As filed with the Securities and Exchange Commission on June 11, 1999
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Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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SUN BANCORP, INC.
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(Exact Name of Registrant as Specified in its Charter)
New Jersey 52-1382541
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(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
226 Landis Avenue, Vineland, New Jersey 08360
(609) 691-7700
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(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Office)
Mr. Philip W. Koebig, III
President and Chief Executive Officer
Sun Bancorp, Inc.
226 Landis Avenue, Vineland, New Jersey 08360
(609) 691-7700
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
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Please send copies of all communications to:
John J. Spidi, Esq. Steven L. Kaplan, Esq.
Tiffany A. Henricks, Esq. ARNOLD & PORTER
MALIZIA SPIDI & FISCH, P.C. 555 Twelfth Street, N.W.
1301 K Street, N.W., Suite 700 East Washington, D.C. 20004
Washington, D.C. 20005
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |_|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Shares Amount to be Proposed Maximum Aggregate Proposed Maximum Amount of
to be Registered Registered Price Per Unit (1) Aggregate Offering Price Registration Fee
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<S> <C> <C> <C> <C>
Common Stock 1,955,000 $19.00 $37,145,000 $10,326.51
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</TABLE>
(1) Based on the average of the high and low sales price of the Common Shares
as reported by the Nasdaq National Market on June 9, 1999.
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 or until the registration statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a), may
determine.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by any sales of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of such State.
<PAGE>
PROSPECTUS
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JULY __, 1999
1,700,000 Shares
[LOGO]
Sun Bancorp, Inc.
Common Stock
Sun Bancorp, Inc. is offering for sale 1,700,000 shares of its common
stock, $1.00 par value per share, at a price of $__.___ per share. The common
stock is currently quoted on the Nasdaq National Market under the symbol "SNBC."
The last reported sale price of the common stock on the Nasdaq National Market
as of July ___, 1999 was $__.___. See "Price Range of the Common Stock and
Dividends."
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You should carefully read the factors set forth in "Risk Factors" beginning on
page ___.
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The Securities offered hereby are not deposits or other obligations of a bank
and are not insured by the Federal Deposit Insurance Corporation or any other
insurer or governmental agency.
------------------------
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 prospectus. Any representation to the contrary is a
criminal offense.
Per Share Total
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Public Offering Price...................... $ $
Underwriting Discounts and Commissions..... $ $
Proceeds to Sun Bancorp before expenses.... $ $
Sun Bancorp has granted the underwriters an option to purchase up to 255,000
additional shares of common stock at the same price and on the same terms,
solely to cover over-allotments, if any.
------------------------
It is expected that the certificates representing the shares of common
stock will be delivered to the underwriters on or about July ___, 1999.
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Advest, Inc. Wheat First Securities
The date of this Prospectus is July __, 1999.
<PAGE>
MAP
<PAGE>
SUMMARY
The following is a summary of information contained elsewhere in this
prospectus and in the documents incorporated by reference. To understand the
stock offering fully, you should read this entire prospectus carefully along
with the documents incorporated by reference.
We use the terms "we", "us" and "our" to refer to Sun Bancorp, Inc. We
use the term "Sun New Jersey" to refer to Sun National Bank, headquartered in
Vineland, New Jersey, and "Sun Delaware" to refer to Sun National Bank,
Delaware, headquartered in Wilmington, Delaware. We use the term "banks" to
refer to Sun New Jersey and Sun Delaware together. In some cases, a reference to
"we" will include the banks as they are both subsidiaries of Sun Bancorp.
On May 20, 1999, our Board of Directors declared a 5% stock dividend on
our common stock, paid on June 21, 1999. Where appropriate, amounts throughout
this prospectus have been adjusted to reflect the stock dividend.
Sun Bancorp, Inc.
Overview.
