger. The pro forma statements do not purport to be
indicative of the results that would actually have been obtained if the
combined operations had been conducted during the periods indicated and are
not intended to be indicative of future results.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, (1)(2)
----------------------------------------------
1991 1992 1993
--------------- ------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans..... $ 833,704 $713,987 $670,705
Interest on investment securi-
ties.......................... 275,410 258,371 234,020
Interest on Federal funds sold
and securities purchased under
agreements to resell.......... 22,054 4,615 955
Interest on trading account se-
curities...................... 1,219 1,367 1,297
Interest on bank balances...... 2,237 668 651
--------------- -------------- --------------
Total interest income........ 1,134,624 979,008 907,628
INTEREST EXPENSE
Interest on savings and time
deposits...................... 498,802 366,023 271,345
Interest on commercial certifi-
cates of deposit $100,000 and
over.......................... 46,526 16,320 7,319
Interest on borrowed funds..... 89,104 47,382 53,056
--------------- -------------- --------------
Total interest expense....... 634,432 429,725 331,720
--------------- -------------- --------------
Net interest income.......... 500,192 549,283 575,908
Provision for loan losses...... 167,650 139,555 95,685
--------------- -------------- --------------
Net interest income after
provision for loan losses... 332,542 409,728 480,223
NON-INTEREST INCOME
Service charges on deposit ac-
counts........................ 42,131 54,356 60,474
Service and loan fee income.... 31,021 35,874 34,626
Trust income................... 16,875 19,837 21,852
Investment securities gains.... 13,919 18,485 8,877
Trading account gains.......... 1,620 1,804 1,884
Other.......................... 44,616 47,186 51,971
--------------- -------------- --------------
Total non-interest income.... 150,182 177,542 179,684
NON-INTEREST EXPENSE
Salaries....................... 172,071 179,457 185,570
Pension and other employee ben-
efits......................... 44,554 51,211 58,601
Occupancy, net................. 43,878 47,668 48,288
Furniture and equipment........ 39,128 42,608 45,791
Other real estate owned ex-
penses........................ 17,725 38,215 41,086
FDIC insurance assessment...... 22,828 26,047 29,244
Advertising and public rela-
tions......................... 9,877 10,578 10,517
Restructuring charges.......... -- -- 21,500
Other.......................... 104,727 115,268 113,755
--------------- -------------- --------------
Total non-interest expenses.. 454,788 511,052 554,352
--------------- -------------- --------------
INCOME BEFORE INCOME TAXES....... 27,936 76,218 105,555
Federal and state income taxes. 3,684 19,430 26,953
--------------- -------------- --------------
INCOME BEFORE CUMULATIVE EFFECT
OF A CHANGE IN ACCOUNTING PRIN-
CIPLE........................... 24,252 56,788 78,602
Cumulative effect of a change -- -- 3,816
in accounting principle....... --------------- -------------- --------------
NET INCOME....................... $ 24,252 $ 56,788 $ 82,418
=============== ============== ==============
NET INCOME PER COMMON SHARE:
Income before cumulative effect
of a change in accounting
principle..................... $ .45 $ 1.08 $ 1.41
Cumulative effect of a change -- -- .07
in accounting principle....... --------------- -------------- --------------
NET INCOME (3)................... $ .45 $ 1.08 $ 1.48
=============== ============== ==============
Average Common Shares Outstanding 49,183 51,023 54,441
(in thousands).................. =============== ============== ==============
</TABLE>
- -------
(1) The financial information for UJB and VSB presented in this table has been
restated to reflect all stock dividends and all stock splits. Income
statement information is presented for the year ended December 31 for UJB
and the fiscal year ended September 30 for VSB.
(2) Certain reclassifications have been made to VSB's historical amounts to
conform to UJB's method of presentation.
(3) Pro forma combined net income per common share was computed based on pro
forma combined net income less preferred dividends divided by the weighted
average number of shares outstanding during the period.
16
<PAGE>
MARKET PRICE AND DIVIDEND MATTERS
MARKET PRICE AND DIVIDEND HISTORY
UJB Stock is listed and traded on the NYSE and is quoted under the symbol
UJB. The following table sets forth, for the periods indicated, the high and
low sale prices of a share of UJB Stock, as reported in published financial
sources, and quarterly dividends declared per share.
VSB Stock is traded in the over-the-counter market and is listed on the
National Market System of NASDAQ. VSB Stock is quoted under the symbol VSBC.
The following table sets forth, for the periods indicated, the high and low
sale prices of a share of VSB Stock, as reported by NASDAQ, and quarterly
dividends declared per share.
All stock prices shown in the table below and in the paragraph following the
table have been rounded to the nearest cent and all stock prices and dividends
shown below have been adjusted for stock splits and stock dividends. All stock
prices and dividends are shown on a calendar year basis.
<TABLE>
<CAPTION>
UJB STOCK VSB STOCK
----------------------- ----------------------
SALE PRICES SALE PRICES
------------- DIVIDENDS ------------ DIVIDENDS
HIGH LOW PER SHARE HIGH LOW PER SHARE
------ ------ --------- ------ ----- ---------
<S> <C> <C> <C> <C> <C> <C>
1991
First Quarter................. $11.63 $ 6.88 $.15 $ 4.92 $2.17 $.046
Second Quarter................ 13.25 10.38 .15 5.79 4.34 .046
Third Quarter................. 16.88 12.50 .15 6.37 4.92 .046
Fourth Quarter................ 17.50 13.13 .15 7.64 6.42 .049
1992
First Quarter................. 18.75 14.00 .15 6.94 5.90 .049
Second Quarter................ 20.38 14.63 .15 8.68 6.25 .049
Third Quarter................. 20.75 16.50 .15 9.90 8.33 .049
Fourth Quarter................ 24.50 16.13 .15 12.13 9.63 .058
1993
First Quarter................. 29.38 22.50 .16 12.92 10.00 .058
Second Quarter................ 29.25 21.63 .16 12.71 11.67 .058
Third Quarter................. 33.25 24.25 .16 15.63 11.67 .058
Fourth Quarter................ 30.25 23.38 .21 20.00 10.00 .070
1994
First Quarter (through March
16).......................... 27.75 23.50 .21 21.13 19.38 .070
</TABLE>
On December 16, 1993, the last full trading day prior to the public
announcement of the execution of the Merger Agreement, the last sale price of a
share of UJB Stock was $24.25 and the last sale price of a share of VSB Stock
was $19.00. On March 16, 1994, the last sale price of a share of UJB Stock was
$27.63 and the last sale price of VSB Stock was $21.13. Stockholders are urged
to obtain current market quotations.
COORDINATION OF DIVIDENDS AND LIMITATIONS UNDER MERGER AGREEMENT
In order to ensure that VSB Stockholders would be paid at least one but no
more than one dividend in the calendar quarter in which the Merger is
consummated, VSB agreed to set record and payment dates for VSB dividends
identical to those set by UJB for UJB dividends. In addition, pending
consummation of the Merger, VSB has agreed not to pay (or make a declaration
which creates an obligation to pay) any cash dividend at a quarterly rate in
excess of $0.07.
17
<PAGE>
DIVIDEND LIMITATIONS
The bank subsidiaries of UJB and VSB are restricted by law in the amount of
dividends they may pay to UJB and VSB, respectively. In addition, UJB is
restricted by certain debt agreements in the amount of dividends it may pay to
its shareholders. Assuming the Merger was effective at March 16, 1994, under
the most restrictive of such agreements, the amount that would have been
available on that date for dividend payments to holders of UJB Stock was
approximately $96,920,000. See "UJB FINANCIAL CORP.--Description of Business."
PROPOSAL I--APPROVAL OF THE MERGER AGREEMENT
THE MERGER
The following information concerning the Merger, insofar as it relates to
matters contained in the Merger Agreement, is qualified in its entirety by
reference to the Merger Agreement, a copy of which is attached hereto as
Appendix A and incorporated herein by reference.
RECOMMENDATION OF VSB BOARD OF DIRECTORS AND REASONS FOR THE MERGER
The Merger Agreement provides for the merger of VSB with and into UJB, with
UJB being the surviving corporation (the "Surviving Corporation"). Upon
consummation of the Merger each outstanding share of VSB Stock, other than
shares of VSB Stock beneficially owned by UJB, if any, and shares of VSB Stock
held in the treasury of VSB, if any, will be converted into and represent the
number of shares of UJB Stock (subject to certain anti-dilution adjustments)
equal to the Exchange Ratio. The Exchange Ratio has not yet been fixed and will
not be fixed until a date which is not more than five business days prior to
the Closing Date of the Merger. See "THE MERGER AGREEMENT--Determination of
Exchange Ratio." The Merger Agreement also provides for an equivalent
conversion of outstanding VSB Director Options granted pursuant to the VSB
Director Option Plan and certain outstanding Incentive Plan Options and Limited
Rights granted under the VSB Incentive Option Plan. See "THE MERGER AGREEMENT--
VSB Stock Option Plans." The Exchange Ratio, and the conversion ratio
applicable to such VSB Director Options and VSB Incentive Plan Options and
Limited Rights, are subject to appropriate adjustments in the event that, from
the date of the Merger Agreement to the Effective Time, the outstanding shares
of UJB Stock are increased or decreased, changed into or exchanged for a
different number or kind of shares or securities through reorganization,
recapitalization, reclassification, stock dividend, stock split or reverse
stock split or other similar changes.
THE MERGER AGREEMENT HAS BEEN APPROVED BY THE VSB BOARD. THE BOARD OF
DIRECTORS OF VSB BELIEVES THAT THE MERGER IS IN THE BEST INTERESTS OF VSB
STOCKHOLDERS. THE VSB BOARD UNANIMOUSLY RECOMMENDS THAT VSB STOCKHOLDERS VOTE
IN FAVOR OF THE PROPOSAL TO APPROVE THE MERGER AGREEMENT.
The VSB Board has considered the terms of the Merger Agreement and has
concluded that such terms are fair to, and that the Merger is in the best
interests of, VSB and its Stockholders. In determining to accept the offer from
UJB and enter into the Merger Agreement, the VSB Board considered a number of
factors, including the following: (i) the financial condition, operating
results and future prospects of UJB and VSB, (ii) a comparison of the price
being paid in the Merger to prices paid in comparable thrift mergers, based,
among other things, on multiples of book value and earnings, (iii) the tax-free
nature of the transaction to VSB's stockholders (except for cash received in
lieu of fractional shares, see "THE MERGER--Certain Federal Income Tax
Consequences"), (iv) VSB's alternatives to the Merger, (v) the provisions of
the Merger Agreement allowing VSB to terminate the Merger Agreement if certain
conditions, including a minimum exchange ratio, are not met at the closing (see
"THE MERGER AGREEMENT--Conditions to the Merger, Termination"), (vi) UJB's
willingness to maintain Valley Savings Bank's existing offices, and (vii) the
opinion of Ryan, Beck that the financial terms of UJB's offer was fair to VSB
and to VSB stockholders from a financial point of view.
18
<PAGE>
The VSB Board also took into account that VSB stockholders would have the
opportunity to participate in the future growth of UJB by obtaining UJB Stock
in the Merger. The Board noted that upon consummation of the Merger, VSB, as
part of an interstate bank holding company of greater size and resources,
should be able to provide its customers with a greater range of services and
should become a stronger competitor in its existing markets. The Board of
Directors of VSB believes that the Merger will result in a stronger and more
effective competitor in its market, better able to compete effectively in the
rapidly changing marketplace for banking and financial services and to take
advantage of opportunities that might not be available to VSB on its own. The
VSB Board believes that the Merger will provide Valley Savings Bank customers
with a broader range of products and services, as well as greater convenience.
BACKGROUND
In October 1993, the VSB management engaged the investment banking firm of
Ryan, Beck to provide financial advisory and investment banking services to VSB
in connection with the desire of the VSB management to enhance stockholder
value. Ryan, Beck was selected by the management of VSB for its expertise in
such matters. VSB established the stockholder enhancement committee of the VSB
Board to work with Ryan, Beck. At the committee's request, Ryan, Beck solicited
interests from third parties as to a possible acquisition of VSB. Fifteen
companies executed confidentiality agreements for the purpose of reviewing
information regarding VSB provided through Ryan, Beck. Five companies expressed
further interest in a possible acquisition of VSB, and two companies conducted
due diligence investigations. Based upon the review of the various parties'
expressed interest in a possible acquisition of VSB, and in consultation with
the stockholder enhancement committee and VSB's legal and financial advisors,
VSB requested that UJB submit a written proposal for the acquisition of VSB.
Such proposal was provided through Ryan, Beck and after further negotiations
between the parties, accepted. The UJB Board of Directors (the "UJB Board") and
the VSB Board, at separate meetings held on December 15, 1993 and December 16,
1993, respectively, approved the terms of the Merger Agreement and the Stock
Option Agreement. The Merger Agreement and the Stock Option Agreement were
executed and delivered on December 16, 1993 and thereupon announced publicly by
the parties.
The terms of the Merger Agreement and the Stock Option Agreement between UJB
and VSB are the result of arms-length negotiations between representatives of
UJB and VSB. For a discussion of the Stock Option Agreement, see "THE MERGER
AGREEMENT--Issuance of Stock Option."
OPINION OF VSB'S FINANCIAL ADVISOR
In October 1993, VSB renewed a pre-existing agreement with Ryan, Beck
pursuant to which Ryan, Beck acts as its financial advisor and as such, among
other things, advised the VSB Board of Directors on the enhancement of
shareholder value, including the possible sale of VSB to a third party. Ryan,
Beck is regularly engaged in the valuation of banks, bank holding companies,
savings and loan associations, and savings and loan holding companies in
connection with mergers, acquisitions and other securities transactions. Ryan,
Beck has knowledge of, and experience with, the New Jersey banking market and
banking organizations operating in that market and was selected by VSB because
of its knowledge of, experience with, and reputation in the financial services
industry, and because of its past relationship with VSB.
In its capacity as financial advisor to VSB, Ryan, Beck participated in the
negotiations with respect to the pricing and other terms and conditions of the
Merger, but the decision as to whether to accept any offer and the final
pricing of the Merger was ultimately made by the Board of Directors of VSB.
Ryan, Beck rendered its oral opinion to the VSB Board of Directors on December
16, 1993 and rendered its written opinion on April , 1994 that, as of December
16, 1993 and as of April , 1994 the financial terms of UJB's offer was "fair"
to VSB and to its shareholders from a financial point of view. No limitations
were imposed by the VSB Board of Directors upon Ryan, Beck with respect to the
investigations made or procedures followed by it in arriving at its opinion.
19
<PAGE>
THE FULL TEXT OF THE WRITTEN OPINION OF RYAN, BECK DATED AS OF APRIL , 1994,
WHICH SETS FORTH ASSUMPTIONS MADE AND MATTERS CONSIDERED, IS ATTACHED AS
APPENDIX B TO THIS PROXY STATEMENT-PROSPECTUS. VSB SHAREHOLDERS ARE URGED TO
READ THIS OPINION IN ITS ENTIRETY. RYAN, BECK'S OPINION IS DIRECTED ONLY TO THE
CONSIDERATION TO BE RECEIVED BY VSB SHAREHOLDERS IN THE MERGER AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY VSB SHAREHOLDER AS TO HOW SUCH SHAREHOLDER
SHOULD VOTE AT THE ANNUAL MEETING. THE SUMMARY OF THE OPINION OF RYAN, BECK SET
FORTH IN THIS PROXY STATEMENT-PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION. RYAN, BECK'S ORAL OPINION AS OF
DECEMBER 16, 1993 WAS TO THE SAME EFFECT AS THE OPINION ATTACHED HERETO.
In arriving at its written opinion, Ryan, Beck reviewed certain publicly
available business and financial information relating to VSB and UJB. For
purposes of such opinion and in connection with its review of the proposed
Merger, Ryan, Beck: (i) reviewed the Merger Agreement; (ii) reviewed the Proxy
Statement-Prospectus; (iii) reviewed UJB's Annual Reports to Shareholders for
the years ended December 31, 1991 through December 31, 1993, Annual Reports on
Form 10K for the years ended December 31, 1991 through December 31, 1993 and
Quarterly Reports on Form 10-Q for the periods ended March 31, 1993, June 30,
1993 and September 30, 1993; (iv) reviewed VSB's Annual Reports to Shareholders
and Annual Reports on Form 10-K for the fiscal years ended September 30, 1991
through 1993, and Quarterly Report on Form 10-Q for the period ended December
31, 1993; (v) reviewed certain operating and financial information, including
projections, provided to Ryan, Beck by the management of VSB and UJB relating
to their respective business and prospects; (vi) met separately with certain
members of VSB's and UJB's senior management to discuss their respective past
and current business, operations, financial condition and future prospects;
(vii) reviewed the historical stock prices and trading volume of the common
stock of VSB and UJB; (viii) reviewed the terms of recent acquisitions of
savings institutions which Ryan, Beck deemed generally comparable to VSB; and
(ix) reviewed the publicly-available financial data and stock market
performance data of publicly-traded savings institutions and banking
institutions which Ryan, Beck deemed generally comparable to VSB and UJB and
(x) conducted such other studies, analyses, inquiries and examinations as Ryan,
Beck deemed appropriate. Ryan, Beck also reviewed the budget of VSB for the
fiscal year ending September 30, 1994 and met with management of VSB to discuss
VSB's past and current business operations and financial condition. In
rendering its opinion, Ryan, Beck also considered the future prospects of VSB
in the event it remained independent.
In connection with its review, Ryan, Beck relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other information regarding UJB and VSB provided to Ryan, Beck by the companies
and their representatives. Ryan, Beck also did not independently verify but
instead assumed that the allowances for loan losses set forth in the balance
sheets of UJB and VSB at December 31, 1993 were adequate and complied fully
with applicable law, regulatory policy and sound banking practice as of the
date of such financial statements. Ryan, Beck was not retained to nor did it
conduct a physical inspection of any of the properties or facilities of UJB and
VSB nor was it retained to nor did Ryan, Beck make any independent evaluation
or appraisal of UJB's and VSB's assets or liabilities. Ryan, Beck also assumed
that the Merger in all respects is, and will be, undertaken and consummated in
compliance with all laws and regulations that are applicable to UJB and VSB.
In rendering its opinion, Ryan, Beck assumed that, in the course of obtaining
the necessary regulatory approvals for the Merger and in preparation of this
Proxy Statement-Prospectus, no conditions will be imposed that will have a
material adverse effect on the contemplated benefits of the Merger to either
VSB or, on a pro forma basis, to UJB.
In arriving at its opinion, Ryan, Beck performed a variety of financial
analyses. Ryan, Beck believes that its analyses must be considered as a whole
and that consideration of portions of such analyses and the factors considered
therein, without considering all factors and analyses, could create an
incomplete view of the analyses and the process underlying Ryan, Beck's
opinion. The preparation of a fairness opinion is a complex process involving
subjective judgments and is not necessarily susceptible to partial analysis and
summary description.
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In its analyses, Ryan, Beck made numerous assumptions with respect to
industry performance, business and economic conditions, and other matters, many
of which are beyond UJB's or VSB's control. Any estimates contained in Ryan,
Beck's analyses are not necessarily indicative of future results or values,
which may be significantly more or less favorable than such estimates.
Estimates of values of companies do not purport to be appraisals or necessarily
reflect the prices at which companies or their securities may actually be sold.
The following is a brief summary of the analyses and procedures performed by
Ryan, Beck in the course of arriving at its December 16, 1993 oral opinion,
which analyses and procedures were presented to the VSB Board of Directors on
that date.
Impact Analysis. Ryan, Beck analyzed the Merger in terms of its effect on
earnings, book value and indicated dividends. Such analysis was done based on
the issuance of a minimum of 0.7727 shares and a maximum of 0.9444 shares of
UJB Stock for each share of VSB Stock. Ryan, Beck assumed a VSB stockholder
would receive UJB Stock having a market value of $21.25 per share of VSB Stock.
The analysis evaluated, among other things, possible dilution in earnings and
book value per share for UJB and the dividends to be received by VSB
shareholders. This analysis was based upon September 30, 1993 data for UJB and
VSB and future earnings estimates for each, and constitutes a prospective
analysis. Accordingly, the data used in this analysis is not comparable to the
historical data as of or for the year ended December 31, 1993 incorporated by
reference or appearing elsewhere herein. See "Summary--Comparative Per Share
Data (unaudited)."
At the time performed, this analysis indicated that the Merger would be
approximately 1.18% to 2.67% dilutive to UJB's earnings per share, based upon
an exchange ratio of between 0.7727 and 0.9444 shares of UJB Stock for each
share of VSB Stock. Ryan, Beck's analysis also evaluated, among other things,
the Merger's approximate 0.23% to 1.32% dilutive effect on UJB 's book value
per share, based upon an exchange ratio of between 0.7727 and 0.9444 shares of
UJB Stock for each share of VSB Stock. In addition, Ryan, Beck's analysis
considered UJB's current indicated annual dividend of $0.84 per share and VSB's
indicated annual dividend of $0.28 per share. The dividends received by VSB
shareholders would increase by 132.1% to 182.1%, based upon an exchange ratio
of between 0.7727 and 0.9444 shares of UJB Stock for each share of VSB Stock.
This impact analysis was based upon data available at the time performed and
should not be construed as indicative of the actual impact of the Merger when
consummated.
Impact per Share Analysis. Ryan, Beck also analyzed the impact of the Merger
on certain UJB values per VSB share based on an assumed exchange ratio of
0.8808 shares of UJB Stock for one share of VSB Stock. That analysis, which was
based on certain assumptions made by Ryan, Beck, found that, based on the
proposed exchange ratio, UJB 's equivalent earnings per share would be $2.20 or
77.4% greater than existing VSB earnings per share; that UJB's equivalent
tangible book value per share would be $17.32 or 19.2% greater than the
existing VSB tangible book value per share; and that UJB's equivalent dividend
income would be $0.74 per share or 163.3% greater than VSB's current dividend
income per share. Based upon an assumed exchange ratio of 0.9444, the
comparable results would be earnings per share of $2.35 or 89.5% greater,
tangible book value per share of $16.29 or 27.3% greater and dividends per
share of $0.79 or 182.1% greater. Based upon an assumed exchange ratio of
0.7727 shares, the comparable results would be earnings per share of $1.95 or
57.3% greater, tangible book value per share of $13.48 or 5.3% greater and
dividends per share of $0.65 or 132.1% greater.
Comparable Companies and Comparable Acquisitions Analysts. Ryan, Beck
compared VSB's September 30, 1993 total assets of $379.1 million, tangible
equity to total assets of 11.39%, year to date (annualized) return on average
assets of 1.24%, year to date (annualized) return on average equity of 10.75%
and nonperforming assets to total assets of 1.48%, with median figures
calculated based on selected thrifts that had announced acquisition
transactions since January 1, 1993 and which Ryan, Beck deemed comparable.
These median figures were as follows: total assets of $224.1 million, tangible
equity to total assets of 9.80%, year to date (annualized) return on average
assets of 1.18%, year to date (annualized) return on average
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equity of 10.89% and nonperforming assets to total assets of 1.28%. The
comparable companies consisted of 15 savings institutions having assets between
$100 and $750 million.
Ryan, Beck also calculated certain ratios based on the proposed transaction
price for the VSB Stock of $21.25 per share, or an aggregate of $76.4 million,
and certain of VSB's results for the quarter ended September 30, 1993. Those
ratios included the proposed transaction price to VSB's stated book value:
174.47%; the proposed transaction price to VSB tangible book value: 174.47%;
the proposed transaction price to VSB's earnings per share: 17.14 times VSB's
latest twelve month earnings; and the proposed transaction price to VSB's
market price on the day before the transaction was announced: 116.44%, and
premium over tangible book value as a percent of core deposits: 11.83%. Ryan,
Beck then compared these ratios to the median ratios for the selected thrifts
described above. The median ratios were as follows: transaction price to stated
book value: 143.45%; transaction price to tangible book value: 146.56%;
transaction price to earnings per share: 13.72 times; and premium over tangible
book value as a percent of core deposits: 5.39%; and the transaction price to
the market price of the target company on the day prior to the announcement of
the transaction: 129.90% .
Ryan, Beck also compared UJB's stock price of 15.37 times earnings (excluding
the impact of restructuring charges taken during the third quarter of 1993 and
the impact of certain accounting changes) and 138.7% of tangible book value,
tier-one capital as a percentage of risk-adjusted assets of 9.14% and
nonperforming assets plus loans 90 days past due of 2.72% of total assets, with
those for selected U.S. banks and bank holding companies that Ryan, Beck deemed
to be comparable to UJB. The comparable range and median stock prices were 8.33
to 91.80 times and 10.54 times earnings, respectively. The comparable range and
median stock prices were 88.9% to 289.2% and 165.84% of tangible book value,
respectively. The median ratio of tier-one capital as a percentage of risk-
adjusted assets was 10.50%, and the median ratio of non-performing assets plus
accruing loans 90 days past due to total assets was 0.91%. Ryan, Beck also
compared UJB's return on average assets of 0.35% and return on average equity
of 4.88% (including the restructuring charges taken during the third quarter of
1993 and the impact of certain accounting changes) to the median return on
average assets and average equity of 1.16% and 15.77%, respectively, for the
selected companies. Ryan, Beck also compared other income, expense and balance
sheet information of such companies with similar information concerning UJB.
The selected companies included 32 banks and bank holding companies with total
assets between $7 billion and $20 billion whose stock is traded on a national
exchange or quoted on NASDAQ.
No company or transaction used in this composite analysis is identical to
VSB, UJB or the Merger. Accordingly, an analysis of the results of the
foregoing is not mathematical; rather, it involves complex considerations and
judgement concerning differences in financial and operating characteristics of
the companies involved and other factors that could affect the public trading
values of the securities of the company or companies to which they are being
compared.
Discounted Cash Flow Analysis. Ryan, Beck estimated the future earnings per
share and the future dividend stream that VSB could produce over a five-year
period, assuming the satisfaction of minimum capital requirements and growth
rates of 5%, 10% and 15% in earnings per share. Ryan, Beck also estimated the
terminal value of the VSB Stock after the five-year period by applying a range
of 8.0 to 13.0 times VSB's terminal year earnings. Using a discounted cash flow
analysis, the dividend streams and terminal values were then discounted to
present values using discount rates ranging from 8% to 20%, which reflects
different assumptions regarding the required rates of return of holders and
prospective buyers of VSB Stock. The range of present values per fully diluted
share of VSB Stock resulting from these assumptions was from $6.04 to $23.76.
The low end of this range was based upon assumptions of a 5% rate of growth in
earnings per share, an earnings per share multiple of 8 and a 20% discount
rate, while the high end of the range was based on a 15% growth rate, a
multiple of 13 times earnings per share and an 8% discount rate.
RYAN, BECK'S WRITTEN OPINION DATED AS OF APRIL , 1994 WAS BASED SOLELY UPON
THE INFORMATION AVAILABLE TO IT AND THE ECONOMIC, MARKET AND OTHER
CIRCUMSTANCES AS THEY EXISTED AS OF THE DATE OF SUCH OPINION,
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INCLUDING THE MARKET PRICE OF UJB STOCK. EVENTS OCCURRING AFTER THAT DATE,
INCLUDING A MATERIAL CHANGE IN THE MARKET PRICE OF UJB STOCK, COULD MATERIALLY
AFFECT THE ASSUMPTIONS AND CONCLUSIONS CONTAINED IN ITS OPINION. RYAN, BECK HAS
NOT UNDERTAKEN TO REAFFIRM OR REVISE ITS OPINION OR OTHERWISE COMMENT UPON ANY
EVENTS OCCURRING AFTER THE DATE THEREOF.
The summary set forth above does not purport to be a complete description of
the analyses and procedures performed by Ryan, Beck in the course of arriving
at its opinion.
For Ryan, Beck's services in connection with the Merger, VSB has paid Ryan,
Beck a $5,000 retainer and has agreed to pay Ryan, Beck a contingent cash fee
equal to .875% of the aggregate dollar value of the consideration received by
the VSB shareholders in the context of the Merger. Based upon an assumed price
for UJB Stock of $24.125 per share, Ryan, Beck's fee would be approximately
$668,500. This fee will be deemed earned and payable and will be paid in full
at the closing of the Merger. Under its agreement with VSB, in the event that
Ryan, Beck had issued an opinion that the Merger was not fair to the VSB
shareholders, Ryan, Beck would have been entitled to fair and reasonable
compensation, in an amount to be negotiated between VSB and Ryan, Beck, at the
time of the issuance of such opinion. In addition, VSB has agreed to reimburse
Ryan, Beck for its reasonable out-of-pocket costs and expenses incurred in
connection with the services rendered to VSB pursuant to its engagement,
including the fees and expenses of its legal counsel, not to exceed $5,000
without the consent of VSB. VSB has agreed to indemnify Ryan, Beck against
certain liabilities, including liabilities under federal securities law,
incurred in connection with its services. VSB has paid Ryan, Beck the $5,000
retainer and has paid Ryan, Beck $2,267 as reimbursement of out-of-pocket
expenses to date. The amount of all Ryan, Beck's fees were determined by
negotiation between VSB and Ryan, Beck.
Ryan, Beck has been VSB's financial advisor from time to time since 1991.
Ryan, Beck has actively engaged as a market maker for VSB Stock. Ryan, Beck has
not had an investment banking relationship with UJB for the past three years,
nor has it actively engaged in making a market in UJB Stock. Ryan, Beck's
equity research department follows all New Jersey bank and thrift stocks
including UJB and VSB and has produced earnings estimates on UJB and VSB but
has not issued a research report on UJB or VSB during the last year but does
comment on UJB and VSB in its periodic commentaries.
CHARTER AND BY-LAWS OF SURVIVING CORPORATION
Pursuant to the Merger Agreement, the Restated Certificate of Incorporation
and By-Laws of UJB, as in effect at the Effective Time, will be the Certificate
of Incorporation and By-Laws of the Surviving Corporation in the Merger unless
and until amended.
BOARD OF DIRECTORS AND OFFICERS OF SURVIVING CORPORATION
The Merger Agreement provides that the directors and officers of UJB
immediately prior to the Effective Time will continue to be the directors and
officers, respectively, of the Surviving Corporation.
NO DISSENTERS' RIGHTS
Under applicable Delaware law, no dissenters' rights of appraisal are
available to holders of VSB Stock in connection with the Merger.
NEW YORK STOCK EXCHANGE LISTING
UJB has agreed in the Merger Agreement to use its best efforts to cause the
shares of UJB Stock to be issued in the Merger to be listed on the NYSE.
Listing of such shares of UJB Stock on the NYSE (subject to official notice of
issuance) is a condition to the consummation of the Merger.
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ACCOUNTING TREATMENT
It is anticipated that the Merger, when consummated, will be accounted for as
a pooling of interests. Receipt of a letter from KPMG Peat Marwick, independent
certified public accountants for UJB and VSB, to the effect that, based on the
facts known to such accountants, the Merger will qualify for pooling-of-
interests accounting treatment if consummated in accordance with the terms of
the Merger Agreement, is a condition to the consummation of the Merger, unless
receipt of such letter is waived by UJB and VSB.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger is expected to qualify as a "tax-free" reorganization under Section
368 of the Internal Revenue Code of 1954, as amended (the "Code"). UJB has
received an opinion from its counsel, Weil, Gotshal & Manges, and VSB has
received an opinion from its counsel, Luse Lehman Gorman Pomerenk & Schick,
both respecting the federal income tax matters relating to the Merger set forth
below, which were based upon certain representations of the management of UJB
and VSB and certain assumptions. The Weil, Gotshal & Manges opinion covers
items (1) and (2) below as to UJB, and the Luse Lehman Gorman Pomerenk & Schick
opinion covers items (1) through (6) below as to VSB, in each case for federal
income tax purposes:
(1) The Merger will constitute a reorganization within the meaning of
Section 368(a)(1) of the Code;
(2) No gain or loss will be recognized by UJB or VSB, as the case may be,
on the Merger;
(3) No gain or loss will be recognized by VSB Stockholders on the receipt
by them of shares of UJB Stock (including fractional share interests) in
exchange for their shares of VSB Stock pursuant to the Merger;
(4) The aggregate tax basis of the shares of UJB Stock (including
fractional share interests) received by VSB Stockholders will be equal to
their aggregate tax basis in the shares of VSB Stock surrendered in
exchange therefor;
(5) The holding period of the shares of UJB Stock (including fractional
share interests) received by a VSB Stockholder in the Merger will include
the period during which the shares of VSB Stock exchanged therefor were
held, provided that the surrendered shares of VSB Stock were held as a
capital asset on the date of the exchange; and
(6) Where cash is received by a VSB Stockholder in lieu of a fractional
share interest in UJB Stock, such VSB Stockholder will recognize gain or
loss measured by the amount of cash received and the basis in such
fractional share interest. Any such gain or loss will be capital gain or
loss, provided that the fractional share interests in UJB Stock constitutes
a capital asset, and will be short-term or long-term capital gain or loss,
depending upon the holding period for such fractional share interest.
The receipt of such opinions again as of the date of the closing of the
Merger is a condition to the consummation of the Merger, unless waived by the
party entitled to receive such opinion.
THE DISCUSSION OF THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE IS
INCLUDED HEREIN FOR GENERAL INFORMATION ONLY, AND PERTAINS ONLY TO UJB, VSB AND
DOMESTIC UNITED STATES HOLDERS OF THE VSB STOCK REFERRED TO ABOVE. IT DOES NOT
PURPORT TO DESCRIBE ALL OF THE TAX CONSEQUENCES RELATING TO THE MERGER, AND
DOES NOT DESCRIBE THE TAX CONSEQUENCES OF THE EXCHANGE IN THE MERGER OF SHARES
OF VSB STOCK AWARDED UNDER THE VSB STOCK OPTION PLANS. THE FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER TO FOREIGN HOLDERS OF VSB STOCK AND HOLDERS OF VSB
STOCK HAVING SPECIAL STATUS UNDER THE CODE MAY VARY FROM THOSE SET FORTH ABOVE.
ALL VSB STOCKHOLDERS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS BOTH AS
TO THE MATTERS DISCUSSED HEREIN AND AS TO ANY ADDITIONAL FEDERAL, OR ANY STATE,
LOCAL OR FOREIGN, TAX CONSEQUENCES WHICH COULD RESULT FROM THE MERGER.
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DIFFERENCES IN STOCKHOLDERS' RIGHTS
The rights of VSB stockholders, which are determined by Delaware corporation
law and the Certificate of Incorporation and By-Laws of VSB, differ from the
rights accorded UJB shareholders, which are determined by New Jersey
corporation law and the Restated Certificate of Incorporation and By-Laws of
UJB. Some of the differences in stockholders' rights are attributable to
differences between the corporation law of Delaware, the state of VSB's
incorporation, and the corporation law of New Jersey, the state of UJB's
incorporation. The remaining differences in shareholders' right are
attributable to differences between the Certificate of Incorporation and By-
Laws of VSB and the Restated Certificate of Incorporation and By-Laws of UJB.
Certain of the rights of VSB stockholders described below which are provided by
Delaware corporation law or contained in the Certificate of Incorporation or
By-Laws of VSB and which are not provided by New Jersey corporation law or
contained in the Restated Certificate of Incorporation or By-Laws of UJB are
deemed to have an anti-takeover effect and will not be available to VSB
stockholders as UJB shareholders; however, certain rights provided for by New
Jersey corporation law or the Restated Certificate of Incorporation or By-Laws
of UJB are also deemed to have an anti-takeover effect and will be available to
VSB stockholders only after becoming UJB shareholders. The following is a
summary discussion of the most significant differences in stockholders' rights.
This summary is qualified in its entirety by reference to the corporation laws
of Delaware and New Jersey and the governing documents of VSB and UJB referred
to above.
Comparison of Certificates of Incorporation and By-Laws
VSB
---
Limitation on Voting Rights. The Certificate of Incorporation of VSB provides
that in no event shall any outstanding VSB Stock which is beneficially owned,
directly or indirectly, by a person who beneficially owns in excess of 10% of
the then outstanding shares of VSB Stock, be entitled or permitted to any vote
in respect of the shares held in excess of the Limit. Beneficial ownership is
determined pursuant to Rule 13d-3 of the General Rules and Regulations under
the Exchange Act, and in any event includes shares beneficially owned by any
affiliate (as defined in the Certificate of Incorporation) of such person,
shares which such person or his affiliates have the rights to acquire upon the
exercise of conversion rights or options and shares as to which such person and
his affiliates have or share investment or voting power but shall not include
shares beneficially owned by the VSB Employee Stock Ownership Plan or
directors, officers and employees of Valley Savings Bank or VSB. The Restated
Certificate of Incorporation of UJB does not contain a similar provision.
Board of Directors The VSB Board is divided into three classes, each of which
contains approximately one-third of the whole number of the members of the VSB
Board. Each class serves a staggered term, with approximately one-third of the
total number of directors being elected each year. The Certificate of
Incorporation of VSB provides that a director may be removed from the VSB Board
prior to the expiration of his term only for cause and upon the vote of 80% of
stockholders entitled to vote thereon. See the material on page 27 captioned
"UJB--Classified Board and Related Provisions" for a discussion of the
classified board and related provisions provided for in UJB's Restated
Certificate of Incorporation.
Cumulative Voting and Special Meetings. The Certificate of Incorporation of
VSB does not permit cumulative voting for any purpose. Moreover, special
meetings of stockholders of VSB may be called only by the VSB Board. The
Certificate of Incorporation of VSB also provides that any action taken by the
stockholders of VSB may be taken only at an annual or special meeting and
prohibits stockholder action by written consent in lieu of a meeting.
Authorized Shares. The Certificate of Incorporation of VSB authorizes the
issuance of 5,000,000 shares of Common Stock and 2,000,000 shares of Preferred
Stock. The VSB Board also has sole authority to determine the terms of any one
or more series of Preferred Stock, including voting rights, conversion rates,
and liquidation preferences.
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Fair Price Provision. The Certificate of Incorporation of VSB also contains a
provision requiring an affirmative vote of the holders of at least 80% of the
voting power of the then outstanding shares of VSB Stock entitled to vote, to
approve a "Business Combination" with an "Interested Stockholder" (generally a
5% or more holder of voting stock or affiliate or associate thereof), unless
the transaction is either (i) approved by a majority of the Disinterested
Directors; or (ii) is at a minimum fair price (as determined in VSB's
Certificate of Incorporation) during a specified time period. Business
Combinations subject to the above described approval and fair price provisions
include: mergers and consolidations with an Interested Stockholder or affiliate
thereof, the disposition of assets equaling or exceeding 25% of the combined
assets of VSB and its subsidiaries to an Interested Stockholder or affiliate
thereof, the issuance or transfer of securities of VSB or a subsidiary thereof
to an Interested Stockholder or affiliate thereof in exchange for consideration
equal to or exceeding 25% of the combined assets of VSB and its subsidiaries
(except pursuant to an employee benefit plan or a subsidiary thereof), the
adoption of any plan or proposal to liquidate or dissolve VSB proposed by or on
behalf of an Interested Stockholder or affiliate thereof, or any
reclassification of securities or recapitalization or other transaction which
would, directly or indirectly, increase the proportionate share of the
outstanding shares of any class of equity or convertible securities directly or
indirectly owned by an Interested Stockholder or affiliate thereof. While the
Restated Certificate of Incorporation of UJB does not contain such a "fair
price" provision, it does contain a provision providing for the issuance of a
Series R Preferred Stock which, together with other components of UJB's
Shareholder Rights Plan (discussed on page 27 under the caption "UJB--
Shareholder Rights Plan") are similar to the VSB "fair price" provision and
achieve a "fair price" objective comparable to that of the VSB "fair price"
provision. Additionally, New Jersey corporation law requires that transactions
between New Jersey corporations and interested shareholders (holders of 10% or
more of the voting stock of that corporation) receive the approval of two-
thirds of the voting stock of the corporation or meet certain minimum financial
terms similar in objective to the financial terms of the VSB "fair price"
provision (discussed on page 30 at the paragraph captioned "Anti-Takeover
Statutes").
Evaluation of Offers. The Certificate of Incorporation of VSB further
provides that the VSB Board, when evaluating any offer of another person to (i)
make a tender or exchange offer for any equity security of VSB, (ii) merge or
consolidate VSB with another corporation or entity or (iii) purchase or
otherwise acquire all or substantially all of the properties and assets of VSB,
shall, in connection with the exercise of its judgment in determining what is
in the best interest of VSB, Valley Savings Bank and the stockholders of the
VSB, give due consideration to all relevant factors, including, without
limitation, the social and economic effects of acceptance of such offer on
VSB's customers and Valley Savings Bank's present and future account holders,
borrowers and employees; on the communities in which VSB and Valley Savings
Bank operate or are located; and on the ability of VSB to fulfill its corporate
purpose and the ability of Valley Savings Bank to fulfill the objectives of a
New Jersey chartered stock savings association under applicable statutes and
regulations. UJB's Restated Certificate of Incorporation does not contain a
similar provision. However, New Jersey corporation law provides that a director
of a New Jersey corporation, in discharging his or her duties to the
corporation and in determining what he or she reasonably believes to be in the
best interests of the corporation, may, in addition to considering the effects
of any action on shareholders, consider any of the following: (a) the effects
of the action on the corporation's employees, suppliers, creditors and
customers; (b) the effects of the action on the community in which the
corporation operates; and (c) the long-term as well as the short-term interests
of the corporation and its shareholders, including the possibility that these
interests may best be served by the continued independence of the corporation.
Determinations resulting in the rejection of a proposal or offer to acquire the
corporation are expressly covered by this provision of New Jersey corporation
law.
New Business and Director Nominations. The Bylaws of VSB also require a
stockholder who intends to nominate a candidate for election to the VSB Board
or to raise new business at a stockholder meeting to give at least sixty days
advance notice to the Secretary of VSB. See the material on pages 27-28
captioned "UJB-- Nominations to the UJB Board, Shareholder Proposals and
Conduct of Meetings" for a discussion of comparable provisions in UJB's By-
Laws.
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Amendment of Certificate of Incorporation and Bylaws. An affirmative vote of
at least 80% of the outstanding voting stock (after giving effect to the
provision limiting voting rights) is required to amend or repeal certain
provisions of the Certificate of Incorporation, including the provisions
limiting voting rights for approval of certain Business Combinations. A similar
vote requirement is necessary for the stockholders to adopt, amend or repeal
any provisions of the Bylaws of VSB.
UJB
---
Classified Board and Related Provisions. The Restated Certificate of
Incorporation of UJB divides the UJB Board into three classes, with each class
of directors serving a staggered term of the three years. Each class of
directors must consist, as nearly as possible, of one third of the number of
directors constituting the entire UJB Board. Presently there are four directors
in Class I, four directors in Class II and four directors in Class III.
The Restated Certificate of Incorporation of UJB further requires that
resolutions increasing the number of directors be approved by 80% of, as the
case may be, directors holding office or shares of capital stock of the Company
entitled to vote generally in the election of directors, voting as a single
class.
The Restated Certificate of Incorporation of UJB also provides that the
affirmative vote of the holders of 80% or more of the combined voting shares of
the Company, voting as a single class, is required to amend, repeal or take any
action inconsistent with the classified board of directors or the requirement
for an 80% affirmative vote to approve any increase in the number of directors.
Meetings and Consents. The Restated Certificate of Incorporation of UJB
requires that all actions by the shareholders of the Company be taken at a duly
called annual or special meeting of the Company's shareholders or by the
unanimous, but not less than unanimous, written consent of the shareholders. An
additional provision in the Restated Certificate of Incorporation of UJB
provides that the affirmative vote of the holders of 80% or more of the
combined voting shares of the Company, voting as a single class, is required to
amend, alter, repeal or take any action inconsistent with this requirement.
Shareholder Rights Plan. UJB has in effect a shareholder rights plan pursuant
to which holders of shares of UJB Stock possess one preferred stock purchase
right for each share of UJB Stock held. Each preferred stock purchase right
entitles the holder to buy, as of the close of business on the tenth day
following the occurrence of certain takeover-related events (the "effective
time"), one-hundredth of a share of a new series of Preferred Stock, designated
the Series R Preferred Stock, at $90 per one-hundredth share (the "exercise
price"), with full shares having rights per share equal to 100 times the rights
of UJB Stock with respect to voting, dividends and distributions upon
liquidation or merger as well as entitling the holder to an additional
preferential dividend. Upon the occurrence of certain subsequently occurring
events, holders of the preferred stock purchase rights become entitled to
purchase either shares of the Series R Preferred Stock (if not already
purchased) or a number of shares of the "acquiring person" (as defined in the
rights plan) equal in market value to twice the exercise price of the preferred
stock purchase right. The UJB Board has the power to redeem the preferred stock
purchase rights at any time but, after the effective time, it may do so only
upon the majority vote of non-management directors in connection with a
business combination it has approved. The combination of prohibitive dilution
of the acquiring person's share values and the power of the UJB Board to redeem
the preferred stock purchase rights is intended to encourage potential
acquiring persons to negotiate with the UJB Board with respect to the terms of
any acquisition or business combination and, to the extent possible, discourage
or defeat partial or two-tiered acquisition proposals and achieve a result
similar to that intended by the "fair price provision" of the VSB Certificate
of Incorporation.
Nominations to the UJB Board, Shareholder Proposals and Conduct of
Meetings. The By-Laws of UJB contain provisions which (i) empower the UJB Board
to adopt rules and regulations governing meetings of UJB shareholders and
empower the chairman of a meeting of UJB shareholders, subject to the rules and
regulations adopted by the UJB Board, to adopt such rules, regulations and
procedures and to take such acts which the chairman deems necessary,
appropriate or convenient for the proper conduct of a shareholder
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meeting, and (ii) establish rules governing nominations for director and
shareholder proposals made at meetings of shareholders and empower the chairman
of the meeting to disallow nominations and shareholder proposals which are not
made at least 70 days in advance of the particular meeting or which otherwise
fail to comply with the requirements of the By-Laws.
Preferred Stock. The Restated Certificate of Incorporation of UJB authorizes
the issuance of 4,000,000 shares of preferred stock. Approximately 600,166
shares of Series B Preferred Stock are currently outstanding. The Restated
Certificate of Incorporation of UJB and the New Jersey Business Corporation Act
authorize the UJB Board to amend the Restated Certificate of Incorporation
without shareholder concurrence to divide the authorized shares of preferred
stock into series, to determine the designations and the number of shares of
any such series, and to determine the relative voting, dividend, conversion,
redemption, liquidation and other rights, preferences and limitations of the
authorized shares of preferred stock.
Comparison of Corporation Laws
Appraisal Rights in Merger or Consolidation. Under New Jersey corporation
law, unless a certificate of incorporation otherwise provides, a dissenting
shareholder of a New Jersey corporation which is a party to a consolidation, or
which is not the surviving corporation in a merger, or which is the surviving
corporation in a merger requiring shareholder approval, has appraisal rights
with respect to any shares other than (1) shares listed on a national
securities exchange or held of record by not less than 1,000 holders, and (2)
shares in exchange for which, pursuant to the plan of merger or consolidation,
the shareholder will receive cash and/or securities which will be listed on a
national securities exchange or held of record by not less than 1,000 holders.
UJB's Restated Certificate of Incorporation contains nothing which provides
differently. Under Delaware corporation law, stockholders of a Delaware
corporation have appraisal rights in a merger or consolidation, except for
certain mergers and consolidations not requiring any vote by stockholders of
the corporation, with respect to any shares other than shares listed on a
national securities exchange or designated as a national market system security
on an interdealer quotation system by the NASD or held of record by more than
2,000 holders. However, even with respect to shares so listed or held,
appraisal rights exist if, pursuant to the plan of merger, the stockholder is
to receive in exchange for his shares anything other than stock of the
surviving corporation, stock of any corporation listed on a national securities
exchange or designated as a national market system security or an interdealer
quotation system by the NASD or held of record by more than 2,000 holders or
cash in lieu of fractional shares.
Appraisal Rights Relating to Disposition of Assets. Under New Jersey
corporation law, a dissenting shareholder in a New Jersey corporation has
appraisal rights in the case of any sale, lease, exchange or other disposition
of substantially all of the assets of the corporation not in the usual or
regular course of business as conducted by the corporation, except with respect
to (1) shares listed on a national securities exchange or held of record by not
less than 1,000 holders, or (2) a transaction pursuant to a plan of dissolution
of the corporation which provides for the distribution of substantially all of
its net assets to shareholders according to their interests within one year,
where such transaction is wholly for cash and/or securities which will be
listed on a national securities exchange or held of record by not less than
1,000 holders, or (3) a sale pursuant to court order. Delaware corporation law
does not provide for appraisal rights in connection with dispositions of
assets.
Class Voting on Merger or Consolidation. Under New Jersey corporation law,
any class or series of shares shall be entitled to vote as a class if the plan
of merger or consolidation contains any provision which, if contained in a
proposed charter amendment, would entitle the class or series to vote as a
class on the amendment. Delaware corporation law is similar to the New Jersey
corporation law.
Source of Dividends. Under New Jersey corporation law, dividends may not be
paid if, after giving effect to the dividend, either (1) the corporation would
be unable to pay its debts as they become due in the ordinary course of its
business or (2) the corporation's total assets would be less than its total
liabilities. Under Delaware corporation law, dividends may be paid out of
surplus or, in the absence thereof, out of the net profits of the current
and/or next preceding fiscal year, except where capital represented by stock
enjoying a preference upon the distribution of assets thereby would be
impaired.
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Power to Adopt, Amend or Repeal By-laws. Under New Jersey corporation law,
the power to adopt, amend and repeal by-laws of a corporation is vested in the
Board of Directors unless such power is reserved to the shareholders in the
certificate of incorporation, but by-laws made by the Board of Directors may be
amended and repealed and new by-laws adopted by the shareholders and the
shareholders may prescribe in such by-laws that the Board may not amend or
repeal by-laws approved by shareholders. Under Delaware corporation law, the
power to adopt, amend or repeal by-laws of a corporation is vested in the
corporation's stockholders, although the corporation's certificate of
incorporation may also vest such power in the corporation's board of directors.
Action by Shareholders by Written Consent in Lieu of a Meeting. Under New
Jersey corporation law, except as otherwise provided in a certificate of
incorporation, any action (other than the election of directors) required or
permitted to be taken at a meeting of the corporation's shareholders, may be
taken without a meeting upon the written consent of shareholders who would have
been entitled to cast the minimum number of votes which would have been
necessary to take such action at a meeting at which all shares entitled to vote
thereon were present and voted (except that the election of a directors
requires unanimous written consent of all shareholders). The corporation must
give all shareholders advance notice of such proposed action if the proposed
action involves a merger, consolidation or sale of substantially all of the
assets of a corporation. As discussed earlier, UJB's Restated Certificate of
Incorporation permits action by written consent only where the consent is
unanimous. Under Delaware corporation law, except as otherwise provided in a
company's certificate of incorporation, any action required or permitted to be
taken at the meeting of a corporation's stockholders may be taken without a
meeting if a written consent, setting forth the action so taken, is signed by
the holders of outstanding shares having not less than the minimum number of
votes that would have been necessary to take such action at a meeting at which
all shares entitled to vote thereon were present and voted. As discussed
earlier, VSB's Certificate of Incorporation prohibits stockholder action by
written consent in lieu of a meeting.
Removal of Directors. Under New Jersey corporation law, one or more of all
directors of a corporation may be removed for cause or, unless otherwise
provided in the certificate of incorporation, without cause by shareholders by
the affirmative vote of the majority of the votes cast by the holders of shares
entitled to vote thereon. Unless otherwise provided in the certificate of
incorporation, shareholders of a corporation whose board of directors is
classified may not remove a director without cause. Under Delaware corporation
law, any director or the entire board of directors may be removed, with or
without cause, by the holders of a majority of the shares then entitled to vote
at an election of directors, except (i) unless the certificate of incorporation
otherwise provides, in the case of a corporation whose board is classified,
stockholders may effect such removal only for cause; or (ii) in the case of a
corporation having cumulative voting, if less than the entire board is to be
removed, no director may be removed without cause if the votes cast against his
removal would be sufficient to elect him if then cumulatively voted at an
election of the entire board of directors, or, if there be classes of
directors, at an election of the class of directors of which he is a part. As
discussed earlier, VSB's Certificate of Incorporation provides that a director
may be removed from office prior to the end of his term only for cause and upon
the vote of 80% of the stockholders entitled to vote thereon.
Special Meetings of Shareholders. Under New Jersey corporation law, holders
of not less than 10% of a corporation's voting stock may apply to the New
Jersey Superior Court for an order directing a special meeting of shareholders
to be held. Under Delaware corporation law, special meetings of stockholders
may be called by the Board of Directors or by such person or persons as may be
authorized by a company's certificate of incorporation or the by-laws. VSB's
Certificate of Incorporation provides that only the VSB Board may call a
special meeting of stockholders.
De Facto Merger. Under New Jersey corporation law, shareholders have the same
voting and dissent and appraisal rights as if they were shareholders of a
surviving corporation in a merger, if (1) voting shares outstanding or issuable
after the transaction exceed by more than 40% voting shares outstanding before
the transaction or (2) shares entitled to participate without limitation in
distributions outstanding or issuable after the transaction exceed by more than
40% such shares outstanding before the transaction. Delaware corporation law
does not contain a comparable provision.
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Shareholders' Derivative Actions. New Jersey corporation law contains certain
provisions which have the effect of discouraging derivative actions.
Specifically, New Jersey law authorizes the Court to award reasonable expenses
and attorney's fees to the successful defendants in a derivative action upon a
finding that the action was brought without cause. In addition, the corporation
may require the plaintiff or plaintiffs to give security for the reasonable
expenses, including attorneys' fees, that may be incurred by the corporation or
by other named defendants for which the corporation may become legally liable
if plaintiff or plaintiffs are holders of less than 5% of the outstanding
shares of any class or series of such corporation (or voting trust certificates
therefor) unless the shares or trust certificates so held have a market value
in excess of $25,000. Delaware corporation law does not contain comparable
provisions.
Proxies. Under New Jersey corporation law, a proxy is valid for no longer
than eleven months unless a longer period is specified. In addition, a proxy is
revocable at will unless coupled with an interest. The death or incapacity of a
shareholder does not revoke a proxy and it will continue in force until
revocation by the shareholder's personal representative. Under Delaware
corporation law, a proxy is not valid beyond three years from its date unless
it so provides for a longer period. In addition, for a proxy to be irrevocable
it must so state and be coupled with an interest in the stock itself or in the
corporation generally, sufficient in law to support an irrevocable power.
Inspection of Books and Records. Under New Jersey corporation law, a
shareholder of record for at least 6 months immediately preceding his demand or
any holder (or a person authorized on behalf of such holder) of at least 5% of
the outstanding shares of any class or series shall have the right to examine
for any proper purpose the books and records. Under Delaware corporation law,
any stockholder upon written demand under oath stating the purpose thereof has
the right during usual business hours to inspect for any proper purpose the
stock ledger, list of stockholders and other books and records, and to make
copies or abstracts therefrom.
Anti-takeover Statutes. New Jersey has adopted a type of anti-takeover
statute known as a "business combination" statute. Subject to numerous
qualifications and exceptions, the statute prohibits an interested stockholder
of a corporation from effecting a business combination with the corporation for
a period of five years unless the corporation's board approved the transaction
prior to the stockholder becoming an interested stockholder. An "interested
stockholder" is defined to include any beneficial owner of 10% or more of the
voting power of the outstanding voting stock of the corporation and any
affiliate of the corporation who within the prior five-year period has at any
time owned 10% or more of the voting power. The term "business combination" is
defined broadly to include, inter alia, merger of the corporation with the
interested stockholder or any corporation which after such merger would be an
affiliate of the interested stockholder, and any transfer of 10% or more of the
corporation's assets to the interested stockholder or affiliate thereof. The
effect of the statute is to protect non-tendering post-acquisition minority
shareholders from mergers in which they will be "frozen out" after the merger,
by prohibiting transactions in which an acquiror could favor itself at the
expense of minority stockholders. The New Jersey statute does not apply to New
Jersey corporations which do not have either their principal executive offices
or significant business operations located in New Jersey. Delaware has adopted
a business combination type of anti-takeover statute which operates in a manner
similar to the New Jersey statute. Although there are numerous differences
between the Delaware statute and the New Jersey statute, the most significant
include the following: (i) under the Delaware statute, the moratorium imposed
on a business combination with an interested stockholder is three years, as
opposed to five years under the New Jersey statute; (ii) the Delaware statute
defines "interested stockholder" using a 15% ownership threshold rather than
the 10% threshold under the New Jersey statute; (iii) the Delaware statute
permits an interested stockholder to avoid the moratorium by acquiring 85% of
the corporation's voting power in the same transaction in which that
stockholder becomes an interested stockholder; the New Jersey statute does not
contain a comparable provision; and (iv) the Delaware statute applies to
Delaware corporations regardless of the locations of their offices and business
operations.
Indemnification. Under New Jersey corporation law, a corporation may
indemnify any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the
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corporation as a director, officer, trustee, employee or agent of another
corporation, partnership, joint venture, sole proprietorship, trust or other
enterprise, against his reasonable expenses (including counsel fees) in
connection with any pending, threatened or completed proceeding by or in the
right of the corporation to procure a judgment in its favor which involves such
person by reason of his corporate agent status, if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation. However, no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation, unless and only to the extent that
the Superior Court of New Jersey or the court in which such proceeding was
brought shall determine that, despite the adjudication of liability but in view
of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Superior Court of New Jersey
or such other court shall deem proper. In connection with any other proceeding,
a corporation may indemnify any such person against his reasonable expenses and
liabilities in connection with any such proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal proceeding, he
had no reasonable cause to believe his conduct was unlawful. New Jersey
corporation law requires that a corporation shall indemnify any such person
against expenses to the extent such person has been successful on the merits or
otherwise in any of the foregoing proceedings or in the defense of any claim,
issue or matter therein, and provides that any such person may apply to a court
for an award of indemnification by the corporation if the corporation has
failed or refused to provide indemnification as provided under the statute.
New Jersey corporation law also permits a corporation to purchase and
maintain insurance on behalf of any such person against any expenses incurred
in any proceeding and any liabilities asserted against such person by reason of
his corporate agent status, whether or not the corporation would have the power
to indemnify such person under the statute.
Similarly, the Delaware corporation law provides that a corporation may
indemnify any person with respect to certain pending or threatened actions
including a suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation and except that no indemnification shall
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery of Delaware or the court in which such action
or suit was brought shall determine upon adjudication that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery of Delaware or such other court shall deem proper.
The Delaware corporation law permits a Delaware business corporation to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against such person and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify such person.
THE MERGER AGREEMENT
The following discussion is a summary of certain provisions of the Merger
Agreement, a copy of which is attached hereto as Appendix A and incorporated
herein by reference, and is qualified in its entirety by reference to that
agreement.
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EFFECTIVE TIME
If the Merger Agreement is approved by the requisite vote of VSB Stockholders
and the other conditions of the Merger, including receipt of all requisite
regulatory approvals, are satisfied or waived, the Merger will become effective
at the date and time specified in the Certificate of Merger respecting the
Merger filed with the Office of the Secretary of State of the State of New
Jersey (the "NJ Certificate"), or, if filed later than the date of the NJ
Certificate, the date of filing of the Certificate of Merger with the Office of
the Secretary of State of the State of Delaware. It is presently contemplated
that the Effective Time will occur late in the second calendar quarter or early
in the third calendar quarter of 1994 due to the need to obtain regulatory
approvals. The Merger Agreement may be terminated by either party if, among
other things, the Effective Time does not occur on or before September 30,
1994.
CLOSING OF THE MERGER
The Merger Agreement provides that, unless otherwise agreed, the closing of
the Merger (the "Closing") will be held on at least five business days notice
(the "Closing Notice") given to VSB by UJB, on a date (the "Closing Date") not
earlier than the last to occur, but (subject to the exception described below)
not later than 15 business days after the last to occur of the following: (1)
the date of approval of the Merger Agreement by VSB Stockholders; (2) if the
transactions contemplated by the Merger Agreement are being contested in any
legal proceedings, the date that all such proceedings have been brought to a
conclusion favorable, in the judgment of UJB and VSB, to the consummation of
the transactions contemplated by the Merger Agreement or such prior date as UJB
and VSB shall elect, whether or not such proceedings have been brought to a
conclusion; and (3) the date on which all governmental approvals are received
and all required waiting periods have expired. In the event either party is
unable to close the Merger within the above-described 15-day period for reasons
outside its control, such as the unavailability of customary certificates of
good standing or other supporting documents, such party may delay the Closing
up to the date which is 30 calendar days after the last to occur of the dates
set forth in clauses (1), (2) and (3) above.
DETERMINATION OF EXCHANGE RATIO
In the Merger, each share of VSB Stock will be converted into and represent a
number of shares of UJB Stock equal to the Exchange Ratio. The Exchange Ratio
has not yet been fixed and will not be fixed prior to the date of the Annual
Meeting. The Merger Agreement provides for the Exchange Ratio to be fixed on
the "Determination Date", which will be the date designated by UJB in the
Closing Notice as the Determination Date and which may not be more than five
business days prior to the Closing Date. On the Determination Date, the
"Average Price" of UJB Stock will be calculated. The Average Price will be the
average of the closing prices of a share of UJB Stock on the NYSE for ten
consecutive trading days ending on the Determination Date.
The Exchange Ratio will be determined as follows based on the Average Price:
(1) If the Average Price of a share of UJB Stock is greater than $27.50,
the Exchange Ratio will be .7727.
(2) If the Average Price of a share of UJB Stock is equal to or greater
than $22.50 and equal to or less than $27.50, the Exchange Ratio will
be equal to the quotient obtained by dividing $21.25 by the Average
Price.
(3) If the Average Price of a share of UJB Stock is less than $22.50 and
greater than or equal to $20.65, the Exchange Ratio shall be .9444.
(4) If the Average Price of a share of UJB Stock is less than $20.65, VSB
has the right to terminate the Merger Agreement by sending a notice of
termination (the "Termination Notice") to UJB within
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three business days following the Determination Date, but UJB has the
right to nullify such termination notice by sending to VSB within three
days of its receipt of the Termination Notice a notice agreeing to an
Exchange Ratio equal to the quotient obtained by dividing $19.50 by the
Average Price.
The Exchange Ratio is subject to the following adjustments in the event the
Closing Date occurs later than July 20, 1994:
(1) If the Closing Date occurs during the period July 21, 1994 through
August 20, 1994, (i) the Exchange Ratio determined pursuant to
Paragraph (1) or (3) above will be increased to .7749 and .9471,
respectively, and (ii) the numerator of the quotient used to determine
the Exchange Ratio in accordance with Paragraph (2) or (4) above will
be increased to $21.31 and $19.56, respectively.
(2) If the Closing Date occurs during the period August 21, 1994 through
September 20, 1994, (i) the Average Price determined pursuant to
Paragraph (1) or (3) above will be increased to .7793 and .9524,
respectively, and (ii) the numerator of the quotient used to determine
the Exchange Ratio in accordance with Paragraph (2) or (4) above will
be increased to $21.43 and $19.68, respectively.
(3) If the Closing Date occurs during the period September 21, 1994 through
September 30, 1994, (i) the Exchange Ratio determined pursuant to
Paragraph (1) or (3) above will be increased to .7858 and .9604,
respectively, and (ii) the numerator of the quotient used to determine
the Exchange Ratio in accordance with Paragraph (2) or (4) above will
be increased to $21.61 and $19.86, respectively.
The Exchange Ratio is also subject to appropriate adjustments in the event
that from the date of the Merger Agreement to the Effective Time, the
outstanding shares of UJB Stock are increased or decreased, changed into or
exchanged for a different number or kind of shares or securities through
reorganization, recapitalization, reclassification, stock dividend, stock split
or reverse stock split or other similar changes.
CONVERSION AND EXCHANGE OF VSB STOCK
Pursuant to the Merger Agreement, each outstanding share of VSB Stock will be
converted into and represent the number of shares of UJB Stock equal to the
Exchange Ratio (subject to certain anti-dilution adjustments), except shares of
VSB Stock beneficially owned by UJB, if any, and shares of VSB Stock held in
the treasury of VSB, if any, which will be cancelled and retired.
Each holder of VSB Stock who would have been entitled to receive a fraction
of a share of UJB Stock (after taking into account all shares of VSB Stock
owned by such holder) will receive in lieu thereof, cash in an amount equal to
such fraction multiplied by the Average Price. Fractional share interests will
not entitle the holders thereof to vote or to receive any dividends or any
interest on the cash payable in lieu thereof.
Prior to the Effective Time, UJB will appoint United Jersey Bank, First
Chicago Trust Company of New York or another entity reasonably satisfactory to
VSB as the exchange agent (the "Exchange Agent"). As soon as practicable after
the Effective Time the Exchange Agent will mail to each VSB Stockholder of
record at the Effective Time instructions and other materials to be used to
surrender certificates representing VSB Stock (the "Certificates") in exchange
for certificates representing the UJB Stock (and cash in lieu of fractional
shares) which such holder is entitled to receive pursuant to the Merger
Agreement. All Certificates so surrendered will be cancelled. Until so
surrendered, UJB may, at its option, refuse to pay to the holders of the
Certificates dividends or other distributions, if any, payable to holders of
UJB Stock; provided, however, that upon surrender and exchange of the
Certificates there shall be paid to such holders the amount, without interest,
of dividends and other distributions, if any, which became payable prior
thereto but which were not paid. No transfer of VSB Stock will be effected on
the stock transfer books of VSB at and after the Effective Time.
VSB STOCKHOLDERS SHOULD NOT SURRENDER THEIR CERTIFICATES FOR EXCHANGE UNTIL
INSTRUCTIONS AND OTHER MATERIALS ARE RECEIVED FROM THE EXCHANGE AGENT. However,
VSB Stockholders are urged to notify VSB now at (201) 768-4600, extension 256,
if their certificates are lost, stolen, destroyed or not properly registered,
in order to begin the process of issuance of replacement certificates.
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VSB STOCK OPTION PLANS
VSB has maintained two stock option plans, the Director Option Plan and the
Incentive Plan.
VSB Stock Option Plan for Outside Directors
As of March 25, 1994, options to purchase 143,856 shares of VSB Stock were
issuable pursuant to outstanding Director Options granted under the Director
Option Plan.
VSB 1988 Incentive Option Plan
Also currently outstanding as of March 25, 1994 are the Tandem Options,
consisting of options to purchase 129,679 shares of VSB Stock granted under the
Incentive Option Plan and any limited rights granted in tandem with such
options. The Limited Rights become exercisable only upon a "Change in Control"
of VSB (as defined in the Incentive Plan) and give the holders thereof the
right upon exercise to receive, in lieu of the VSB Stock purchasable upon
exercise of the related Incentive Plan Option, cash equal to the difference
between the exercise price of the related Incentive Plan Option and the fair
market value of a share of VSB Stock on the date of exercise. The Merger will
constitute a "Change in Control" of VSB under the Incentive Plan and the
Limited Rights will become exercisable at the Effective Time. VSB and UJB have
each been advised by their respective independent public accountants that an
exercise of a limited right, following the conversion in the Merger of all
outstanding Tandem Options into stock options and limited rights relating to
UJB Stock, would be inconsistent with pooling-of-interests accounting
treatment. Consequently, VSB agreed to use its best efforts to enter into
Amending Agreements with holders of Tandem Options providing for the conversion
of such Tandem Options into stock options and limited rights relating to UJB
Stock on terms and conditions identical to those provided for in the Tandem
Options and the Incentive Plan, except that holders of the converted stock
options and limited rights would have the right to receive UJB Stock (rounded
down to the nearest whole share), rather than cash, upon exercise of the
converted limited rights. UJB's obligation to consummate the Merger is
conditioned upon VSB's obtaining sufficient Amending Agreements to permit the
Merger to be accounted for as a pooling-of-interests.
General
At the Effective Time, each outstanding Director Option will be automatically
converted into an option to acquire the number of shares of UJB Stock which
would have been issued pursuant to the Merger if all of the shares of VSB Stock
subject to the particular Director Option were issued and outstanding
immediately prior to the Effective Time. At the Effective Time, each
outstanding Tandem Option will be automatically converted into a stock option
and limited right with respect to the number of shares of UJB Stock which would
have been issued pursuant to the Merger if all of the shares of VSB Stock
subject to the Tandem Option were issued and outstanding immediately prior to
the Effective Time. The exercise price for the UJB Stock subject to a converted
option will be equal to the exercise price for the VSB Stock subject to the
Director Option or Tandem Option so converted divided by the Exchange Ratio,
and will be subject to the other terms and conditions in the applicable VSB
option agreement, except as provided otherwise in an Amending Agreement. A
converted Director Option will be exercisable in accordance with the terms of
the Director Option Plan and a converted Tandem Option will be exercisable in
accordance with the terms of the Incentive Plan, except as provided otherwise
by an Amending Agreement. The number of shares of UJB Stock that may be
purchased under any such converted option will not include any fractional share
but will be rounded down to the next lower full share. As soon as practicable
after the Effective Time, UJB will issue to the holders of Director Options and
Tandem Options appropriate instruments confirming the conversion described
above; provided, however, that UJB will not be obligated to issue such
confirming instruments or any shares of UJB Stock upon the exercise of any
converted options or limited rights until the shares of UJB Stock issuable upon
exercise of the converted options or limited rights have been registered with
the Commission, and have been authorized for listing on the NYSE and for sale
by any appropriate state securities regulators, which UJB will use its best
efforts to effect as promptly as practicable, but in no event more than 30 days
after the Effective Time.
INTEREST OF CERTAIN PERSONS IN THE MERGER
Upon the consummation of the Merger, Mr. Greene will be entitled to receive a
cash payment and certain other benefits pursuant to change in control
provisions in his employment contracts with VSB and
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Valley Savings Bank. See "PROPOSAL II--ELECTION OF DIRECTORS--Executive
Compensation." The cash payment to be made to Mr. Greene upon consummation of
the Merger will be approximately $ and the estimated value of other
benefits to be provided to Mr. Greene is $ . Additionally, Mr. Greene
participates in the ESOP and the Incentive Option Plan, both of which are
discussed elsewhere herein, and in the MRP, a stock award plan for key
employees under which no additional grants will be made but which will continue
to be administered in accordance with its terms following the Merger.
Directors and former directors of VSB and of Valley Savings Bank will be
afforded indemnification rights and advancement of expenses as provided for
under New Jersey law and, respectively, in the Restated Certificate of
Incorporation and By-laws of UJB and the Certificate of Incorporation and By-
laws of Valley Savings Bank and any successor banking corporation.
COVENANTS
VSB Covenants
Pursuant to the Merger Agreement, VSB has covenanted, among other things,
that, until termination of the Merger Agreement, VSB will advise UJB of any
material adverse change in VSB's business and certain other circumstances, and
the business of VSB and its subsidiaries will be carried on diligently and
substantially in the same manner as prior to the execution of the Merger
Agreement. Furthermore, until termination of the Merger Agreement, without the
prior written consent of UJB, VSB will not declare or pay any cash dividends at
a quarterly rate in excess of $0.07 and will refrain from taking certain other
actions, including certain actions relating to changes in its capital stock,
the incurrence of liabilities and the issuance of capital stock.
VSB also has agreed that, until termination of the Merger Agreement, it will
not directly or indirectly through any agent solicit or initiate, or encourage
any unsolicited inquiry respecting, any proposal or offer for, or authorize or
enter into any agreement or agreement in principle providing for any business
combination or takeover transaction (other than the Merger), whether as the
proposed surviving, disappearing, acquiring or acquired corporation, or (except
as may be required by court order or decree or required by statute or
regulation) furnish or cause to be furnished any information, except
information previously made public and any information customarily furnished to
the public in the ordinary course of business, concerning its business or
properties to any person or entity other than UJB, and except as the VSB Board
in the exercise of its fiduciary duties determines otherwise. In addition, VSB
has agreed to notify UJB by telephone promptly upon receipt of any inquiry with
respect to a proposed merger, consolidation, business combination, assets
acquisition or disposition, tender offer or other takeover transaction with
another person or receipt of a request for information from any governmental or
regulatory authority with respect to a proposed acquisition of VSB or any of
its subsidiaries or assets by another party, and to deliver as soon as possible
by facsimile transmission to UJB a copy of any document relating thereto
promptly after any such document is received by VSB.
UJB Covenants
Pursuant to the Merger Agreement, UJB has covenanted, among other things,
that until termination of the Merger Agreement UJB will advise VSB of any
material adverse change in UJB's business and certain other circumstances, and
will use its best efforts to preserve its business organization intact and its
relationship with customers and others having business dealings with it.
UJB has also agreed supplementally not to adopt the VSB ESOP and,
accordingly, in accordance with the terms of the ESOP, the ESOP will terminate
upon the passage of time.
UJB has agreed to comply with the VSB severance policy with respect to
employees of VSB or any of its subsidiaries, or persons hired to replace such
employees, whose employment with UJB is terminated without cause within
eighteen months of the Effective Time and to pay one additional month of
severance payments to such terminated employees. In addition to the covenant
respecting involuntary termination of employment, certain VSB employees, if
assigned within one year of the Effective Time to positions other than those
held by them at the Effective Time, will have a six month period to terminate
their employment voluntarily and receive severance benefits in accordance with
the VSB severance policy plus the one additional month of
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severance payments provided for with respect to involuntary terminations. UJB
has also agreed in connection with the Merger that all persons who are
employees of Valley Savings Bank at the Effective Time shall remain employees
of Valley Savings Bank for 90 days following the Effective Time, except persons
with respect to whom termination for cause exists.
REGULATORY APPROVALS
The Merger is subject to approval by the Federal Reserve Board under the
Banking Holding Company Act of 1956, as amended (the "BHC Act"). The BHC Act
provides that the Federal Reserve Board may not approve any transaction: (1)
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
business of banking in any part of the United States, or (2) the effect of
which in any section of the country may be substantially to lessen competition,
or to tend to create a monopoly, or which in any other manner would be in
restraint of trade, unless the Federal Reserve Board finds that the
anticompetitive effects of the proposed transaction are clearly outweighed in
the public interest by the probable effect of the transaction in meeting the
convenience and needs of the communities to be served. In conducting its review
of any application for approval, the Federal Reserve Board is required to
consider the financial and managerial resources and future prospects of the
company or companies and the banks concerned, and the convenience and needs of
the communities to be served. Under the BHC Act as interpreted by the Federal
Reserve Board and the courts, the Federal Reserve Board may deny any
application if it determines that the financial or managerial resources of the
acquiring bank holding company are inadequate. The acquisition by UJB of 5% or
more of VSB's voting stock, whether by exercise of the Stock Option or
otherwise, is subject to the same approval. The BHC Act provides that a
transaction approved by the Federal Reserve Board may not be consummated for 30
days after such approval. During such period, the Justice Department may
commence legal action challenging the transaction under the antitrust laws. If,
however, the Justice Department does not commence legal action during the 30-
day period, it may not challenge the transaction thereafter except in an action
commenced under Section 2 of the Sherman Antitrust Act. The BHC Act provides
for the publication of notice and the opportunity for administrative hearings
relating to the application for approval of the Merger and authorizes the
Federal Reserve Board to permit interested parties to intervene in the
proceedings. If an interested party is permitted to intervene, such
intervention could substantially delay the regulatory approval required for
consummation of the Merger.
The indirect acquisition by UJB of 100% of the capital stock of Valley
Savings Bank by virtue of UJB's acquisition of 100% of the capital stock of,
and merger with, VSB is subject to the approval of the New Jersey Commissioner
of Banking under the New Jersey Savings Bank Holding Companies Act (the "New
Jersey Savings Bank Act"). In determining whether to approve the direct or
indirect acquisition of shares of a capital stock savings bank, the New Jersey
Commissioner of Banking is required by the New Jersey Savings Bank Act to
consider:
(1) With respect to the acquiror: the financial condition and the
resources of the acquiror; the competence, character, and banking
experience of the acquiror, including the acquiror's record of compliance
with laws and regulations; whether the acquiror has (i) employed any
device, scheme or artifice to defraud; or (ii) obtained or will obtain any
money or property by means of any untrue statement of a material fact or
any omission of a material fact; or (iii) engaged in any act, transaction,
practice or course of business which operates or would operate as a fraud
or deceit upon the capital stock savings bank, the shareholders of the
capital stock savings bank, the depositors thereof, or the public at large;
and the acquiror's plans and intentions with respect to the operation of
the capital stock savings bank; and
(2) With respect to the capital stock savings bank: the financial
condition and prospects of the capital stock savings bank, which shall
include consideration as to the sufficiency of current or projected capital
positions, as well as the level of indebtedness of the capital stock
savings bank before and after the acquisition; the convenience and needs of
the depositors and the communities served by the capital stock savings
bank; and the effect of the proposed acquisition on the safety and
soundness of the capital stock savings bank.
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The New Jersey Savings Bank Act provides that the New Jersey Commissioner of
Banking may not approve any acquisition of 5% or more of the capital stock of a
capital stock savings bank if approval of the application would result in a
person owning more shares than permitted by the charter or bylaws of the
capital stock savings bank.
The New Jersey Savings Bank Act provides for the publication of notice and
for an administrative hearing relating to the application for approval.
Regulations of the New Jersey Commissioner of Banking permit objecting parties
to file written objections and present the objections orally at the
administrative hearing. The hearing was held March 10, 1994; no objections to
the Merger were presented orally or in writing. Neither the New Jersey Savings
Bank Act nor regulations of the New Jersey Commissioner of Banking stipulate a
period within which the New Jersey Commissioner of Banking must act upon an
acquiror's application.
The acquisition by UJB of 5% or more of VSB's capital stock, whether by
exercise of the Stock Option or otherwise, is subject to the same approval by
the New Jersey Commissioner of Banking.
Based on current precedents, the managements of UJB and VSB anticipate that
the Merger will be approved by the New Jersey Commissioner of Banking and by
the Federal Reserve Board and believe it is not subject to challenge by the
Justice Department under the antitrust laws. However, there is no assurance
that the New Jersey Commissioner of Banking, the Federal Reserve Board or the
Justice Department will not challenge the Merger or that any approval by the
New Jersey Commissioner of Banking or the Federal Reserve Board will not
contain conditions unacceptable to UJB or VSB or both. VSB Stockholders should
be aware that regulatory approvals of the Merger may be based upon different
considerations than those which would be important to such stockholders in
determining whether or not to approve the Merger. Any such approvals should in
no event be construed by a stockholder as a recommendation by any regulatory
agency with respect to the Merger.
CONDITIONS TO THE MERGER; TERMINATION
The obligations of both parties to consummate the Merger are subject to the
satisfaction of certain net worth and other customary conditions described in
the Merger Agreement. Any of such conditions may be waived by the party for
whose benefit the condition was included.
Either party may terminate the Merger Agreement if (1) the shareholders of
VSB fail to approve the Merger Agreement by the requisite vote, (2) the other
party materially breaches a warranty, representation or covenant and such
breach is not cured or capable of being cured within 30 days of the giving of
written notice thereof, (3) a requisite regulatory approval is not received or
for any other reason the Merger has not been closed by September 30, 1994.
EXPENSES
In the event that the Merger Agreement is terminated by either party due to
the willful breach of the Merger Agreement by the other party, the other party
has agreed to reimburse the terminating party for its out-of-pocket expenses,
up to an amount not to exceed $100,000, reasonably incurred in connection with
the Merger Agreement, including counsel, printing and filing fees, but
excluding fees of investment bankers, brokers or finders. In the event that the
Merger Agreement is terminated by VSB after an acquisition of another entity by
UJB or a subsidiary of UJB prior to the Determination Date, which acquisition
is considered legally significant or involves the issuance of five percent or
more of the shares of UJB Stock then outstanding, UJB will reimburse VSB for
its reasonable costs and expenses, up to a maximum of $100,000. In the event
that the Merger Agreement is terminated for any other reason, each party has
agreed to bear its own expenses, except that the printing costs for this Proxy
Statement-Prospectus and the filing fees of the Commission, the New Jersey
Commissioner of Banking and the NYSE will be borne equally by the parties up to
$200,000 and such expenses in excess thereof will be borne by UJB.
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ISSUANCE OF STOCK OPTION
During negotiation of the terms of the Merger, UJB required as a condition of
entering into the Merger Agreement that UJB and VSB enter into the Stock Option
Agreement. UJB believed that the Stock Option Agreement would increase the
likelihood of the consummation of the Merger and, if the Merger were not
consummated due to certain events (including, among other things, a competing
offer for VSB), would provide a means by which UJB might be compensated for the
loss of business opportunities. The VSB Board approved the Stock Option
Agreement in order to induce UJB to enter into the Merger Agreement on terms
that the VSB Board considered favorable to VSB Shareholders.
Therefore, simultaneously with the execution of the Merger Agreement, UJB and
VSB entered into the Stock Option Agreement and, pursuant thereto, VSB issued
to UJB the Stock Option to purchase up to 841,704 shares of VSB Stock at a
purchase price of $18.125 per share, subject to certain adjustments set forth
in the Stock Option Agreement (the "Option Price").
The Stock Option is not exercisable unless a Purchase Event (as defined in
the Stock Option Agreement) has occurred and is deemed to be continuing. A
Purchase Event includes: (1) the acquisition by any person (other than UJB or
an affiliate) of 25% or more of the outstanding shares of VSB Stock or (2) the
entry by VSB or any of its subsidiaries into an agreement with an unrelated
third party to merge or consolidate with VSB or any of its banking
subsidiaries, or to purchase, lease or otherwise acquire substantially all of
the assets of VSB or any of its banking subsidiaries, or to acquire 25% or more
of the voting stock of VSB or any of its banking subsidiaries, or the
recommendation by the VSB Board that VSB Shareholders approve such a
transaction.
UJB may assign its rights under the Stock Option Agreement after a Purchase
Event has occurred, provided, however, that until 30 days after the Federal
Reserve Board's approval of UJB's application, such transfer must occur in: (1)
a widely dispersed public distribution, (2) a private placement in which no
party acquires the right to purchase in excess of 2% of the voting shares of
VSB, (3) an assignment to a single party for the purpose of conducting a widely
dispersed public distribution on UJB's behalf, or (4) any other manner approved
by the Federal Reserve Board. Shares of VSB Stock acquired upon exercise of the
Stock Option ("Option Shares") are not transferable by UJB except in a
transaction registered or exempt from registration under the Securities Act.
UJB has the right, under certain circumstances, to require VSB to register
the Option Shares with the Commission for resale to the public and the right
under certain other circumstances, in the event of a public offering of VSB
Stock, to require VSB to include the Option Shares in the registration
statement covering the public offering.
UJB has the right, upon the occurrence of a Purchase Event that occurs prior
to an event causing the termination of the Stock Option, to require VSB to
repurchase from UJB the Stock Option at a price equal to the amount by which
the market/offer price exceeds the Option Price, multiplied by the number of
shares for which the Stock Option may then be exercised. The owner of Option
Shares delivered within 30 days of a Purchase Event has the right to require
VSB to repurchase Option Shares from such owner at a price equal to the
market/offer price multiplied by the number of Option Shares. The market/offer
price is the highest of (1) the price per share of VSB Stock at which a tender
offer or exchange offer has been made, (2) the price per share of VSB Stock
paid pursuant to a merger, consolidation or other agreement with VSB, (3) the
highest last sale price for shares of VSB Stock within a 30-day period as
quoted in the NASDAQ National Market System and (4) in the event of a sale of
substantially all of VSB's assets, the sum of the price paid for such assets
and the current market value of any remaining assets, divided by the number of
shares of VSB Stock then outstanding.
The Stock Option terminates immediately upon the first to occur of: (1) the
time immediately prior to the Effective Time; (2) 12 months after the first
occurrence of a Purchase Event; (3) 18 months after the termination of the
Merger Agreement following the occurrence of a Preliminary Purchase Event (as
defined in the Stock Option Agreement); (4) termination of the Merger Agreement
by VSB in the event the Average
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Price of UJB Stock during the Determination Period is less than $20.65 (see
"THE MERGER AGREEMENT--Determination of Exchange Ratio") or by UJB under the
general termination provisions prior to the occurrence of a Purchase Event or a
Preliminary Purchase Event; or (5) 18 months after the termination of the
Merger Agreement resulting from discussions or negotiations with any other
person or entity relating to a proposed merger, consolidation or other business
combination. The Stock Option may not be exercised and UJB may not require VSB
to repurchase the Stock Option if UJB is in breach of the Merger Agreement such
that VSB is entitled to terminate the Merger Agreement.
A Preliminary Purchase Event includes: (1) the entry by VSB or any of its
subsidiaries into an agreement with an unrelated third party to merge or
consolidate with VSB or any of its banking subsidiaries, or to purchase, lease
or otherwise acquire substantially all of the assets of VSB or any of its
banking subsidiaries, or to acquire 15% or more of the voting stock of VSB or
any of its banking subsidiaries (each an "Acquisition Transaction") or the
recommendation by the VSB Board that the VSB Shareholders approve such
Acquisition Transaction; (2) the acquisition by another party of 15% or more of
the outstanding shares of VSB Stock; (3) the public announcement of a proposal
to VSB or its shareholders by another party to engage in an Acquisition
Transaction (including without limitation, the commencement of or filing of a
registration statement with respect to a tender offer or exchange offer); (4)
after a proposal described in clause (3), VSB shall have breached any
obligation in the Merger Agreement which breach entitles UJB to terminate the
Merger Agreement and remains uncured; (5) the filing by another party of an
application with the Federal Reserve Board for approval of an Acquisition
Transaction; and (6) the failure of VSB Shareholders to approve the Merger
Agreement after the public announcement of a proposal by any person which, if
effected, would result in the occurrence of one of the events described in
clauses 3 or 5.
UJB FINANCIAL CORP.
DESCRIPTION OF BUSINESS
UJB commenced operations as a New Jersey corporation on October 1, 1970. As a
bank holding company registered under the BHC Act, UJB owns six bank
subsidiaries and nine active non-bank subsidiaries. At December 31, 1993, UJB
had total consolidated assets of $13.4 billion on the basis of which it ranked
as the fourth largest New Jersey bank holding company.
The bank subsidiaries engage in a general banking business. United Jersey
Bank is UJB's largest bank subsidiary, accounting for approximately 46% of
UJB's total consolidated assets at December 31, 1993. UJB's non-bank
subsidiaries engage primarily in discount brokerage, venture capital
investment, commercial finance lending, lease financing, and reinsuring credit
life and disability insurance policies related to consumer loans made by the
bank subsidiaries.
The bank subsidiaries operated 258 banking offices located in major trade
centers and suburban areas in New Jersey and Pennsylvania as of December 31,
1993. The following table lists, as of December 31, 1993, each bank subsidiary,
the location in New Jersey or Pennsylvania of its principal office, the number
of its banking offices and, in thousands of dollars, its total assets and
deposits. Effective March 18, 1994, The Hazleton National Bank and Hanover Bank
were merged into First Valley Bank.
<TABLE>
<CAPTION>
LOCATION NO. OF
OF PRINCIPAL BANKING TOTAL TOTAL
OFFICES OFFICES ASSETS(1) DEPOSITS(1)
----------------- ------- ---------- -----------
<S> <C> <C> <C> <C>
United Jersey Bank(2)..... Hackensack, NJ 75 $6,164,317 $5,206,265
United Jersey
Bank/Central, N.A.(4).... Princeton, NJ 76 3,499,097 3,155,037
First Valley Bank(3)...... Bethlehem, PA 48 1,909,285 1,479,022
United Jersey Bank/South,
N.A.(4).................. Cherry Hill, NJ 35 1,233,095 1,062,598
The Hazleton National
Bank(4).................. Hazleton, PA 14 466,715 411,075
Hanover Bank(3)........... Wilkes-Barre, PA 10 290,808 251,502
</TABLE>
- --------
(1) Not adjusted to exclude interbank deposits or other transactions among the
subsidiaries.
(2) State bank, a member of the Federal Reserve System.