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We are a multi-bank holding company headquartered in Vineland, New
Jersey. Our principal subsidiaries are Sun New Jersey and Sun Delaware. At March
31, 1999, we had total assets of $1.522 billion, total deposits of $1.007
billion and total shareholders' equity of $77 million. We provide community
banking services through 63 financial service centers in southern and central
New Jersey and in the contiguous New Castle County market in Delaware. In
addition, we have a loan production office in Philadelphia, Pennsylvania. We
offer comprehensive lending, depository and financial services to our customers
and our marketplace. Our lending services to consumers include residential
mortgage loans, home equity loans and installment loans. Our commercial deposit
services include checking accounts and cash management products such as
electronic banking, sweep accounts, lockbox services, PC banking and controlled
disbursement services. Our consumer services include checking accounts, savings
accounts, money market deposits, certificates of deposit and individual
retirement accounts. Through a third party arrangement, we also offer mutual
funds, securities brokerage, annuities and investment advisory services.
Expansion Strategy.
- -------------------
Our Board of Directors and management recognize the demand for a
locally based and managed community bank that can provide comprehensive,
competitive and responsive commercial and retail banking services to meet the
borrowing, depository and other financial services needs of the small and medium
sized business and consumers in the communities we serve. Beginning in 1993, we
embarked upon an expansion of our operations and retail market share in central
and southern New Jersey through mergers, acquisitions and expansion of
facilities and financial services.
Asset Growth and Geographic Expansion.
- --------------------------------------
Through our acquisition and expansion program, we have successfully
completed the acquisition of two commercial banks with a total of $119 million
in assets, as well as eight branch purchase transactions in which we acquired a
total of 37 branches, $590 million of deposits and $146 million of loans in
southern and central New Jersey and New Castle County, Delaware.
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<PAGE>
Our expansion in southern and central New Jersey has also included the
opening of seven de novo financial service centers, including our first
supermarket office. In 1999, we opened twelve new financial service centers in
locations previously occupied by regional competitors. These new financial
service centers have significantly enhanced our market presence in the New
Jersey counties of Camden, Mercer, Monmouth and Ocean.
In December 1998, we expanded into contiguous portions of Delaware
through Sun Delaware's assumption of eight branches in New Castle County with
$169 million of deposits and $125 million of loans. The demographics of this
market and the opportunities for Sun Delaware are similar to the markets and
communities we currently serve in southern and central New Jersey. We believe
that there are significant opportunities for a community bank to be highly
competitive in this market.
In executing our expansion strategy, we have significantly increased
our assets and deposits as well as our geographic market, market share and the
penetration of our financial service center network. Our consolidated assets
have grown from $112 million at year-end 1993 to $1.522 billion at March 31,
1999 and our consolidated deposits have increased from $99 million to $1.007
billion during this period. Concurrent with our franchise growth, our earnings
have grown from $1.1 million in 1993 to $8.8 million in 1998, a compound annual
growth rate of 50.7%. On a per share basis, earnings have increased from $0.41
per share on a diluted basis in 1993 to $1.14 per share in 1998, a compounded
annual growth rate of 34.4%. We have reached these levels of earnings despite
non-cash intangible amortization expense amounting to $3.9 million in 1998.
We also have experienced a significant level of loan growth. Our loan
portfolio increased from $83.4 million at December 31, 1993 to $730.3 million at
March 31, 1999. Much of our loan growth is attributable to the hiring of a
number of experienced loan officers previously employed by larger banking
organizations. In most cases, these loan officers brought with them established
contacts and relationships with individuals or entities throughout our primary
market area and thus were able to increase our customer base and the number of
loan originations. An additional reason for our loan growth is that our lending
officers live in the communities in which they work. They understand the local
business environment and the economic conditions and trends in their market. We
also have established a number of regional advisory boards, consisting of
prominent local business and community representatives who refer significant
business opportunities to us. Our efforts to increase our lending to businesses
along the central and southern New Jersey seashore that operate primarily during
certain periods of the year (i.e., seasonal lending) have contributed to our
loan growth.
Operational Enhancements and Expanded Services.
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To support and manage our expanded operations and to provide management
resources to support further expansion and growth, we have recruited and hired
experienced commercial loan officers, and also credit, compliance, loan review,
internal audit, and operations personnel and senior level executives.
Additionally, we have enhanced and expanded our operational and management
information systems.
We provide competitive and comprehensive commercial and consumer
financial services to our customers and our marketplace. We have significantly
expanded our telecommunications, computer and technology based systems to
provide our customers with enhanced services that include telephone
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<PAGE>
banking, personal computer home banking and sophisticated cash management for
commercial customers.