(3) State bank, not a member of the Federal Reserve System.
(4) National Bank.
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UJB is a legal entity separate and distinct from its subsidiaries. There are
various legal limitations on the extent to which a bank subsidiary may finance
or otherwise supply funds to UJB or its non-bank subsidiaries. Under federal
law, no bank subsidiary may, subject to certain limited exceptions, make loans
or extensions of credit to, or investments in the securities of, UJB or its
non-bank subsidiaries or take their securities as collateral for loans to any
borrower. Each bank subsidiary is also subject to collateral security
requirements for any loans or extensions of credit permitted by such
exceptions. In addition, certain bank regulatory limitations exist on the
availability of subsidiary bank undistributed net assets for the payment of
dividends to UJB without the prior approval of the bank regulatory authorities.
The National Bank Act, which affects UJB's one nationally-chartered bank, and
the Federal Reserve Act, which affects UJB's one state-member bank, restrict
the payment of dividends in any calendar year to the net profit of the current
year combined with retained net profits of the preceding two years. Each of the
two state-chartered banks may declare a dividend only if, after payment
thereof, its capital would be unimpaired and its remaining surplus would equal
50 percent of its capital (New Jersey) or 100 percent of its capital
(Pennsylvania). At December 31, 1993, the total undistributed net assets of the
subsidiary banks were $858,299,000 of which $96,920,000 was available under the
most restrictive limitations for the payment of dividends to UJB.
RECENT DEVELOPMENTS
On September 22, 1993, UJB announced a comprehensive restructuring and
consolidation program aimed at enhancing shareholder value and improving UJB's
competitive position. The program included the statewide consolidations of bank
subsidiaries through the merger of United Jersey Bank/Central, N.A. and United
Jersey Bank/South, N.A. into United Jersey Bank (expected to be completed
during the third quarter of 1994), and the merger of The Hazleton National Bank
and Hanover Bank into First Valley Bank (completed March 18, 1994), resulting
in one bank in New Jersey and one bank in Pennsylvania.
DESCRIPTION OF UJB CAPITAL STOCK
UJB is presently authorized to issue 65,000,000 shares of UJB Stock, par
value $1.20 per share, and 4,000,000 shares of Preferred Stock, without par
value ("UJB Preferred Stock"). At its Annual Meeting of Shareholders scheduled
to be held April 25, 1994, UJB will seek authorization to increase authorized
UJB Stock to 130,000,000 shares. As of December 31, 1993, there were 51,631,856
shares of UJB Stock and 600,166 shares of UJB Preferred Stock, Series B
("Series B Preferred Stock") outstanding. Pursuant to New Jersey law, the UJB
Board has authority to set the terms and conditions of the authorized but
unissued UJB Preferred Stock. UJB may issue any authorized UJB Stock and UJB
Preferred Stock without further shareholder vote, unless required for a
particular transaction by applicable law or stock exchange rules, including
rules of the NYSE, on which the UJB Stock and the Series B Preferred Stock are
presently listed. The issuance of additional UJB Stock or UJB Preferred Stock,
including UJB Preferred Stock which might be convertible into UJB Stock, may,
among other things, affect the earnings per share applicable to existing UJB
Stock and the equity and voting rights of existing holders of UJB Stock.
COMMON STOCK
The rights of holders of UJB Stock are subject to the preferences of holders
of the Series B Preferred Stock described below and the preferences as to
dividends and liquidation rights and other prior rights, if any, of any other
class or series of UJB Preferred Stock which may be issued. The holders of UJB
Stock are entitled to one vote for each share with respect to all matters voted
upon by shareholders, including the election of Directors, and are entitled to
receive dividends when, as and if declared by the UJB Board out of funds of UJB
legally available therefor. Shares of UJB Stock do not have cumulative voting
rights; accordingly, at any annual meeting of UJB shareholders (or at any
special meeting of shareholders where an election of Directors is conducted or
where an election of Directors occurs by means of written shareholder consent
in lieu of a meeting) the holders of 50 percent plus 1 of the shares presented
at the annual meeting
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(provided a quorum is present) can fill all positions on the UJB Board which
are up for election at such annual meeting if they so choose and, in such
event, the holders of the remaining less than 50 percent of the shares will not
be able to fill any of such positions. UJB has a classified Board of Directors,
under which approximately one-third of the Directors are elected each year. In
the event of the liquidation of UJB, holders of UJB Stock are entitled to share
pro rata in the distribution of UJB's assets available for such purpose. All
shares of UJB Stock are fully paid and nonassessable. No preemptive rights
attach to the ownership of UJB Stock and no personal liability is imposed on
the holders thereof by reason of the ownership of such shares. First Chicago
Trust Company of New York is the transfer agent, dividend disbursing agent and
registrar for the UJB Stock. United Jersey Bank is the co-transfer agent.
SERIES B PREFERRED STOCK
The Series B Preferred Stock is entitled to cumulative dividends which are
payable quarterly on February 1, May 1, August 1 and November 1 of each year.
For each quarterly period, the dividend rate will be determined in advance of
such period, and will be 1.5 percent less than the highest of the 3-month U.S.
Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Thirty Year
Constant Maturity Rate, which are average yields on certain U.S. Treasury fixed
rate securities, as published by the Federal Reserve Board. However, the
dividend rate for any dividend period will not be less than 6 percent per annum
nor greater than 11 percent per annum. The Series B Preferred Stock is
redeemable at the option of UJB, in whole or in part, on or after May 1, 1992
and prior to May 1, 1995 at a redemption price of $51.50 per share and,
thereafter, at $50 per share, in each case plus accrued and unpaid dividends.
Holders of Series B Preferred Stock have the right to vote as a class on
certain amendments to the Restated Certificate of Incorporation of UJB which
may affect the Series B Preferred Stock and to elect two directors in the event
of a failure to pay full cumulative dividends for six quarters. They have no
other voting rights. The Series B Preferred Stock is not convertible into
shares of UJB Stock and has no preemptive rights. The Series B Preferred Stock
is not subject to any sinking fund or other repurchase or retirement obligation
of UJB. First Chicago Trust Company of New York is the transfer agent, dividend
disbursing agent and registrar for shares of the Series B Preferred Stock.
SHAREHOLDER RIGHTS PLAN
In August 1989, UJB adopted a shareholder rights plan (the "Rights Plan"),
under which preferred stock purchase rights (the "Rights") attached to UJB
Stock outstanding as of the close of business on August 28, 1989. Holders of
shares of UJB Stock issued subsequent to that date receive the Rights with
their shares. Except as indicated below, each Right entitles the registered
holder to purchase from UJB one one-hundredth of a share of a new series of UJB
Preferred Stock, designated the Series R Preferred Stock (the "Series R
Preferred Stock"). The Rights expire on August 16, 1999, and are subject to
redemption and amendment in certain circumstances. The Rights trade
automatically with shares of UJB Stock and become exercisable only under
certain circumstances as described below.
In general, the Rights will become exercisable upon the earlier to occur (a
"Distribution Date") of the following: (1) ten days following a public
announcement that a person or group has acquired beneficial ownership of 15
percent or more of the UJB Stock outstanding at the time or voting securities
of UJB representing 15 percent or more of the total voting power of UJB (such
person or group becoming an "Acquiring Person") or (2) ten business days (or
such later date as the UJB Board may determine) after the commencement of a
tender offer or exchange offer that would result in a person or group
beneficially owning 30 percent or more of the outstanding UJB Stock or voting
securities representing 30 percent or more of the total voting power of UJB.
Generally, in the event a Distribution Date occurs by virtue of a person or
group becoming an Acquiring Person (other than pursuant to an offer for all
outstanding shares of UJB Stock and other voting securities which the UJB Board
determines to be fair to shareholders and otherwise in the best interests of
UJB), each
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Right, other than Rights owned by the Acquiring Person, will thereafter entitle
the holder to receive, upon exercise of the Right, Series R Preferred Stock
having a value equal to two times the exercise price of the Right.
In the event that a Distribution Date occurs (under either of the
circumstances described above) and UJB is acquired in a merger or other
business combination, or more than 50 percent of UJB's assets, cash flow or
earning power is sold or transferred, each Right, other than Rights that may be
owned by the Acquiring Person, will thereafter entitle the holder thereof to
receive, upon the exercise of the Right, common stock of the acquiror having a
value equal to two times the exercise price of the Right.
The foregoing description of the Rights Plan does not purport to be complete
and is qualified in its entirety by reference to the terms of the Rights Plan,
which is more fully described in UJB's Registration Statement on Form 8-A filed
August 28, 1989.
VSB BANCORP, INC.
DESCRIPTION OF BUSINESS
VSB was incorporated under the laws of the State of Delaware in connection
with the conversion of Valley Savings Bank from a mutual savings to a capital
stock savings institution in 1988. On December 31, 1992, Valley Savings Bank
converted from a New Jersey savings and loan association charter to a New
Jersey savings bank charter. In connection therewith, VSB became a bank holding
company, subject to examination and regulation by the Federal Reserve Board.
VSB and its subsidiaries conduct their business through an executive office
located in Closter, New Jersey, and six full service offices located in
Closter, Bergenfield, Dumont, Northvale, River Vale and Old Tappan, New Jersey.
The executive offices of the VSB and Valley Savings Bank are located at 15 Ver
Valen Street, Closter, New Jersey. Apart from the operation of Valley Savings
Bank, VSB has not engaged in any material operations to date. The assets of VSB
consist of all of the shares of Valley Savings Bank's capital stock and an
interest-earning deposit account.
Valley Savings Bank's primary business consists of attracting deposits from
the general public and originating permanent loans which are secured by
residential properties, as well as originating residential construction,
commercial mortgage and consumer loans. Valley Savings Bank has discontinued
commercial business lending activities and continues to diminish its current
commercial loan portfolio through attrition. In recent years, Valley Savings
Bank has emphasized the origination of adjustable-rate mortgage loans for
retention in its loan portfolio.
Valley Savings Bank's primary market area for savings deposits is Bergen
County, while its primary market area for lending consists of Bergen, and to a
lesser extent, Hudson, Morris, Ocean and Passaic Counties, New Jersey. Valley
Savings Bank also serves its customers through participation in the Money
Access Center (MAC) and CIRRUS, which are networks of automated teller machines
located throughout the United States.
DESCRIPTION OF VSB CAPITAL STOCK
VSB is authorized to issue 5,000,000 shares of VSB Stock having a par value
of $.01 per share and 2,000,000 shares of Preferred Stock having a par value of
$.01 per share ("VSB Preferred Stock"). The VSB Stock is not an account of an
insurable type, and is not insured by the FDIC. As of the date of this Proxy
Statement-Prospectus, VSB had 3,402,059 shares of VSB Stock outstanding and had
no shares of VSB Preferred Stock outstanding.
COMMON STOCK
Dividends. VSB is subject to the requirements of Delaware law, which
generally limit dividends to an amount equal to the excess of the net assets of
VSB (the amount by which total assets exceed total
42
<PAGE>
liabilities) over its statutory capital, or if there is no such excess, to its
net profits for the current and/or immediately preceding fiscal year. The
holders of VSB Stock are entitled to receive and share equally in such
dividends as may be declared by the VSB Board out of funds legally available
therefor.
Voting Rights. The holders of VSB Stock possess exclusive voting rights. They
elect the VSB Board and act on such other matters as are required to be
presented to them under Delaware law or as are otherwise presented to them by
the VSB Board. Each holder of VSB Stock is entitled to one vote per share
(excepted as noted below), but do not have any right to cumulate votes in the
election of directors. Certain matters require 80% stockholder vote. In
addition, shares of VSB Stock owned by any person in excess of 10% of the
issued and outstanding shares may not be voted. Directors of VSB are elected by
a plurality of votes cast; the VSB Board is divided into three classes, with
approximately one-third of the VSB Board elected at each annual meeting of
stockholders.
Preemptive Rights. Holders of VSB Stock are not entitled to preemptive rights
with respect to any shares which may be issued.
PREFERRED STOCK
The VSB Board is authorized to approve the issuance of series of VSB
Preferred Stock without the approval of VSB's stockholders. The rights,
qualifications, limitations and restrictions on each such series of VSB
Preferred Stock issued may be determined by the VSB Board at the time of
issuance and may include, among other things, redemption rights, stated or
participating dividends, special voting rights and convertibility to VSB Stock.
VSB Preferred Stock may rank prior to VSB Stock as to dividend rights,
liquidation preferences, or both. Such VSB Preferred Stock may have voting and
conversion rights which could adversely affect the voting power of the holders
of the VSB Stock and may assist management in impeding an unfriendly takeover
or attempted change in control.
PROPOSAL II--ELECTION OF DIRECTORS
CERTAIN INFORMATION REGARDING THE DIRECTORS
The number of directors of VSB Bancorp is currently set at eight (8).
Directors are elected for staggered terms of three years each, with the term of
office of only one class of directors expiring in each year. Directors serve
until their successors are elected and qualified. In November, 1988, Valley
Savings Bank, VSB's wholly-owned subsidiary, converted from the mutual to the
stock form of ownership (the "Conversion"). Upon Conversion, Valley Savings
Bank issued all of its capital stock to VSB, which simultaneously sold its
Common Stock to the public. Each of the current members of the VSB Board also
is serving on the Board of Directors of the Valley Savings Bank.
The three nominees proposed for election at the Annual Meeting are Messrs.
Eckerson, Frank and Reeve. Each nominee is presently a Director of VSB Bancorp.
No person being nominated as a Director is being proposed for election pursuant
to any agreement or understanding between any person and VSB Bancorp.
The names of the three nominees for election to the VSB Board are set forth
below, along with certain other information concerning such individuals and the
other members of the VSB Board, as of March 25, 1994. The VSB Board believes
that the nominees will stand for election and will serve if elected as
directors. However, if any person nominated by the VSB Board fails to stand for
election or is unable to accept election, the proxies will be voted for the
election of such other person or persons as the VSB Board may recommend.
43
<PAGE>
<TABLE>
<CAPTION>
TERM TO EXPIRE AMOUNT AND NATURE OF
NAME, PRINCIPAL OCCUPATION AND FOLLOWING FISCAL YEAR BENEFICIAL OWNERSHIP PERCENT
BUSINESS EXPERIENCE FOR PAST 5 YEARS ENDING SEPTEMBER 30, OF STOCK(1) OF CLASS
- ------------------------------------ --------------------- -------------------- --------
DIRECTOR NOMINEES
-----------------
<S> <C> <C> <C>
Wilbur H. Eckerson, Age 78 ............................. 1996 25,380(2) .74%
Director of Valley Savings Bank since 1964 and of VSB
since its formation in 1988. He is currently self-
employed as a builder.
Andrew Frank, Age 78 ................................... 1996 20,553(2) .60%
Director of Valley Savings Bank since 1956 and of VSB
since its formation in 1988. Prior to his retirement in
1991, he was Vice President of Bluefield Developers,
Inc., a building corporation, and the broker of record
of Andrew Frank & Co., a real estate agency.
Arthur H. Reeve, Age 66 ................................ 1996 73,872(2)(3) 2.16%
Director of Valley Savings Bank since 1961 and of VSB
from 1988 until April 1990. Mr. Reeve was reappointed
to VSB's Board in November, 1991. Mr. Reeve is an
attorney in private practice.
<CAPTION>
DIRECTORS
---------
William J. Durkin, Age 67 .............................. 1995 17,401(2) .51%
Director of Valley Savings Bank since 1969 and of VSB
since its formation in 1988. Mr. Durkin has served as
Secretary to the VSB Board and the Board of Directors
of Valley Savings Bank since November, 1991. He was
Chairman of the Board of Durkin Agency, Inc., a
general insurance agency, until his retirement in
1991.
Allen S. Greene, Age 47 ................................ 1995 200,104(4) 5.71%
Director of VSB since April, 1990 and of Valley Savings
Bank since July, 1990. Chairman of the Board of VSB and
Valley Savings Bank since October 1, 1990 and Chief
Executive Officer of VSB and Valley Savings Bank since
November 5, 1990. Mr. Greene is also a real estate
investor through closely held corporations and
partnerships in which he holds direct or indirect
interests. Mr. Greene was President of Allen S. Greene
and Company, Inc., a financial consulting firm, from
June, 1977 until May, 1990.
Gerard F. Stoddard, Age 59 ............................. 1995 18,360(2) .54%
Director of VSB since April, 1990 and of Valley
Savings Bank since July, 1990. Principal of G. Stoddard
Communications, New York, New York (independent
communications consulting firm) since April, 1986.
Donald C. Bogert, Age 83 ............................... 1994 20,414(2) .60%
Director of Valley Savings Bank since 1963 and of VSB
since its formation in 1988. Mr. Bogert is a retired
real estate broker and appraiser.
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
TERM TO EXPIRE AMOUNT AND NATURE OF
NAME, PRINCIPAL OCCUPATION AND FOLLOWING FISCAL YEAR BENEFICIAL OWNERSHIP PERCENT
BUSINESS EXPERIENCE FOR PAST 5 YEARS ENDING SEPTEMBER 30, OF STOCK(1) OF CLASS
- ------------------------------------ --------------------- -------------------- --------
<S> <C> <C> <C>
Martin Spiro, Age 60....... 1994 330,820(5) 9.72%
Director of VSB since
November, 1990, and of
Valley Savings Bank since
February, 1991. Mr. Spiro
is a private investor.
All executive officers and
directors as a group (12
persons).................. -- 733,388(6) 20.37%
</TABLE>
- --------
(1) Unless otherwise indicated, each person effectively exercises sole (or
shared with spouse) voting and dispositive power as to the shares reported.
(2) Includes 14,904 shares which may be acquired pursuant to presently
exercisable stock options granted under the Stock Option Plan for Outside
Directors.
(3) Includes 23,877 shares beneficially owned by Mr. Reeve's spouse, and 10,267
shares held by Mr. Reeve as trustee, as to which shares he has voting and
dispositive power as trustee.
(4) Includes 104,544 shares that may be acquired pursuant to presently
exercisable stock options, and 3,000 shares subject to awards under the MRP
and 12,938 shares held in a VSB ESOP account for the benefit of Mr. Greene,
as to which voting may presently be directed.
(5) Includes 247,272 shares as to which Mr. Spiro has sole voting and
dispositive power as trustee of a trust for the benefit of his children.
(6) Includes 198,749 shares that may be acquired pursuant to the exercise of
presently exercisable stock options, and 8,542 shares subject to awards
under the MRP and 23,084 shares held in VSB ESOP accounts for the benefit
of executive officers, as to which voting may presently be directed.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION
OF ALL NOMINEES NAMED IN THIS PROXY STATEMENT.
BOARD OF DIRECTORS MEETINGS AND COMMITTEE
The VSB Board has established an executive committee. There is an audit
committee established by Valley Savings Bank which also serves as the audit
committee of VSB. Neither VSB nor Valley Savings Bank has a nominating
committee. The VSB Board met nine times, and the Board of Directors of Valley
Savings Bank met twelve times, during the fiscal year ended September 30, 1993.
No Director attended fewer than 75% of the total meetings of the Boards of
Directors and committees on which such VSB Board member served during fiscal
1993, including meetings of the Board of Directors and committees of Valley
Savings Bank.
Directors Durkin (Chairman), Spiro and Stoddard serve as members of Valley
Savings Bank's audit committee, which is responsible for reviewing budget and
audit performance and evaluating policies and procedures relating to auditing
functions and controls. The audit committee met three times during the fiscal
year ended September 30, 1993. VSB's executive committee, consisting of
Directors Durkin, Frank, Greene, Reeve and Spiro, exercises the authority of
the VSB Board when the VSB Board is not in session, subject to applicable law
and the bylaws. The executive committee of Valley Savings Bank, consisting of
Directors Durkin, Frank, Greene, Reeve and Spiro, exercises the authority of
the Board of Directors of Valley Savings Bank when the Board of Directors of
Valley Savings Bank is not in session, subject to applicable law and the
bylaws. The non-management members of the executive committee of Valley Savings
Bank also serve as the compensation committee, and in this capacity are
responsible for establishing compensation and benefit policies. In addition,
the non-management members of the executive committee of Valley Savings Bank
and VSB administer certain stock related employee compensation plans. The
Bank's executive committee met ten times during the fiscal year ended September
30, 1993, while VSB's executive committee did not meet separately during the
1993 fiscal year.
45
<PAGE>
DIRECTORS COMPENSATION
Fees. Directors of Valley Savings Bank are paid an annual retainer by Valley
Savings Bank of $15,000, plus a $600 fee for each executive committee meeting
attended. A fee of $200 is paid by Valley Savings Bank
for all other committee meetings attended. As Secretary to the VSB Board, Mr.
Durkin is paid an additional fee of $125 per VSB Board meeting. Except as to
Mr. Durkin, officers who are Directors do not receive fees for services as a
Director. Directors do not receive fees from VSB for services on the VSB Board.
VSB Bancorp, Inc. Stock Option Plan for Outside Directors. The Option Plan
for Outside Directors (the "Directors Option Plan"), which has been presented
to and approved by the stockholders, authorized the granting of an option to
each Director of VSB or Valley Savings Bank at October 27, 1988, the date of
the initial sale of VSB Stock, who was not also an officer or employee of
Valley Savings Bank or VSB, to purchase 14,904 shares of VSB Stock at an
exercise price of $6.08 (the option exercise price and the number of shares
subject to the option have been adjusted for stock dividends). The Directors
Option Plan provides that to the extent that shares are available, persons who
become Directors subsequent to October 27, 1988 will also receive an option to
purchase 14,904 shares of VSB Stock, or such lesser number as then available,
at an exercise price equal to the then fair market value of VSB Stock. Under
the Directors Option Plan, there are in the aggregate 178,848 shares of VSB
Stock reserved for issuance pursuant to the exercise of options. As of
September 30, 1993, options have been granted and are outstanding as to 143,856
shares of VSB Stock reserved for issuance under the Directors Option Plan.
Options are exercisable, from time to time in whole or in part, and expire
upon the earlier of (i) ten years from the date of grant, or (ii) three years
from the date that a person ceases to serve as an Outside Director. The option
price can be paid by the optionee in cash at the time the option is exercised,
or the optionee can tender previously acquired shares of VSB Stock as payment
for the exercise of options. An option may be exercised only by the optionee,
except that in the event of the death or disability of the optionee, his legal
representative may exercise such option by giving notice of exercise within one
year of the optionee's death or disability. The Directors Option Plan provides
that the exercise price and number of shares subject to the option shall be
adjusted for changes in VSB's capital structure, including stock dividends and
stock splits and appropriate adjustments will be made to the exercise price and
number of shares subject to options presently outstanding.
Directors Emeritus Plan. Under the Directors Emeritus Plan, a Director who is
not an officer or employee of Valley Savings Bank, who has served as a Director
for at least twenty-four months, and who agrees to provide continuing services
to Valley Savings Bank, will be eligible, upon retirement, to receive one year
of benefits (i.e., continuing retainer fees) for every two years of prior
service on the VSB Board. In no event shall the number of months for which a
benefit is to be paid be less than seventy-two months. A Director must agree to
provide consultation service to the VSB Board as requested from time to time,
but no more than two days a month.
The Directors Emeritus Plan is unfunded. All benefits payable under the
Directors Emeritus Plan will be paid from Valley Savings Bank's current assets.
There are no tax consequences to either the Director or Valley Savings Bank
until benefits are paid out to the Director. At that time, the Director will
recognize income in the amount of the payment and Valley Savings Bank will be
entitled to an offsetting deduction. Upon a change in control of Valley Savings
Bank, the Directors may choose a lump-sum cash payment equal to the cost of
purchasing an annuity that would provide the benefits otherwise payable to the
Director under the plan (and the Director would not be obligated to agree to
provide consulting services to Valley Savings Bank).
Deferred Fee Plan. Under the Valley Savings Bank Directors Deferred Fee Plan
(the "Deferred Fee Plan"), Directors of Valley Savings Bank may defer the
receipt of fees earned by reason of serving as a Director. In order to
participate in the Deferred Fee Plan, a Director must execute an election to
defer a specific part, up to 100%, of the fees the Director would be paid in
the coming year. The election must be made prior to the beginning of the year
for which it is effective, and is irrevocable for that year.
46
<PAGE>
Amounts deferred under the Deferred Fee Plan prior to October 31, 1991 earn
interest at a rate equal to the greater of (i) the rate payable with respect to
the six-month Treasury Bill, plus one quarter of one percent, or (ii) nine
percent. Amounts deferred under the Deferred Fee Plan after October 31, 1991
earn interest at a rate equal to Valley Savings Bank's one year certificate of
deposit rate as in effect on the date the fee is deferred, with such rate
adjusted annually to reflect the then current rate of Valley Savings Bank's one
year certificate of deposit. Participants in the Deferred Fee Plan receive
distributions of their amounts and the interest thereon in equal monthly
payments over a five year period, beginning at the time the participant ceases
to be a Director.
In the event of a participant's death, the Deferred Fee Plan provides for the
payment of the participant's entire account to be made to the participant's
beneficiary. The Deferred Fee Plan also provides that a single payment of the
participant's entire account balance may be made to a participant who ceases to
be a Director of Valley Savings Bank and becomes affiliated with a competitor
of Valley Savings Bank.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
Prior to August 1989, Valley Savings Bank made loans to its officers and
employees in the ordinary course of business. Except as to mortgage loans, such
transactions were on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons, and did not involve more than a normal risk of collectibility or
present other unfavorable features. The interest rate charged to officers and
employees on mortgage loans was set at 1% above Valley Savings Bank's average
cost of funds and the origination fee was waived.
The current policy of Valley Savings Bank is to extend credit to related
persons on substantially the same terms as those granted to others, including
the interest rate and origination fees. Such loans do not involve more than a
normal risk of collectibility or present other unfavorable features.
Set forth below is certain information as of September 30, 1993 as to loans
outstanding from Valley Savings Bank to any of its officers during fiscal 1993,
where the aggregate indebtedness to Valley Savings Bank exceeded $60,000 at any
time since October 1, 1992 and which indebtedness included loans made under the
policy in effect prior to August, 1989. All of the following loans are secured
by the individual's primary residence.
<TABLE>
<CAPTION>
LARGEST BALANCE
AMOUNT AS OF
DATE OF TYPE OF OUTSTANDING SEPTEMBER 30, INTEREST
NAME AND POSITION LOAN LOAN DURING FISCAL 1993 1993 RATE
----------------- ------- -------- ------------------ ------------- --------
<S> <C> <C> <C> <C> <C>
Deborah A. Mazzotta. 7/20/88 Mortgage $86,114 $76,890 7.91%
Vice President
</TABLE>
Arthur H. Reeve, a Director of Valley Savings Bank, is a member of a law firm
that is retained annually by Valley Savings Bank to provide general legal
services. With respect to fiscal 1993, Valley Savings Bank paid $178,00 in fees
to Mr. Reeve's law firm.
47
<PAGE>
EXECUTIVE COMPENSATION
Tables
The following table sets forth the cash compensation paid by Valley Savings
Bank, for services rendered during the fiscal years ended September 30, 1993,
1992 and 1991, to the Chief Executive Officer of the Bank (the "Named
Executive Officer").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------- --------------------------------
AWARDS PAYOUTS
--------------------- -------
FISCAL
YEAR OTHER RESTRICTED
NAME AND ENDED ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
PRINCIPAL POSITION SEPTEMBER 30 SALARY BONUS(1) COMPENSATION(2) AWARDS SARS(#) PAYOUTS COMPENSATION(5)
------------------ ------------ -------- -------- --------------- ---------- -------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Allan S. Greene 1993 $199,912 $80,300 -- -- (3) -- -- $50,394
Chairman, President 1992 185,394 74,333 -- -- -- -- 24,762
and Chief Executive 1991 168,459 43,000 -- $72,000 139,104(4) -- --
Officer
</TABLE>
- --------
(1) Cash bonuses are paid in the fiscal year following the fiscal year in
which they are reported.
(2) Perquisites and other personal benefits, securities or property paid
during the indicated fiscal year did not exceed the lesser of $50,000 or 10%
of the annual salary and bonus reported in the table, and are therefore
excluded from "other compensation."
(3) The total number of restricted shares held and their aggregate market
value (adjusted for the November 10, 1993 20% stock dividend) as of
September 30, 1993, are as follows: Mr. Greene: 18,862 shares, $294,719. All
of Mr. Greene's shares are fully vested.
(4) Mr. Greene was granted 80,500 options on November 4, 1990. The number of
options outstanding at September 30, 1993 reflects three 20% stock
dividends.
(5) Amounts reflect the market value of shares allocated to Mr. Greene's ESOP
Account during each fiscal year. Values are calculated as of December 31
during each fiscal year.
Set forth below is certain information concerning options exercised in
fiscal 1993 by the Named Executive Officer and options outstanding to such
Named Executive Officer at September 30, 1993.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS AT THE-MONEY OPTIONS AT
FISCAL YEAR-END FISCAL YEAR-END(2)
------------------------- -------------------------
SHARES ACQUIRED VALUE EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
NAME UPON EXERCISE REALIZED(1) (#) ($)
---- --------------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Allen S. Greene......... 34,560 $368,064 104,544/0 $1,331,368/0
</TABLE>
- --------
(1) Represents the aggregate market value of underlying securities at
exercise, minus the aggregate exercise price.
(2) Represents the difference between the aggregate exercise price of the
options and the aggregate market value of VSB Stock that could be acquired
upon exercise, calculated as of September 30, 1993.
Employment Contract
VSB and Valley Savings Bank renewed, on substantially similar terms,
substantially similar employment contracts with Allen S. Greene, effective as
of September 20, 1993, pursuant to which Mr. Greene agreed to serve as
Chairman of the Board and Chief Executive Officer of VSB and Valley Savings
Bank until at least January 1, 1996. A contract may be extended for one
additional twelve month period at the discretion of either the VSB or Valley
Savings Bank Board of Directors, as the case may be. If the contract with
Valley Savings Bank is not extended, or upon expiration of the extension
period provided for in that contract, Mr. Greene is entitled to receive a
severance payment equal to his base salary then in effect. The base salary
under the contracts for service to both VSB and Valley Savings Bank is
$216,810. The base salary may be increased
48
<PAGE>
but not decreased at the discretion of the Board of Directors of either VSB or
Valley Savings Bank. In addition to the base salary, the contracts provide,
among other things, for the participation by Mr. Greene in stock option plans
and other benefit plans available to executive personnel of VSB and Valley
Savings Bank, and require VSB or Valley Savings Bank to provide Mr. Greene with
an automobile. The contracts provide for the termination of the employment of
Mr. Greene by VSB or Valley Savings Bank for "cause," as defined in the
contracts, at any time. In the event Mr. Greene's employment with Valley
Savings Bank is terminated for reasons other than cause, Mr. Greene (or his
beneficiary) would be entitled to receive salary payments (and the severance
payment) for the remaining term of the contracts. Upon a termination of Mr.
Greene's employment with Valley Savings Bank other than for cause, certain
insurance coverages would be maintained for Mr. Greene. Mr. Greene's employment
with Valley Savings Bank would be deemed terminated upon any material change in
his functions, duties or responsibilities which would cause his position to
become one of lesser responsibility, importance, or scope. If a termination of
Mr. Greene's employment with Valley Savings Bank is for cause, no further
salary payments or benefits or severance payment would be provided. If a
termination of Mr. Greene's employment with Valley Savings Bank for cause is
disputed by Mr. Greene, VSB and Valley Savings Bank would be required to
continue making salary payments and providing benefits to Mr. Greene until the
dispute was settled by arbitration. If it were determined in arbitration that
cause for termination existed, no further salary payments would be made to Mr.
Greene, or benefits provided, but reimbursement of payments already made would
not be required unless it were also determined that Mr. Greene had disputed his
termination for cause in bad faith.
If Mr. Greene's employment with either Valley Savings Bank or VSB is
terminated following a change in control (as defined in the contracts) of VSB,
Mr. Greene is entitled to receive title and ownership to the automobile then
being provided to him and a lump sum payment equal to the cost of twelve months
of overnight garage (parking) fees at the monthly rate being paid by Mr. Greene
(or by Valley Savings Bank on his behalf) immediately prior to the change in
control. All taxes and any fees or expenses due as a result of or related to
the transfer of title of the automobile to Mr. Greene would be paid by Valley
Savings Bank, and Mr. Greene would be paid an additional amount equal to any
state or federal income tax payable by as a result of the payment of such taxes
and expenses and as a result of such additional payment. Upon the occurrence of
a change in control of either VSB or Valley Savings Bank, Mr. Greene is
entitled to receive, as severance pay or liquidated damages, or both, a sum
equal to 2.99 times: the sum of (i) Mr. Greene's base salary in effect
immediately prior to the change in control, plus (ii) the bonus paid to Mr.
Greene as to the fiscal year ended prior to the change in control, or if a
bonus has been paid as to the fiscal year in which the change in control
occurs, such bonus, whichever is greater. Mr. Greene is also entitled to
receive a supplemental benefit equal to the difference between the benefit
payable to Mr. Greene pursuant to the terms of Valley Savings Bank's defined
benefit pension plan at the time of the change in control and the benefit that
would be payable to him pursuant to the terms of pension plan if Mr. Greene had
an additional three years of credited service under the pension plan at the
time of the change in control. Notwithstanding the preceding, in the event that
the aggregate payments or benefits to be made or afforded Mr. Greene under the
contracts (the "termination benefits") would be deemed to include an "excess
parachute payment" under Section 280G of the Code or any successor thereto,
then, if (i) the amount equal to three times Mr. Greene's "base amount" (as
determined in accordance with said Section 280G) minus $1.00 (the
"nontriggering amount"), were greater than (ii) the amount equal to the
termination benefits minus the amount of tax required to be paid by Mr. Greene
thereon by Section 4999 of the Code, then the termination benefits would be
reduced to the nontriggering amount.
Pension Plan
Valley Savings Bank maintains the Valley Savings Bank Pension Plan (the
"Pension Plan") for employees who have completed one year of service with
Valley Savings Bank and attained age 21. The Pension Plan is a qualified plan
within the meaning of section 401(a) of the Code, and the trust associated with
the Pension Plan is tax exempt under section 501(a) of the Code.
49
<PAGE>
The Pension Plan provides a benefit, commencing upon the participant's normal
retirement date, equal to 20.5% of the participant's average monthly
compensation up to $550, plus 41% of the participant's average monthly
compensation in excess of $550, reduced by 1/15 for each year of service less
than 15. Normal retirement date is the first day of the calendar month on or
next following the later of the participant's 65th birthday or the date of
completion of ten years of service. The average monthly compensation for
purposes of determining benefits under the Pension Plan is the average monthly
compensation (excluding bonuses) of the participant's five consecutive years of
service that produce the highest average within the ten years preceding the
participant's retirement (beginning in calendar year 1994, monthly compensation
at an annual rate in excess of $150,000 is excluded in accordance with recent
amendments to the Code).
The Pension Plan provides an early retirement benefit for participants who
have completed ten years of service and who have attained age 60. The early
retirement benefit is the participant's accrued benefit reduced by 1/15 for
each of the first five years, and 1/20 for each of the next five years, that
the early retirement date precedes the normal retirement date.
Participants in the Pension Plan are 100% vested in their benefits after the
completion of five years of service. The Pension Plan benefit is generally an
actuarially-reduced 50% joint and survivor annuity, payable monthly. If both
the participant and spouse reject this form of payment, an alternative form of
payment may be provided.
Due to the funding status of the Pension Plan, Valley Savings Bank did not
have to make a contribution for fiscal year 1993.
As of the end of fiscal year 1993, Mr. Greene had three years of credited
service under the Pension Plan. The employment agreements between VSB and
Valley Savings Bank and Mr. Greene provide for a supplemental benefit (the
"supplemental benefit") equal to the difference between the benefit payable to
Mr. Greene pursuant to the terms of the Pension Plan at the time of a Change in
Control (as defined in the employment agreements) of VSB and the benefit that
would be payable to Mr. Greene pursuant to the terms of the Pension Plan if Mr.
Greene had an additional three years of credited service under the Pension Plan
at the time of the Change in Control. VSB must purchase for Mr. Greene an
annuity from an AAA rated insurance company acceptable to Mr. Greene (or from
such other insurance company as is acceptable to Mr. Greene) to fund the
supplemental benefit.
COMPENSATION COMMITTEE REPORT
General. Under rules established by the Commission, VSB is required to
provide certain data and information in regard to the compensation and benefits
provided to VSB's Chief Executive Officer and other executive officers of VSB.
The disclosure requirements for the Chief Executive Officer and other executive
officers include the use of tables and a report explaining the rationale and
considerations that led to fundamental executive compensation decisions
affecting those individuals. In fulfillment of this requirement, the following
report has been prepared for inclusion in this proxy statement.
All cash compensation paid to executive officers is paid by Valley Savings
Bank. VSB does not currently pay cash compensation to executive officers. The
compensation Committee of the Board of Directors of Valley Savings Bank (the
"Compensation Committee") makes recommendations to the full Board of Directors
of Valley Savings Bank as to base salaries and incentive bonus awards. The
Compensation Committee is comprised of Messrs. Frank, Durkin, Reeve and Spiro.
CEO Greene offers input and advice as to executive compensation decisions
affecting the members of senior management, other than himself. Compensation
decisions and recommendations as to Mr. Greene are made without the
participation of Mr. Greene. Mr. Greene is party to employment agreements with
VSB and Valley Savings Bank which provide, among other things, for a minimum
salary to be payable to Mr. Greene and for Mr. Greene's participation in all
benefit plans or arrangements provided by VSB and Valley Savings Bank.
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The primary components of executive compensation for 1993 were base salary
and incentive bonus awards. The Incentive Plan and the MRP were implemented in
fiscal 1989 and most of the shares of the stock reserved for issuance for those
plans were awarded in prior fiscal years. During fiscal 1993, the Compensation
Committee did award 12,480 stock options and 4,440 shares of stock under the
MRP to three executives. Such awards were made in the normal course of
business.
Base Salaries. The salaries for senior management are reviewed annually on a
cycle that coincides with VSB's September 30 year-end. In general, the purpose
of the annual salary review is to insure that Valley Savings Bank's base salary
levels are competitive with financial institutions similar in size, geographic
market and business profile in order for Valley Savings Bank to attract and
retain persons of high quality. Mr. Greene recommends proposed salary increases
for senior management, other than himself, to the Compensation Committee and
the full Board of Directors of Valley Savings Bank. Mr. Greene's
recommendations are based on the individual's performance during the previous
fiscal year. Increases in salaries for fiscal 1993 ranged from 6% to 11%.
Incentive Bonus Awards. The Board of Directors of Valley Savings Bank has
instituted the Key Management Incentive Compensation Plan (the "Incentive Bonus
Plan"), a non-qualified plan, to provide a compensatory award to certain
management personnel. The officers entitled to participate in the Incentive
Bonus Plan and the target bonus levels are recommended by the Chairman of the
Board of Valley Savings Bank and approved by the Compensation Committee. Eight
officers were approved for participation in fiscal 1993. Under the Incentive
Bonus Plan, awards are made to key management personnel based on attaining
projected profit goals. Profit goals and percentage amounts (i.e., percentages
of salary that the bonus may constitute) are established at the beginning of
the fiscal year. The Incentive Bonus Plan, as currently established, allows for
the participants to receive increased percentages as net profit increases. The
percentage range for the Incentive Bonus Plan is eight to forty percent. In
consideration for being a participant in the Incentive Bonus Plan, the
participants have agreed that they will not be eligible for other holiday or
non-specific performance bonuses. Those participating officers who have entered
into employment contracts with Valley Savings Bank and VSB have agreed that
bonuses paid under the Incentive Bonus Plan will be excluded from the
definition of compensation under their contracts. The amount of bonuses
distributed for services rendered in fiscal 1993 was $139,861.
Compensation of Chief Executive Officer. The Board of Directors of Valley
Savings Bank approved a base salary for the CEO for fiscal 1993 of $200,750
which represented an 8% increase from the level of base salary of $185,833
provided in fiscal 1992. Under the employment agreements between VSB and Valley
Savings Bank and Mr. Greene, the base salary may not be decreased. The 1993
base salary increase was not based on specific criteria but rather based on a
perception of Mr. Greene's individual performance as well as Valley Savings
Bank's overall performance for fiscal 1993. Mr. Greene also received an $80,300
cash bonus in accordance with the terms of the Incentive Bonus Plan, based upon
criteria established at the beginning of the fiscal year.
COMPENSATION COMMITTEE WILLIAM J. DURKIN, ANDREW FRANK, ARTHUR H. REEVE AND
MARTIN SPIRO
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PERFORMANCE GRAPH
The following graph compares the five year cumulative total stockholder
return on VSB Stock, based on the market price of VSB Stock and assuming the
reinvestment of dividends, with (i) the cumulative total return of companies
quoted in the NASDAQ National Market (the "NASDAQ Market Index") and (ii) a
peer group consisting of all thrift institutions quoted on NASDAQ (the "Media
General S&L Peer Group Index").
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN AMONG
VSB STOCK, THE NASDAQ MARKET INDEX AND THE MEDIA GENERAL S&L PEER GROUP INDEX
<CAPTION>
NASDAQ MEDIA GENERAL
Measurement period VSB MARKET S&L PEER GROUP
(Fiscal year Covered) STOCK INDEX INDEX
- --------------------- -------- -------- --------------
<S> <C> <C> <C>
Measurement PT -
10/27/88 $ 100.00 $ 100.00 $ 100.00
FYE 09/30/89 $ 134.00 $ 120.00 $ 142.00
FYE 09/30/90 $ 80.00 $ 93.00 $ 77.00
FYE 09/30/91 $ 96.00 $ 124.00 $ 124.00
FYE 09/30/92 $ 178.00 $ 120.00 $ 140.00
FYE 09/30/93 $ 298.00 $ 157.00 $ 217.00
</TABLE>
INDEPENDENT AUDITORS
The VSB Board has not yet selected independent auditors for the fiscal year
ending September 30, 1994. The selection will be based in general upon the
accounting firm's overall fee structure for auditing services, tax consulting,
tax return review or preparation, and general consultations. The independent
auditors for the fiscal year ended September 30, 1993 were KPMG Peat Marwick. A
representatives of KPMG Peat Marwick is expected to attend the Annual Meeting.
The representative will be given the opportunity to make a statement if it is
so desired and will be available to respond to questions from stockholders
present at the Annual Meeting.
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STOCKHOLDER PROPOSALS
To be eligible for inclusion in VSB's proxy material relating to the next
annual meeting of stockholders in the event the Merger is not consummated, a
stockholder proposal must be received by the Secretary at the offices of VSB at
the address set forth on the first page of this Proxy Statement, not later than
November , 1994. Any such proposal will be subject to Proxy Rule 14a-8 of the
rules and regulations of the Securities and Exchange Commission.
ADVANCE NOTICE OF CERTAIN MATTERS TO BE CONDUCTEDAT AN ANNUAL MEETING
The Bylaws of VSB provide an advance notice procedure for certain business,
or nominations to the VSB Board, to be brought before an annual meeting. In
order for a stockholder to properly bring business before an annual meeting or
to propose a nominee to the VSB Board, the stockholder must give written notice
to the Secretary of VSB not less than sixty (60) days before the time fixed for
such meeting; provided, however, that in the event that less than seventy (70)
days notice or prior public disclosure of the date of the meeting is given,
notice by the stockholder to be timely must be received not later than the
close of business on the tenth day following the day on which such notice of
the date of the annual meeting was mailed or such public disclosure was made.
The notice must include the stockholder's name, address and number of shares
owned and describe briefly the proposed business, the reasons for bringing the
business before the annual meeting, and any material interest of the
stockholder in the proposed business. In the case of nominations to the VSB
Board, certain information regarding the nominee must be provided.
LEGAL MATTERS
The legality of the UJB Stock offered hereby will be passed upon for UJB by
Richard F. Ober, Jr., Esq., Executive Vice President, General Counsel and
Secretary of UJB. Mr. Ober owns 20,877 shares of UJB Stock and options to
purchase 54,674 shares of UJB Stock at a weighted average exercise price of
$17.24. Certain legal matters will be passed upon for UJB by Weil, Gotshal &
Manges, New York, New York (a partnership including professional corporations),
and for VSB by Luse Lehman Gorman Pomerenk & Schick, a Professional
Corporation, Washington, D.C.
EXPERTS
The consolidated financial statements of UJB and subsidiaries as of December
31, 1993 and 1992 and for each of the years in the three-year period ended
December 31, 1993, included in UJB's Form 8-K filed on March 18, 1994,
incorporated by reference herein and in the Registration Statement, have been
incorporated by reference herein and in the Registration Statement in reliance
upon the report of KPMG Peat Marwick, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing.
The report of KPMG Peat Marwick for the year ending December 31, 1993 refers
to a change in the method of accounting for income taxes.
The consolidated financial statements of VSB and subsidiaries as of September
30, 1993, included in VSB's Annual Report on Form 10-K for the year ended
September 30, 1993, incorporated by reference herein and in the Registration
Statement have been incorporated by reference herein and in the Registration
Statement in reliance upon the report of KPMG Peat Marwick, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
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OTHER MATTERS
The VSB Board knows of no business which will be presented for consideration
at the Annual Meeting other than as stated in the Notice of Annual Meeting of
Stockholders and this Proxy Statement. If, however, other matters are properly
brought before the Annual Meeting, it is the intention of the persons named in
the accompanying proxy card to vote the shares represented thereby on such
matters in accordance with their best judgment.
By Order of the Board of Directors
-------------------------------------
William J. Durkin
Secretary
Closter, New Jersey
March , 1994
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. WHETHER OR
NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO SIGN AND
PROMPTLY RETURN THE ACCOMPANYING WHITE PROXY CARD IN THE ENCLOSED, POSTAGE-PAID
ENVELOPE.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated December 16th, 1993, between UJB Financial
Corp., a New Jersey business corporation ("UJB"), and VSB Bancorp, Inc., a
Delaware business corporation ("VSB").
W I T N E S S E T H :
WHEREAS, the respective boards of directors of UJB and VSB deem it advisable
and in the best interests of their respective shareholders to merge VSB into
UJB (the "Merger") pursuant to the laws of the States of New Jersey and
Delaware and this Agreement and Plan of Merger (the "Agreement"); and
WHEREAS, pursuant to the Merger, VSB shareholders will receive, in exchange
for the shares of common stock, par value $.01 per share, of VSB (the "VSB
Stock") held by such shareholders, shares of the common stock of UJB, par value
$1.20 per share (the "UJB Common Stock"), as set forth herein, and cash for any
fractional share interest; and
WHEREAS, to effectuate the Merger, the parties hereby adopt a plan of
reorganization in accordance with the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein and the Stock Option
Agreement entered into contemporaneously herewith (the "Stock Option
Agreement"), the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE I.
GENERAL PROVISIONS
Section 1.01. The Merger.
(a) Upon the terms and subject to the conditions contained in this Agreement,
at the Effective Time (as defined in Section 1.06), VSB shall be merged with
and into UJB pursuant to and in accordance with the provisions of, and with the
effect provided in, the New Jersey Business Corporation Act, as amended (the
"New Jersey Act") and the Delaware General Corporation Law, as amended (the
"Delaware Law") (UJB as surviving corporation being hereinafter sometimes
referred to as the "Surviving Corporation").
Section 1.02. Capital Stock of UJB. All shares of the capital stock of UJB
outstanding immediately prior to the Effective Time shall be unaffected by the
Merger and shall remain outstanding immediately thereafter.
Section 1.03. Terms of Conversion of VSB Common Stock.
(a) At the Effective Time, by virtue of the Merger and without any action on
the part of any shareholder:
(1)All shares of VSB Stock which immediately prior to the Effective Time
are either owned beneficially by UJB or held in the treasury of VSB shall
be cancelled and retired and no cash, securities or other consideration
shall be paid or delivered under this Agreement in exchange for such VSB
Stock; and
(2)Subject to Section 1.07, each share of VSB Stock outstanding
immediately prior to the Effective Time shall be converted in accordance
with the New Jersey Act and the Delaware Law into the number of shares of
UJB Common Stock equal to the exchange ratio determined in accordance with
the following (the "Exchange Ratio"):
(A)If the Average Price (as defined in Section 1.03(b) below) of a
share of UJB Common Stock is greater than $27.50, the Exchange Ratio
shall be .7727;
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(B) If the Average Price of a share of UJB Common Stock is equal to
or greater than $22.50 and equal to or less than $27.50, the Exchange
Ratio shall be equal to the quotient obtained by dividing $21.25 by the
Average Price; and
(C) If the Average Price of a share of UJB Common Stock is less than
$22.50, the Exchange Ratio shall be .9444; provided, however, that if
the Average Price of a share of UJB Common Stock is less than $20.65,
the Board of Directors of VSB shall have the right, exercisable only
until 11:59 p.m. on the third business day following the Determination
Date (as defined in Section 9.01), to terminate this Agreement by
giving UJB notice of such termination, referring to this Section
1.03(a)(2)(C), and this Agreement shall be terminated pursuant to such
notice, effective as of 11:59 p.m. on the third business day following
receipt of such notice by UJB, unless UJB shall, prior to 11:59 p.m. on
the third business day following receipt of such termination notice,
send notice to VSB agreeing that the Exchange Ratio shall be equal to
the quotient obtained by dividing $19.50 by the Average Price;
provided, however, that in the event the Closing Date occurs during Period
1, Period 2 or Period 3 (all as defined below), (i) an Exchange Ratio
determined in accordance with subsection (A) above shall be increased by
.0022, .0066 or .0131, respectively, (ii) the numerators of the quotients
used to determine an Exchange Ratio in accordance with subsection (B) above
or the final clause of the proviso to subsection (C) above shall be
increased by $.06, $.18 or $.36, respectively, and (iii) an Exchange Ratio
determined in accordance with the first clause of subsection (C) above
shall be increased by .0027, .008 or .016, respectively. "Period 1" is
hereby defined to be the period commencing July 21, 1994 and ending August
20, 1994. "Period 2" is hereby defined to be the period commencing August
21, 1994 and ending September 20, 1994. "Period 3" is hereby defined to be
the period commencing September 21, 1994 and ending September 30, 1994.
(b) For purposes of this Agreement:
(1) "Average Price" means the average (rounded to the nearest penny) of
the closing prices of a share of UJB Common Stock on the New York Stock
Exchange--Composite Transactions Tape for the 10 consecutive trading days
ending on the Determination Date as reported in The Wall Street Journal, or
if not reported therein, as reported in an authoritative source mutually
agreeable to VSB and UJB.
(2) "business day" shall mean a calendar day other than a Saturday or a
Sunday, January 1, the third Monday in January, the third Monday in
February, the last Monday in May, July 4, the First Monday in September,
the second Monday in October, November 11, the fourth Thursday in November,
or December 25. If January 1, July 4, November 11 or December 25 fall on a
Sunday, the next Monday is not a business day.
(c) The Exchange Ratio shall be subject to appropriate adjustments in the
event that, from the date hereof to the Effective Time, the outstanding UJB
Common Stock shall have been increased, decreased, changed into or exchanged
for a different number or kind of shares or securities through reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other like changes in the outstanding shares of UJB Common Stock.
Section 1.04. Reservation of UJB Common Stock; Issuance of Shares Pursuant
to the Merger. UJB shall reserve and make available for issuance to holders
of VSB Stock in connection with the Merger, on the terms and subject to the
conditions of this Agreement, sufficient shares of UJB Common Stock (which
shares, when issued and delivered, will be duly authorized, legally and validly
issued, fully paid and non-assessable). The shares of UJB Common Stock to be
issued in accordance with the Plan are sometimes referred to herein as the
"Shares". Upon the terms, and subject to the conditions of this Agreement,
including the conversion of VSB Stock according to the Exchange Ratio, UJB
shall issue the Shares upon consummation of the Merger to holders of VSB Stock.
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Section 1.05. Exchange Agent Arrangements. Prior to the Effective Time (as
defined in Section 1.06), UJB shall appoint United Jersey Bank, First Chicago
Trust Company of New York or another entity reasonably satisfactory to VSB as
the exchange agent (the "Exchange Agent") responsible for exchanging, in
connection with and upon consummation of the Merger, certificates representing
the Shares for certificates representing shares of VSB Stock, and upon
consummation of the Merger UJB shall deliver to the Exchange Agent certificates
representing shares of UJB Common Stock and cash representing fractional share
interests as shall be required to be delivered to holders of shares of VSB
Stock pursuant to this Agreement. Any UJB Common Stock or cash in lieu of
fractional share interests delivered to the Exchange Agent and unclaimed at the
end of one year from the Effective Time shall be repaid to UJB, in which event
the persons entitled thereto shall look only to UJB for payment thereof;
provided, however, that, if UJB shall, as required or permitted by law, pay to
the appropriate state authorities any unclaimed UJB Common Stock or cash so
repaid to UJB, said persons shall thereafter look only to the appropriate state
authorities for payment thereof.
Section 1.06. Effective Time. The Merger shall be effective at the hour and
on the date (the "Effective Time") specified in the Certificate of Merger of
UJB and VSB required by this Agreement to be filed with the Secretary of State
of the State of New Jersey in accordance with Section 14A:10-4.1 of the New
Jersey Act (the "NJ Certificate"), or, if filed later than the date of the NJ
Certificate, the date of filing of the Certificate of Merger required by this
Agreement to be filed with the Secretary of State of the State of Delaware in
accordance with Section 252 of the Delaware Law (the "Delaware Certificate")
(the NJ Certificate and the Delaware Certificate are collectively referred to
herein as the "Certificates of Merger"). UJB shall file the Certificates of
Merger not later than one business day following the Closing Date.
Section 1.07. Exchange of VSB Certificates.
(a) After the Effective Time, the holder of certificates theretofore
representing shares of VSB Stock (the "VSB Certificates"), upon surrender of
such certificates to the Exchange Agent, shall be entitled to receive in
exchange therefor certificates representing the number of whole Shares to which
the holders are entitled pursuant to the conversion effected by Section 1.03,
and payments due in lieu of any fractional share interests pursuant to Section
1.08. Until so surrendered, outstanding VSB Certificates, other than those not
converted pursuant to Section 1.03(a)(1), shall be deemed for all purposes,
other than as provided below with respect to unsurrendered VSB Certificates and
UJB's right to refuse the payment of dividends or other distributions, if any,
in respect of UJB Common Stock, to represent the number of whole Shares into
which the shares of VSB Stock have been converted and the right to receive
cash, if any, as provided in Section 1.08. Until so surrendered, UJB may, at
its option, refuse to pay to the holders of VSB Certificates dividends or other
distributions, if any, payable to holders of UJB Common Stock; provided,
however, that upon surrender and exchange of VSB Certificates there shall be
paid to such holders the amount, without interest, of dividends and other
distributions, if any, which became payable prior thereto but which were not
paid.
(b) Holders of VSB Certificates as of the Effective Time shall cease to be,
and shall have no further rights as, shareholders of VSB.
(c) As promptly as practicable after the Effective Time UJB shall cause the
Exchange Agent to send to each holder of VSB Certificates instructions and
transmittal materials for use in surrendering and exchanging VSB Certificates.
If VSB Certificates are properly presented to the Exchange Agent, UJB shall
cause the Exchange Agent to cancel and exchange them for UJB Certificates and
payments in lieu of fractional shares.
(d) At and after the Effective Time there shall be no transfers on the stock
transfer books of VSB of the shares of VSB Stock which were outstanding
immediately prior to the Effective Time.
Section 1.08. Fractional Shares. Each holder of a VSB Certificate who by
virtue of this Article I would have been entitled to receive a fraction of a
share of UJB Common Stock (after taking into account all shares of VSB Stock
represented by the VSB Certificates then delivered by such holder) shall
receive at the time
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such holder is to receive his UJB Certificates, in lieu of such fraction of a
share, cash in an amount equal to such fraction multiplied by the Average
Price.
Section 1.09. Restated Certificate of Incorporation and By-Laws. The
Restated Certificate of Incorporation and By-Laws of UJB in force immediately
prior to the Effective Time shall be the Restated Certificate of Incorporation
and By-Laws of the Surviving Corporation, except as duly amended thereafter and
except, with respect to the Restated Certificate of Incorporation, to the
extent such is affected by the Certificate of Merger.
Section 1.10. Board of Directors and Officers. The Board of Directors of
the Surviving Corporation shall consist of members of the Board of Directors of
UJB at the Effective Time. The officers of the Surviving Corporation shall
consist of the officers of UJB immediately prior to the Effective Time. Such
directors and officers shall serve as such for the terms prescribed in the
Restated Certificate of Incorporation and By-Laws of UJB, or otherwise as
provided by law or until their earlier deaths, resignation or removal.
Section 1.11. VSB Stock Option Plans. At the Effective Time, each option to
purchase shares of VSB Stock issued and outstanding on the date hereof pursuant
to stock option plans of VSB disclosed in VSB Schedule XI (the "VSB Stock
Option Plans") shall be deemed to constitute, and shall automatically be
converted into, an option to acquire, otherwise on the same terms and
conditions as provided under the VSB Stock Option Plan under which such option
was issued, such number of shares of UJB Common Stock as would have been issued
pursuant to the Merger if all of the shares of VSB Stock subject to such option
were issued and outstanding immediately prior to the Effective Time, with an
exercise price per share of UJB Common Stock subject to the converted option
equal to the exercise price per share of VSB Stock subject to the VSB option so
converted divided by the Exchange Ratio set forth in this Agreement (subject to
adjustment as provided herein); provided, however, that the number of shares of
UJB Common Stock that may be purchased under any such converted option shall
not include any fractional share interest but shall be rounded down to the next
lower full share. As soon as practicable after the Effective Time, UJB shall
issue to the holders of such VSB options appropriate instruments confirming the
right of such holders to acquire shares of UJB Common Stock on the terms and
conditions provided by this Section 1.11, upon surrender of their outstanding
instruments representing such VSB options; provided, however, that UJB shall
not be obligated to issue any such confirming instruments or any shares of UJB
Common Stock upon the exercise of any VSB options until such time as the shares
of UJB Common Stock issuable upon exercise of such converted options have been
registered with the Securities and Exchange Commission (the "SEC") pursuant to
an effective registration statement and have been authorized for listing on the
New York Stock Exchange and for sale by any appropriate state securities
regulators, which UJB shall use its best efforts to effect as promptly as
practicable, but in no event more than 30 days after the Effective Time.
Section 1.12. Additional Actions. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of VSB acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger or otherwise to
carry out this Agreement, the officers and directors of the Surviving
Corporation shall be authorized to execute and deliver, in the name and on
behalf of VSB or otherwise, all such deeds, bills of sale, assignments and
assurances and to take, in the name and on behalf of VSB, all such other
actions and things as may be necessary or desirable to vest, perfect or confirm
any and all right, title and interest in, to and under such rights, properties
or assets in the Surviving Corporation or otherwise to carry out this
Agreement.
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ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF VSB
VSB represents and warrants to UJB as follows:
Section 2.01. Organization, Capital Stock.
(a) Each of VSB and its nonbank subsidiaries, including the nonbank
subsidiaries of banks (the term "subsidiary", as used herein, shall mean any
corporation or other organization of which 25% or more of the outstanding
shares of any class of capital stock or other equity security is directly or
indirectly owned), all of which are listed, together with their respective
states of incorporation, on VSB Schedule I, is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, qualified to transact business in and in good standing under the
laws of all jurisdictions where the failure to be so qualified would have a
material adverse effect upon VSB or such subsidiary, and each has all corporate
power and authority and all material licenses, franchises, certificates,
permits and other governmental authorizations which are legally required to own
and lease its properties, to occupy its premises and to engage in its business
and activities as presently engaged in, and each has complied in all material
respects with all applicable laws, regulations and orders.
(b) VSB is duly registered as a bank holding company under the Bank Holding
Company Act of 1956, as amended (the "Bank Holding Company Act").
(c) VSB or one of its subsidiaries is the holder and beneficial owner of all
of the issued and outstanding capital stock of all of VSB's direct and indirect
nonbank subsidiaries.
(d) The authorized capital stock of VSB consists of 5,000,000 shares of
common stock, each of $.01 par value, of which at the date hereof 3,402,073
shares are outstanding, and 2,000,000 shares of preferred stock, each of $.01
par value, of which at the date hereof no shares are outstanding. The
authorized and outstanding capital stock of each nonbank subsidiary is set
forth on VSB Schedule I hereto together with the holders of outstanding capital
stock and the number of shares of outstanding capital stock held. All issued
shares of the capital stock of VSB and of each of its nonbank subsidiaries have
been fully paid, were duly authorized and validly issued, are non-assessable,
have been issued pursuant to an effective registration statement and current
prospectus under the Securities Act of 1933 (the "Securities Act") or an
appropriate exemption from registration under the Securities Act and were not
issued in violation of the preemptive rights of any shareholder. No options
covering capital stock of VSB or any of its nonbank subsidiaries, warrants to
purchase or contracts to issue capital stock of VSB or any of its nonbank
subsidiaries, or any other contracts, rights (including preemptive rights),
commitments or convertible securities entitling anyone to acquire from VSB or
any of its subsidiaries or obligating them to issue any capital stock, or
securities convertible into or exchangeable for shares of capital stock, of VSB
or any of its nonbank subsidiaries are outstanding, in existence, or the
subject of an agreement, except for options provided for in the Stock Option
Agreement and except as set forth in VSB Schedule II. All plans of VSB for the
granting of stock options or stock appreciation rights, and any amendments
thereto, have been duly approved by the shareholders of VSB in accordance with
the requirements of the Code and Rule 16b-3 under the Securities Exchange Act
of 1934 (the "Exchange Act").
(e) VSB owns no bank subsidiary other than Valley Savings Bank ("Valley").
("bank" is hereby defined to include commercial banks, savings banks, private
banks, trust companies, savings and loan associations, building and loan
associations and similar institutions receiving deposits and making loans).
Valley is a savings bank duly organized, validly existing, and in good standing
under the laws of the State of New Jersey. Valley is duly authorized to conduct
all activities and exercise all powers contemplated by applicable laws of the
State of New Jersey, (ii) is an insured bank as defined in the Federal Deposit
Insurance Act, and (iii) has all corporate power and authority and all material
licenses, franchises, certificates, permits and other
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governmental authorizations which are legally required to own and lease its
properties and assets, to occupy its premises, and to engage in its business
and activities as presently engaged in, and has complied in all material
respects with all applicable laws, regulations and orders.
(f) The authorized and outstanding capital stock of Valley is as set forth on
VSB Schedule III. VSB is the holder and beneficial owner of all shares of the
issued and outstanding capital stock of Valley. All issued and outstanding
shares of the capital stock of Valley have been fully paid, were duly
authorized and validly issued, are non-assessable, have been issued pursuant to
an effective registration statement and current prospectus under the Securities
Act or an appropriate exemption from registration under the Securities Act, and
were not issued in violation of the preemptive rights of any shareholder. No
options covering the capital stock of Valley, warrants to purchase or contracts
to issue capital stock of Valley, or any other contracts, rights (including
preemptive rights), commitments or convertible securities entitling anyone to
acquire from VSB or any of its subsidiaries or obligating them to issue any
capital stock, or securities convertible into or exchangeable for shares of
capital stock, of Valley are outstanding, in existence, or the subject of an
agreement.
(g) All capital stock of its subsidiaries beneficially owned by VSB is held
free and clear of any claims, liens, encumbrances or security interests.
Section 2.02. Financial Statements. The financial statements and schedules
contained or incorporated in VSB's (a) annual report to shareholders for the
fiscal year ended September 30, 1993, and (b) annual report on Form 10-K
pursuant to the Exchange Act for the fiscal year ended September 30, 1993 (the
"VSB Financial Statements") are true and correct in all material respects as of
their respective dates and each fairly presents the consolidated financial
condition, results of operations and changes in capital accounts, retained
earnings and financial position of VSB and its subsidiaries at its respective
date and for the period to which it relates. Except as may otherwise be
described therein or in the accountants' reports thereon, the VSB Financial
Statements were prepared in accordance with generally accepted accounting
principles consistently applied. The VSB Financial Statements do not, as of the
dates thereof, include any material asset or omit any material liability,
absolute or contingent, or other fact, the inclusion or omission of which
renders the VSB Financial Statements, in light of the circumstances under which
they were made, misleading in any respect.
Section 2.03. No Conflicts. VSB and each of its subsidiaries is not in, and
has received no notice of, violation or breach of, or default under, nor will
the execution, delivery and performance of this Agreement by VSB, or the
consummation of the transactions contemplated hereby including the Merger by
VSB upon the terms provided herein (assuming receipt of the Required Consents),
violate, conflict with, result in the breach of, constitute a default under,
give rise to a claim or right of termination, cancellation, revocation of, or
acceleration under, or result in the creation or imposition of any lien, charge
or encumbrance upon any of the material rights, permits, licenses, assets or
properties of VSB or any of its subsidiaries or upon any of the capital stock
of VSB or any of its subsidiaries, or constitute an event which could, with the
lapse of time, action or inaction by VSB or any of its subsidiaries or a third
party, or the giving of notice and failure to cure, result in any of the
foregoing, under any of the terms, conditions or provisions, as the case may
be, of:
(a) the Certificate of Incorporation or the By-Laws of VSB or any of its
subsidiaries;
(b) any law, statute, rule, ruling, determination, ordinance or
regulation of or agreement with any governmental or regulatory authority;
(c) any judgment, order, writ, award, injunction or decree of any court
or other governmental authority; or
(d) any note, bond, mortgage, indenture, lease, policy of insurance or
indemnity, license, contract, agreement or other instrument;
to which VSB or any of its subsidiaries is a party or by which VSB or any of
its subsidiaries or any of their assets or properties are bound or committed,
the consequences of which individually or in the aggregate,
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would have a material adverse effect either on Valley or on VSB and its
subsidiaries, taken as a whole, or enable any person to enjoin the transactions
contemplated hereby.
Section 2.04. Absence of Undisclosed Liabilities. To the best knowledge of
VSB management, VSB and its subsidiaries have no liabilities, whether
contingent or absolute, direct or indirect, matured or unmatured (including but
not limited to liabilities for federal, state and local taxes, penalties,
assessments, lawsuits or claims against VSB or any of its subsidiaries), and no
loss contingency (as defined in Statement of Financial Accounting Standards No.
5), material individually or in the aggregate either to Valley or to VSB and
its subsidiaries, taken as a whole, other than (a) those reflected in the VSB
Financial Statements or disclosed in the notes thereto, (b) commitments made by
VSB or any of its subsidiaries in the ordinary course of its business which are
not in the aggregate material in frequency or amount either to Valley or to VSB
and its subsidiaries, taken as a whole, and (c) liabilities arising in the
ordinary course of its business since September 30, 1993 which are not in the
aggregate material in frequency or amount either to Valley or to VSB and its
subsidiaries, taken as a whole. Neither VSB nor any of its subsidiaries has,
since September 30, 1993, become obligated on any debt due in more than one
year from the date of this Agreement in excess of $250,000, other than intra-
corporate debt and deposits received, repurchase agreements and borrowings from
the Federal Home Loan Bank of New York entered into in the ordinary course of
business.
Section 2.05. Absence of Litigation, Agreements with Bank
Regulators. There is no outstanding order, injunction or decree of any court
or governmental or self-regulatory body against or affecting VSB or any of its
subsidiaries which materially and adversely affects Valley or VSB and its
subsidiaries, taken as a whole, and there are no actions, arbitrations, claims,
charges, suits, investigations or proceedings (formal or informal) material to
either Valley or VSB and its subsidiaries, taken as a whole, pending or, to
VSB's knowledge, threatened, against or involving VSB or any of its
subsidiaries or their officers or directors (in their capacity as such) in law
or equity or before any court, panel or governmental agency, except as
disclosed in VSB Schedule IV. Neither Valley nor VSB is a party to any
agreement or memorandum of understanding with, or is a party to any commitment
letter to, or has submitted a board of director resolution or similar
undertaking to, or is subject to any order or directive by, or is a recipient
of any extraordinary supervisory letter from, any governmental or regulatory
authority which restricts materially the conduct of its business, or in any
manner relates to its capital adequacy, its credit or reserve policies or its
management, nor has Valley or VSB been advised by any governmental or
regulatory authority that it is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any of the foregoing.
Section 2.06. Brokers' Fees. VSB has entered into this Agreement with UJB
as a result of direct negotiations without the assistance or efforts of any
finder, broker, financial advisor or investment banker, other than Ryan, Beck &
Co. Except as disclosed in VSB Schedule V, true and complete copies of all
agreements between VSB and Ryan, Beck & Co. with respect to the transactions
contemplated by this Agreement have previously been delivered to UJB.
Section 2.07. Material Information. The representations and warranties made
by VSB in this Agreement and the VSB Schedules hereto, and, at the time of
filing, all filings made by VSB and its subsidiaries after September 30, 1992
with the SEC and the appropriate bank regulatory authorities do not or did not
contain any untrue statement of a material fact and do not or did not omit to
state any material fact required to be stated herein or therein or necessary to
make the statements contained herein or therein, in light of the circumstances
under which they were made, not misleading.
Section 2.08. Corporate Action. Assuming due execution and delivery by each
of the other parties thereto, and subject to the approval by the shareholders
of VSB of this Agreement, the Merger and the other transactions contemplated
hereby in accordance with VSB's Certificate of Incorporation at a meeting of
such holders to be duly called and held, VSB has the corporate power and is
duly authorized by all necessary corporate action to execute, deliver and
perform this Agreement. The Board of Directors of VSB has taken all action
required by law, its Certificate of Incorporation, its By-Laws or otherwise to
authorize the execution
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and delivery of this Agreement. This Agreement is a valid and binding agreement
of VSB enforceable in accordance with its terms except as such enforcement may
be limited by applicable principles of equity, and by bankruptcy, insolvency,
moratorium or other similar laws presently or hereafter in effect affecting the
enforcement of creditors' rights generally. The Board of Directors of VSB in
authorizing the execution of this Agreement has determined to recommend to the
shareholders of VSB the approval of this Agreement, the Merger and the other
transactions contemplated hereby and thereby.
Section 2.09. Absence of Changes. There has not been, since September 30,
1993, any material adverse change in the financial condition, assets,
liabilities, business or results of operations of Valley or of VSB and its
subsidiaries taken as a whole, and there is no matter or fact which may result
in any such material adverse change in the future (other than changes which may
affect the banking industry in general). Except as disclosed in VSB Schedule
VI, neither VSB nor any of its subsidiaries has, since September 30, 1993, (a)
declared, set aside or paid any dividend or other distribution in respect of
its capital stock, and dividends from subsidiaries to VSB or other subsidiaries
of VSB, or, directly or indirectly, purchased, redeemed or otherwise acquired
any shares of such stock held by persons other than VSB and its subsidiaries;
(b) incurred current liabilities since that date other than in the ordinary
course of business, (c) sold, exchanged or otherwise disposed of any of their
assets except in the ordinary course of business; (d) made any extraordinary
officers' salary increase or wage increase, entered into any employment,
consulting, severance or change of control contract with any present or former
director, officer or salaried employee, or instituted any employee or director
welfare, bonus, stock option, profit-sharing, retirement, severance or other
benefit plan or arrangement or modified any of the foregoing so as to increase
its obligations thereunder in any material respect; (e) suffered any taking by
condemnation or eminent domain or other damage, destruction or loss in excess
of $50,000, whether or not covered by insurance, adversely affecting its
business, property or assets, or waived any rights of value in excess of
$50,000; (f) entered into any transactions which in the aggregate exceeded
$250,000 other than in the ordinary course of business; or (g) acquired the
assets or capital stock of another company, except in a fiduciary capacity or
in the course of securing or collecting loans or leases.
Section 2.10. Allowance for Loan and Lease Losses. At September 30, 1993
and thereafter VSB's allowance for loan and lease losses is adequate in all
material respects to provide for all losses on loans and leases outstanding
and, to the best of VSB's knowledge, the loan and lease portfolios of VSB in
excess of such allowances are collectible in the ordinary course of business.
VSB Schedule VII constitutes a list of all loans and leases made by VSB or any
of its subsidiaries that have been "classified" as to quality by any internal
or external auditor, accountant or examiner, and such list is accurate and
complete in all material respects.
Section 2.11. Taxes and Tax Returns. Neither VSB nor any of its
subsidiaries has at any time filed a consent pursuant to Section 341(f) of the
Code or consented to have the provisions of Section 341(f)(2) of the Code apply
to any disposition of a subsection (f) asset (as such term is defined in
Section 341(f)(4) of the Code) owned by VSB or any of its subsidiaries. None of
the property being acquired by UJB or its subsidiaries in the Merger is
property which UJB or its subsidiaries will be required to treat as being owned
by any other person pursuant to the provisions of Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended and in effect immediately prior to
the enactment of the Tax Reform Act of 1986 or is "tax-exempt use property"
within the meaning of Section 168(h)(1) of the Code. Proper and accurate
amounts have been withheld from employees by VSB and each of its subsidiaries
for all periods in full and complete compliance with the tax, social security
and unemployment withholding provisions of applicable federal, state and local
law. Proper and accurate federal, state and local returns have been timely
filed by VSB and each of its subsidiaries for all periods for which returns
were due, including with respect to employee income tax withholding, social
security and unemployment taxes, and the amounts shown thereon to be due and
payable have been paid in full or adequate provision therefor has been included
on the books of VSB or its appropriate subsidiary. Other than franchise tax
returns filed by VSB with the State of Delaware, neither VSB nor any of its
subsidiaries is required to file tax returns with any state other than the
State of New Jersey. Provision has been made on the books of VSB or its
appropriate subsidiary for all unpaid taxes, whether or not disputed, that may
become due and payable by VSB or any of its subsidiaries in future periods in
respect of transactions, sales or services
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previously occurring or performed, except as to an amount of up to $10,000
which may be owed with respect to sales taxes. The Internal Revenue Service
("IRS") has audited the consolidated federal income tax returns of Valley for
all taxable years ended on or prior to September 30, 1988. Neither VSB nor any
of its subsidiaries is subject to an audit or review of its tax returns by any
state other than the State of New Jersey. VSB is not and has not been a United
States real property holding corporation as defined in Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code. Neither VSB nor any of its subsidiaries is currently a party to any tax
sharing or similar agreement with any third party. There are no material
matters, assessments, notices of deficiency, demands for taxes, proceedings,
audits or proposed deficiencies pending or threatened against VSB or any of its
subsidiaries and there have been no waivers of statutes of limitations or
agreements related to assessments or collection in respect of any federal,
state or local taxes. Neither VSB nor any of its subsidiaries has agreed to or
is required to make any adjustment pursuant to Section 481(a) of the Code by
reason of a change in accounting method initiated by VSB or any of its
subsidiaries, and neither VSB nor any of its subsidiaries has any knowledge
that the IRS has proposed any such adjustment or change in accounting method.
VSB and its subsidiaries have complied in all material respects with all
requirements relating to information reporting and withholding (including back-
up withholding) and other requirements relating to the reporting of interest,
dividends and other reportable payments under the Code and state and local tax
laws and the regulations promulgated thereunder and other requirements relating
to reporting under federal law including recordkeeping and reporting on
monetary instruments transactions.
Section 2.12. Properties. VSB, directly or through its subsidiaries, has
good and marketable title to all of its properties and assets, tangible and
intangible, including those reflected in the most recent consolidated balance
sheet included in the VSB Financial Statements (except properties and assets
disposed of since that date in the ordinary course of business not in excess of
$35,000), which properties and assets are not subject to any mortgage, pledge,
lien, charge or encumbrance other than as reflected in the VSB Financial
Statements or which in the aggregate do not materially adversely affect or
impair the operation of Valley or of VSB and its subsidiaries taken as a whole.
VSB and each of its subsidiaries enjoys peaceful and undisturbed possession
under all material leases under which it or any of its subsidiaries is the
lessee, where the failure to enjoy such peaceful and undisturbed possession
would have a material adverse effect on Valley or on VSB and its subsidiaries
taken as a whole, and none of such leases contains any unusual or burdensome
provision which would materially and adversely affect or impair the operations
of Valley or of VSB and its subsidiaries taken as a whole.
Section 2.13. Condition of Properties; Insurance. All real and tangible
personal properties owned by VSB or any of its subsidiaries or used by VSB or
any of its subsidiaries in its business are in a good state of maintenance and
repair, are in good operating condition, subject to normal wear and tear,
conform in all material respects to all applicable ordinances, regulations and
zoning laws, and are adequate for the business conducted by VSB or such
subsidiary subject to exceptions which are not, in the aggregate, material. VSB
and each of its subsidiaries maintains insurance (with companies which, to the
best of VSB's knowledge, are authorized to do business in New Jersey) against
loss relating to such properties in amounts which are customary, usual and
prudent for corporations or banks, as the case may be, of their size. Such
policies are in full force and effect, are carried in an amount and form and
are otherwise adequate to protect VSB and each of its subsidiaries from any
adverse loss resulting from risks and liabilities reasonably foreseeable at the
date hereof, and are disclosed on VSB Schedule VIII. All material claims
thereunder have been filed in a due and timely fashion. Since September 30,
1991, neither VSB nor any of its subsidiaries has ever been refused insurance
for which it has applied or had any policy of insurance terminated (other than
at its request).
Section 2.14. Contracts.
(a) Except as set forth in VSB Schedule IX, neither VSB nor any of its
subsidiaries is a party to and neither they nor any of their assets are bound
by any written or oral lease or license with respect to any property, real or
personal, as tenant or licensee involving an annual consideration in excess of
$25,000.
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(b) Except as set forth in VSB Schedule IX, neither VSB nor any of its
subsidiaries is a party to and neither they nor any of their assets is bound by
any written or oral: (i) employment or severance contract (including, without
limitation, any collective bargaining contract or union agreement) which is not
terminable without penalty by VSB or a subsidiary, as appropriate, on 60 days'
or less notice; (ii) contract or commitment for capital expenditures in excess
of $25,000 individually or $50,000 in the aggregate for any one project; (iii)
contract or commitment whether or not made in the ordinary course of business
for the purchase of materials or supplies or for the performance of services
involving consideration in excess of $25,000 (including advertising and
consulting agreements and retainer agreements with attorneys, accountants,
actuaries, or other professionals); (iv) contract or option to purchase or sell
any real or personal property involving consideration in excess of $50,000; or
(v) other contracts material to the business of Valley or of VSB and its
subsidiaries taken as a whole and not made in the ordinary course of business.
(c) Neither VSB nor any of its subsidiaries is a party to or otherwise bound
by any contract, agreement, plan, lease, license, commitment or undertaking
which, in the reasonable opinion of management of VSB, is materially adverse,
onerous, or harmful to any aspect of the business either of Valley or of VSB
and its subsidiaries taken as a whole.
Section 2.15. Interest of Management and Affiliates. Except as disclosed on
VSB Schedule X, all loans presently on the books of VSB or any of its
subsidiaries to its present or former directors or executive officers, or their
associates, or any members of their immediate families, have been made in the
ordinary course of business and on the same terms and interest rates as those
prevailing for comparable transactions with others and do not involve more than
the normal risk of repayment or present other unfavorable features. Except as
set forth in VSB Schedule X, no present or former officer or director of VSB or
any of its subsidiaries or any of their associates or any members of their
immediate families has any interest in any property, real or personal, tangible
or intangible, used in or pertaining to the business of VSB or any of its
subsidiaries except for the normal rights of a shareholder; no such person is
indebted to or has a contract or commitment for the purchase or sale of real or
personal property, materials, supplies or services in excess of $10,000 per
annum or for longer than one year whether or not in the ordinary course of
business with VSB or any of its subsidiaries except for normal business expense
advances and loans or other extensions of credit of not more than $25,000 in
the aggregate; neither VSB nor any of its subsidiaries has any commitment,
whether written or oral, to lend any funds to any such person; and neither VSB
nor any of its subsidiaries is indebted to any such person except for deposits
taken in the ordinary course of business and amounts due for normal
compensation or reimbursement of expenses incurred in furtherance of the
business of such person's employer and reimbursable according to a policy of
VSB or such subsidiary, as appropriate, as in effect immediately prior to the
date hereof. The consummation of the transactions contemplated hereby will not
(either alone, or upon the occurrence of any act or event, the lapse of time,
or the giving of notice and failure to cure) result in any payment (severance
or other) becoming due from VSB or any of its subsidiaries or any successor or
assign thereof to any director, officer or employee of VSB or any of its
subsidiaries or any successor or assign of such subsidiary, except as disclosed
in VSB Schedule X.
Section 2.16. Pension and Benefit Plans.
(a) Neither VSB nor any of its subsidiaries maintains an employee pension
benefit plan, within the meaning of Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or has made any
contributions to any such employee pension benefit plan except employee pension
benefit plans listed in VSB Schedule XI (individually a "VSB Plan" and
collectively the "VSB Plans"). In its present form each VSB Plan complies in
all material respects with all applicable requirements under ERISA and the
Code. Except as disclosed in Schedule XI, each VSB Plan and the trust created
thereunder is qualified and exempt under Sections 401(a) and 501(a) of the
Code, and VSB or the subsidiary whose employees are covered by such VSB Plan
has received from the IRS a determination letter to that effect. Each VSB Plan
has been administered and communicated to the participants and beneficiaries in
all material respects in accordance with its terms. Except as disclosed in
Schedule XI, no employee or agent of VSB or any subsidiary whose employees are
covered by a VSB Plan has engaged in any action or has failed to act in such
manner that, as a
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result of such action or failure: (i) the IRS could revoke a favorable
determination as to such VSB Plan's qualification and the associated trust's
exemption or impose any liability or penalty under the Code, or (ii) a
participant or beneficiary or a nonparticipating employee has been denied
benefits properly due or to become due under such VSB Plan or has been misled
as to his or her rights under such VSB Plan. Based upon reasonable actuarial
assumptions and the cost method established for each VSB Plan by its enrolled
actuary, the actuarial present value of all accumulated benefits under all VSB
Plans as of January 1, 1993 did not exceed the net assets then available for
benefits. There has not been any accumulated funding deficiency with respect to
any VSB Plan within the meaning of Section 412 of the Code, whether or not such
deficiency has been waived. No person has engaged in any prohibited transaction
involving any VSB Plan or associated trust within the meaning of Section 406 of
ERISA or Section 4975 of the Code and there has not been any reportable event
involving any VSB Plan within the meaning of Section 4043 of ERISA and the
regulations thereunder which required notification to the Pension Benefit
Guaranty Corporation ("PBGC"). No liability under Title IV of ERISA has been
incurred with respect to any VSB Plan or associated trust other than for
required insurance premiums payable to PBGC which have been paid when due. No
fact or circumstance, including but not limited to (i) a reportable event as
defined above (other than a reportable event not subject to the provision for
30-day notice to the PBGC under such regulations), (ii) the withdrawal of VSB
or any ERISA affiliate of VSB from a VSB Plan during a plan year in which it
was a "substantial employer" as defined in ERISA, (iii) the filing of a notice
of intent to terminate a VSB Plan or the treatment of a VSB Plan amendment as a
termination under ERISA, (iv) the institution of proceedings to terminate a VSB
Plan by the PBGC, or (v) any other event or condition which exists with respect
to any VSB Plan which would constitute grounds for the termination of such VSB
Plan by the PBGC, or for the appointment by the appropriate United States
District Court of a trustee to administer such VSB Plan. All reports, filings,
disclosures, and other communications which have been required to be made to
the participants and beneficiaries, other employees, the IRS, the U.S.
Department of Labor, the PBGC, or any other governmental agency pursuant to the
Code, ERISA, or other applicable statute or regulation have been made in a
timely manner and all such reports and communications were true and correct in
all material respects. No liability has been incurred on account of delinquent
or incomplete compliance or failure to comply with such requirements. VSB has
no knowledge of any event that could result in a liability of VSB or its ERISA
Affiliates (as defined below) to the PBGC. VSB and all its ERISA Affiliates
have met all requirements with respect to funding the VSB Plans imposed by
ERISA or the Code. There have not been any nor are there now existing any
events or conditions that would permit any VSB Plan to be terminated to be
terminated under circumstances would cause the lien provided under Section 4068
of ERISA to attach to the property of VSB or its ERISA affiliates. "ERISA
Affiliate" means any trade or business (whether or not incorporated) which is a
member of a group of which VSB is a member and which is under common control
within the meaning of Section 414 of the Code.
(b) All bonus, deferred compensation, profit-sharing, retirement, pension,
stock option, stock award and stock purchase plans and all other employee
benefit plans with an annual cost in excess of $25,000 other than medical,
major medical, disability, life insurance or dental plans covering employees
generally, maintained by VSB or any of its subsidiaries (collectively "Benefit
Plans") are listed in VSB Schedule XI and comply in all material respects with
all applicable requirements imposed by the Securities Act, the Exchange Act,
ERISA, the Code, and applicable rules and regulations thereunder. The Benefit
Plans have been administered and communicated to the participants and
beneficiaries in all material respects in accordance with their terms, and no
employee or agent of VSB or any of its subsidiaries has engaged in any action
or failed to act in such manner that, as a result of such action or failure:
(i) the IRS could revoke a favorable determination as to a Benefit Plan's
qualification and any associated trust's exemption or impose any liability or
penalty under the Code; or (ii) a participant or beneficiary or a
nonparticipating employee has been denied benefits properly due or to become
due under the Benefit Plans or has been misled as to their rights under the
Benefit Plans. All reports, filings, disclosures, and other communications
which have been required to be made to the participants and beneficiaries,
other employees of VSB or any of its subsidiaries, the SEC, the IRS, the U.S.
Department of Labor, the PBGC, and any other governmental agency pursuant to
the Code, ERISA, or other applicable statute or regulation have been made in a
timely manner and all such reports and communications
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were true and correct in all material respects. No material liability has been
incurred on account of delinquent or incomplete compliance or failure to comply
with such requirements.
Section 2.17. Fidelity Bonds. Since at least January 1, 1989, VSB and each
of its subsidiaries has continuously maintained fidelity bonds insuring them
against acts of dishonesty by each of the respective insured's employees in
such amounts as are customary, usual and prudent for organizations of its size
and business. All material claims thereunder have been filed in a due and
timely fashion. Since January 1, 1989, the aggregate amount of all claims under
such bonds has not exceeded the policy limits of such bonds (excluding, except
in the case of excess coverage, a deductible amount of not more than $50,000)
and neither VSB nor any of its subsidiaries is aware of any facts which would
form the basis of a claim or claims under such bonds aggregating in excess of
the applicable deductible amounts under such bonds. Neither VSB nor any of its
subsidiaries has reason to believe that its respective fidelity coverage will
not be renewed by its carrier on substantially the same terms as the existing
coverage, except for possible premium increases unrelated to VSB's and its
subsidiaries' past claim experience.
Section 2.18. Labor Matters. Hours worked by and payment made to employees
of VSB and each of its subsidiaries have not been in violation of the Fair
Labor Standards Act or any applicable law dealing with such matters; and all
payments due from VSB and each of its subsidiaries on account of employee
health and welfare insurance have been paid or accrued as a liability on the
books of VSB or its appropriate subsidiary. No labor dispute, strike or other
work stoppage has occurred and is continuing or is threatened with respect to
VSB or any of its subsidiaries. Except as set forth in VSB Schedule XII, no
employee of VSB or any of its subsidiaries has been terminated, suspended,
disciplined or dismissed under circumstances that are likely to result in a
material claim, suit, action, complaint or proceeding against VSB or any of its
subsidiaries. No employees of VSB or any of its subsidiaries are unionized nor
has such union representation been requested by any group of employees or any
other person within the last two years.
Section 2.19. Books and Records. The minute books of VSB and each of its
subsidiaries contain complete and accurate records of and fairly reflect all
actions taken at all meetings and accurately reflect all other corporate action
of the shareholders and the boards of directors and each committee thereof. The
books and records of VSB and each of its subsidiaries fairly and accurately
reflect the transactions to which VSB and each of its subsidiaries is or has
been a party or by which their properties are subject or bound, and such books
and records have been properly kept and maintained.
Section 2.20. Concentrations of Credit. Except as disclosed on VSB Schedule
XIII, no customer or affiliated group of customers (a) is owed by VSB or any
subsidiary of VSB an aggregate amount equal to more than 5% of the
shareholders' equity of VSB or such subsidiary (including deposits, other debts
and contingent liabilities) or (b) owes to VSB or any of its subsidiaries an
aggregate amount equal to more than 5% of the shareholders' equity of VSB or
such subsidiary (including loans and other debts, guarantees of debts of third
parties, and other contingent liabilities).
Section 2.21. Trademarks and Copyrights. Neither VSB nor any of its
subsidiaries has received notice or otherwise knows that the manner in which
VSB or any of its subsidiaries conducts its business including its current use
of any material trademark, trade name, service mark or copyright violates
asserted rights of others in any trademark, trade name, service mark, copyright
or other proprietary right.
Section 2.22. Equity Interests. Except as disclosed in VSB Schedule XIV,
neither VSB nor any of its subsidiaries owns, directly or indirectly, any
equity interest, other than by virtue of a security interest securing an
obligation not presently in default, in any bank, corporation, partnership or
other entity, except: (a) in a fiduciary capacity; or (b) an interest valued at
less than $50,000 acquired in connection with a debt previously contracted.
Section 2.23. Environmental Matters. Except as disclosed on Schedule XVII,
to the knowledge of VSB, no Hazardous Substances (as hereinafter defined) have
been stored, treated, dumped, spilled, disposed,
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discharged, released or deposited at, under or on (1) any property now owned,
occupied or leased ("Present Property") by VSB or any of its subsidiaries, (2)
any property previously owned, occupied or leased ("Former Property") by VSB or
any of its subsidiaries during the time of such previous ownership, occupancy
or lease; or (3) any Participation Facility (as hereinafter defined) during the
time that VSB or any of its subsidiaries participated in the management of, or
may be deemed to be or to have been an owner or operator of, such Participation
Facility. To the knowledge of VSB, neither VSB nor any of its subsidiaries has
disposed, of, or arranged for the disposal of, Hazardous Substances from any
Present Property, Former Property or Participation Facility, and no owner or
operator of a Participation Facility disposed of, or arranged for the disposal
of, Hazardous Substances from a Participation Facility during the time that VSB
or any of its subsidiaries participated in the management of, or may be deemed
to be or to have been an owner or operator of, such Participation Facility. To
the knowledge of VSB, no Hazardous Substances have been stored, treated,
dumped, spilled, disposed, discharged, released or deposited at, under or on
any Loan Property (as hereinafter defined), nor is there, with respect to any
such Loan Property, any violation of environmental law which could materially
adversely affect the value of such Loan Property to an extent which could
prevent or delay VSB or any of its subsidiaries from recovering the full value
of its loan in the event of a foreclosure on such Loan Property.
As used in this Agreement, (a) "Participation Facility" shall mean any
property or facility of which the relevant person or entity (i) has at any time
participated in the management or (ii) may be deemed to be or to have been an
owner or operator, (b) "Loan Property" shall mean any real property in which
the relevant person or entity holds a security interest in an amount greater
than $50,000 and (c) "Hazardous Substances" shall mean (i) any flammable
substances, explosives, radioactive materials, hazardous materials, hazardous
substances, hazardous wastes, toxic substances, pollutants, contaminants or any
related materials or substances specified in any applicable Federal or state
law or regulation relating to pollution or protection of human health or the
environment (including, without limitation, ambient or indoor air, surface
water, groundwater, land surface or subsurface strata) and (ii) friable
asbestos, polychlorinated biphenyls, urea formaldehyde, and petroleum and
petroleum-based products.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF UJB
UJB represents and warrants to VSB as follows:
Section 3.01. Organization, Capital Stock.
(a) UJB is a corporation duly organized, validly existing and in good
standing under the laws of the State of New Jersey with authorized capital
stock consisting of 65,000,000 shares of Common Stock, each of par value $1.20,
of which 51,537,329 shares were issued and outstanding as of September 30, 1993
and 4,000,000 shares of Preferred Stock, each without par value, of which
600,166 shares of Series B Adjustable Rate Cumulative Preferred Stock ($50
stated value) were issued and outstanding and 600,000 shares of Series R
Preferred Stock were reserved for issuance as of September 30, 1993. All issued
and outstanding shares of UJB's capital stock have been fully paid, were duly
and validly issued, and are non-assessable.
(b) UJB is qualified to transact business in and is in good standing under
the laws of all jurisdictions where the failure to be so qualified would have a
material adverse effect upon UJB and its subsidiaries, taken as a whole. The
bank subsidiaries of UJB are duly organized, validly existing and in good
standing under the laws of their jurisdiction of organization. UJB and its bank
subsidiaries have all corporate power and authority and all material licenses,
franchises, certificates, permits and other governmental authorizations which
are legally required to own and lease their respective properties, occupy their
respective premises, and to engage in their respective businesses and
activities as presently engaged in. UJB is duly registered as a bank holding
company under the Bank Holding Company Act.
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(c) All issued shares of the capital stock of UJB and of each of its bank
subsidiaries have been fully paid, were duly authorized and validly issued, are
non-assessable (subject with respect to national banks to 12 U.S.C. 55), have
been issued pursuant to an effective registration statement and current
prospectus under the Securities Act or an appropriate exemption from
registration under the Securities Act and were not issued in violation of the
preemptive rights of any shareholder. UJB or one of its subsidiaries is the
holder and beneficial owner of all of the issued and outstanding capital stock
of its bank subsidiaries. No options covering capital stock of UJB or any of
its bank subsidiaries, warrants to purchase or contracts to issue capital stock
of UJB or any of its bank subsidiaries, or any other contracts, rights
(including preemptive rights), commitments or convertible securities entitling
anyone to acquire from UJB or any of its subsidiaries or obligating them to
issue any capital stock, or securities convertible into or exchangeable for
shares of capital stock, of UJB or any of its bank subsidiaries are
outstanding, in existence, or the subject of an agreement, except for UJB
Common Stock issuable pursuant to employee stock options granted under stock
option plans or stock option components of incentive plans of UJB (2,318,755
shares at December 31, 1992), UJB Common Stock issuable pursuant to UJB's
Dividend Reinvestment and Stock Purchase Plan, UJB Savings Incentive Plan and
1993 Incentive Stock and Option Plan and Series R Preferred Stock issuable
pursuant to the UJB Shareholder Rights Plan.
Section 3.02. Financial Statements. The financial statements and schedules
contained or incorporated in UJB's (a) annual report to shareholders for the
fiscal year ended December 31, 1992, (b) annual report on Form 10-K pursuant to
the Exchange Act for the fiscal year ended December 31, 1992, and (c) quarterly
reports on Form 10-Q pursuant to the Exchange Act for the fiscal quarters ended
March 31, 1993, June 30, 1993 and September 30, 1993 (the "UJB Financial
Statements") are true and correct in all material respects as of their
respective dates and each fairly presents the consolidated financial condition,
results of operations and changes in capital accounts, undivided profits and
financial position of UJB and its subsidiaries at its respective date and for
the period to which it relates. Except as may otherwise be described therein or
in the accountants' reports thereon, the UJB Financial Statements were prepared
in accordance with generally accepted accounting principles consistently
applied. The UJB Financial Statements do not, as of the dates thereof, include
any material asset or omit any material liability, absolute or contingent, or
other fact, the inclusion or omission of which renders the UJB Financial
Statements, in light of the circumstances under which they were made,
misleading in any respect.
Section 3.03. No Conflicts. UJB is not in, and has received no notice of,
violation or breach of, or default under, nor will the execution, delivery and
performance of this Agreement by UJB, or the consummation of the Merger by UJB
upon the terms and conditions provided herein (assuming receipt of the Required
Consents), violate, conflict with, result in the breach of, constitute a
default under, give rise to a claim or right of termination, cancellation,
revocation of, or acceleration under, or result in the creation or imposition
of any lien, charge or encumbrance upon any rights, permits, licenses, assets
or properties material to UJB and its subsidiaries, taken as a whole, or upon
any of the capital stock of UJB, or constitute an event which could, with the
lapse of time, action or inaction by UJB or a third party, or the giving of
notice and failure to cure, result in any of the foregoing, under any of the
terms, conditions or provisions, as the case may be, of:
(a) the Restated Certificate of Incorporation or the By-Laws of UJB;
(b) any law, statute, rule, ruling, determination, ordinance, or
regulation of any governmental or regulatory authority;
(c) any judgment, order, writ, award, injunction, or decree of any court
or other governmental authority; or
(d) any material note, bond, mortgage, indenture, lease, policy of
insurance or indemnity, license, contract, agreement, or other instrument;
to which UJB is a party or by which UJB or any of its assets or properties are
bound or committed, the consequences of which would have a material adverse
effect on UJB and its subsidiaries, taken as a whole, or enable any person to
enjoin the transactions contemplated hereby.
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Section 3.04. Absence of Litigation, Agreements with Bank Regulators. There
is no outstanding order, injunction, or decree of any court or governmental or
self-regulatory body against or affecting UJB or its subsidiaries which
materially and adversely affects UJB and its subsidiaries, taken as a whole,
and there are no actions, arbitrations, claims, charges, suits, investigations
or proceedings (formal or informal) material to UJB and its subsidiaries, taken
as a whole, pending or, to UJB's knowledge, threatened, against or involving
UJB or their officers or directors (in their capacity as such) in law or equity
or before any court, panel or governmental agency, except as disclosed in the
Forms 10-K and 10-Q of UJB referred to in Section 3.02. Except, as previously
disclosed to VSB, neither UJB nor any bank subsidiary of UJB is a party to any
agreement or memorandum of understanding with, or is a party to any commitment
letter to, or has submitted a board of director resolution or similar
undertaking to, or is subject to any order or directive by, or is a recipient
of any extraordinary supervisory letter from, any governmental or regulatory
authority which restricts materially the conduct of its business, or in any
manner relates to its capital adequacy, its credit or reserve policies or its
management, nor has UJB or any bank subsidiary of UJB, been advised by any
governmental or regulatory authority that it is contemplating issuing or
requesting (or is considering the appropriateness of issuing or requesting) any
of the foregoing.
Section 3.05. Material Information. The representations and warranties made
by UJB in this Agreement and, at the time of filing, all filings made by UJB
and its subsidiaries after December 31, 1992 with the SEC and appropriate bank
regulatory authorities do not contain any untrue statement of a material fact
and do not omit to state any material fact required to be stated herein or
therein or necessary to make the statements contained herein or therein, in
light of the circumstances under which they were made, not misleading.
Section 3.06. Corporate Action. Assuming due execution and delivery by each
of the other parties thereto, UJB has the corporate power and is duly
authorized by all necessary corporate action to execute, deliver, and perform
this Agreement. The Board of Directors of UJB has taken all action required by
law, its Restated Certificate of Incorporation, its By-Laws or otherwise to
authorize the execution and delivery of this Agreement. Approval by the
shareholders of UJB of this Agreement, the Merger or the transactions
contemplated by this Agreement are not required by applicable law. This
Agreement is a valid and binding agreement of UJB enforceable in accordance
with its terms except as such enforcement may be limited by applicable
principles of equity, and by bankruptcy, insolvency, moratorium or other
similar laws presently or hereafter in effect affecting the enforcement of
creditors' rights generally.
Section 3.07. Absence of Changes. There has not been, since December 31,
1992, any material adverse change in the prospects, financial condition,
assets, liabilities, business or results of operations of UJB and its
subsidiaries taken as a whole, and there is no matter or fact which may result
in any such material adverse change in the future (other than changes which may
affect the banking industry in general).
Section 3.08. Non-bank Subsidiaries. The non-bank subsidiaries of UJB did
not, taken in the aggregate, constitute a "significant subsidiary" of UJB, as
that term is defined in Rule 1-02(v) of Regulation S-X of the SEC (17
CFR(S)210.1-02(v)), at September 30, 1993.
Section 3.09. Absence of Undisclosed Liabilities. The financial statements
of UJB are prepared on an accrual basis and reflect all known assets and
liabilities. There are no material undisclosed liabilities to the best
knowledge of management.
Section 3.10. Allowance for Loan and Lease Losses. UJB's allowance for loan
and lease losses is adequate in all material respects to provide for all losses
on loans and leases outstanding, and to the best of UJB's knowledge the loan
and lease portfolios of UJB in excess of such allowances are collectible in the
ordinary course of business.
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Section 3.11. Environmental Matters. Except as disclosed in the Forms 10-K
and 10-Q of UJB referred to in Section 3.02 hereof, to the knowledge of UJB:
(a) no Hazardous Substances have been stored, treated, dumped, spilled,
disposed, discharged, released or deposited at, under or on any (i) Present
Property of UJB or a subsidiary, (ii) Former Property of UJB or a
subsidiary during the time of previous ownership, occupancy or lease, or
(iii) Participation Facility during the time that UJB or a subsidiary
participated in the management of, or may be deemed to be or to have been
an owner or operator of, such facility, where such storage, treatment,
dumping, spilling, disposing, discharging, releasing, or depositing would
have a material adverse effect on UJB and its subsidiaries, taken as a
whole;
(b) neither UJB nor any subsidiary has disposed of or arranged for the
disposal of Hazardous Substances from any Present Property, Former Property
or Participation Facility, and no owner or operator of a Participation
Facility disposed of, or arranged for the disposal of, Hazardous Substances
from a Participation Facility during the time that UJB or any subsidiary
participated in the management of, or may be deemed to be or to have been
an owner or operator of such Participation Facility, where such disposal or
arranging for disposal would have a material adverse effect on UJB and its
subsidiaries, taken as a whole;
(c) no Hazardous Substances have been stored, treated, dumped, spilled,
disposed, discharged, released or deposited at, under or on any Loan
Property, nor is there with respect to any Loan Property any violation of
an environmental law, where such storage, treatment, dumping, spilling,
disposing, discharging, releasing, depositing or violation would have a
material adverse effect on UJB and its subsidiaries, taken as a whole.
ARTICLE IV.
COVENANTS OF VSB
VSB hereby covenants and agrees with UJB that:
Section 4.01. Preparation of Registration Statement and Applications for
Required Consents. VSB will cooperate with UJB in the preparation of a
Registration Statement on Form S-4 (the "Registration Statement") including the
VSB proxy statement to be included as a part thereof (the "VSB Proxy
Statement") and filed with the SEC under the Securities Act for the
registration of the UJB Common Stock to be issued in connection with the
Merger. In connection therewith, VSB will furnish all information concerning
VSB reasonably deemed necessary by counsel to UJB for the filing or preparation
for filing under the Securities Act of the Registration Statement. VSB will
cooperate with UJB and provide such information as may be advisable in
obtaining an order of effectiveness for the Registration Statement, appropriate
permits or approvals under state securities and "blue sky" laws, the required
approval under the Bank Holding Company Act by the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"), the required approval
from the Department of Banking of the State of New Jersey, the listing of the
Shares on the New York Stock Exchange (subject to official notice of issuance)
and any other governmental or regulatory consents or approvals or the taking of
any other governmental or regulatory action necessary or, in the reasonable
judgment of UJB, advisable to consummate the Merger (the "Required Consents").
VSB covenants and agrees that all information furnished by VSB will comply in
all material respects with the provisions of applicable law, including the
Securities Act and the rules and regulations of the SEC thereunder, and will
not contain any untrue statement of a material fact and will not omit to state
any material fact required to be stated therein or necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. VSB will furnish to Ryan, Beck & Co. investment
bankers advising VSB, such information as they may reasonably request for
purposes of the opinion referred to in Section 8.08.
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Section 4.02. Notice of Adverse Changes. VSB will promptly advise UJB in
writing of (a) any event occurring subsequent to the date of this Agreement
which would render any representation or warranty of VSB contained in this
Agreement or the VSB Schedules or the materials furnished pursuant to the Post-
Signing Disclosure List (as defined in Section 4.09), if made on or as of the
date of such event or the Closing Date (as defined at Section 9.01), untrue or
inaccurate in any material respect, (b) any material adverse change in the
business of VSB or any of its subsidiaries, (c) any inability or perceived
inability of VSB to perform or comply with the terms or conditions of this
Agreement, (d) the institution or threat of institution of litigation involving
VSB or any of its subsidiaries or assets, which, if determined adversely to VSB
or any of its subsidiaries, would have a material adverse effect upon Valley or
VSB and its subsidiaries taken as a whole or the Merger and the related
transactions, and (e) any governmental complaint, investigation, hearing, or
communication indicating that such litigation is contemplated, (f) any written
notice of, or other communication relating to, a default or event which, with
notice or lapse of time or both, would become a default, received by VSB or a
subsidiary subsequent to the date hereof and prior to the Effective Time, under
any agreement, indenture or instrument to which VSB or a subsidiary is a party
or is subject and which is material to the business, operation or condition
(financial or otherwise of Valley or VSB and its subsidiaries taken as a
whole), and (g) any written 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 including the
Merger. VSB agrees that the delivery of such notice shall not constitute a
waiver by UJB of any of the provisions of Articles VI or VII.
Section 4.03. Meeting of Shareholders. VSB will call a meeting of its
shareholders for the purpose of voting upon this Agreement, the Merger and the
transactions contemplated hereby to be held as promptly as practicable and, in
connection therewith, will comply with Delaware law and the Exchange Act and
all regulations promulgated thereunder governing shareholder meetings and proxy
solicitations. In connection with such meeting, VSB shall mail a Proxy
Statement to its shareholders and use its best efforts to obtain shareholder
approval of this Agreement, the Merger and the transactions contemplated
hereby.
Section 4.04. Copies of Filings. Without limiting the provisions of Section
4.01, VSB will deliver to UJB, at least twenty-four hours prior to an
anticipated date of filing or distribution, all documents to be filed with the
SEC or any bank regulatory authority or to be distributed in any manner to the
shareholders of VSB or the public, together with, in the case of all quarterly
financial statements provided pursuant to this section, a written opinion of
the chief financial officer of VSB to the effect that such financial statements
are true, correct and complete in all material respects and have been prepared
in accordance with generally accepted accounting principles consistently
applied, except as disclosed therein, and with the books and records of VSB,
and present fairly the consolidated financial position of VSB and its
subsidiaries at the date thereof and the results of operations for the period
covered thereby.
Section 4.05. No Material Transactions. Until the Effective Time, VSB will
not and will not allow any of its subsidiaries to, without the prior written
consent of UJB: (a) pay (or make a declaration which creates an obligation to
pay) any cash dividends at a quarterly rate in excess of $0.07, other than
dividends from subsidiaries of VSB to VSB or other subsidiaries of VSB; (b)
fail to coordinate with UJB the declaration of any dividends and fail to set
record and payment dates which are identical to those of UJB; (c) declare or
distribute any stock dividend or authorize or effect a stock split; (d) merge
with, consolidate with, or sell any material asset to any other corporation,
bank, or person (except for mergers of subsidiaries of VSB into VSB or other
subsidiaries of VSB) or enter into any other transaction not in the ordinary
course of business; (e) except in a fiduciary capacity, make or agree to make
any direct or indirect redemption, retirement, purchase or other acquisition of
any of its capital stock; (f) incur any liability or obligation other than
intracompany obligations, make or agree to make any commitment or disbursement,
acquire or dispose or agree to acquire or dispose of any property or asset
(tangible or intangible), make or agree to make any contract or agreement or
engage or agree to engage in any other transaction, except transactions in the
ordinary course of business and other transactions aggregating not more than
$250,000; (g) subject any of its properties or assets to any lien, claim,
charge, option or encumbrance, except in the ordinary course of business and
for amounts not
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material in the aggregate; (h) except in accordance with and as provided in
compensation information previously furnished to UJB with respect to
individuals who are employees on the date hereof, increase or enter into any
agreement to increase the rate of compensation of any such employee or pay any
employee bonus if such payment will cause the aggregate employee bonuses paid
by VSB to exceed $215,000 (excluding any payments made pursuant to Section
4.15); (i) except as previously disclosed in writing to UJB, create or modify
any employment or severance arrangement or any pension or profit sharing plan,
bonus, deferred compensation, death benefit, retirement or other employee or
director benefit plan of whatsoever nature, or change the level of benefits
under any such arrangement or plan, or increase any severance or termination
pay benefit or any other fringe benefit; (j) distribute, issue or sell any
shares of its capital stock, except as required by rights existing on the date
of this Agreement under the VSB Stock Option Plans or distribute, issue, sell
or grant any stock appreciation rights or options covering, warrants to
purchase or contracts to issue, or enter into any contracts or other rights
entitling anyone to acquire or obligating VSB or any of its subsidiaries to
issue, any capital stock or securities convertible into or exchangeable for
shares of capital stock, of VSB or any of its subsidiaries; (k) amend its
Certificate of Incorporation or By-laws; (l) modify, amend or cancel any of its
existing borrowings other than intra-corporate borrowings and borrowings from
the Federal Home Loan Bank of New York or enter into any contract, agreement,
lease or understanding other than the lease contemplated on the date hereof of
900 square feet at the Rivervale branch of Valley, contracts for the sale of
OREO property and contracts, agreements leases or understandings in the
ordinary course of business or which do not involve the creation of any
material obligation or release of any material right of VSB or any of its
subsidiaries; (m) accelerate the exercisability of any stock appreciation
rights or options or the release of any restrictions on stock issued under
VSB's Benefit Plans; or (n) directly or indirectly through any investment
banker, broker, financial or investment advisor or other agent, solicit or
initiate, or encourage any unsolicited inquiry respecting, any proposal or
offer for, or enter into discussions or negotiate for, or authorize or enter
into any agreement or agreement in principle providing for, any merger,
consolidation, sale or other disposition of assets or securities, tender offer,
exchange offer or other acquisition of outstanding securities or other business
combination or takeover transaction (other than the Merger), whether as the
proposed surviving, disappearing, acquiring or acquired corporation, or (except
as may be required by court order or decree or required by statute or
regulation) furnish or cause to be furnished any information, except
information previously made public and any information customarily furnished to
the public in the ordinary course of business, concerning its business or
properties, to any person or entity, other than UJB. In addition, VSB will
notify UJB by telephone to its chief executive officer or general counsel
promptly upon receipt of any inquiry with respect to a proposed merger,
consolidation, business combination, assets acquisition or disposition, tender
offer or other takeover transaction with another person or receipt of a request
for information from any governmental or regulatory authority with respect to a
proposed acquisition of VSB or any of its subsidiaries or assets by another
party, and will immediately deliver as soon as possible by facsimile
transmission, receipt acknowledged, to the UJB officer notified as required
above a copy of any document relating thereto promptly after any such document
is received by VSB. Nothing contained in this clause (n) shall prohibit the VSB
Board of Directors from providing information to, or entering into discussions
or negotiations with, any person or entity that makes any unsolicited written
bona fide proposal if and only to the extent that the VSB Board of Directors,
based on the advice of independent legal counsel, determines in good faith that
such action is necessary for the VSB Board of Directors to comply with its
fiduciary duty to shareholders under applicable law and VSB, prior to
furnishing information, or entering into discussions or negotiations with, such
party, notifies UJB that it is doing so and receives from such person or entity
an executed confidentiality agreement in reasonably customary form.
Section 4.06. Operation of Business in Ordinary Course. VSB, on behalf of
itself and its subsidiaries, covenants and agrees that from and after the date
hereof and until the Effective Time, it and its subsidiaries: (a) will carry on
their business diligently and substantially in the same manner as heretofore
and will not institute any unusual or novel methods of management or operation
of their properties or business and will maintain such in their customary
manner; (b) will use their best efforts to continue in effect their present
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insurance coverage on all properties, assets, business and personnel; (c) will
use their best efforts to preserve their business organization intact, preserve
their present relationship with customers and others having business dealings
with them, and keep available their present employees, provided, however, that
VSB or any of its subsidiaries may terminate any employee for unsatisfactory
performance or other reasonable business purpose, and provided further,
however, that VSB will notify and consult with UJB prior to terminating any of
the five highest paid employees of VSB; (d) will use their best efforts to
continue to maintain fidelity bonds insuring VSB and its subsidiaries against
acts of dishonesty by each of their employees in such amounts (not less than
present coverage) as are customary, usual and prudent for corporations or
banks, as the case may be, of their size; (e) will not do anything or fail to
do anything which will cause a breach of or default under any contract,
agreement, commitment or obligation to which they or any one of them is a party
or by which they or any of their assets or properties may be bound or committed
if the consequence of such, individually or in the aggregate, may have a
material adverse effect on Valley or VSB and its subsidiaries taken as a whole;
and (f) will not change their methods of accounting in effect at September 30,
1993, or change any of their methods of reporting income and deductions for
Federal income tax purposes from those employed in the preparation of their
Federal income tax returns for the taxable year ending September 30, 1992,
except as required by changes in laws, regulations or generally accepted
accounting principles or changes that are to a preferable accounting method,
and approved in writing by VSB's independent certified public accountants.
Section 4.07. Further Actions. VSB will: (a) execute and deliver such
instruments and take such other actions as UJB may reasonably require to carry
out the intent of this Agreement; (b) use all reasonable efforts to obtain
consents of all third parties and governmental bodies necessary or reasonably
desirable for the consummation of the transactions contemplated by this
Agreement; (c) diligently support this Agreement in any proceeding before any
regulatory authority whose approval of any of the transactions contemplated
hereby is required or reasonably desirable or before any court in which
litigation in respect thereof is pending; and (d) use its best efforts so that
the other conditions precedent to the obligations of UJB set forth in Articles
VI and VII hereof are satisfied.
Section 4.08. Cooperation. Until the Effective Time, VSB will give to UJB
and to its representatives, including its accountants, KPMG Peat Marwick, and
its legal counsel, full access during normal business hours to all of its
property, documents, contracts and records, will provide such information with
respect to its business affairs and properties as UJB from time to time may
reasonably request, and will cause its managerial employees, counsel and
independent certified public accountants to be available on reasonable request
to answer questions of UJB's representatives covering the business and affairs
of VSB or any of its subsidiaries.
Section 4.09. Copies of Documents. As promptly as practicable, but not
later than 30 days after the date hereof, VSB will furnish to or make available
to UJB all the documents, contracts, agreements, papers, and writings referred
to in the VSB Schedules or called for by the list or lists provided by UJB to
VSB on or prior to the date hereof (the "Post-Signing Disclosure List").
Section 4.10. Applicable Laws. VSB and its subsidiaries will use their best
efforts to comply promptly with all requirements which federal or state law may
impose on VSB or any of its subsidiaries with respect to the Merger and will
promptly cooperate with and furnish information to UJB in connection with any
such requirements imposed upon UJB or on any of its subsidiaries in connection
with the Merger.
Section 4.11. Agreements of Affiliated Shareholders. VSB agrees to furnish
to UJB, not later than 10 business days prior to the date of mailing of the
Proxy Statement, a list of those persons who, in the opinion of securities
counsel to VSB reasonably satisfactory to UJB ("Securities Counsel"), is an
affiliate of VSB for the purposes of Rule 145 under the Securities Act (a "VSB
Affiliate"), shall cause each VSB Affiliate to enter into, prior to the date of
mailing of the Proxy Statement, an agreement, satisfactory in form and
substance to UJB, substantially in the form of Exhibit A hereto, and effective
prior to such date (an "Affiliate Agreement"), which provides that, among other
things, (a) the UJB Common Stock to be acquired by a VSB Affiliate upon
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consummation of the Merger (such shares of UJB Common Stock being sometimes
referred to herein as "Acquired Shares") will not be acquired with a view to
the sale or distribution thereof except as permitted by Rule 145, (b) the
shares of VSB Stock beneficially owned by such person on the effective date of
the Affiliate Agreement and the Acquired Shares (collectively, the "Affiliate
Shares") will not be disposed of in such a manner as to violate the Securities
Act or the Affiliate Agreement and without UJB having first received an opinion
of counsel satisfactory to UJB to the foregoing effect or other evidence of
compliance with Rule 145 and the Affiliate Agreement (e.g., copies of brokers'
representation letter, Form 144 and any other forms customarily required to
effectuate a brokers' transaction under Rule 145), in each case satisfactory to
UJB (the Office of the Corporate Secretary of UJB can be consulted for guidance
on what constitutes satisfactory evidence of compliance), (c) such VSB
Affiliate will not sell or otherwise transfer or in any way reduce his or her
risk with respect to the Affiliate Shares from the effective date of the
Affiliate Agreement until such time after the Effective Time as UJB shall have
published financial results covering at least 30 days of combined operations of
UJB and VSB, (d) the certificates representing the Acquired Shares may bear a
legend referring to the foregoing restrictions on disposition and UJB may issue
to its transfer agent appropriate stop transfer instructions with respect to
the Acquired Shares, and (e) in a transfer of Affiliate Shares not complying
with Rule 145, each VSB Affiliate will obtain an agreement, and deliver a copy
of such to UJB, from the transferee in such a transfer which is substantially
similar to an Affiliate Agreement (other than for clause (c) above), unless
such transferee may under the Securities Act dispose of the Affiliate Shares
without registration under the Securities Act and without violation of the
Affiliate Agreement.
Section 4.12. Loans and Leases to Affiliates. All loans and leases
hereafter made by VSB or any of its subsidiaries to any of its present or
former directors, executive officers, or their respective associates shall be
made only in the ordinary course of business and on the same terms and at the
same interest rates as those prevailing for comparable transactions with others
and shall not involve more than the normal risk of repayment or present other
unfavorable features.
Section 4.13. ESOP Debt and Termination. Valley shall contribute cash to
the VSB Employee Stock Ownership Plan (the "ESOP") in accordance with its past
practices in an amount which, together with all other cash in the ESOP
customarily used for such purposes, is sufficient to meet all expenses of the
ESOP as they come due, including making timely payments of principal and
interest on loans outstanding to the ESOP. Unless it is determined that such
action would have an adverse effect upon the treatment of the Merger as a tax-
free transaction and a pooling of interests, or violate Rule 145, VSB shall
terminate the ESOP, as soon as practicable after the Effective Time. In
connection with such termination, VSB shall, immediately prior to the Effective
Time, instruct the ESOP trustee, effective as of the Effective Time, to, as
soon as practicable after the Effective Time, (i) exchange VSB Stock held in
the ESOP trust for Shares and cash in lieu of fractional share interests, (ii)
sell a number of Shares which together with cash received in the Merger in lieu
of fractional share interests is sufficient to repay the remaining principal on
the ESOP loans and any interest accrued thereon, (iii) repay the ESOP loans in
full, and (iv) distribute Shares remaining in the ESOP trust after the sale
referred to in clause (ii) above in accordance with the terms of the ESOP.
Section 4.14. Management Recognition Plan. Within forty-five days of the
date hereof, additional awards as to no more than 5,850 shares of VSB Stock
acquired pursuant to the Valley Savings Bank Management Recognition and
Retention Plan and Trust Agreement, as amended (the "MRP") and held by the MRP
trustee for the MRP may be granted to employees of Valley, as determined by the
committee of the Board of Directors of Valley responsible for administering the
MRP (the "MRP Committee"). After such 45th day, awards of an additional 550
shares in the aggregate may be made pursuant to the MRP by the MRP Committee.
After the date hereof, no additional VSB Stock shall be acquired by or on
behalf of, or with the intention of contributing same, to the MRP and no
further contributions shall be made to the MRP by Valley, VSB or any affiliate
thereof.
Section 4.15. Limited Rights.
(a) VSB shall use its best efforts to obtain from holders of VSB stock
options under the VSB 1988 Incentive Stock Option Plan (the "1988 Plan")
agreements which rescind, waive, abrogate, cancel and render
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null and void the Limited Rights attached to such holders' VSB stock options
under the 1988 Plan (the "Limited Rights"). VSB is authorized to offer holders
of the Limited Rights, in return for the relinquishment of their Limited
Rights, the right to receive either (i) in the conversion of VSB stock options
that occurs pursuant to Section 1.11 hereunder, in lieu of a converted UJB
stock option, a number of shares of UJB Common Stock for each relinquished
Limited Right equal to the difference between the exercise price of the
converted UJB stock option and the Average Price, divided by the Average Price;
or (ii) conversion of the underlying VSB stock option in the Merger, in
accordance with Section 1.11 of this Agreement, into an option to purchase
shares of UJB Common Stock which such option shall remain exercisable for one
year (rather than three months as currently provided) following the holder's
termination of employment during a time when the option is otherwise still
exercisable; provided, however, that the authority granted VSB under this
clause (ii) shall not become effective until KPMG Peat Marwick shall have first
advised VSB and UJB that the Merger can be accounted for under generally
accepted accounting principles on a pooling of interests basis notwithstanding
the use of that particular form of consideration.
(b) In addition, VSB is authorized to offer holders of the Limited Rights
additional consideration which shall not exceed $65,000 in fair value in the
aggregate but this authority shall also not become effective until KPMG Peat
Marwick shall have first advised VSB and UJB that the Merger can be accounted
for under generally accepted accounting principles on a pooling of interests
basis notwithstanding the use of that particular form of consideration.
Section 4.16. ERISA. VSB shall maintain and cause each of its ERISA
affiliates to maintain VSB Plan assets that are at least equal in value to Plan
benefits guaranteed under Title IV of ERISA, and not permit any Prohibited
Transaction within the meaning of Section 406 of ERISA to exist.
ARTICLE V.
COVENANTS OF UJB
UJB hereby covenants and agrees with VSB that:
Section 5.01. Approvals and Registrations. Based on such assistance and
cooperation of VSB as may be required by UJB, UJB will use its best efforts to
prepare and file (a) with the SEC, the Registration Statement, (b) with the
Federal Reserve Board, an application for approval of the Merger, (c) with the
New Jersey Department of Banking, an application for approval of the Merger,
and (d) with the New York Stock Exchange, an application for the listing of the
shares of UJB Common Stock issuable upon the Merger, subject to official notice
of issuance, except that UJB shall have no obligation to file a new
registration statement or a post-effective amendment to the Registration
Statement covering any reoffering of UJB Common Stock by VSB Affiliates. UJB
covenants and agrees that all information furnished by UJB for inclusion in the
Registration Statement, the Proxy Statement, and all applications to
appropriate regulatory agencies for approval of the Merger and related
transactions will comply in all material respects with the provisions of
applicable law, including the Securities Act and the Exchange Act and the rules
and regulations of the SEC thereunder, and will not contain any untrue
statement of a material fact and will not omit to state any material fact
required to be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading. UJB will furnish to Ryan, Beck & Co., investment bankers advising
VSB, such information as they may reasonably request for purposes of the
opinion referred to in Section 8.08.
Section 5.02. Notice of Adverse Changes. UJB will promptly advise VSB in
writing of (a) any event occurring subsequent to the date of this Agreement
which would render any representation or warranty of UJB contained in this
Agreement or the UJB Schedules, if made on or as of the date of such event or
the Closing Date, untrue or inaccurate in any material respect, (b) any
material adverse change in the business of
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UJB and its subsidiaries taken as a whole, (c) any inability or perceived
inability of UJB to perform or comply with the terms or conditions of this
Agreement, (d) the institution or threat of institution of material litigation
involving UJB or its assets which, if determined adversely to UJB, would have a
material adverse effect on UJB and its subsidiaries taken as a whole or the
Merger, (e) any governmental complaint, investigation, or hearing or
communication indicating that such litigation is contemplated, (f) any written
notice of, or other communication relating to, a default or event which, with
notice or lapse of time or both, would become a default, received by UJB
subsequent to the date hereof and prior to the Effective Time, under any
agreement, indenture or instrument to which UJB is a party or is subject and
which is material to the business, operation or condition (financial or
otherwise of UJB and its subsidiaries taken as a whole), and (g) any written
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 including the Merger. UJB agrees that the
delivery of such notice shall not constitute a waiver by VSB of any of the
provisions of Articles VI or VIII.
Section 5.03. Copies of Filings. UJB shall promptly provide to VSB copies
of the application for approval of the Merger filed with the Federal Reserve
Board and all reports filed by it during such period with the SEC on Forms 10-
Q, 8-K and 10-K.
Section 5.04. Operation of Business. UJB, on behalf of itself and its bank
subsidiaries, covenants and agrees that from and after the date hereof and
until the Effective Time it: (a) will use its best efforts to continue in
effect its present insurance coverage on all properties, assets, business, and
personnel; (b) will use its best efforts to preserve its business organization
intact and preserve its present relationship with customers and others having
business dealings with it; (c) will use its best efforts to continue to
maintain fidelity bonds insuring it against acts of dishonesty by each of its
employees in such amounts (not less than present coverage) as are customary,
usual and prudent for corporations or banks, as the case may be, of its size;
(d) will not do anything or fail to do anything which will cause a breach of or
default under any contract, agreement, commitment or obligation to which it is
a party or by which it or any of its assets or properties may be bound or
committed if the consequences of such breach may have a material adverse effect
on UJB and its subsidiaries taken as a whole; (e) will not change its methods
of accounting in effect at December 31, 1992, or change any of its methods of
reporting income and deductions for Federal income tax purposes from those
employed in the preparation of its Federal income tax returns for the taxable
year ending December 31, 1992, except as required by changes in laws,
regulations or generally accepted accounting principles or changes that are to
a preferable accounting method, and approved by UJB's independent certified
public accountants.
Section 5.05. Further Actions. UJB will: (a) execute and deliver such
instruments and take such other actions as VSB may reasonably require to carry
out the intent of this Agreement; (b) use all reasonable efforts to obtain
consents of all third parties and governmental bodies necessary or reasonably
desirable for the consummation of the transactions contemplated by this
Agreement; (c) diligently support this Agreement in any proceeding before any
regulatory authority whose approval of any of the transactions contemplated
hereby is required or reasonably desirable or before any court in which
litigation in respect thereof is pending; and (d) use its best efforts so that
the other conditions precedent to the obligations of VSB set forth in Articles
VI and VIII hereof are satisfied.
Section 5.06. Applicable Laws. UJB will use its best efforts to comply
promptly with all requirements which federal or state law may impose on UJB
with respect to the Merger and will promptly cooperate with and furnish
information to VSB in connection with any such requirements imposed upon VSB or
on any of its subsidiaries in connection with the Merger.
Section 5.07. Severance.
(a) VSB Schedule XV contains the VSB severance policy (the "VSB Severance
Policy"). UJB agrees (i) to comply with the VSB Severance Policy with respect
to any current employees of VSB or any of its
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subsidiaries, or persons hired to replace terminated current employees of VSB
or any of its subsidiaries, whose employment with UJB or any of its
subsidiaries is terminated without cause within eighteen months of the
Effective Time, and (ii) to pay one additional month of severance payments to
such terminated employees pursuant to the terms of the VSB Severance Policy
upon the expiration of the severance payment period provided for in the VSB
Severance Policy.
(b) In the event that within one year of the Effective Time an individual
listed on VSB Schedule XVI is assigned to a position with UJB or one of its
subsidiaries other than the position held by such individual at the Effective
Time, such individual shall have until the expiration of a six month period
from the time his or her duties commence in the new position to elect to
terminate his or her employment with UJB and receive severance benefits in
accordance with the VSB Severance Policy (without regard to the eighteen month
period provided for therein) plus the one additional month of severance
payments as described in clause (ii) of Section 5.07(a) above.
Section 5.08. VSB Directors Purchase of Insurance. UJB shall permit
individuals who are Directors or Directors Emeritus of VSB at the Effective
Time to purchase supplemental Medicaid medical insurance coverage from the
insurance companies providing such coverages to retirees of UJB, or from UJB if
UJB is self-insured, at rates comparable to those paid by the individuals
immediately prior to the Effective Time, subject to increases in rates
applicable to all retirees receiving such coverage through UJB.
Section 5.09. Valley Savings Bank. It is UJB's current intention to retain
individuals serving as independent members of the Board of Directors of Valley
at the Effective Time (the "Old Valley Board") as members of the Board of
Directors of Valley after the Effective Time (the "New Valley Board") and to
continue paying directors' fees to such individuals after the Effective Time
comparable to the fees received prior to the Effective Time, subject to UJB's
rights under applicable laws to elect additional directors to and remove
directors from the New Valley Board, to change the rates of compensation for
directors and to merge Valley into another subsidiary of UJB at any time in its
sole discretion. UJB agrees to honor the Valley Outside Directors' Emeritus
Plan, as amended through August 16, 1993. It is also UJB's current intention to
cause Valley to maintain banking operations at the current branches of Valley
after the Effective Time, subject to UJB's right to take such actions at any
time as are in the best interests of UJB and its subsidiaries, taken as a
whole.
Section 5.10. Indemnification. Directors and former directors of VSB shall,
after the Effective Time, be afforded indemnification rights and advancement of
expenses by UJB as provided for in the New Jersey Act and in the Restated
Certificate of Incorporation and By-Laws of UJB. Directors and former Directors
of Valley shall be afforded such indemnification rights and advancement of
expenses as are provided for in applicable New Jersey statutes and the
Certificate of Incorporation and By-Laws of Valley and any successor banking
corporation.
Section 5.11. Unpaid VSB Dividends. By virtue of the Merger and without
further action on anyone's part, UJB shall assume the obligation of VSB to pay
dividends, if any, on VSB Stock which have a record date prior to the Effective
Time but are not payable until after the Effective Time.
Section 5.12. Management Retention Plan. At the Effective Time, all shares
of VSB Stock held in the MRP trust by the MRP trustee on behalf of Valley
employees who prior to the Effective Time received awards under the MRP ("Award
Recipients") shall at the Effective Time be deemed earned (as that term is used
in the MRP) by the Award Recipient to which they were awarded, whether or not
otherwise vested or earned by such Award Recipients immediately prior to the
Effective Time. As promptly as practicable following the Effective Time, UJB
shall cause Valley to take such steps as are necessary to terminate the MRP and
the Shares received by the MRP trustee in the Merger in exchange for shares of
VSB Stock held on behalf of
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Award Recipients shall be distributed to the appropriate Award Recipients,
together with the cash representing any accrued dividends on such Shares
(whether accrued prior to or after the Effective Time), any cash representing
cash received in the Merger in lieu of fractional shares of UJB Common stock,
and any earnings on all such cash.
Section 5.13. Valley Directors' Deferred Fee Plan. UJB shall, after the
Effective Time, maintain the Valley Deferred Fee Plan for three years or afford
participants participation in a plan of comparable terms and conditions for the
same period of time.
Section 5.14. Cooperation. Until the Effective Time, UJB will give to VSB
and to its representatives, including its accountants, KPMG Peat Marwick, and
its legal counsel, full access during normal business hours to all of its
property, documents, contracts and records, will provide such information with
respect to its business affairs and properties as VSB from time to time may
reasonably request, and will cause its managerial employees, counsel and
independent certified public accountants to be available on reasonable request
to answer questions of VSB's representatives covering the business and affairs
of UJB or any of its subsidiaries.
Section 5.15. Publication of Results of Combined Operations. If the Closing
takes place within the first or third month of any calendar quarter, UJB will
publish financial results including at least a calendar month of not less than
30 days of post-merger combined operations which shall be published promptly
following the first full calendar month following the Closing and which shall
be in accordance with Section 201.01 of the Commission's Codification of
Financial Reporting Policies, and UJB shall file a Form 8-K for this purpose if
necessary.
ARTICLE VI.
CONDITIONS PRECEDENT TO THE RESPECTIVE OBLIGATIONS OF UJB AND VSB
The respective obligations of UJB and VSB under this Agreement to consummate
the Merger are subject to the satisfaction of all the following conditions,
compliance with which or the occurrence of which may only be waived in whole or
in part in writing by UJB and VSB:
Section 6.01. Receipt of Required Consents. UJB and VSB shall have received
the Required Consents; the Required Consents shall not, in the reasonable
opinion of UJB or VSB, contain restrictions or limitations which would
materially adversely affect the financial condition of UJB after consummation
of the Merger; the Required Consents and the transactions contemplated hereby
shall not on the Closing Date be contested by any federal or state governmental
authority; and on the Closing Date the Required Consents needed for the Merger
shall have been obtained and shall not have been withdrawn or suspended.
Section 6.02. Effective Registration Statement. The Registration Statement
shall have been declared effective by the SEC; no stop order suspending the
effectiveness of the Registration Statement shall have been issued and remain
in effect on the Closing Date; and no proceeding for that purpose shall have
been initiated or, to the knowledge of UJB or VSB, shall be contemplated or
threatened by the SEC on the Closing Date.
Section 6.03. Tax Matters. At the time of effectiveness of the Registration
Statement and at the Closing Date UJB shall have received an opinion of Weil,
Gotshal & Manges, special counsel to UJB, as to the matters referred to in
subparagraphs (a) and (b) below, and VSB shall have received an opinion of
Securities Counsel to VSB as to all matters referred to below (the "Tax
Opinions"), satisfactory in form and substance to UJB or VSB, as the case may
be, and substantially to the effect that, for federal income tax purposes:
(a) The Merger will constitute a reorganization within the meaning of
Section 368(a)(1) of the Code;
(b) No gain or loss will be recognized by UJB or VSB, as the case may be,
on the Merger;
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(c) No gain or loss will be recognized to the shareholders of VSB on the
receipt by them of shares of UJB Common Stock (including fractional share
interests) in exchange for their shares of VSB Stock pursuant to the
Merger;
(d) The aggregate tax basis of the UJB Common Stock (including fractional
share interests) received by the shareholders of VSB will be equal to their
aggregate tax basis in the VSB Stock surrendered in exchange therefor;
(e) The holding period of the UJB Common Stock (including fractional
share interests) received by a shareholder of VSB in the Merger will
include the period during which the VSB Stock exchanged therefor was held,
provided that the surrendered VSB Stock was held as a capital asset on the
date of the exchange; and
(f) Where cash is received by a shareholder of VSB as a result of the
sale of a fractional share interest in UJB Common Stock, such shareholder
will recognize gain or loss measured by the amount of cash received and the
basis in such fractional share interest. Any such gain or loss will be
capital gain or loss, provided that the fractional share interest in UJB
Common Stock constitutes a capital asset, and will be short-term or long-
term capital gain or loss, depending upon the holding period for such
fractional share interest.
In rendering such opinions, such counsel may rely as to matters of fact, to the
extent they deem proper, on certificates and information obtained from officers
of UJB and VSB and UJB and VSB agree to provide to such counsel such
certificates as they may reasonably request. The parties recognize that such
counsel may require the execution of tax certificates substantially in the
forms previously delivered to the parties as a condition to furnishing such
opinions.
In addition, no condition or set of facts or circumstances shall exist at the
Closing Date which will either (x) preclude any of the parties to this
Agreement from satisfying the terms or conditions of, or assumptions made in,
the Tax Opinions, as the case may be, or (y) result in any of the factual
assumptions contained in the Tax Opinions being untrue.
Each party will consult promptly with its tax counsel regarding the tax
opinions to be delivered pursuant to this Section 6.03 and, subject to timely
receipt of all relevant information from the other party, will advise the other
party within 30 days from the date of this Agreement in the event that such
counsel advises that there is a significant likelihood that it will not be able
to render such opinion or the conditions necessary to be satisfied in order to
render such opinion.
Section 6.04. Absence of Litigation. At the Closing Date, no investigation
by any state or federal agency, and no action, suit, arbitration or proceeding
before any court, state or federal agency, panel or governmental or regulatory
body or authority, shall have been instituted or threatened against UJB or any
of its subsidiaries, or VSB or any of its subsidiaries, that is material to the
Merger or to the financial condition of UJB and its subsidiaries taken as a
whole or Valley or VSB and its subsidiaries taken as a whole, as the case may
be. At the Closing Date, no order, decree, judgment, or regulation shall have
been entered or law or regulation adopted by any such agency, panel, body or
authority which enjoined or has a material adverse effect upon the Merger or on
the financial condition of UJB and its subsidiaries taken as a whole or Valley
or VSB and its subsidiaries taken as a whole, as the case may be.
Section 6.05. NYSE Listing. At the Closing Date, the shares of UJB Common
Stock to be issued in the Merger shall have been listed on the New York Stock
Exchange subject to official notice of issuance.
Section 6.06. Pooling Letter. The parties hereto shall have received a
letter from KPMG Peat Marwick to the effect that, based on the facts known to
such accountants, the Merger will qualify for pooling-of-interests accounting
treatment if consummated in accordance with this Agreement.
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ARTICLE VII
CONDITIONS PRECEDENT TO THE OBLIGATION OF UJB
The obligation of UJB to consummate the Merger is subject to the satisfaction
of all of the following conditions, compliance with which or the occurrence of
which may be waived in whole or in part by UJB in writing:
Section 7.01. Accountants' Letters. VSB shall have furnished to UJB letters
from the independent certified public accountants for VSB, dated (x) the
effective date of the Registration Statement and (y) the Closing Date (the
latter covering only financial statements dated subsequent to the date of the
former), in form and substance reasonably satisfactory to UJB, to the effect
that:
(a) They are a firm of independent public accountants with respect to VSB
and its subsidiaries within the meaning of applicable provisions of the
Securities Act and applicable published rules and regulations thereunder,
and information about them set forth in the Registration Statement is
materially correct insofar as it relates to them;
(b) In their opinion, the consolidated financial statements of VSB
examined by them comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and the Exchange
Act, as applicable, and the published rules and regulations thereunder;
(c) On the basis of limited procedures, not constituting an audit,
consisting of a reading of the unaudited financial statements of VSB, other
information referred to below, and the latest available interim financial
statements of VSB, inspection of the minute books of VSB since the date of
the latest audited financial statements, inquiries of officers of VSB
responsible for financial and accounting matters and such other inquiries
and procedures as may be specified in such letter, nothing came to their
attention that caused them to believe that:
(i) The VSB unaudited consolidated financial statements included in
the Registration Statement or in VSB's quarterly reports on Form 10-Q
since September 30, 1993 do not comply as to form in all material
respects with the applicable accounting requirements of the Securities
Act and Exchange Act and published rules and regulations thereunder or
are not stated on a basis substantially consistent with the basis for
the audited consolidated financial statements included or incorporated
by reference in VSB's annual report on Form 10-K for the most recent
fiscal year except for changes that are to a preferable accounting
method;
(ii) The VSB unaudited consolidated financial statements in the
Registration Statement or subsequent thereto up to the Closing Date for
any period ending after the end of the latest interim period covered by
the most recently filed quarterly report on Form 10-Q of VSB and any
data for a comparable prior period included therein were not determined
on a basis substantially consistent with the basis for the
corresponding amounts in the audited consolidated financial statements
included or incorporated by reference in VSB's annual report on Form
10-K for the most recent fiscal year except for changes that are to a
preferable accounting method;
(iii) As of a specified date not more than five days prior to the
date of delivery of such letter, there have been any changes in the
total capital stock (other than issuances of common stock pursuant to
rights existing on the date of this Agreement under VSB's Stock Option
Plans and Dividend Reinvestment and Stock Purchase Plan), or
consolidated long-term debt of VSB and subsidiaries consolidated, or
any decreases in consolidated shareholders' equity or consolidated
total assets or consolidated total deposits or consolidated allowance
for loan and lease losses of VSB and subsidiaries consolidated as
compared with respective amounts shown in the unaudited consolidated
balance sheet included in the most recent quarterly report on Form 10-Q
(or, if more recent, the latest audited consolidated balance sheet
included in the most recent annual report on Form 10-K), except in each
case for changes or decreases which are described in such letter;
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(iv) For the period from the date of the latest unaudited
consolidated financial statements included in the quarterly report on
Form 10-Q (or, if more recent, the latest audited consolidated
statement of income included in the most recent annual report on Form
10-K) to the end of the latest period for which financial statements
are available, there were any decreases in consolidated net interest
income, consolidated net interest income after provision for loan and
lease losses or the total and per share amounts of consolidated net
income, in each case as compared with the comparable period in the
preceding year, except in each case for decreases which are described
in such letter.
Section 7.02. No Adverse Changes. During the period from September 30, 1993
to the Closing Date there shall not have been any material adverse change in
the financial condition or results of operations of Valley or of VSB and its
subsidiaries taken as a whole, and none of them shall have sustained any
material loss or damage to their properties, whether or not insured, which
materially affects the ability of Valley or of VSB and its subsidiaries taken
as a whole to conduct their business.
Section 7.03. Representations and Covenants. Except with respect to matters
resulting from transactions specifically contemplated by this Agreement, all
representations and warranties made by VSB in this Agreement and the VSB
Schedules and the material furnished pursuant to the Post-Signing Disclosure
List shall be true and correct on the date of this Agreement, and in all
material respects on the Closing Date with the same force and effect as if such
representations and warranties were made on the Closing Date. VSB shall have
complied in all material respects with all covenants and agreements contained
herein to be performed by VSB on or before the Closing Date.
Section 7.04. Secretary's Certificate. VSB shall have furnished to UJB a
certificate signed by the Secretary of VSB and dated the Closing Date,
certifying to the satisfaction of the condition set forth in Section 7.12
herein and the effectiveness of all resolutions adopted by the Board of
Directors (including committees thereof) and shareholders of VSB relating to
this Agreement and the Merger and related transactions, a copy of which
resolutions shall be attached to such certificate.
Section 7.05. Officer's Certificate. VSB shall have furnished to UJB a
certificate signed by the Chairman or President of VSB, dated the Closing Date,
certifying to the satisfaction of the conditions set forth in Sections 6.01 and
6.02, the last paragraph of Section 6.03 and Section 6.04 as they relate to VSB
and in Sections 7.02, 7.03, 7.09, and 7.10.
Section 7.06. Opinion of VSB's Counsel. UJB shall have received an opinion
of Securities Counsel to VSB, dated the Closing Date and reasonably
satisfactory in form and substance to counsel for UJB, substantially to the
effect provided in Exhibit B.
Section 7.07. Affiliate and Certain Other Agreements. Each person who is a
VSB Affiliate shall have delivered to UJB an executed Affiliate Agreement.
Section 7.08. Approvals of Legal Counsel. All actions, proceedings,
instruments and documents required to carry out the transactions contemplated
by this Agreement or incidental thereto and all related legal matters shall be
reasonably satisfactory to counsel to UJB, and such counsel shall have been
furnished with certified copies of actions and proceedings and such other
documents and instruments as they shall have reasonably requested.
Section 7.09. Consents to VSB Contracts. All consents, approvals or
waivers, in form and substance reasonably satisfactory to UJB, required to be
obtained in connection with the Merger from other parties to material
mortgages, notes, leases, permits, franchises, loans or other agreements, or
contracts to which VSB or any of its subsidiaries is a party or by which they
or any of their assets or properties may be bound or committed shall have been
obtained.
Section 7.10. Net Worth. The sum of consolidated shareholders' equity and
consolidated allowance for loan losses and real estate held for investment of
VSB (as determined in accordance with generally accepted
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accounting principles consistently applied with those used in preparing VSB's
Financial Statements as of September 30, 1993) at the last day of the month
preceding the Closing Date shall be not less than $45,228,000.
Section 7.11. FIRPTA Affidavit. VSB shall have delivered to UJB an
affidavit of an executive officer of VSB stating, under penalties of perjury,
that VSB is not and has not been a United States real property holding company
(as defined in Section 897(c)(2) of the Code) during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code.
Section 7.12. Shareholder Approval. The shareholders of VSB, at the meeting
contemplated by this Agreement, shall have authorized and approved the Merger
and this Agreement and all transactions contemplated by this Agreement as and
to the extent required by all applicable laws and regulations and the
provisions of its Certificate of Incorporation and By-Laws.
Section 7.13. Absence of Regulatory Agreements. Neither Valley nor VSB
shall be a party to any agreement or memorandum of understanding with, or
commitment letter to, or board of director resolution submitted to or similar
undertaking made to, or be subject to any order or directive by, or be a
recipient of any extraordinary supervisory letter from, any governmental or
regulatory authority which restricts materially the conduct of its respective
business or has a material adverse effect upon the Merger or upon the financial
condition of Valley or VSB and its subsidiaries taken as a whole, and neither
Valley nor VSB shall have been advised by any governmental or regulatory
authority that such authority is contemplating issuing or requesting, or
considering the appropriateness of issuing or requesting, any of the foregoing.
Section 7.14. Amendment of Limited Rights. VSB shall have obtained a
sufficient number of agreements pursuant to Section 4.15 hereof with holders of
Limited Rights to permit the Merger, in the opinion of KPMG Peat Marwick, to be
accounted for under generally accepted accounting principles on a pooling of
interests basis.
The receipt of the documents required by this Article VII by UJB shall in no
way constitute a waiver by UJB of any of the provisions of or its rights under
this Agreement.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE OBLIGATION OF VSB
The obligation of VSB to consummate the Merger is subject to the satisfaction
of all of the following conditions, compliance with which or the occurrence of
which may be waived in whole or in part by VSB in writing:
Section 8.01. Accountants' Letter. UJB shall have furnished to VSB a letter
from independent certified public accountants for UJB, dated the Closing Date
in form and substance reasonably satisfactory to VSB, to the effect that:
(a) They are a firm of independent public accountants with respect to UJB
and its subsidiaries within the meaning of applicable provisions of the
Securities Act and applicable published rules and regulations thereunder,
and information about them set forth in the Registration Statement and the
VSB Proxy Statement, is materially correct insofar as it relates to them;
(b) In their opinion, the consolidated financial statements of UJB
examined by them comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and the Exchange
Act, as applicable, and the published rules and regulations thereunder;
(c) On the basis of limited procedures, not constituting an audit,
consisting of a reading of the unaudited financial statements of UJB, other
information referred to below, and the latest available interim financial
statements of UJB, inspection of the minute books of UJB since the date of
the latest audited financial statements, inquiries of officers of UJB
responsible for financial and accounting matters
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and such other inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe that:
(i) The UJB unaudited consolidated financial statements included in
the Registration Statement or UJB's quarterly reports on Form 10-Q
since December 31, 1992 do not comply as to form in all material
respects with the applicable accounting requirements of the Securities
Act and Exchange Act and published rules and regulations thereunder or
are not stated on a basis substantially consistent with the basis for
the audited consolidated financial statements included or incorporated
by reference in UJB's annual report on Form 10-K for the most recent
fiscal year except for changes that are to a preferable accounting
method;
(ii) The UJB unaudited consolidated financial statements in the
Registration Statement or subsequent thereto up to the Closing Date for
any period ending after the end of the latest interim period covered by
the most recently filed quarterly report on Form 10-Q of UJB and any
data for a comparable prior period included therein were not determined
on a basis substantially consistent with the basis for the
corresponding amounts in the audited consolidated financial statements
included or incorporated by reference in UJB's annual report on Form
10-K for the most recent fiscal year except for changes that are to a
preferable accounting method;
(iii) As of a specified date not more than five days prior to the
date of delivery of such letter, there have been any changes in the
total capital stock (other than issuances of Common Stock upon exercise
of options granted under stock option plans or stock option plan
components of incentive plans of UJB in effect on the date hereof or
issuances of UJB Common stock pursuant to UJB's Dividend Reinvestment
and Stock Purchase Plan, Savings Incentive Plan or 1993 Incentive Stock
and Option Plan or issuances of Series R Preferred Stock pursuant to
UJB's Shareholder Rights Plan, or repurchases of not more than
1,000,000 shares of UJB Common Stock at a price not greater than 105%
of market value (as determined over a period not in excess of five
trading days), or issuances in connection with business acquisitions,
redemptions by UJB of its Series B Adjustable Rate Cumulative Preferred
Stock, the Rights attached to the UJB Common Stock or the Series R
Preferred Stock issuable under its Shareholder Rights Plan), or
increases in consolidated long-term debt of UJB and subsidiaries
consolidated in excess of $400 million, or any decreases in
consolidated shareholders' equity (other than as a result of the
redemption by UJB of its Series B Adjustable Rate Cumulative Preferred
Stock, the Rights attached to the UJB Common Stock or the Series R
Preferred Stock issuable under its Shareholder Rights Plan) or
consolidated total assets (other than as a result of such redemption)
or consolidated total deposits or consolidated allowance for loan and
lease losses of UJB and subsidiaries consolidated as compared with
respective amounts shown in the unaudited consolidated balance sheet
included in the most recent quarterly report on Form 10-Q (or, if more
recent, the latest audited consolidated balance sheet included in the
most recent annual report on Form 10-K), except in each case for
changes, increases, or decreases which are described in such letter;
(iv) For the period from the date of the latest unaudited
consolidated financial statements included in the quarterly report on
Form 10-Q (or, if more recent, the latest audited statement of income
included in the most recent annual report on Form 10-K) to the end of
the latest period for which financial statements are available, there
were any decreases in consolidated net interest income, consolidated
net interest income after provision for loan and lease losses or the
total and per share amounts of consolidated net income, in each case as
compared with the comparable period in the preceding year, except in
each case for decreases which are described in such letter.
Section 8.02. No Adverse Changes. During the period from December 31, 1992
to the Closing Date there shall not have been any material adverse change in
the financial condition or results of operations of UJB and its subsidiaries,
taken as a whole, and they shall not have sustained any material loss or damage
to their properties, whether or not insured, which materially affects the
ability of UJB and its subsidiaries, taken as a whole, to conduct their
business.
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Section 8.03. Representations and Covenants. Except with respect to matters
resulting from transactions specifically contemplated by this Agreement, all
representations and warranties made by UJB in this Agreement shall be true and
correct on the date of this Agreement and, in all material respects, on the
Closing Date with the same force and effect as if such representations and
warranties were made on the Closing Date. UJB shall have complied in all
material respects with all covenants and agreements contained herein or therein
to be performed by UJB on or before the Closing Date. The entry by UJB after
the date hereof into any agreement to acquire any company or other entity, the
issuance of up to $400 million of debt, and the issuance of Series R Preferred
Stock pursuant to UJB's Shareholder Rights Plan, the redemption by UJB of its
Series B Adjustable Rate Cumulative Preferred Stock, the Rights attached to UJB
Common Stock or the Series OF Preferred Stock issuable pursuant to UJB's
Shareholder Rights Plan, and any transactions reasonably necessary or
appropriate in connection therewith, are specifically permitted by this
Agreement.
Section 8.04. Secretary's Certificate. UJB shall have furnished to VSB a
certificate signed by the Secretary of UJB and dated the Closing Date,
certifying to the satisfaction of the condition set forth in Section 6.05 and
the effectiveness of all resolutions adopted by the Board of Directors
(including committees thereof) of UJB relating to this Agreement and the Merger
and related transactions, a copy of which resolutions shall be attached to such
certificate.
Section 8.05. Officer's Certificate. UJB shall have furnished to VSB a
certificate signed by the Chairman, Vice Chairman, President or an Executive
Vice President of UJB, dated the Closing Date, certifying to the satisfaction
of the conditions set forth at Sections 6.01 and 6.02, the last paragraph of
Section 6.03 and Section 6.04 as they relate to UJB and Sections 8.02 and 8.03.
Section 8.06. Opinions of UJB Counsel. VSB shall have received an opinion
of General Counsel for UJB, dated the Closing Date and reasonably satisfactory
in form and substance to counsel for VSB, substantially to the effect provided
in Exhibit C.
Section 8.07. Approvals of Legal Counsel. All actions, proceedings,
instruments and documents required to carry out the transactions contemplated
by this Agreement or incidental thereto and all related legal matters shall be
reasonably satisfactory to counsel to VSB, and such counsel shall have been
furnished with certified copies of actions and proceedings and such other
documents and instruments as they shall have reasonably requested.
Section 8.08. Fairness Opinion. The VSB Proxy Statement shall have
contained the favorable signed opinion of Ryan, Beck & Co., dated the date of
the Proxy Statement or not more than five business days prior thereto,
regarding the fairness from a financial point of view of the consideration to
be received by the shareholders of VSB in the Merger.
Section 8.09. Absence of Regulatory Agreements. Neither UJB nor any of its
bank subsidiaries shall be a party to any agreement or memorandum of
understanding with, or commitment letter to, or board of director resolution
submitted to or similar undertaking made to, or be subject to any order or
directive by, or be a recipient of any extraordinary supervisory letter from,
any governmental or regulatory authority which restricts materially the conduct
of UJB's business or has a material adverse effect upon the Merger or upon the
financial condition of UJB and its subsidiaries taken as a whole, except for
such of the foregoing as was previously disclosed to VSB, and neither UJB nor
any of its bank subsidiaries shall have been advised by any governmental or
regulatory authority that such authority is contemplating issuing or
requesting, or considering the appropriateness of issuing or requesting, any of
the foregoing.
The receipt of the documents required by this Article VIII by VSB shall in no
way constitute a waiver by VSB of any of the provisions of or its rights under
this Agreement.
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ARTICLE IX.
CLOSING; TERMINATION RIGHTS
Section 9.01. Closing. Unless a different place and time are agreed to by
the parties hereto, the closing of the Merger (the "Closing") shall take place
on a date determined by UJB on at least five business days notice (the "Closing
Notice") given to VSB, at the office of UJB, 301 Carnegie Center, Princeton,
New Jersey, commencing at 10:00 a.m., which date shall not be earlier than the
last to occur of the following but not later than 15 business days (provided
however, that in the event that either party is unable to close for reasons
outside of its control such as the unavailability of customary certificates of
good standing or other supporting documents referred to below, the date of
Closing may be postponed by such party without breaching this Agreement, but
not later than 30 days) after the last to occur of the following:
(a) the date of the approval of the Merger by the shareholders of VSB in
accordance with Section 7.12;
(b) if the transactions contemplated by this Agreement are being
contested in any legal proceeding, the date that such proceeding has been
brought to a conclusion favorable, in the judgment of UJB and VSB, to the
consummation of the transactions contemplated herein or such prior date as
UJB and VSB shall elect, whether or not such proceeding has been brought to
a conclusion; or
(c) the date of receipt of the last of the Required Consents (and the
expiration of any required waiting period required by statute or
incorporated into such Required Consents).
Such date is sometimes referred to herein as the "Closing Date". In the Closing
Notice UJB shall specify the "Determination Date" for purposes of determining
the Average Price, which date shall not be more than five business days prior
to the Closing Date. At the Closing, the parties will exchange certificates,
legal opinions and other documents for the purpose of determining whether the
conditions precedent to the obligations of the parties set forth herein have
been satisfied or waived. After all such conditions have been satisfied or
waived, VSB shall execute and deliver to UJB, and UJB shall execute and deliver
and UJB shall file or cause to be filed with each of the respective Secretaries
of State of the States of New Jersey and Delaware, appropriate Certificates of
Merger in compliance with this Agreement. All proceedings to be taken and all
documents to be executed and delivered by all parties at the Closing shall be
deemed so taken, executed and delivered simultaneously, and no proceedings
shall be deemed taken or any documents executed or delivered until all have
been taken, executed or delivered.
Section 9.02. Termination Rights.
(a) The Boards of Directors of VSB and UJB may terminate this Agreement by
mutual consent at any time prior to the Effective Time. In addition, if either
party shall refuse to close because, on the date on which the Closing must be
held as determined by Section 9.01, all the conditions precedent to its
obligation to close under Article VI shall not have been met, the Board of
Directors of such party may terminate this Agreement by giving written notice
of such termination to the other party. Furthermore, Board of Directors of
either party may terminate this Agreement in the event that:
(i) the shareholders of VSB at the meeting of shareholders called for the
purpose of approving the Merger, this Agreement and the transactions
contemplated by this Agreement, upon voting, shall have failed to approve
by the requisite vote;
(ii) a material breach of a warranty or representation or covenant made
by the other shall have occurred and such breach has not been cured, or is
not capable of being cured, within 30 days after written notice of the
existence thereof shall have been given to the other party;
(iii) VSB's investment banker is unable to deliver to VSB by June 30,
1994 the opinion required by Section 8.08; or
(iv) the Closing is not consummated on or before September 30, 1994.
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(b) If either party shall refuse to close because, on the date on which the
Closing must be held as determined by Section 9.01, all the conditions to its
obligation to close, other than a condition set forth in Article VI, shall not
have been met, (other than a failure of the condition set forth at Section 7.12
due to the circumstances set forth in Section 9.02(a)(i) hereof and a failure
of the condition set forth at Section 8.08 due to the circumstances set forth
at Section 9.02(a)(iii) hereof), the Board of Directors of such party may
terminate this Agreement by giving written notice of such termination to the
other party.
(c) Upon a termination of this Agreement pursuant to this Section 9.02 or
Section 1.03(a)(2)(C) hereof, the obligations of the parties under this
Agreement (except for those under this Section 9.02) shall terminate and be of
no further force or effect, each party shall be mutually released and
discharged from liability to the other party or to any third parties hereunder,
and
(i) Any acquisition by UJB or a subsidiary of UJB (whether such
acquisition is by purchase, exchange, merger or consolidation), subsequent
to the date of this Agreement but prior to the Determination Date, which
acquisition is considered significant for purposes of 17 CFR 210.11-01(b)
or involves the possible issuance by UJB of five percent or more of the
shares of UJB Common Stock outstanding on such date is hereby defined to be
a "Subsequent Acquisition". To determine whether the number of shares
possibly to be issued in a Subsequent Acquisition equals five percent or
more the number of shares to be issued should be divided by a number
determined by adding the number of shares possibly to be issued to the
number of shares of UJB Common Stock outstanding on the date the
determination is made. In the event a Subsequent Acquisition is followed by
a termination of this Agreement in accordance with Section 1.03(a)(2)(C),
UJB shall be obligated to reimburse VSB for reasonable costs and expenses
paid or incurred in connection with this Agreement, up to a maximum of
$100,000.
(ii) In the event termination occurs under this Section 9.02 or Section
1.03(a)(2)(C) otherwise than as described in subsection (i) above, the
expenses incurred in connection with printing of the VSB Proxy Statement
and the Registration Statement, and the filing fees of the SEC, the New
Jersey Department of Banking, and the New York Stock Exchange, up to
$200,000, shall be borne equally by UJB and VSB and expenses in excess of
$200,000 shall be borne exclusively by UJB; provided, however, that: (A) if
VSB terminates this Agreement pursuant to Section 9.02(a)(ii) or Section
9.02(b), UJB shall reimburse VSB for its out-of-pocket expenses, up to an
amount not to exceed $100,000, reasonably incurred in connection with this
Agreement, including counsel fees and the printing and filing fees referred
to above, but excluding any brokers', finders' or investment bankers' fees;
(B) if UJB terminates this Agreement pursuant to Section 9.02(a)(i) or (ii)
or Section 9.02(b), VSB shall reimburse UJB for its out-of-pocket expenses,
up to an amount not to exceed $100,000, reasonably incurred in connection
with this Agreement, including counsel fees and the printing and filing
fees referred to above, but excluding any brokers', finders' or investment
bankers' fees.
(d) Notwithstanding any termination of this Agreement, (i) VSB shall
indemnify and hold UJB harmless from and against any claim by any broker or
finder asserting a right to brokerage commissions or finders' fees as a result
of any action allegedly taken by or understanding allegedly reached with VSB
and (ii) UJB shall indemnify and hold VSB harmless from and against any claim
by any broker or finder asserting a right to brokerage commissions or finders'
fees as a result of any action allegedly taken by or understanding allegedly
reached with UJB.
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<PAGE>
ARTICLE X.
MISCELLANEOUS
Section 10.01. Press Releases. At all times until the Closing Date or the
termination of this Agreement, each party shall promptly advise and consult
with the other prior to issuing, or permitting any of its subsidiaries,
directors, officers, employees or agents to issue, any press release or other
information to the press or any third party with respect to this Agreement, or
the transactions contemplated hereby.
Section 10.02. Article and Section Headings. Article and section headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
Section 10.03. Entire Agreement; Amendments. This Agreement, the VSB
Schedules, the Post-Signing Disclosure List and the Stock Option Agreement and
the Exhibits hereto and thereto, if any, entered into contemporaneously
herewith by the parties hereto constitute the entire agreement between the
parties pertaining to the subject matter hereof and supersede all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the parties, and there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof except as specifically set forth herein or therein. No
supplement, modification, waiver or termination of this Agreement shall be
binding unless executed in writing by the party to be bound thereby (or in the
case of a termination occurring pursuant to Section 9.02 or Section
1.03(a)(2)(C) hereof by the party exercising a right to terminate this
Agreement). No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provision hereof or thereof
(whether or not similar), nor shall any waiver constitute a continuing waiver
unless otherwise expressly provided in the instrument granting such waiver. The
parties hereto may amend or modify this Agreement in such manner as may be
agreed upon by a written instrument executed by the parties, except that, after
the meeting described in Section 7.12 hereof, no such amendment or modification
shall reduce the amount of, or change the forms of consideration to be received
by the shareholders of VSB contemplated by this Agreement, unless such
modification is submitted to a vote of the shareholders of VSB.
Section 10.04. Survival of Representations, Warranties and Covenants. No
investigation made by the parties hereto made heretofore or hereafter shall
affect the representations and warranties of the parties which are contained
herein and each such representation and warranty shall survive such
investigation.
Section 10.05. Notices. Any notice or other communication required or
permitted hereunder shall be in writing, and shall be deemed to have been
given, unless otherwise specified in a particular provision of this Agreement,
if placed in the mail, registered or certified, postage prepaid, or if
delivered personally or by courier, receipt requested, or by facsimile
transmission, receipt acknowledged addressed as follows:
UJB: UJB Financial Corp.
Attn: T. Joseph Semrod
301 Carnegie Center
P.O. Box 2066
Princeton, NJ 08543-2066
Telephone No.: 609-987-3300
Facsimile No.: 609-987-3435
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<PAGE>
With a copy to: Richard F. Ober, Jr., Esq.
UJB Financial Corp.
301 Carnegie Center
P.O. Box 2066
Princeton, NJ 08543-2066
Telephone No.: 609-987-3430
Facsimile No.: 609-987-3435
VSB: VSB Bancorp, Inc.
Attn: Allen S. Greene
15 VerValen Street
Closter, NJ 07624
Telephone No.: 201-768-4600, x. 750
Facsimile No.: 201-768-7329
With a copy to: John J. Gorman, Esq.
Muldoon, Murphy & Faucette
5105 Wisconsin Avenue, N.W.
Washington, DC 20016
Telephone No.: 202-362-0840
Facsimile No.: 202-966-9409
or to such other address as such party may designate by notice to the others,
which change of address shall be deemed to have been given upon receipt.
A notice or other communication hereunder shall be deemed delivered (i) if
mailed by certified or registered mail to the proper address, with adequate
postage prepaid, on the fifth business day following posting or (ii) if
delivered by other means, when received by the party to whom it is directed.
Section 10.06. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New Jersey,
without giving effect to the provisions, policies or principles thereof
relating to choice or conflict of laws except that matters affecting thereof
relating to choice or conflict of laws except that matters affecting the
validity of corporate action taken by any Delaware corporation shall be
governed by the laws of the State of Delaware.
Section 10.07. Counterparts. This Agreement is being executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
agreement.
Section 10.08. Binding Effect. All of the terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns.
Section 10.09. Extensions; Waivers and Consents. Either party hereto, by
written instrument signed by its Chairman, Vice Chairman, President, or Chief
Financial Officer, may extend the time for the performance of any of the
obligations of the other party hereto, and may waive, at any time before or
after approval of this Agreement and the transactions contemplated hereby by
the shareholders of VSB, subject to the provisions of Section 10.03 hereof: (i)
any inaccuracies of the other party in the representations and warranties in
this Agreement or any other document delivered pursuant hereto or thereto; (ii)
compliance with any of the covenants or agreements of the other party contained
in this Agreement; (iii) the performance (including performance to the
satisfaction of a party or its counsel) by the other party of any of its
obligations hereunder or thereunder, and (iv) the satisfaction of any
conditions to the obligations of the waiving party hereunder or thereunder. Any
consent or approval of a party hereunder shall be effective only if signed by
the Chairman,
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Vice Chairman, President or Chief Financial Officer of such party. Subject to
Section 10.03, no such instrument, consent or approval may modify the form or
amount of consideration to be received by the shareholders of VSB.
IN WITNESS WHEREOF, VSB and UJB have caused this Agreement to be executed in
counterparts by their duly authorized officers and their corporate seals to be
hereunto affixed as of the date first above written.
Corporate Seal UJB Financial Corp.
By: /s/ John G. Collins
Attest:/s/ George J. Soltys, Jr. -------------------------------------
--------------------------------- JOHN G. COLLINS,
GEORGE J. SOLTYS, JR., VICE CHAIRMAN OF THE BOARD
SENIOR VICE PESIDENT
VSB Bancorp, Inc.
Corporate Seal
By: /s/ Allen S. Greene
Attest: /s/ Leonard J. Stanley -------------------------------------
--------------------------------- ALLEN S. GREENE, CHAIRMAN OF THE BOARD,
LEONARD J. STANLEY CHIEF EXECUTIVE OFFICER AND PRESIDENT
FIRST VICE PRESIDENT
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<PAGE>
[LETTERHEAD OF UJB FINANCIAL APPEARS HERE]
March 17, 1994
Allen S. Greene
VSB Bancorp, Inc.
15 Ver Valen Street
Closter, New Jersey 07624
Re: Amendments to the Agreement and Plan of Merger between UJB Financial Corp.
and VSB Bancorp, Inc. dated December 16, 1993 (the "Merger Agreement")
Dear Allen;
I would like to confirm our agreement that the Merger Agreement is hereby
amended as follows:
1. Section 4.13 of the Merger Agreement is deleted in its entirety.
2. Section 5.12 of the Merger Agreement is deleted in its entirety.
3. All references to Muldoon, Murphy & Faucette in the Merger Agreement
shall be replaced with Luse Lehman Gorman Pomerenk & Schick, a
Professional Corporation, with appropriate changes to the address,
telephone and facsimile numbers.
This letter agreement constitutes an amendment or modification to the Merger
Agreement as contemplated by Section 10.03 thereof.
Very truly yours,
/s/ John G. Collins
Agreed to and accepted by VSB Bancorp, Inc.
By: /s/ Allen S. Greene
-------------------
Allen S. Greene
Chairman, President and
Chief Executive Officer
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Appendix B
April , 1994
The Board of Directors
VSB Bancorp, Inc.
15 Ver Valen Street
Closter, NJ 07624
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to VSB Bancorp, Inc. ("VSB") and its shareholders of the proposed merger
("Proposed Merger") between VSB and UJB Financial Corp. ("UJB").
The terms of the Agreement and Plan of Merger dated December 16, 1993 and
Amendment dated March 1994 to the Agreement and Plan of Merger
(collectively, "the Agreement"), by and between VSB and UJB, in addition to
providing the terms of the Proposed Merger, indicate that the consummation of
the Proposed Merger is subject to receipt of approvals from the shareholders of
VSB and from various regulatory agencies, and is further subject to the
satisfaction of certain other conditions. As provided for in the Agreement,
under the terms of the Proposed Merger, VSB will merge with and into UJB. Under
the terms of the Agreement, each of the outstanding shares of VSB will be
converted into and become the right to receive between 0.7727 and 0.9444 shares
(the "Exchange Ratio") of UJB common stock. The Exchange Ratio is subject to
upward adjustment in the event that the closing date of the Proposed Merger is
subsequent to July 20, 1994. The Agreement provides that the Proposed Merger
may be terminated by VSB if the average of the closing prices of UJB Common
Stock on the New York Stock Exchange for 10 consecutive trading days ("Average
Price") ending on the determination date (as defined) is less than $19.50 per
share and UJB does not agree to increase the Exchange Ratio to $19.50 divided
by the Average Price.
Ryan, Beck & Co., Inc., as a customary part of its investment banking business,
is engaged in the valuation of banking and thrift institutions and their
securities in connection with mergers and acquisitions. In conducting our
investigation and analysis of this transaction, we have met separately with
senior management of UJB and VSB to discuss their respective operations,
financial statements, and future prospects, and have reviewed and analyzed
material prepared in connection with the Proposed Merger, including, among
other things, the following: (1) the Agreement; (2) the Proxy Statement-
Prospectus and Registration Statement on Form S-4 concerning the Proposed
Merger; (3) UJB's Annual Reports to Shareholders for the years ended December
31, 1991 through December 31, 1993 and Annual Reports on Form 10-K for the
years ended December 31, 1991 through December 31, 1993 and Quarterly Reports
on Form 10-Q for the periods ended March 31, 1993, June 30, 1993 and September
30,1993; (4) VSB's Annual Reports to Shareholders and Annual Reports on Form
10-K for the fiscal years ended September 30, 1991 through September 30, 1993,
and Quarterly Report on Form 10-Q for the period ended December 31, 1993; (5)
certain operating and financial information, including projections, provided to
us by the management of UJB and VSB relating to their respective businesses and
prospects; (6) the historical stock prices and trading volume of the common
shares of VSB and UJB; (7) the publicly-available financial data and stock
market performance data of publicly-traded banking institutions and savings
institutions which we deemed generally comparable to UJB and VSB; (8) the terms
of recent acquisitions of savings institutions which we deemed generally
comparable to VSB, and (9) other such studies, analyses, inquiries and
examinations as we deemed appropriate. We also met separately with the
management of VSB and UJB to discuss their respective past and current
business, operations, financial condition and future prospects. While we have
taken care in our investigation and analyses, we have relied upon and assumed
the accuracy, completeness and fairness of the financial and other information
provided to us by the respective institutions or publicly available, and have
not attempted to verify such information. We have also relied upon the
managements of VSB and UJB as to the reasonableness and achievability of the
financial and operating forecasts and projections (and the assumptions and
bases
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therefor) provided to us, and we have assumed that such forecasts and
projections reflect the best currently available estimates and judgments of the
respective managements. We also did not independently verify and have relied on
and assumed that the allowances for loan losses set forth in the balance sheets
of UJB and VSB at December 31, 1993 were adequate and complied fully with
applicable law, regulatory policy and sound banking practice as of the date of
such financial statements. We also assumed that the Proposed Merger in all
respects is, and will be in compliance with all laws and regulations applicable
to UJB and VSB. We have not made or obtained any independent evaluations or
appraisals of the assets or liabilities of either VSB or UJB or their
respective subsidiaries.
In conducting our analysis and arriving at our opinion as expressed herein, we
have considered such financial and other factors as we have deemed appropriate
in the circumstances. In rendering our opinion, we have assumed that in the
course of obtaining the necessary regulatory approvals for the Proposed Merger
and in preparation of the final Proxy Statement-Prospectus, no conditions will
be imposed that will have a material adverse effect on the contemplated
benefits of the Proposed Merger to either VSB or, on a pro forma basis, to UJB.
Our opinion is based upon conditions and projections as they exist and can be
evaluated on the date hereof.
Based upon and subject to the foregoing, it is our opinion as investment
bankers that the terms of the Proposed Merger as provided and described in the
Agreement are fair, from a financial point of view, to VSB and its
shareholders.
Very truly yours,
RYAN, BECK & CO., INC.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
With respect to the indemnification of directors and officers, Section 5 of
Article IX of the By-Laws of UJB provides:
"Section 5. Indemnification. Each person who was or is a party and each
person who is threatened to be or is made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
investigative or arbitrative, by reason of the fact that such person is, or
was, a director, officer or employee of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, trustee, agent, or
employee of another corporation, partnership, joint venture, sole
proprietorship, trust or other enterprise, whether or not for profit, shall be
indemnified and reimbursed by the Corporation for liabilities (including
amounts paid or incurred in satisfaction of settlements, judgments, fines and
penalties) and expenses (including reasonable costs, disbursements and counsel
fees) to the fullest extent permitted by the laws of the State of New Jersey as
in effect at the time of such indemnification. The foregoing right of
indemnification shall inure to the benefit of the heirs, executors, and
administrators of each such person, shall not be exclusive of any other rights
or indemnification to which any director, officer, employee or other person may
be entitled in any capacity as a matter of law or under any by-law, agreement,
vote of shareholders or directors, insurance policy, or otherwise; and shall
continue as to each such person who has ceased to be a director, officer or
employee.
"The By-Law shall be implemented and construed to provide any director,
officer, employee, or other person described above who is found to have acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the Corporation the maximum indemnification,
advancement of expenses, and reimbursement for liabilities and expenses allowed
by law, provided, however, that advancement of counsel fees will be made only
when the Board of Directors determines that arrangements for counsel are
satisfactory to the Board."
Such provision is consistent with Section 14A:3-5 of the Business Corporation
Act of the State of New Jersey, the state of UJB's incorporation, which permits
the indemnification of officers and directors, under certain circumstances and
subject to specified limitations, against liability which any officer or
director may incur in such capacity.
UJB carries officers' and directors' liability insurance policies which
provide coverage against judgments, settlements and legal costs incurred
because of actual or asserted acts or omissions of such officers and directors
of UJB arising out of their duties as such, subject to certain exceptions,
including, but not limited to, damages based upon illegal personal profits or
adjudicated dishonesty of the person seeking indemnification. The policies
provide coverage of $35,000,000 in the aggregate.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
This Registration Statement includes the following exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
2(a) Agreement and Plan of Merger dated December 16, 1993, between UJB and
VSB (included without exhibits as Appendix A to the Proxy Statement-
Prospectus included in this Registration Statement; with exhibits A, B
and C incorporated by reference to Exhibit (10)Y. to the Current
Report on Form 8-K of UJB, dated December 15, 1993).
(b) Amendment dated March 17, 1994 to the Agreement and Plan of Merger
between UJB and VSB (included with Exhibit 2(a) as Appendix A to the
Proxy Statement-Prospectus).
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
3(a) Restated Certificate of Incorporation of UJB, as restated July 1,
1988, as amended through May 16, 1990 (incorporated by reference to
Exhibit (3)A. on Form 10-Q of UJB for the quarter ended June 30,
1990).
(b) By-Laws of UJB as amended through December 16, 1992 (incorporated by
reference to Exhibit (3)B.(i) to the Current Report on Form 8-K of
UJB, dated December 16, 1992).
* 5 Opinion of Richard F. Ober, Jr., Esq. regarding legality of securities
being issued.
* 8(a) Opinion of Weil, Gotshal & Manges regarding tax matters.
* (b) Opinion of Luse Lehman Gorman Pomerenk & Schick regarding tax matters.
10(a) Stock Option Agreement dated December 16, 1993, between UJB and VSB
(incorporated by reference to Exhibit (10)Z. to the Current Report on
Form 8-K of UJB, dated December 15, 1993).
13(a) Quarterly Report on Form 10-Q of UJB for the quarter ended September
30, 1993.
(b) Quarterly Report on Form 10-Q of VSB for the quarter ended December
31, 1993.
24(a) Consent of KPMG Peat Marwick (UJB).
24(b) Consent of KPMG Peat Marwick (VSB).
* (c) Consent of Richard F. Ober, Jr., Esq.--included in his opinion filed
as Exhibit 5 to this Registration Statement.
* (d) Consent of Weil, Gotshal & Manges--included in its opinion filed as
Exhibit 8(a) to this Registration Statement.
* (e) Consent of Luse Lehman Gorman Pomerenk & Schick--included in its
opinion filed as Exhibit 8(b) to this Registration Statement.
25 Power of Attorney (contained on the signature pages to this
Registration Statement).
28(a) Form of Proxy.
* (b) Opinion of Ryan, Beck & Co. (Included as Appendix B to the Proxy
Statement-Prospectus included in this Registration Statement).
</TABLE>
- --------
* To be filed by amendment
(b) Financial Statement Schedules.
All financial statement schedules either are not required or are included in
the notes to the financial statements incorporated by reference herein.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions set forth in response to Item 20
hereof, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in
II-2
<PAGE>
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(c) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(d) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(e) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(f) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415 under the
Securities Act, will be filed as a part of an amendment to the registration
statement and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Township of West Windsor, and
the State of New Jersey on the 21st day of March, 1994.
UJB Financial Corp.
/s/ T. Joseph Semrod
By: ________________________________
T. JOSEPH SEMROD,
CHAIRMAN OF THE BOARD OF
DIRECTORS AND PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints T. Joseph Semrod, John R. Haggerty, William J.
Healy and Richard F. Ober, Jr., and each of them, the undersigned's true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for the undersigned and in the undersigned's name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same
with all exhibits thereto and other documents in connection therewith, with the
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below on the 21st day of March, 1994 by the following
persons in the capacities indicated.
SIGNATURES TITLES
/s/ T. Joseph Semrod Chairman of the Board of Directors
- ------------------------------------- and President (Chief Executive
T. JOSEPH SEMROD Officer)
/s/ John R. Haggerty Senior Executive Vice President-
- ------------------------------------- Finance (Principal Financial
JOHN R. HAGGERTY Officer)
/s/ William J. Healy Executive Vice President and
- ------------------------------------- Comptroller (Principal Accounting
WILLIAM J. HEALY Officer)
/s/ Robert L. Boyle Director
- -------------------------------------
ROBERT L. BOYLE
II-4
<PAGE>
SIGNATURES TITLES
/s/ John G. Collins Director
- -------------------------------------
JOHN G. COLLINS
/s/ T.J. Dermot Dunphy Director
- -------------------------------------
T.J. DERMOT DUNPHY
/s/ Elinor J. Ferdon Director
- -------------------------------------
ELINOR J. FERDON
/s/ Fred G. Harvey Director
- -------------------------------------
FRED G. HARVEY
/s/ John R. Howell Director
- -------------------------------------
JOHN R. HOWELL
/s/ Francis J. Mertz Director
- -------------------------------------
FRANCIS J. MERTZ
Director
- -------------------------------------
GEORGE L. MILES, JR.
/s/ Henry S. Patterson II Director
- -------------------------------------
HENRY S. PATTERSON II
/s/ Raymond Silverstein Director
- -------------------------------------
RAYMOND SILVERSTEIN
/s/ Joseph M. Tabak Director
- -------------------------------------
JOSEPH M. TABAK
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<C> <S> <C>
2(a) Agreement and Plan of Merger dated December 16, 1993, between
UJB and VSB (included without exhibits as Appendix A to the
Proxy Statement-Prospectus included in this Registration
Statement; with exhibits A, B and C incorporated by reference
to Exhibit (10)Y. to the Current Report on Form 8-K of UJB,
dated December 15, 1993).
(b) Amendment dated March 17, 1994 to the Agreement and Plan of
Merger between UJB and VSB (included with Exhibit 2(a) as
Appendix A to the Proxy Statement-Prospectus).
3(a) Restated Certificate of Incorporation of UJB, as restated July
1, 1988, as amended through May 16, 1990 (incorporated by
reference to Exhibit (3)A. on Form 10-Q of UJB for the quarter
ended June 30, 1990).
(b) By-Laws of UJB as amended through December 16, 1992
(incorporated by reference to Exhibit (3)B.(i) to the Current
Report on Form 8-K of UJB, dated December 16, 1992).
* 5 Opinion of Richard F. Ober, Jr., Esq. regarding legality of
securities being issued.
* 8(a) Opinion of Weil, Gotshal & Manges regarding tax matters.
* (b) Opinion of Luse Lehman Gorman Pomerenk & Schick regarding tax
matters.
10(a) Stock Option Agreement dated December 16, 1993, between UJB and
VSB (incorporated by reference to Exhibit (10)Z. to the Current
Report on Form 8-K of UJB, dated December 15, 1993).
13(a) Quarterly Report on Form 10-Q of UJB for the quarter ended
September 30, 1993.
(b) Quarterly Report on Form 10-Q of VSB for the quarter ended
December 31, 1993.
24(a) Consent of KPMG Peat Marwick (UJB).
24(b) Consent of KPMG Peat Marwick (VSB).
* (c) Consent of Richard F. Ober, Jr., Esq.--included in his opinion
filed as Exhibit 5 to this Registration Statement.
* (d) Consent of Weil, Gotshal & Manges--included in its opinion
filed as Exhibit 8(a) to this Registration Statement.
* (e) Consent of Luse Lehman Gorman Pomerenk & Schick--included in
its opinion filed as Exhibit 8(b) to this Registration
Statement.
25 Power of Attorney (contained on the signature pages to this
Registration Statement).
28(a) Form of Proxy.
* (b) Opinion of Ryan, Beck & Co. (Included as Appendix B to the
Proxy Statement-Prospectus included in this Registration
Statement).
</TABLE>
- --------
* To be filed by amendment
<PAGE>
EXHIBIT 13(a)
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1993
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 1-6451
UJB Financial Corp.
(Exact name of registrant as specified in its charter)
New Jersey 22-1903313
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
301 Carnegie Center, P.O. Box 2066, Princeton, New Jersey 08543-2066
(Address of principal executive offices) (Zip Code)
(609) 987-3200
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report).
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. [X] Yes [ ] No
As of October 31, 1993 there were 51,537,329 shares of common stock,
$1.20 par value, outstanding
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
In accordance with Instruction D., included herein as Exhibit (28)A
is UJB Financial Corp. consolidated balance sheets as of September
30, 1993, December 31, 1992 and September 30, 1992; as Exhibit
(28)B is UJB Financial Corp. consolidated statements of income for
the nine months and three months ended September 30, 1993 and 1992;
and as Exhibit (28)C is UJB Financial Corp. consolidated statements
of cash flows for the nine months ended September 30, 1993 and
1992. Also included herein as Exhibit (28)D is UJB Financial Corp.
consolidated statements of shareholders' equity as of September 30,
1993 and 1992; as Exhibit (28)E is UJB Financial Corp. consolidated
reconciliation of allowance for loan losses as of September 30,
1993 and 1992; and as Exhibit (28)F is UJB Financial Corp.
consolidated average balance sheets with resultant interest and
rates for the nine months ended September 30, 1993 and 1992.
The consolidated financial statements included herein as Exhibits
include the accounts of UJB Financial Corp. and all of its
subsidiaries. Significant intercompany transactions have been
eliminated in consolidation.
The consolidated financial statements have been prepared on an
accrual basis. For additional information and disclosures required
under generally accepted accounting principles, reference is made
to the registrant's 1992 Annual Report on Form 10-K.
The accompanying financial statements reflect, in the opinion of
management, all normal, recurring adjustments necessary to present
fairly the financial position of UJB Financial Corp. and
subsidiaries (the Company), and the results of their operations and
changes in their cash flows. The financial statements presented,
in all material respects, comply with the current reporting
requirements of supervisory authorities.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Financial Condition
Total assets at September 30, 1993 were $13.6 billion, a decrease
of $173.5 million or 1.3 percent from year-end 1992. Compared to
September 30, 1992, total assets increased $81.2 million or .6
percent. Earning assets decreased $79.1 million or .6 percent from
year-end 1992 but increased $45.1 million or .4 percent compared to
September 30, 1992. Specific categories are discussed below.
The investment portfolio at September 30, 1993 increased $289.8
million or 11.0 percent from year-end 1992. The increase in the
investment portfolio was the result of $1.0 billion in purchases,
principally in collateralized mortgage obligations (CMOs), offset
by maturities of $664.3 million during the nine months of 1993.
-1-
<PAGE>
Since December 1992, other securities increased $698.4 million as
investment strategies were directed toward the purchase of whole
loan CMOs. Most of this growth was funded by reductions in the
funds sold position (Federal Funds sold and securities purchased
under agreements to resell) and paydowns of agency CMOs. Compared
to September 30, 1992, the investment portfolio decreased $9.9
million or 0.3 percent.
At September 30, 1993, investment securities available for sale
amounted to $807.1 million, a decrease of $74.2 million or 8.4
percent from year-end 1992. These investments, recorded at the
lower of cost or market, were comprised of $412.0 million of U.S.
Government and agency CMOs and $395.1 million of other securities,
principally whole loan CMOs. During the nine months of 1993,
$330.2 million of investment securities available for sale
(predominately agency CMOs) were sold at a net gain of $6.8
million. Total maturities were $131.1 million during the nine
month period. Offsetting these decreases were purchases of $316.3
million and a transfer of $70.8 million into the available for sale
category from the investment portfolio. Compared to September 30,
1992, investment securities available for sale increased $265.7
million reflecting the transfer of agency CMOs in late 1992 and at
September 30, 1993. The aggregate market value on these securities
was $816.7 million at September 30, 1993.
Total loans decreased $76.5 million or .9 percent from December 31,
1992 to $8.7 billion at the end of the third quarter of 1993 and
were $184.2 million or 2.1 percent below September 30, 1992. The
economic slowdown in the region continued to impact the loan
portfolio during the first nine months of 1993. From December 31,
1992, commercial loans decreased $55.6 million or 1.3 percent to
$4.3 billion at September 30, 1993. Mortgage loans decreased $4.7
million or .2 percent from December 31, 1992 to $2.3 billion at
September 30, 1993, however, balances were $106.3 million or 4.8%
higher than September 30, 1992. Instalment loans increased $12.3
million or .6 percent from December 31, 1992 to $2.0 billion,
principally in response to an auto loan refinancing promotion.
Compared to September 30, 1992 instalment loans decreased $54.7
million or 2.7% mainly due to 1992 home equity loan activity.
Non-bank loans decreased $37.9 million or 26.3 percent to $106.2
million from December 31, 1992. The decrease was the result of a
bulk sale of $44.8 million in accruing and non-accruing real estate
loans during the first quarter of 1993 as part of the wind-down of
Trico Mortgage Company.
At the end of the third quarter of 1993, non-performing loans were
$273.5 million, or 3.14 percent of total loans. This compares to
$361.8 million, or 4.12 percent at year-end 1992, and $385.5
million, or 4.34 percent at the end of the third quarter of 1992.
In the third quarter of 1993, non-performing loans decreased by
$88.3 million from the year-end 1992 and were down $112.0 million
-2-
<PAGE>
from September 30, 1992. Compared to the second quarter 1993,
non-performing loans decreased $22.5 million. This was the ninth
consecutive quarter of decline in non-performing loans since their
highest level at June 30, 1991 of $483.0 million.
The following table summarizes the trends in the components of
non-performing loans (in thousands):
<TABLE>
<CAPTION>
Sept. 30, Dec. 31, Sept. 30,
1993 1992 1992
--------- -------- ---------
<S> <C> <C> <C>
Commercial and industrial $ 57,805 $ 82,072 $110,286
Non-bank second mortgages 1,594 21,380 20,510
Real estate:
Construction and development 98,597 130,651 131,855
Real estate related 115,504 127,713 122,848
-------- -------- --------
Total real estate 214,101 258,364 254,703
-------- -------- --------
Total $273,500 $361,816 $385,499
======== ======== ========
</TABLE>
At September 30, 1993, other real estate was $92.7 million, net of
a $29.5 million allowance. Since June 30, 1993, this net balance
decreased $11.2 million. Compared to December 31, 1992 and
September 30, 1992, these net balances decreased $29.1 million and
$53.6 million, respectively. In-substance foreclosures of $41.4
million at September 30, 1993 were reflected in other real estate
compared to $48.3 million at December 31, 1992.
The allowance for loan losses at September 30, 1993 was $246.8
million, or 2.84 percent of loans, compared to $275.3 million, or
3.13 percent of loans at December 31, 1992 and $291.5 million or
3.28 percent of loans at September 30, 1992. The allowance for
loan losses provides coverage for 90.3 percent of non-performing
loans, up from 76.1 percent at December 31, 1992 and 75.6 percent a
year ago. For the three months ended September 30, 1993, net
charge offs were $25.9 million or 1.18 percent of average loans
compared to $34.8 million or 1.56 percent during the comparable
period in 1992. For the nine months ended September 30, 1993, net
charge offs were $102.5 million or 1.57 percent of average loans
compared to $110.3 million or 1.68 percent during the prior year
period. A formal process is in place throughout the organization
to assess the risk inherent in the loan portfolio on a ongoing
basis. The methodology utilized includes monitoring the level of
the allowance for loan losses in relation to the assessment of risk
in the loan portfolio with particular emphasis on problem loans.
This process provides the rationale for the determination of the
adequacy of the allowance.
At September 30, 1993 total deposits were $11.4 billion, a decrease
of $386.2 million or 3.3 percent from December 31, 1992 and $12.4
million from a year ago. Retail savings and time deposits
decreased $494.7 million or 5.5 percent from year-end to $8.5
billion and decreased $344.6 million or 3.9 percent from September
30, 1992. Commercial certificates of deposit $100,000 and over
were $218.4 million, a decrease of $26.4 million or 10.8 percent
-3-
<PAGE>
compared to December 31, 1992 and declined $140.0 million or 39.1
percent compared to September 30, 1992. Demand deposits increased
$134.9 million or 5.2 percent from year-end to $2.7 billion and
increased $472.2 million or 21.0 percent from September 30, 1992.
At September 30, 1993, long-term debt was $212.7 million, a
decrease of $3.9 million or 1.8 percent from year-end 1992.
Compared to September 30, 1992, long-term debt increased $151.5
million. This increase reflects the impact of $175.0 million of
qualifying subordinated debt issued during the fourth quarter of
1992 and $20.0 million of senior notes issued during the third
quarter of 1993. Offsetting these increases was a payoff of the
12.95% Mortgage note in the amount of $18.3 million. Other
borrowed funds increased $113.3 million or 17.7 percent from
December 31, 1992 to $754.4 million. Compared to September 30,
1992, other borrowed funds decreased $144.2 million. Through
balance sheet management, the Company reduced the borrowed funds
position with excess liquidity.
Total shareholders' equity increased $40.4 million or 4.4 percent
from December 31, 1992 to $960.7 million. The leverage ratio of
the company increased 23 basis points to 6.90 percent at September
30, 1993 from 6.67 percent at December 31, 1992. At September 30,
1992, the leverage ratio was 6.58 percent. Under the risk-based
capital guidelines, the Company's Tier I capital was 9.14 percent
and total capital was 12.20 percent at September 30, 1993, compared
with 8.94 percent and 12.05 percent, respectively, at December 31,
1992. At September 30, 1992, the Tier I capital ratio was 8.72
percent and total capital was 10.19 percent. The current minimum
regulatory guidelines for Tier I and total risk-based capital
ratios are 4.0 percent and 8.0 percent respectively.
Results of Operations
For the third quarter of 1993, UJB Financial reported net income of
$11.8 million or $.22 per share compared with net income of $16.3
million or $.33 per share earned during the third quarter of 1992.
The results for the nine months and third quarter were reduced due
to a pre-tax restructuring charge of $21.5 million. During the
third quarter, the Company adopted a comprehensive restructuring
program to realign the Company along lines of business and to
consolidate the six member banks into one bank in New Jersey and
one in Pennsylvania. Without the after tax effect of this
restructuring charge, net income for the quarter would have been
higher by $12.7 million, or $.25 per common share.
Net income for the nine months ended September 30, 1993 was $54.6
million compared with $36.1 million for the nine months of 1992.
On a per share basis, net income for the nine months ended
September 30, 1993 was $1.04, compared to $.74 reported for the
same period in 1992. Net income was favorably impacted for both
the quarter and year-to-date by increases in the net interest
margin and a reduction in the loan loss provision, due to the
decline in non-performing loans.
-4-
<PAGE>
Net interest income on a tax-equivalent basis was $434.2 million
for the nine months of 1993 compared with $414.5 million for the
nine months ended September 30, 1992, an increase of $19.7 million
or 4.8 percent. Interest income on a tax-equivalent basis was
$682.9 million for the nine months ended September 30, 1993, a
decrease of $55.3 million or 7.5 percent compared to the same
period in 1992. The decline in interest income for the nine months
was primarily due to the lower interest rate environment.
Partially offsetting this decline were volume increases in average
investment securities available for sale and the benefit of reduced
levels of non-performing loans.
Interest earning assets averaged $12.5 billion during the first
nine months of 1993, an increase of $224.4 million or 1.8 percent
over the same period in 1992. Most of this growth occurred in
investment securities available for sale. Investment securities
available for sale increased $688.6 million to average $787.0
million during the nine months of 1993. Partially offsetting this
increase, investment securities decreased $375.2 million or 11.4
percent. This decrease was principally the result of maturities in
the portfolio and reinvestment into securities classified as
available for sale. Money market investments decreased $49.9
million or 64.4 percent. The loan portfolio decreased $47.6
million or .5 percent to average $8.7 billion during the nine
months of 1993. As a result of the lower interest rate environment
the yield on interest earning assets declined 73 basis points to
7.29 percent for the nine months of 1993, compared to 8.02 percent
for the corresponding period of 1992.
Interest expense decreased $75.0 million or 23.2 percent for the
nine months ended September 30, 1993 compared to the same period in
1992. The benefit of the lower rate environment on the cost of
retail time deposits and the reduction of commercial certificates
of deposit and other borrowed funds were the primary factors in the
decline in interest expense. Consumer preference continued to
shift out of retail certificates of deposit toward more liquid
savings-type accounts that are generally lower-yielding. Interest
expense on commercial certificates of deposit and borrowed funds
benefited from the decline in the rate environment, together with
the reduction in balances outstanding. Commercial certificates of
deposits over $100,000 decreased $186.7 million during the nine
months of 1993 compared to the prior year period. Other borrowed
funds declined $145.5 million during this period. Offsetting these
decreases in volume, long-term debt increased $148.1 million
reflecting the $175.0 million of capital qualifying subordinated
debt issued in the fourth quarter of 1992 and $20.0 million of
senior notes issued during the third quarter of 1993. The cost of
all liabilities declined 90 basis points from 4.19 percent at
September 30, 1992 to 3.29 percent for the nine months ended
September 30, 1993. Demand deposits averaged $2.5 billion during
the nine months ended September 30, 1993, an increase of $402.9
million or 19.2 percent over the comparable period in 1992.
-5-
<PAGE>
The net interest spread percentage on a tax-equivalent basis (the
difference between the rate earned on average interest earning
assets and the rate paid on average interest bearing liabilities)
increased to 4.00 percent for the nine months of 1993 compared with
3.83 percent during the corresponding period in 1992.
Additionally, net interest margin (net interest income on a
tax-equivalent basis as a percentage of average interest earning
assets) increased to 4.64 percent during the nine months of 1993
compared with 4.50 percent during the same period in 1992. The
increase in net interest spread and net interest margin reflected
the benefit of favorable retail deposit repricing in a declining
rate environment, the benefit of reduced levels of non-performing
loans and the favorable impact of an increase in demand deposits.
The provision for loan losses for the quarter ended September 30,
1993 was $24.0 million compared to $32.0 million for the same
period a year earlier. On a year-to-date basis, the provision was
$74.0 million, a decline of $39.0 million or 34.5 percent compared
with the nine months of 1992. This reduction in the provision for
loan losses reflects the decline in the levels of non-performing
loans.
Non-interest income for the third quarter of 1993 totaled $44.3
million, an increase of $4.8 million or 12.3 percent compared with
the third quarter of 1992. For the nine months ended September 30,
1993, non-interest income totaled $132.6 million, an increase of
$4.3 million or 3.3 percent from the prior year period. Investment
securities transactions are reflected in non-interest income. For
the nine months of 1993, net gains of $6.8 million were realized
compared with gains of $11.1 million in 1992. These gains were
recognized as the Company sold securities out of the available for
sale portfolio in recognition of the prepayment risk in CMOs as a
result of a declining interest rate environment.
For the third quarter of 1993, service charges on deposits were
$14.7 million, an increase of $1.5 million or 11.0 percent over the
prior year period. Service charges on deposits increased $4.6
million or 11.6 percent during the nine month period ended
September 30, 1993 compared to the corresponding period in 1992.
The increase for the quarter and year-to-date in service charges
was primarily due to increased account analysis activity in
addition to pricing changes effective in August, 1993. Service fee
income on loans decreased $.4 million or 4.0 percent compared with
the quarter ended September 30, 1992. For the 1993 nine month
period service fee income decreased $.5 million or 1.8 percent
compared to the prior year period. Trust fee income increased $.5
million or 10.7 percent compared to the third quarter of 1992.
This income rose $1.7 million or 11.7 percent during the first nine
months of 1993, principally due to fees generated from mutual
funds. During the third quarter of 1993, other income increased
$4.1 million or 38.4 percent over the same period in 1992. On a
year-to-date basis, other income increased $2.8 million or 7.8
-6-
<PAGE>
percent compared to the nine months ended September 30, 1992. The
increase in other income was due to gains from secondary mortgage
activity, discount brokerage fees and international fees.
Non-interest expenses in the third quarter totaled $150.5 million,
up $27.1 million, or 22.0 percent, over a year ago, and for the
nine months ended September 30, 1993 were $415.1 million, up $46.4
million, or 12.6 percent, from the year-ago period. Non-interest
expenses for the third quarter and nine months of 1993 included a
restructuring charge of $21.5 million. This charge relates to a
comprehensive restructuring program to realign the Company along
lines of business and to consolidate the six member banks into one
bank in New Jersey and one in Pennsylvania. Excluding this charge,
expenses for the third quarter and the nine months would have
increased 4.5 percent and 6.7 percent, respectively.
Salaries expense increased $2.0 million or 4.5 percent during the
third quarter of 1993 compared to the third quarter of 1992, and
rose $4.1 million or 3.1 percent during the nine months of 1993
compared to the corresponding period in 1992. Pension and other
employee benefits for the third quarter were $14.9 million, up $2.7
million or 22.5 percent over the third quarter of 1992. These
expenses were $43.7 million for the nine months ended September 30,
1993, up $5.8 million or 15.2 percent above the corresponding
period in 1992. The increase over the prior year's quarter and the
nine month period was partially due to higher medical insurance
expense of $1.2 million and $1.8 million, respectively.
Additionally, the Company provides certain postretirement health
care and life insurance benefits for retired employees. During the
first quarter of 1993, the Company adopted Statement of Financial
Accounting Standards 106, "Employers' Accounting For Postretirement
Benefits Other Than Pensions" (FAS 106) on a prospective basis.
The additional expense accrued during the quarter amounted to $.7
million and $2.2 million for the 1993 nine month period.
Furniture and equipment expense rose $.9 million or 8.7 percent for
the quarter and rose $2.6 million or 8.2 percent during the nine
months of 1993. The increases over prior year periods result from
increased equipment rentals and maintenance expenses related to the
installation of new on-line equipment to support branch automation.
The FDIC insurance assessment decreased $.9 million or 14.5 percent
during the third quarter of 1993 compared to the third quarter of
1992. This decrease reflects the impact of the reduced assessment
rates under the risk-based assessment system implemented under the
Federal Deposit Insurance Corporation Improvement Act of 1991
(FDICIA). These rates were reevaluated and reduced at June 30,
1993. However, for the nine month period of 1993, the FDIC
insurance assessment rose $2.6 million or 13.8 percent, reflecting
the higher assessments charged during the first half of 1993.
-7-
<PAGE>
Other real estate expenses were $8.4 million for the third quarter
of 1993 and were $31.4 million for the nine months of 1993.
Included in these amounts is a provision for losses on other real
estate and expenses related to holding and operating foreclosed
property. Provisions of $6.7 million for the third quarter and
$25.3 million for the nine months of 1993 were added to the
allowance for other real estate. This compares to $6.9 million for
the third quarter of 1992 and $15.4 million in the 1992 nine month
period. Expenses for operating and maintaining other real estate
amounted to $1.7 million for the third quarter and $6.1 million for
the nine months ended September 30, 1993 compared with $2.5 million
for the third quarter of 1992 and $8.3 million for the nine months
of 1992. Total other real estate expenses rose $7.7 million or
32.6 percent over the nine months ended September 30, 1992.
During the third quarter of 1993, the Company recorded a
restructuring charge of $21.5 million. This charge included
severance and human resources costs of $12.3 million, facilities
costs of $4.4 million and $4.8 million for data processing,
financial systems and other costs.
In February 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards 109, "Accounting for
Income Taxes" (FAS 109). This Statement changes the method of
accounting for income taxes from the deferred method required under
Accounting Principle Board Opinion 11 to the asset and liability
method. The Statement addressed various matters related to the
temporary differences from financial statement basis and tax basis
of assets and liabilities. Effective January 1, 1993, the Company
adopted FAS 109. The cumulative effect of the adoption of FAS 109
resulted in a positive effect to earnings of $3.8 million or $.07
per share recorded in the first quarter of 1993. Prior year
financial statements have not been restated to apply the provisions
of this Statement.
In August of 1993, the Revenue Reconciliation Act of 1993 was
signed into law. Among its provisions was an increase to the
Corporate tax rate from 34 percent to 35 percent retroactive to
January 1, 1993. Under the provisions of FAS 109, a change in the
tax rate requires an adjustment to the deferred tax asset. The
adjustment resulted in a net reduction of $2.1 million in tax
expense.
Liquidity
Liquidity is a measure of the ability to meet present and future
funding obligations and commitments. Bank liquidity is the ability
to meet the borrowing needs and deposit withdrawal requirements of
customers to support asset growth. Principal sources of liquidity
are deposit generation, access to purchased funds, maturities and
repayments of loans and investment securities and interest and fee
income.
-8-
<PAGE>
The company has an Asset/Liability Committee (ALCO), whose function
is to monitor and coordinate all activities relating to the
maintenance of liquidity and protection of net-interest income from
fluctuations in market interest rates.
Savings and time deposits declined for the nine months of 1993,
primarily in the category of retail certificates of deposits as
consumers seek yields in alternative instruments. Demand deposits
increased $134.9 million to $2.7 billion. This growth was used in
part to reduce commercial certificates of deposits by $26.4 million.
Proceeds of $337.0 million from the sales and $131.1 million from
maturities of investment securities available for sale provided a
source of liquidity since year-end 1992. Maturities of $664.3
million of investment securities also contributed to liquidity.
Other borrowed funds, which experienced a $113.3 million increase
since December 31, 1992 provided another source of liquidity.
Offsetting these sources were purchases of $1.0 billion of
investment securities and $316.3 million of investment securities
available for sale.
Additional liquidity is provided in the investments available for
sale and the investment portfolio. Scheduled maturities and
anticipated principal repayments of the total investment portfolio
including investments available for sale, will be approximately
$273 million throughout the balance of 1993. These portfolios
serve as a source of liquidity when the regional economy rebounds
and loan growth is again experienced.
-9-
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
In re Payroll Express Corporation, United States Bankruptcy Court,
Southern District of New York, Case No. 92-B-43150, filed June 5, 1992.
Reported on Form 10K/A filed August 16, 1993 for the period ended
December 31, 1992. Fifteen of the customers of Payroll Express filed
on September 29, 1993 a lawsuit captioned Beth Israel Medical Center et
al. v. United Jersey Bank and National Westminster Bank New Jersey,
United States District Court for the District of New Jersey, Civil
Action No. 93-4348 (WGB). The suit seeks approximately $7 million in
damages from the defendant banks on a variety of common law theories.
The lawsuit captioned Kingsbrook Jewish Medical Center v. Payroll
Express Corp. and United Jersey Bank, United States District Court,
Eastern District of New York, Civil Action No. CV 92-2537, filed May
29, 1992, has been voluntarily dismissed without prejudice by the
Plaintiff.
In re UJB Financial Corp. Shareholder Litigation, United States
District Court for the District of New Jersey, Trenton, Civil Action
No. 90-1569 (AET). Suit filed April 5, 1990. Reported on Form 10-K
for the period ended December 31, 1992 and on Form 10-Q for the periods
ended March 31, 1993 and June 30, 1993.
On September 13, 1993, the District Court denied the defendants' motion
to dismiss the plaintiffs' claims under the Securities Exchange Act of
1934 and New Jersey common law and reserved decision on the motion with
regard to plaintiffs' claims under the Securities Act of 1933. The
plaintiffs subsequently stipulated to the dismissal with prejudice of
their claims under the Securities Act of 1933 on October 14, 1993. The
defendants filed a motion requesting certification of an appeal from
the District Court order to the United States Court of Appeals for the
Third Circuit pursuant to 12 U.S.C. 1292(b) on October 29, 1993. The
defendants also filed an Answer denying the allegations of the Second
Consolidated Amended Class Action Complaint on October 28, 1993.
McAdoo CERCLA Matter.
Reported on Form 10-K for the period ended December 31, 1992 and on
Form 10-Q for the periods ended March 31, 1993 and June 30, 1993. The
Court's decision approving the Consent Decree was submitted to the
United States Court of Appeals for the Third Circuit in connection with
the pending appeal which is calendared for December 2, 1993.
-10-
<PAGE>
ITEM 5. Other Information.
On September 22, 1993 the Registrant issued a news release announcing a
comprehensive restructuring program. The restructuring will focus on:
(a) a new management structure centered on four primary lines of
business, (b) consolidation of all New Jersey headquartered banks into
a single New Jersey headquartered bank and the consolidation of all
Pennsylvania headquartered banks into a single Pennsylvania
headquartered bank, (c) enhanced customer service, and (d) establishing
new financial goals. The news release announcing the restructuring is
attached hereto as Exhibit 1 and is hereby incorporated into this Item
5 by reference.
-11-
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(1) News Release of UJB Financial Corp. dated September 22,
1993.
(3)A.(i) Restated Certificate of Incorporation of UJB Financial
Corp., as restated July 1, 1988, as amended through August
20, 1993.
(3)A.(ii) Amendment, dated August 20, 1993, to the Restated
Certificate of Incorporation of UJB Financial Corp., as
restated July 1, 1988.
(4)D. Note Agreement, dated as of August 19, 1993, between UJB
Financial Corp. and The Northwestern Mutual Life Insurance
Company relating to $20,000,000 of 7.95% Senior Notes Due
August 25, 2003.
(4)R.(v) Third Amendment, dated September 1, 1993, to the Note
Agreement, dated as of November 10, 1985, between First
Valley Corporation and The Northwestern Mutual Life
Insurance Company relating to $20,000,000 of 11 1/2%
Senior Notes Due December 15, 1995 of First Valley
Corporation.
(10)B.(i) Master Agreement of Lease, dated January 26, 1982, between
United Jersey Banks (former name of UJB Financial Corp.)
and Sha-Li Leasing Associates, Inc. relating to equipment
leases in excess of $10,000,000 in aggregate lease
obligations, including form of Equipment Schedule.
(10)B.(ii) Assignment and Assumption of Equipment Lease, effective
December 31, 1991, between UJB Financial Corp. and UJB
Financial Service Corporation (relating to assignment of
Master Agreement of Lease).
(10)B.(iii) Form of Guaranty Agreement between UJB Financial Corp. and
various lenders under the Master Agreement of Lease
relating to certain equipment leases in excess of
$10,000,000 in aggregate lease obligations.
(11) UJB Financial Corp. computation of net income per common
share for the nine and three months ended September 30,
1993 and 1992.
(28)A UJB Financial Corp. consolidated balance sheets as of
September 30, 1993, December 31, 1992 and September 30,
1992.
-12-
<PAGE>
(28)B UJB Financial Corp. consolidated statements of income for
the nine months and three months ended September 30, 1993
and 1992.
(28)C UJB Financial Corp. consolidated statements of cash flows
for the nine months ended September 30, 1993 and 1992.
(28)D UJB Financial Corp. consolidated statements of
shareholders' equity as of September 30, 1993 and 1992.
(28)E UJB Financial Corp. consolidated reconciliation of
allowance for loan losses as of September 30, 1993 and
1992.
(28)F UJB Financial Corp. consolidated average balance sheets
with resultant interest and rates for the nine months
ended September 30, 1993 and 1992.
(b) Reports on Form 8-K
None
-13-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UJB FINANCIAL CORP.
Registrant
DATE: November 12, 1993 BY: s/WILLIAM J. HEALY
William J. Healy
Executive Vice President and Comptroller
(Chief Accounting Officer)
-14-
<PAGE>
EXHIBIT INDEX
Exhibit No.
(1) News Release of UJB Financial Corp. dated September 22,
1993.
(3)A.(i) Restated Certificate of Incorporation of UJB Financial
Corp., as restated July 1, 1988, as amended through
August 20, 1993. [THIS EXHIBIT EXCLUDED]
(3)A.(ii) Amendment, dated August 20, 1993, to the Restated
Certificate of Incorporation of UJB Financial Corp., as
restated July 1, 1988. [THIS EXHIBIT EXCLUDED]
(4)D. Note Agreement, dated as of August 19, 1993, between UJB
Financial Corp. and The Northwestern Mutual Life
Insurance Company relating to $20,000,000 of 7.95% Senior
Notes Due August 25, 2003. [THIS EXHIBIT EXCLUDED]
(4)R.(v) Third Amendment, dated September 1, 1993, to the Note
Agreement, dated as of November 10, 1985, between First
Valley Corporation and The Northwestern Mutual Life
Insurance Company relating to $20,000,000 of 11 1/2%
Senior Notes Due December 15, 1995 of First Valley
Corporation. [THIS EXHIBIT EXCLUDED]
(10)B.(i) Master Agreement of Lease, dated January 26, 1982,
between United Jersey Banks (former name of UJB Financial
Corp.) and Sha-Li Leasing Associates, Inc. relating to
equipment leases in excess of $10,000,000 in aggregate
lease obligations, including form of Equipment Schedule. [THIS
EXHIBIT EXCLUDED]
(10)B.(ii) Assignment and Assumption of Equipment Lease, effective
December 31, 1991, between UJB Financial Corp. and UJB
Financial Service Corporation (relating to assignment of
Master Agreement of Lease). [THIS EXHIBIT EXCLUDED]
(10)B.(iii) Form of Guaranty Agreement between UJB Financial Corp.
and various lenders under the Master Agreement of Lease
relating to certain equipment leases in excess of
$10,000,000 in aggregate lease obligations. [THIS EXHIBIT
EXCLUDED]
(11) UJB Financial Corp. computation of net income per common
share for the nine and three months ended September 30,
1993 and 1992.
(28)A UJB Financial Corp. consolidated balance sheets as of
September 30, 1993, December 31, 1992 and September 30,
1992.
<PAGE>
(28)B UJB Financial Corp. consolidated statements of income for
the nine months and three months ended September 30, 1993
and 1992.
(28)C UJB Financial Corp. consolidated statements of cash flows
for the nine months ended September 30, 1993 and 1992.
(28)D UJB Financial Corp. consolidated statements of
shareholders' equity as of September 30, 1993 and 1992.
(28)E UJB Financial Corp. consolidated reconciliation of
allowance for loan losses as of September 30, 1993 and
1992.
(28)F UJB Financial Corp. consolidated average balance sheets
with resultant interest and rates for the nine months
ended September 30, 1993 and 1992.
<PAGE>
Exhibit (1)
Immediate
Media
Faith P. Goldstein, VP
Corporate Communications
609-987-3341
Analysts
Kerry K. Calaiaro, VP
Investor Relations
609-987-3226
UJB FINANCIAL ANNOUNCES RESTRUCTURING AND CONSOLIDATION;
WILL FOCUS ON FOUR PRIMARY BUSINESS LINES
Princeton, NJ, September 22....... As the final phase of a strategic
initiative, UJB Financial Corp. (NYSE: UJB) today announced a comprehensive
restructuring program to enhance shareholder value and improve its competitive
position for the '90s and beyond.
In making the announcement, Chairman and Chief Executive Officer T. Joseph
Semrod said, "We will focus on four fronts: 1.) a new management structure
centered on four primary lines of business, 2.) New Jersey and Pennsylvania
statewide consolidations of existing member banks, 3.) enhanced customer
service, and 4.) establishment of new financial goals.
"The new structure will be aligned along lines of business, and will
concentrate on our most profitable core businesses: wholesale lending, retail
banking, mortgage banking and investment management. While UJB Financial has
always been a leader in providing banking services to middle market companies,
-1-
<PAGE>
a new emphasis will now also be placed on small business customers with under
$2 million in sales."
Semrod pointed out, "Our studies show that small businesses prefer to handle
banking at a local office. We have an extensive retail branch network which
is well positioned to directly deliver banking services to these customers.
Emphasizing small business is also consistent with UJB Financial's commitment
to the goals of the Community Reinvestment Act."
The company will be capitalizing on emerging trends and expanding its mortgage
business in both New Jersey and eastern Pennsylvania. "We will be
implementing a plan to increase both our mortgage servicing and originations
during the next three years," Semrod said.
Semrod also reported that UJB Financial's successful investment management
group, private banking and discount brokerages will now be working in tandem
to offer customers better accessibility to investment and credit services.
"But, as much as the company will benefit from the restructuring," Semrod
said, "the real winners will be our customers. By creating statewide banks,
New Jersey customers will be able to conduct transactions at 185 branches, and
Pennsylvania customers will have 72 offices to serve them.
"We want to make it convenient and desirable for our customers to rely on us
for all their financial needs. The resulting nearly $11 billion New Jersey
bank and the $3 billion Pennsylvania bank will be customer-driven
organizations with close ties to their local communities."
-2-
<PAGE>
Semrod said that he expects the consolidations to take place in stages over
the next year and to be completed by the third quarter of 1994. UJB
Financial's present New Jersey banks are: United Jersey Bank, United Jersey
Bank/Central, N.A. and United Jersey Bank/South, N.A. The Pennsylvania banks
are: First Valley Bank, The Hazleton National Bank and Hanover Bank.
Semrod, 56, who is currently chairman of United Jersey Bank, will be named
chairman of the resulting New Jersey bank while John R. Howell, 60, a UJB
Financial vice chairman and chairman of First Valley Bank, will be named
chairman of the resulting Pennsylvania bank.
UJB Financial has now completed ten consecutive quarters of improved earnings
and eight successive quarters of declines in the level of non-performing
loans. Semrod said that this progress, combined with efficiencies and revenue
growth provided by the restructuring, and the planned implementation of a
strengthened and centralized credit risk management function, have permitted
new financial goals to be set for the company. "Our goal is to achieve a
return on assets (ROA) of 1.20 percent, return on equity (ROE) of over 15
percent, and a 59 percent efficiency ratio by the fourth quarter of 1995,"
Semrod stated.
In the past year, the company has been implementing major projects in branch
automation and back office and check processing consolidations. Now, with the
added savings from the line of business strategies and the bank
consolidations, UJB Financial is anticipating total annualized savings and
incremental revenues of approximately $40 million.
-3-
<PAGE>
Semrod pointed out, "A restructuring program of this magnitude requires
difficult decisions. While specific staffing needs for the new organization
have yet to be determined, we believe that our actions going forward will
ultimately affect approximately 7 percent of our work force.
"Since the beginning of this year, automation and consolidation efforts have
already resulted in staff reductions of about 240 employees. We were able to
place a number of these people in vacant positions throughout the
organization. For staff affected by the planned restructuring, we will try to
do the same. However, in situations where this is not possible, employees
will receive severance packages and outplacement assistance," he emphasized.
The company anticipates a restructuring charge in conjunction with the
realignment, but Semrod said that it will be necessary to define severance
packages and other costs before a specific amount can be determined. It is
anticipated this charge will be recognized in 1993, and that the quarter in
which it is taken would remain profitable.
UJB Financial, the 44th largest bank holding company in the nation, has total
assets of $13.5 billion. Through its six banks, nine non-bank subsidiaries,
and 257 banking offices, the company provides financial services throughout
New Jersey and eastern Pennsylvania to individuals, businesses, not-for-profit
organizations, governments and other financial institutions.
<PAGE>
UJB FINANCIAL CORP. Exhibit (11)
COMPUTATION OF NET INCOME PER COMMON SHARE
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
----------------- ------------------
1993 1992 1993 1992
------- ------- -------- --------
<S> <C> <C> <C> <C>
Average number of common
shares outstanding
(in thousands) (A) 51,190 46,779 51,361 48,017
======= ======= ======= =======
Net income $54,611 $36,106 $11,843 $16,315
less: Preferred dividend 1,350 1,394 450 464
------- ------- ------- -------
Net income available to
common shareholders (B) $53,261 $34,712 $11,393 $15,851
======= ======= ======= =======
Net income per common share $ 1.04 $ 0.74 $ 0.22 $ 0.33
======= ======= ======= =======
</TABLE>
Note: The dilutive effect of stock options and equity contracts in 1993
and 1992 was not material for all periods shown.
<PAGE>
UJB FINANCIAL CORP. Exhibit (28)A
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
Assets September 30, December 31, September 30,
1993 1992 1992
------------- ------------ -------------
<S> <C> <C> <C>
Cash and cash equivalents:
Cash and due from banks $ 740,299 $ 885,047 $ 728,296
Federal funds sold and securities purchased
under agreements to resell - 234,500 34,500
----------- ----------- -----------
Total cash and cash equivalents 740,299 1,119,547 762,796
Interest bearing deposits with banks 18,989 13,819 16,794
Trading account securities 33,176 21,961 27,350
Investment securities available for sale 807,061 881,278 541,384
Investment securities:
U.S. Government and Federal agencies 1,844,619 2,199,506 2,314,323
States and political subdivisions 324,495 378,198 398,041
Other securities 754,227 55,839 220,827
----------- ----------- -----------
Total investment securities 2,923,341 2,633,543 2,933,191
Loans (net of unearned discount):
Commercial 4,261,462 4,317,021 4,459,755
Mortgage 2,332,030 2,327,363 2,225,727
Instalment 2,006,239 1,993,974 2,060,982
Non-bank 106,158 144,051 143,656
----------- ----------- -----------
Total loans 8,705,889 8,782,409 8,890,120
Less: Allowance for loan losses 246,836 275,296 291,458
----------- ----------- -----------
Net loans 8,459,053 8,507,113 8,598,662
Premises and equipment 168,256 173,160 174,939
Other real estate owned, net of allowance 92,651 121,774 146,209
Accrued interest receivable 75,065 79,496 84,095
Due from customers on acceptances 19,590 21,378 22,706
Other assets 259,922 197,802 208,068
----------- ----------- -----------
Total Assets $13,597,403 $13,770,871 $13,516,194
=========== =========== ===========
Liabilities and Shareholders' Equity Deposits:
Non-interest bearing demand deposits $ 2,721,895 $ 2,586,997 $ 2,249,744
Interest bearing deposits:
Savings and time deposits 8,460,233 8,954,921 8,804,797
Commercial certificates of deposit of $100,000 and over 218,376 244,743 358,393
----------- ----------- -----------
Total deposits 11,400,504 11,786,661 11,412,934
Commercial paper 54,061 62,861 90,621
Other borrowed funds 754,353 641,004 898,543
Accrued interest payable 36,093 36,704 50,126
Bank acceptances outstanding 19,590 21,378 22,706
Accrued expenses and other liabilities 159,420 85,423 76,050
----------- ----------- -----------
12,424,021 12,634,031 12,550,980
Long-term debt 212,696 216,570 61,240
Shareholders' equity :
Preferred stock without par value:
Series B: Authorized and outstanding 600,166 in 1993 and
1992, adjustable-rate cumulative, $50 stated value 30,008 30,008 30,008
Common stock par value $1.20:
Authorized 65,000,000 shares; issued and outstanding
51,517,090 at September 30, 1993, 50,864,031 at
December 31, 1992 and 50,502,612 at September 30, 1992 61,821 61,037 60,603
Surplus 381,088 370,345 364,275
Retained earnings 487,769 458,880 449,088
----------- ----------- -----------
Total shareholders' equity 960,686 920,270 903,974
----------- ----------- -----------
Total Liabilities and Shareholders' Equity $13,597,403 $13,770,871 $13,516,194
=========== =========== ===========
</TABLE>
<PAGE>
UJB FINANCIAL CORP. Exhibit (28)B
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
------------------------- ------------------------
1993 1992 1993 1992
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on loans $496,466 $528,559 $164,974 $174,361
Interest on investment securities:
taxable 128,058 161,509 42,166 52,945
tax-exempt 19,377 23,046 6,230 7,439
Interest on investment securities available
for sale 24,304 6,536 7,368 2,953
Interest on Federal funds sold and securities
purchased under agreements to resell 670 2,466 82 213
Interest on trading account securities 1,053 1,107 328 462
Interest on deposits with banks 342 524 159 102
-------- -------- -------- --------
Total interest income 670,270 723,747 221,307 238,475
Interest Expense
Interest on savings and time deposits 203,399 273,122 63,342 83,876
Interest on commercial certificates of deposit
$100,000 and over 5,624 13,711 1,870 3,644
Interest on borrowed funds 39,721 36,941 13,510 12,150
-------- -------- -------- --------
Total interest expense 248,744 323,774 78,722 99,670
-------- -------- -------- --------
Net interest income 421,526 399,973 142,585 138,805
Provision for loan losses 74,000 113,000 24,000 32,000
-------- -------- -------- --------
Net interest income after provision
for loan losses 347,526 286,973 118,585 106,805
Non-Interest Income
Service charges on deposit accounts 44,265 39,681 14,717 13,255
Service fee income on loans 25,094 25,565 9,048 9,422
Trust income 16,135 14,450 5,410 4,888
Investment securities gains (losses) 6,769 11,118 (4) 977
Trading account gains 1,352 1,342 492 332
Other 39,009 36,176 14,631 10,574
-------- -------- -------- --------
Total non-interest income 132,624 128,332 44,294 39,448
Non-Interest Expenses
Salaries 136,421 132,288 46,533 44,535
Pension and other employee benefits 43,731 37,959 14,851 12,121
Occupancy, net 36,145 35,190 11,778 11,777
Furniture and equipment 33,661 31,110 11,466 10,544
Other real estate provision and operating expenses 31,356 23,650 8,400 9,344
FDIC insurance assessment 21,497 18,890 5,450 6,372
Advertising and public relations 7,860 7,863 2,609 2,526
Restructuring charges 21,500 - 21,500 -
Other 82,928 81,762 27,864 26,130
-------- -------- -------- --------
Total non-interest expenses 415,099 368,712 150,451 123,349
-------- -------- -------- --------
Income before income taxes 65,051 46,593 12,428 22,904
Federal and state income taxes 14,256 10,487 585 6,589
-------- -------- -------- --------
Income before cumulative effect of a change in
accounting principle 50,795 36,106 11,843 16,315
Cumulative effect of a change in accounting
principle * 3,816 - - -
-------- -------- -------- --------
Net Income $ 54,611 $ 36,106 $ 11,843 $ 16,315
======== ======== ======== ========
Net Income Per Common Share:
Income before cumulative effect of a change in
accounting principle $0.97 $0.74 $0.22 $0.33
Cumulative effect of a change in accounting
principle * 0.07 - - -
-------- -------- -------- --------
Net Income Per Common Share $1.04 $0.74 $0.22 $0.33
======== ======== ======== ========
Average Common Shares Outstanding (in thousands) 51,190 46,779 51,361 48,017
======== ======== ======== ========
</TABLE>
* Effective January 1993, the company adopted Financial Accounting Standards
No.109, Accounting for Income Taxes.
<PAGE>
UJB FINANCIAL CORP. Exhibit (28)C
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------
1993 1992
-------------- ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 54,611 $ 36,106
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses and other real
estate 99,287 128,397
Depreciation, amortization and accretion 18,913 15,696
Gains on sales of investment and trading
account securities (8,121) (12,460)
Gains on sales of mortgages held for sale (2,367) (2,354)
Proceeds from the sales other real estate
owned 35,927 56,897
Proceeds from the sales of mortgages held
for sale 197,532 212,057
Originations of mortgages held for sale (188,146) (220,142)
Purchases of investment securities
available for sale (316,303) -
Proceeds from maturities of investment
securities available for sale 131,077 -
Proceeds from the sales of investment
securities available for sale 337,000 612,212
Net increase in trading account securities (9,863) (22,753)
Increase in accrued interest receivable
and other assets (59,549) (5,943)
Increase (decrease) in accrued interest
payable, accrued
expenses and other liabilities 71,598 (713)
----------- -----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 361,596 797,000
INVESTING ACTIVITIES
Proceeds from sales of investment securities - 159,643
Proceeds from maturities of investment
securities 664,309 703,412
Purchases of investment securities (1,029,406) (1,559,464)
Net (increase) decrease in interest bearing
deposits with banks (5,170) 9,112
Net increase in loans (60,640) (304,430)
Purchases of premises and equipment, net (10,000) (4,632)
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (440,907) (996,359)
FINANCING ACTIVITIES
Net increase in demand and savings deposits 105,941 577,000
Net decrease in time deposits (492,098) (477,613)
Net increase (decrease) in short term
borrowings 103,389 (49,190)
Principal payments on long-term debt (22,714) (6,484)
Proceeds from the issuance of long-term debt 20,000 3,300
Dividends paid (25,363) (22,179)
Proceeds from issuance of common stock, net
of related expenses - 68,345
Proceeds from issuance of common stock under
dividend
reinvestment and other stock plans 11,527 9,224
Other, net (619) (691)
----------- -----------
NET CASH USED (PROVIDED) BY FINANCING
ACTIVITIES (299,937) 101,712
----------- -----------
DECREASE IN CASH AND CASH EQUIVALENTS (379,248) (97,647)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,119,547 860,443
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 740,299 $ 762,796
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid:
Interest payments $ 249,355 $ 331,961
Income tax payments 18,448 12,850
Noncash investing activities:
Transfer of investments to investments
securities available for sale 70,788 861,105
Transfer of loans to other real estate 41,613 117,963
</TABLE>
<PAGE>
UJB FINANCIAL CORP. Exhibit (28)D
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(dollars in thousands)
<TABLE>
<CAPTION>
Total
Preferred Common Retained Shareholders'
Stock Stock Surplus Earnings Equity
--------- ------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1991 $30,008 $55,064 $292,245 $434,482 $811,799
Net Income - - - 36,106 36,106
Proceeds from issuance of common stock
net of related expense (4,000,000 shares) - 4,800 63,545 - 68,345
Cash dividends declared:
Preferred stock - Series B - - - (1,394) (1,394)
Common Stock - - - (21,474) (21,474)
Common stock issued:
Dividend reinvestment and other stock plans
(472,037 shares) - 566 7,610 - 8,176
Exercise of stock options, net (144,080 shares) - 173 875 - 1,048
Change in valuation allowance for
marketable equity securities - - - 1,368 1,368
------- ------- -------- -------- --------
Balance, September 30, 1992 $30,008 $60,603 $364,275 $449,088 $903,974
======= ======= ======== ======== ========
Balance, December 31, 1992 $30,008 $61,037 $370,345 $458,880 $920,270
Net Income - - - 54,611 54,611
Cash dividends declared:
Preferred stock - Series B - - - (1,350) (1,350)
Common Stock - - - (24,632) (24,632)
Common stock issued:
Dividend reinvestment and other stock plans
(382,111 shares) - 459 7,689 - 8,148
Exercise of stock options, net (270,948 shares) - 325 3,054 - 3,379
Change in valuation allowance for
marketable equity securities - - - 260 260
------- ------- -------- -------- --------
Balance, September 30, 1993 $30,008 $61,821 $381,088 $487,769 $960,686
======= ======= ======== ======== ========
</TABLE>
<PAGE>
UJB FINANCIAL CORP. Exhibit (28)E
CONSOLIDATED RECONCILIATION OF ALLOWANCE FOR LOAN LOSSES
(dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30
------------------------------
1993 1992
-------- --------
<S> <C> <C>
Balance, January 1 $275,296 $288,770
Provision charged to expense 74,000 113,000
-------- --------
349,296 401,770
Net charge offs:
Loans charged off 111,813 119,072
Less recoveries 9,353 8,760
-------- --------
Net loans charged off 102,460 110,312
-------- --------
Balance, September 30 $246,836 $291,458
======== ========
</TABLE>
<PAGE>
UJB FINANCIAL CORP. Exhibit (28)F
CONSOLIDATED AVERAGE BALANCE SHEETS WITH RESULTANT INTEREST AND RATES
(Tax-Equivalent Basis, dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30
--------------------------------------------------------------
1993 1992
----------------------------- -------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
----------- -------- ------ ------------ --------- ------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets:
Interest bearing deposits with banks $ 15,283 $ 342 2.99 % $ 18,215 $ 524 3.84 %
Investment securities held for sale 787,023 24,304 4.12 98,427 6,536 8.85
Trading account securities 31,526 1,113 4.72 20,040 1,156 7.71
Money market investments 27,594 670 3.25 77,528 2,466 4.25
Investment securities:
U.S. Government and Federal agencies 2,129,510 107,800 6.75 2,652,561 149,569 7.52
States and political subdivisions 348,461 28,993 11.09 413,382 34,020 10.97
Other securities 449,481 20,428 6.06 236,758 11,887 6.69
----------- -------- ----- ----------- -------- -----
Total investment securities 2,927,452 157,221 7.16 3,302,701 195,476 7.89
Loans:
Commercial 4,259,398 221,499 6.95 4,473,761 241,724 7.22
Mortgage 2,340,231 144,948 8.26 2,188,899 148,003 9.02
Instalment 2,020,587 125,337 8.29 1,966,968 131,632 8.94
Non-bank 111,872 7,483 8.94 150,026 10,737 9.56
----------- -------- ----- ----------- -------- -----
Total loans 8,732,088 499,267 7.64 8,779,654 532,096 8.10
----------- -------- ----- ----------- -------- -----
Total interest earning assets 12,520,966 682,917 7.29 12,296,565 738,254 8.02
----------- -------- ----- ----------- -------- -----
Non-interest earning assets:
Cash and due from banks 833,840 739,212
Allowance for loan losses (262,764) (299,393)
Other assets 607,952 634,006
----------- -----------
Total non-interest earning assets 1,179,028 1,073,825
----------- -----------
TOTAL ASSETS $13,699,994 $13,370,390
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
Savings deposits $ 5,310,214 93,243 2.35 $ 4,859,587 118,962 3.27
Other time deposits 3,433,732 110,156 4.29 3,886,362 154,160 5.30
Commercial certificates of deposit
$100,000 and over 260,891 5,624 2.88 447,581 13,711 4.09
----------- -------- ----- ----------- -------- -----
Total interest bearing deposits 9,004,837 209,023 3.10 9,193,530 286,833 4.17
Commercial paper 64,715 1,427 2.95 97,406 2,746 3.77
Other borrowed funds 809,707 23,769 3.92 955,210 28,602 4.00
Long-term debt 216,213 14,525 8.98 68,121 5,593 10.97
----------- -------- ----- ----------- -------- -----
Total interest bearing liabilities 10,095,472 248,744 3.29 10,314,267 323,774 4.19
----------- -------- ----- ----------- -------- -----
Non-interest bearing liabilities:
Demand deposits 2,500,903 2,097,999
Other liabilities 151,121 124,111
Total non-interest bearing liabilities 2,652,024 2,222,110
----------- -----------
Shareholders' equity 952,498 834,013
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $13,699,994 $13,370,390
=========== ===========
Net interest income (tax-equivalent basis) 434,173 4.00 % 414,480 3.83 %
Tax-equivalent basis adjustment (12,647) ===== (14,507) =====
-------- -----------
Net Interest Income $ 421,526 $ 399,973
=========== ===========
Net Interest Income as a Percent of Interest
Earning Assets (tax-equivalent basis) 4.64 % 4.50 %
===== =====
</TABLE>
Note: The tax-equivalent adjustment was computed based on a Federal income tax
rate of 35% for 1993, and 34% for 1992.
<PAGE>
EXHIBIT 13(b)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended DECEMBER 31, 1993
Commission File No. 0-17476
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
VSB BANCORP, INC
-----------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-2907065
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
15 Ver Valen Street, Closter, New Jersey 07624
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
(201) 768-4600
-----------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
----------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all the reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares of Common Stock, $.01 par value per share,
outstanding as of January 31, 1994 is:
3,402,059
<PAGE>
VSB BANCORP, INC.
AND SUBSIDIARIES
INDEX
-----
<TABLE>
<CAPTION>
Page No
-------
<S> <C>
PART I - FINANCIAL INFORMATION (unaudited)
Item 1
Consolidated Balance Sheets as of
December 31, 1993 and September 30,
1993 1
Consolidated Statements of Income
for the three months ended
December 31, 1993 and 1992 2
Consolidated Statements of Changes in
Stockholders' Equity for the three
months ended December 31, 1993 and
1992 3
Consolidated Statements of Cash Flows for
the three months ended December 31,
1993 and 1992 4-5
Notes to Consolidated Financial Statements 6-7
Item 2
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8-16
PART II - OTHER INFORMATION 17
SIGNATURES 18
</TABLE>
<PAGE>
VSB BANCORP,INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
(dollars in thousands)
<TABLE>
<CAPTION>
(unaudited)
December 31, September 30,
Assets 1993 1993
- ------ ------------------- ----------------------
<S> <C> <C>
Cash on hand and in banks $4,934 $4,770
------------------- ----------------------
Total cash and cash equivalents 4,934 4,770
Loans held for sale 2,911 3,628
Investment securities, net 74,085 69,052
Investment required by law - Stock in FHLB of NY,
at cost 2,616 2,616
Mortgage-backed securities, net 160,175 157,269
Loans receivable 130,648 133,074
Less: Allowance for loan losses 2,050 2,050
Deferred loan fees 85 86
------------------- ----------------------
Loans receivable, net 128,513 130,938
Real estate owned, net 2,174 2,505
Premises and equipment, net 3,928 3,962
Real estate held for investment, net 218 218
Accrued interest receivable, net 2,729 2,759
Other assets 1,530 1,375
------------------- ----------------------
Total assets $383,813 $379,092
=================== ======================
Liabilities and Stockholders' Equity
- ------------------------------------
Liabilities:
Deposits $294,329 $294,208
Advance payment by borrowers for taxes and insurance 1,353 1,490
Employee Stock Ownership Plan (ESOP) debt 330 375
Advances from the FHLB of New York 39,697 36,699
Other liabilities 2,814 3,142
------------------- ----------------------
Total liabilities 338,523 335,914
------------------- ----------------------
Stockholders' equity:
Preferred stock: $0.01 par value, authorized
2,000,000 shares, issued 0 -- --
Common stock: $0.01 par value, authorized 5,000,000
shares, issued 3,402,059 shares at December 31,
1993 and 3,372,715 at September 30, 1993 34 34
Additional paid-in capital 18,376 18,198
Retained earnings (substantially restricted) 27,298 25,529
Common stock acquired by ESOP (330) (375)
Common stock acquired by Management Recognition
Plan (MRP) (88) (208)
------------------- ----------------------
Total stockholders' equity 45,290 43,178
------------------- ----------------------
Total liabilities and stockholders' equity $383,813 $379,092
=================== ======================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
1
<PAGE>
VSB BANCORP, INC.
AND SUBSIDIARIES
Consolidated Statements of Income
(dollars in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
------------------------------
1993 1992
------------- -------------
<S> <C> <C>
Interest income:
Loans receivable $2,489 $2,888
Mortgage-backed securities 2,126 2,432
Investment securities 1,038 486
Short-term investments -- 18
------------- -------------
Total interest income 5,653 5,824
Interest expense:
Deposits 2,282 2,763
Advances from the FHLB of New York and
other borrowings 321 7
------------- -------------
Total interest expense 2,603 2,770
Net interest income 3,050 3,054
Provisions for loan losses and
real estate owned -- 389
------------- -------------
Net interest income after provisions for loan
losses and real estate owned 3,050 2,665
------------- -------------
Other income:
Loan fees and service charges 33 50
Income (loss) from real estate held for
investment (2) 79
Gain on sale of loans 162 141
Service charges on deposit accounts 90 78
Gain on sale of real estate owned 125 --
Other 31 6
------------- -------------
Total other income 439 354
------------- -------------
Other expenses:
Compensation and benefits 940 782
Advertising 66 49
Occupancy and equipment 169 173
Data processing fees 62 61
SAIF deposit insurance premiums 171 190
Real estate owned, net 31 23
Other 270 348
------------- -------------
Total other expenses 1,709 1,626
------------- -------------
Income before income taxes 1,780 1,393
Federal and state income taxes 552 432
------------- -------------
Income before cumulative effect of a change in
accounting principle 1,228 961
Cumulative effect of a change in accounting
principle 781 --
------------- -------------
Net income $2,009 $961
============= =============
Net Income Per Common Share:
Income before cumulative effect of a change in
accounting principle $0.34 $0.28
Cumulative effect of a change in accounting
principle* 0.22 --
------------- -------------
Net Income per common share $0.56 $0.28
============= =============
Average Common Shares Outstanding (in
thousands) 3,393 3,332
============= =============
</TABLE>
* Effective October 1993, the company adopted Financial Accounting Standards
No. 109, Accounting for Income Taxes.
See accompanying notes to unaudited consolidated financial statements.
2
<PAGE>
VSB BANCORP, INC.
AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Common Common
Additional Stock Stock
Preferred Common Paid in Retained Acquired Acquired Treasury
Three months ended December 31, 1992 Stock Stock Capital Earnings by ESOP by MRP Stock Total
- ------------------------------ ------ ------ ---------- -------- -------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1992 $ -- $ 27 $ 22,313 $ 21,954 ($555) ($257) ($4,260) $ 39,222
Net income -- -- -- 961 -- -- -- 961
Principal payment of ESOP debt -- -- -- -- 45 -- -- 45
Stock options exercised from Treasury -- -- 86 -- -- -- (86) --
Cash dividends on common stock -- -- -- (164) -- -- -- (164)
Stock Dividend -- 1 (4,346) -- -- -- 4,346 1
------- --------- ---------- ---------- -------- --------- ------------ ----------
Balance at December 31, 1992 $ -- $ 28 $ 18,053 $ 22,751 ($510) ($257) $ -- $ 40,065
======= ========= ========== ========== ======== ========= ============ ==========
Three months ended December 31, 1993
- ------------------------------
Balance at September 30, 1993 $ -- $ 34 $ 18,198 $ 25,529 ($375) ($208) $ -- $ 43,178
Net income -- -- -- 2,009 -- -- -- 2,009
Principal payment of ESOP debt -- -- -- -- 45 -- -- 45
Distribution of MRP shares -- -- -- -- -- 120 -- 120
Stock options exercised from
unissued shares -- -- 178 -- -- -- -- 178
Cash dividends on common stock -- -- -- (240) -- -- -- (240)
------- --------- ---------- ---------- -------- --------- ------------ ----------
Balance at December 31, 1993 $ -- $ 34 $ 18,376 $ 27,298 ($330) ($88) $ -- $ 45,290
======= ========= ========== ========== ======== ========= ============ ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE>
VSB BANCORP, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
------------------------
1993 1992
---------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $2,009 $961
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 65 86
Amortization of premiums on investments and mortgage-backed securities 274 175
Accretion of discounts on investments, loans and mortgage-backed securities (43) (18)
Provisions for loan losses and real estate owned -- 389
Provision for ESOP expense 45 45
Increase in deferred taxes (393) (38)
Increase in distribution of MRP shares 120 --
Decrease in deferred loan fees (1) (6)
Decrease in interest receivable 30 148
Decrease in other assets 238 767
Decrease in interest payable (59) (99)
Decrease in loans held for sale 717 373
Decrease in other liabilities (328) (480)
--------- ---------
Net cash provided by operating activities 2,674 2,303
--------- ---------
Cash flows from investing activities:
Proceeds from maturities of investment securities 6,000 2,000
Purchase of investment securities (11,036) (13,454)
Net decrease in loans receivable 2,757 4,621
Principal collected on mortgage-backed securities 13,864 14,145
Purchase of mortgage-backed securities (16,998) (9,480)
Purchases of premises and equipment, net (31) (25)
--------- ---------
Net cash used in investing activities (5,444) (2,193)
--------- ---------
</TABLE>
4
<PAGE>
VSB BANCORP, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1993 1992
--------------------------
<S> <C> <C>
Cash flows from financing activities:
Net increase in NOW, money market and savings accounts $2,093 $4,516
Net decrease in certificates of deposit (1,913) (4,332)
Net decrease in advance payment by borrowers for taxes and insurance (137) (193)
Net proceeds from FHLB of New York advances 2,998 --
Payments on ESOP debt (45) (45)
Cash dividends paid (240) (164)
Common stock issued from the exercise of stock options 178 --
--------- ---------
Net cash (used in) provided by financing activities 2,934 (218)
--------- ---------
Net increase (decrease) in cash and cash equivalents 164 (108)
Cash and cash equivalents at beginning of period 4,770 7,156
--------- ---------
Cash and cash equivalents at end of period $4,934 $7,048
========= =========
Supplemental disclosures of cash flows information:
Cash paid during the periods for:
Interest $2,571 $2,899
Income taxes -- --
Supplemental disclosures of non-cash investments:
Transfer of loans receivable, net to real estate owned $213 $250
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE>
VSB BANCORP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - Principles of Consolidation
The consolidated financial statements include the accounts of VSB Bancorp, Inc.,
("the Company") and its wholly-owned subsidiaries, Valley Savings Bank, ("the
Bank"), Ver Valen, Inc. and Nelav, Inc. All significant material intercompany
balances and transactions have been eliminated in consolidation. Certain
reclassifications have been made to prior year period amounts to conform to
the current period presentation.
NOTE 2 - Basis of Financial Statement Presentation
In the opinion of the Company's management, the accompanying unaudited
consolidated interim financial statements contain all adjustments (consisting
only of normal recurring accruals) which are necessary for a fair statement of
interim results of operations for the periods reflected herein. The results of
operations for the three months ended December 31, 1993 are not necessarily
indicative of results to be expected for the fiscal year ending September 30,
1994. The unaudited consolidated interim financial statements presented herein
should be read in conjunction with the consolidated financial statements and
notes thereto included in the Company's 1993 Annual Report to Stockholders.
NOTE 3 - Earnings Per Common Share
Earnings per share of common stock for the three months ended December 31, 1993
and 1992 were computed by dividing net income by the weighted average number of
shares of common stock and common stock equivalents outstanding during the
periods, which includes the effect of the 20% stock dividend issued on November
10, 1993 to stockholders of record on October 15, 1993. Common stock
equivalents consist solely of director and employee stock options which are
dilutive and, therefore, are included in the calculation using the treasury
stock method.
NOTE 4 - Loans Held for Sale
Loans held for sale are carried at the lower of cost or market. Gains or losses
resulting from the sale of loans are recognized to the extent that the sale
proceeds differ from the specifically identified net carrying value of the
loans.
6
<PAGE>
NOTE 5 - Debt Securities Held for Investment
Debt securities classified as investment securities and mortgage-backed
securities are held to meet longer-term investment objectives. VSB Bancorp,
Inc. has the ability and intent to hold such securities to maturity. These
securities are carried at cost, adjusted for amortization of premiums and
accretion of discounts, and are recorded as of their settlement dates. Gains
and losses on dispositions of debt securities held for investment are generally
computed by the specific identification method.
NOTE 6 - Loans Receivable, net
Loans receivable, net are stated at their outstanding principal balance.
Interest is accrued monthly as earned, except when a loan becomes 90 days or
more past due. Once a loan becomes 90 days past due, accrued but unpaid
interest is reserved for, and interest income is subsequently recognized only to
the extent that payments are received.
The following table provides a breakdown of loans receivable:
<TABLE>
<CAPTION>
December 31, September 30,
(dollars in thousands) 1993 1993
==================================================================
<S> <C> <C>
Conventional first mortgage $ 89,207 $ 89,150
Construction 4,867 3,735
Commercial real estate 19,039 20,492
Commercial business 199 214
-------- --------
113,312 113,591
Home equity and second mortgage 17,639 19,335
Loans on savings deposits 709 734
Auto loans 72 99
Other 266 266
-------- --------
18,686 20,434
Less:
Allowance for loan losses 2,050 2,050
Deferred loan fees 85 86
Loans in process 1,350 951
-------- --------
3,485 3,087
-------- --------
$128,513 $130,938
======== ========
</TABLE>
7
<PAGE>
VSB BANCORP, INC.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS AT DECEMBER 31, 1993, COMPARED TO
SEPTEMBER 30, 1993.
- --------------------------------------------------------------------------------
GENERAL
VSB Bancorp, Inc., a Delaware Corporation ("VSB" or the "Company"), became the
parent company of Valley Savings Bank, S.L.A. ("the Bank") upon the conversion
of the Bank from mutual to stock form on October 27, 1988. The Company
currently owns 100% of the issued and outstanding common stock of the Bank and
does not presently operate any other subsidiaries except the Bank and its two
wholly-owned subsidiaries Ver Valen, Inc. and Nelav, Inc. The discussion herein
reflects the financial condition and results of operations of the Company and
should be reviewed in conjunction with the consolidated financial statements and
related notes presented elsewhere in this report.
On December 16, 1993, VSB Bancorp, Inc. (the "Company") and UJB Financial Corp.
("UJB") entered into an Agreement and Plan of Merger (the "Agreement") providing
for the merger of the Company with and into UJB (the "Merger"). Upon
consummation of the Merger, each shareholder of the Company will receive between
.7727 and .9444 shares of UJB Common Stock for each share of Company Common
Stock, in accordance with the exchange ratio provided for in the Agreement.
Consummation of the Merger is subject to the satisfaction of all conditions set
forth in the Agreement, including the receipt of the approval of the Company's
shareholders and the approval from the Board of Governors of the Federal Reserve
System. Simultaneously with the execution of the Agreement, the Company and UJB
entered into a stock option agreement, dated December 16, 1993 (the "Stock
Option Agreement"), pursuant to which, in consideration of the mutual covenants
and agreements contained therein and in the Agreement, UJB acquired from the
Company and the Company granted to UJB an option to purchase up to an aggregate
of 841,704 shares of the Common Stock of the Company at the per share price of
$18.125 (the "Option"). The Option is exercisable upon the occurrence of a
Purchase Event (as defined in the Stock Option Agreement). The Option
terminates upon the occurrence of an Exercise Termination Event (as defined in
the Stock Option Agreement).
This description of the Agreement is qualified in its entirety by reference to
Exhibit 2 to the Company's form 8-K filed on December 29, 1993.
8
<PAGE>
FINANCIAL CONDITION
Total assets of the Company at December 31, 1993 were $383.8 million, an
increase of $4.7 million (or 1.2%) as compared to fiscal year-end 1993. The
increase is primarily attributed to an increase in investment securities of $5.0
million (or 7.3%), and mortgage-backed securities ("MBS"), net of $2.9 million
(or 1.8%), which was partially offset by a decrease in loans receivable, net of
$2.4 million (or 1.8%), a decrease in loans held for sale of $717,000 (or 19.8%)
and a decrease in real estate owned, net of $331,000 (or 13.2%). The increase
in investment securities and mortgage-backed securities was primarily funded by
an increase in the overnight line of credit with the FHLB of New York and, to a
lesser extent, by principal repayments from loans, MBS, and the sale of real
estate owned and loans held for sale. The investment agency securities
purchased generally have stated maturities of five years with one, two, or
three-year call provisions. The mortgage-backed securities purchased generally
have repricing or maturity periods of five years or less. As noted above, these
securities were purchased primarily with advances having maturities of one-year
or less with the objective being to increase net interest income and to reduce
the Bank's estimated one-year interest rate sensitivity gap.
Loans receivable, net continues to decline due to management's continued focus
on traditional mortgage lending, and reduction of its commercial business and
development construction loan portfolios. In addition, the Bank has maintained
its policy of selling fixed rate mortgage loans into the secondary market.
Real estate owned, net decreased $331,000 from $2.5 million at September 30,
1993 to $2.2 million at December 31, 1993. The reduction of real estate owned,
net was primarily due to the sale of a five-lot subdivision located in Wayne,
New Jersey.
Total liabilities increased approximately $2.6 million (or 0.8%) to $338.5
million from $335.9 million at September 30, 1993. The increase is primarily
attributed to an increase in advances from the FHLB of New York of $3.0 million.
At December 31, 1993, total stockholders' equity increased $2.1 million, (or
4.9%) to $45.3 million from $43.2 million at September 30, 1993. The increase
is primarily due to net income of $2.0 million for the quarter ended December
31, 1993.
The book value per share at December 31, 1993 was $13.31 as compared to $12.02
at December 31, 1992 (adjusted for the 20% stock dividend issued on November 10,
1993 to stockholders of record on October 15, 1993).
Non-performing loans, consisting of loans over 90 days delinquent and non-
accrual loans, decreased $498,000 from $3.1 million at
9
<PAGE>
September 30, 1993 to $2.6 million at December 31, 1993. One loan with a book
value of approximately $213,000 was transferred to real estate owned. The Bank
recorded this property, in real estate owned at its estimated fair value which
was the loan's carrying value. At December 31, 1993, the book value of this
property after a cash payment of $44,000 was approximately $169,000.
The following table provides a list of loans delinquent 90 days or more, and
real estate owned at December 31, 1993 (dollars in thousands).
<TABLE>
<CAPTION>
Loans delinquent 90 days or more:
- ---------------------------------
<S> <C>
9 First Mortgage Loans $ 499
2 Construction Loans 1,203
4 Commercial Real Estate Loans 673
1 Commercial Business Loans 108
3 Home Equity Loans 133
------
Total $2,616
======
</TABLE>
<TABLE>
<CAPTION>
Real Estate Owned:
- ------------------
<S> <C>
Residential Properties $ 514
Commercial Properties 1,848
------
Total $2,362
======
</TABLE>
At December 31, 1993 the Bank had an allowance for losses on real estate owned
of $188,000 as compared to $223,000 at September 30, 1993.
SUBSIDIARY COMPANY REAL ESTATE DEVELOPMENT ACTIVITIES
At December 31, 1993, the Bank's investment in real estate held for investment
in its subsidiary service corporation remained unchanged at $218,000, as
compared to the investment in real estate at September 30, 1993. Ver Valen,
Inc., the Bank's only subsidiary that is currently involved in real estate
investments, is currently attempting to dispose of its sole property located in
Berkeley Township, New Jersey.
ALLOWANCE FOR LOAN LOSSES AND REAL ESTATE OWNED
The allowance for loan losses on loans receivable remained unchanged at $2.1
million at December 31, 1993, compared to the allowance for loan losses at
September 30, 1993. No provision for loan losses were made during the current
quarter.
The Bank's management believes that its present allowance for loan losses and
real estate owned is adequate based on current information available. However,
no assurances can be given as to the necessity of further additions to the
provision, due to the uncertainty of the New Jersey economy and real estate
market.
10
<PAGE>
VSB BANCORP, INC.
AND SUBSIDIARIES
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED
DECEMBER 31, 1993, AS COMPARED TO THE THREE MONTHS ENDED
DECEMBER 31, 1992.
- --------------------------------------------------------------------------------
GENERAL
For the first quarter of fiscal 1994, VSB Bancorp, Inc. reported net income of
$2.0 million or $0.56 per share compared with net income of $961,000 or $0.28
per share earned during the first quarter of fiscal 1993. The first quarter of
1994 results include the adoption of Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes." The cumulative effect of the accounting
change had a favorable impact on net income of $781,000 or $0.22 per share. Net
income before the cumulative effect of SFAS No. 109 increased 28.0% to $1.23
million, or $0.34 per share, as compared to $961,000, or $0.28 per share, for
the first quarter ended December 31, 1992.
INTEREST INCOME
Total interest income decreased by $171,000 (or 2.9%) to $5.7 million for the
three months ended December 31, 1993, compared to $5.8 million for the same
period in 1992. For the three months ended December 31, 1993, interest income
on loans receivable decreased by $399,000 (or 13.8%) to $2.5 million, as
compared with $2.9 million for the same period ended 1992. The decrease in
interest on loans receivable is principally attributed to a decrease in the
average balance of loans outstanding from $144.4 million to $135.3 million for
the three month periods ended December 31, 1992 and 1993, and a decrease in the
average yield from 7.98% to 7.34% during the respective periods. The decrease
in loans receivable is primarily attributed to decreases in the commercial
mortgage loan and home equity loan portfolios.
Interest on mortgage-backed securities decreased $306,000 (or 12.6%) to $2.1
million for the three months ended December 31, 1993, compared to $2.4 million
for the respective period in 1992. The decrease in interest income from
mortgage-backed securities is principally the result of a decrease in the
average yield from 6.51% at December 31, 1992 to 5.31% at December 31, 1993. The
decrease in average yield was more than sufficient to offset an increase in the
average balance of mortgage-backed securities from $149.3 million to $160.3
million for the respective periods.
Interest on investment securities increased $552,000 (or 114%) to $1.0 million
for the three months ended December 31, 1993, compared to $486,000 for the
respective period in 1992. The increase is primarily attributed to an increase
in the average balance of investment securities from $26.3 million to $69.8
million for the
11
<PAGE>
respective three month periods ended December 31, 1992 and 1993. The increase
in interest income was partially offset by a decrease in the average yield on
investment securities from 6.11% to 5.56% for the respective three-month periods
ended December 31, 1992 and 1993.
INTEREST EXPENSE
Interest on deposits decreased by $481,000 (or 17.4%) to $2.3 million for the
three month period ended December 31, 1993 as compared with $2.8 million for the
same period in 1992. The average balance of deposits decreased by $4.4 million
(or 1.5%) to $294.1 million for the three months ended December 31, 1993,
compared to $298.5 million for the same period in 1992. The decrease in the
average balance of deposits was primarily due to the Bank's controlled pricing
strategy and the lower interest rate environment. In addition, consumer
preference continued to shift out of certificates of deposit toward more liquid
savings-type accounts that generally have lower yields.
The average rate paid on deposits decreased 59 basis points from 3.67% to 3.08%
for the three-month period ended December 31, 1992 and 1993 respectively. This
decrease in the average rate paid is reflective of the current declining
interest rate environment.
Interest on other borrowings, which is comprised of advances from the FHLB of
New York and the Bank's Employee Stock Ownership Plan debt, increased by
$314,000 (or 4,486%) to $321,000 for the three-month period ended December 31,
1993, over the respective period in 1992. The increase is the result of an
increase in advances from the FHLB of NY of $39.7 million at December 31, 1993
from no outstanding balances during the three-month period ended December 31,
1992. The average rate paid on advances from the FHLB for the three months
ended December 31, 1993 was 3.40%. The average balance of advances from the
FHLB of NY for the three-month period ended December 31, 1993 was $36.9 million.
OTHER INCOME
Total other income increased $85,000 (or 24.0%) to $439,000 for the three months
ended December 31, 1993, as compared with $354,000 for the same period in 1992.
The increase in total other income for the three months ended December 31, 1993
is primarily attributed to a gain on the sale of one real estate owned property
of $125,000 and, to a lesser extent, by an increase in gain on sale of loans of
$21,000 (or 14.9%) to $162,000, as compared to $141,000 for the same period
ended December 31, 1992. The increase in gain on sale of loans is consistent
with the Bank's expanded mortgage origination program and the favorable interest
rate environment for home purchasing and refinancing.
12
<PAGE>
Loan fees and service charges decreased $17,000 (or 34.0%) to $33,000 for the
three-month period ended December 31, 1993 as compared with $50,000 for the same
period in 1992. The decrease in income is primarily due to a decrease in late
charge income during the three-month period ended December 31, 1993.
For the first quarter of 1994, the Company recorded a loss from real estate held
for investment of $2,000 as compared to income of $79,000 for the three-month
period ended December 31, 1992.
OTHER EXPENSES
Total other expenses increased by $83,000 (or 5.1%) to $1.7 million for the
three months ended December 31, 1993, as compared to $1.6 million for the
respective period in 1992.
Compensation and benefits increased $158,000 (or 20.2%) to $940,000 during the
three-month period ended December 31, 1993, as compared to $782,000 for the
respective period ended in 1992. The increase is primarily attributed to a one-
time charge of approximately $80,000 relating to certain management stock
awards, as well as additional pension accruals of approximately $27,000, during
the three-month period ended December 31, 1993.
Advertising expense increased $17,000 (or 34.7%) to $66,000 during the three-
month period ended December 31, 1993, as compared to $49,000 for the respective
period ended December 31, 1992. The increase is primarily due to expenses
associated with the River Vale branch remodeling and a checking account
promotion.
Occupancy and equipment, data processing fee, SAIF deposit insurance premium,
and real estate owned expenses did not change significantly during the periods
presented.
Other expenses decreased $78,000 (or 22.4%) to $270,000 for the three-month
period ended December 31, 1993, as compared to $348,000 for the same period in
1992. The decrease is primarily attributed to legal costs associated with the
Bank's efforts to reduce non-performing loans and real estate owned during the
three month period ended December 31, 1992.
ACCOUNTING FOR INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards 109, "Accounting for Income Taxes" (Statement
109). This Statement changes the method of accounting for income taxes from the
deferred method required under Accounting Principle Board Opinion 11 to the
asset and liability method. The Statement addressed various matters related to
the temporary differences from financial statement basis and tax basis of assets
and liabilities.
13
<PAGE>
Effective October 1, 1993, the Company adopted Statement 109. The cumulative
effect of the adoption of Statement 109 resulted in a positive effect to
earnings of $781,000 or $.22 per share. Prior financial statements have not
been restated to apply the provisions of this Statement.
The tax effects of temporary differences that give rise to significant portions
of the deferred tax asset and deferred tax liabilities at December 31, 1993 are
presented below (in thousands).
<TABLE>
<CAPTION>
Deferred tax assets:
<S> <C>
Loans, primarily due to allowance for loan losses $ 738
Real estate owned, primarily allowance for real
estate owned losses 82
Accrued interest receivable, primarily reserve
for uncollected interest 217
Accrued expenses 219
----
1,256
Less: Valuation allowance (64)
------
1,192
Deferred tax liabilities:
Investment in Real Estate, primarily due to
timing differences in income recognition 80
Other 15
-----
95
-----
Net Deferred tax asset $1,097
======
</TABLE>
A valuation allowance has been established against certain state temporary
differences. The potential realization of such temporary differences for which
a valuation allowance has been established will be reviewed at each future
balance sheet date and adjusted accordingly.
Except for the effects of the reversal of temporary differences, the Company is
not currently aware of any factors which could cause significant differences
between taxable income and pretax book income in future periods.
Management believes it is more likely than not, based upon current projections,
that the Company will generate sufficient taxable income to utilize the net
deferred tax asset. However, there can be no absolute assurance that the Company
will generate any specific level of continuing earnings in future periods.
INCOME TAX
The Company's provision for income taxes increased $120,000 (or 27.8%) to
$552,000 for the three months ended December 31, 1993, as
14
<PAGE>
compared with $432,000 for the comparable period in 1992. Income tax expense
varies with the amount of pretax income. For the three-month period ended
December 31, 1993, pre-tax income increased $387,000 (or 27.8%) to $1.8 million
as compared with pre-tax income of $1.4 million for the three months ended
December 31, 1992.
NET INCOME
Net income increased $1.0 million (or 109.0%) to $2.0 million for the three
months ended December 31, 1993, compared to net income of $961,000 for the same
period in 1992. The increase in net income is primarily a result of an increase
in net interest income after provisions for loan losses and real estate held for
investment of $385,000 (or 14.4%) coupled with the cumulative effect of adopting
Financial Accounting Standards No. 109, "Accounting for Income Taxes," of
$781,000 for the three months ended December 31, 1993, as compared to the same
period in 1992.
LIQUIDITY AND CAPITAL RESOURCES
The Bank maintains specified levels of cash and "liquid" investments in
qualifying types of United States Treasury and Federal Agency Securities and
other investments generally having maturities of five years or less. Liquid
investments are those investments readily convertible to cash. The level of
liquidity maintained is that which is estimated by management to be adequate to
meet normal operations, potential deposit outflows, and repayments of maturing
debt. Cash flow projections are reviewed monthly to ensure adequate liquidity.
At December 31, 1993, the Bank's liquid assets represented 29.8% of its net
withdrawable savings and borrowings. Additional liquidity is provided by
Federal Home Loan Bank advances, principal collected on loans, principal
amortization of mortgage-backed securities, and proceeds from maturities of
investment securities.
Both the Corporation and the Savings Bank are subject to regulatory capital
requirements mandated by the Board of Governors of the Federal Reserve System
("FRB") and Federal Deposit Insurance Corporation ("FDIC"). Both the
Corporation and the Savings Bank are required to maintain minimum regulatory
capital requirements, defined by the FRB and FDIC as risk-based ratio capital
(Tier 1 and Total) and leverage ratio capital. The following table presents the
minimum required ratios and the actual ratios applicable to the Corporation as
of December 31, 1993.
15
<PAGE>
<TABLE>
<CAPTION>
Regulatory
Capital Required
--------------- Regulatory
Amount Percent Capital
------ ------- -----------
<S> <C> <C> <C>
Tier I Leverage Ratio
(under Part 325
of the FDIC Regulation) $45,290 11.91% 4%
Tier I Risk-based 45,290 28.48% 4%
Total Risk-based Capital 47,279 29.73% 8%
</TABLE>
16
<PAGE>
VSB BANCORP, INC.
AND SUBSIDIARIES
PART II
Item 1. Legal Proceedings
-----------------
Neither the Corporation nor the Savings Bank was engaged in any legal
proceeding of a material nature at December 31, 1993. From time to
time, it is a party to legal proceedings in the ordinary course of
business wherein it enforces its security interest in loans.
Item 2. Changes in Securities
---------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submissions of Matters to a Vote of Security Holders
----------------------------------------------------
Not applicable.
Item 5. Other Materially Important Events
---------------------------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
A current report on form 8-K was filed on December 29, 1993 to
report, pursuant to item 1(b), that the Company entered into a merger
agreement with UJB Financial Corp.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VSB BANCORP, INC.
Date: February 10, 1994 /s/ Allen S. Greene
----------------- ------------------------
Allen S. Greene
Chairman of the Board,
President &
Chief Executive Officer
Date: February 10, 1994 /s/ Leonard J. Stanley
----------------- ------------------------
Leonard J. Stanley
First Vice President -
Finance
Principal Accounting
Officer
18
<PAGE>
EXHIBIT 24(A)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
UJB Financial Corp.:
We consent to the use of our report, incorporated herein by reference, and to
the reference to our Firm under the heading "Experts" in the Prospectus/Proxy
Statement.
Our report dated January 17, 1994 refers to a change in the method of
accounting for income taxes.
KPMG Peat Marwick
Short Hills, New Jersey
March 18, 1993
<PAGE>
EXHIBIT 24(B)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
VSB Bancorp, Inc.:
We consent to the use of our report, incorporated herein by reference, and to
the reference to our Firm under the heading "Experts" in the Prospectus/Proxy
Statement.
KPMG Peat Marwick
Short Hills, New Jersey
March 18, 1993
<PAGE>
EXHIBIT 28(A)
PROXY
VSB BANCORP, INC.
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF VSB
BANCORP, INC. FOR USE ONLY AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
MAY 12, 1994, AND AT ANY ADJOURNMENTS THEREOF.
The undersigned hereby appoints Allen S. Greene and Martin Spiro, or any of
them, with the full power of substitution, to act as attorneys and proxies for
the undersigned, and to vote all shares of Common Stock of VSB Bancorp, Inc.,
which the undersigned is entitled to vote, at the Annual Meeting of
Stockholders to be held at the Ramada Inn, 100 Chestnut Ridge Road, Montvale,
New Jersey on May 12, 1994, at 10:00 a.m. and at any and all adjournments
thereof.
You are encouraged to specify your choices by marking the appropriate box
BELOW. You need not mark any box if you wish to vote in accordance with the
Board of Directors' recommendations, only sign on the REVERSE SIDE. The proxies
cannot vote your shares unless you sign and return this card.
The proxy is revocable and, when properly executed, will be voted in the
manner directed herein by the undersigned. If no directions are made, this
proxy will be voted FOR Proposal No. 1 and FOR each of the nominees listed
--- ---
below.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NO. 1 AND FOR EACH OF
THE NOMINEES LISTED BELOW.
1. Approve Agreement and Plan of Merger, dated December 16, 1993, as amended,
between VSB Bancorp, Inc. (VSB) and UJB Financial Corp. (UJB) providing for
the merger of VSB into UJB.
[_] FOR [_] AGAINST [_] ABSTAIN
2. Election of Directors: Wilbur H. Eckerson, Andrew Frank and Arthur H. Reeve.
[_] FOR all Nominees (except as [_] WITHHOLD for all the Nominees
written to the contrary below)
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
WRITE THE NOMINEE'S NAME ON THE LINE BELOW)
------------------------------------------------------------------------------
(continued, and to be signed, on other side)
<PAGE>
The undersigned further gives the proxies authority in their discretion to
vote upon such other business as may properly come before the Annual Meeting.
The undersigned acknowledges receipt of the Notice of the Annual Meeting of
Stockholders and of a Proxy Statement, both dated March , 1994. Please sign
exactly as name appears herein. If signing as attorney, executor,
administrator, trustee or guardian, please indicate the capacity in which you
are acting. Proxies executed by corporations should be signed by a duly
authorized officer.
Please mark, date and sign as your name appears below and return in the
envelope.
----------------------------------------
Signature
----------------------------------------
Signature if held jointly
DATED: ___________________________, 1994