Future Strategy.
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It continues to be our strategy to take advantage of strategic
opportunities in our marketplace. We expect that the continuing consolidation of
the banking industry and the customer service disruption caused by larger
regional bank mergers will continue to provide opportunities to expand our
operations and increase our market share. In May 1999, we entered into an
agreement to acquire 14 branch locations, assume approximately $250 million in
deposits and purchase of account loans from First Union National Bank ("First
Union"). The First Union acquisition is expected to be consummated during the
third quarter of 1999. This is an in-market acquisition, principally in
Cumberland and Cape May counties in New Jersey, which we expect will enhance our
market share. Due to the overlap with our existing financial service center
locations, we plan to consolidate six of the facilities and reduce the
associated operating expenses. Based on deposit information provided by the
Federal Deposit Insurance Corporation as of June 30, 1998, as result of the
acquisition, our market share in Cumberland County will increase from 10.3% to
22.1% and our market share in Cape May County will increase from 8.4% to 16.8%.
Our executive offices are located at 226 Landis Avenue, Vineland, New
Jersey 08360, and our telephone number is (609) 691-7700.
5
<PAGE>
The Offering
<TABLE>
<CAPTION>
<S> <C>
Shares of common stock offered............................... 1,700,000 shares of common stock.
Shares of common stock outstanding before this offering...... 7,568,765 shares.
Shares of common stock outstanding after this offering....... 9,268,765 shares. Assumes no exercise of the underwriters'
over-allotment option to purchase up to 255,000 shares of
common stock. See "Underwriting."
Estimated net proceeds to us................................. Approximately $30.3 million. Assumes no exercise of the
underwriters' over-allotment option to purchase up to 255,000
shares of common stock. See "Underwriting."
Dividends on common stock.................................... Historically, we have not paid cash dividends on our common
stock. Our Board of Directors does not currently intend to pay
cash dividends, but it may consider such a policy in the
future. We have in the past paid stock dividends. See "Price
Range of Our Common Stock and Dividends," and "Risk Factors --
Limitations on Payment of Dividends."
Use of proceeds.............................................. The proceeds we receive from this offering will be used
primarily to contribute capital to Sun New Jersey in connection
with the First Union acquisition and for our other corporate
purposes. Sun New Jersey intends to use the capital for
general corporate purposes, primarily to support the First
Union acquisition. See "Use of Proceeds."
Nasdaq National Market symbol................................ The common stock is quoted on the Nasdaq National Market under
the symbol "SNBC."
Purchases by our directors, officers and employees .......... The underwriters have reserved 150,000 shares of common stock
offered in this offering (8.8% of the shares to be offered) for
sale at the public offering price to our directors, officers,
employees and affiliates. See "Underwriting."
Activities that may maintain or stabilize the market price of
the common stock ............................................ In connection with this offering and in compliance with
applicable law and industry practice, the underwriters may
overallot or effect transactions which stabilize, maintain or
otherwise affect the market price of the common stock at levels
above those which might otherwise prevail in the open
market, including by entering stabilizing bids, purchasing common
stock to cover syndicate short positions and imposing penalty
bids. These stablizing transactions, if commenced by the
underwriters, may be discontinued at any time. See "Underwriting."
The underwriters have been granted an option to purchase up to
Over-allotment option.......................................... 255,000 additional shares of common stock at the same price and
on the same terms as this offering, solely to cover
over-allotments.
Risk Factors
Before investing, you should carefully consider the matters set forth
under "Risk Factors," beginning on page __.
6
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following is our selected consolidated information. You should read
it together with our consolidated financial statements and the notes thereto
included in (1) our 1998 Annual Report to Stockholders, which is incorporated by
reference into this prospectus as part of our Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 and (2) our Quarterly Report on Form 10-Q
for the quarter ended March 31, 1999, which is incorporated by reference into
this prospectus. See "Incorporation of Certain Documents by Reference" and
"Recent Operating Results." We have prepared the consolidated historical
financial and other data at or for the three months ended March 31, 1999 and
1998, which is unaudited and which may not be indicative of results on an
annualized basis or for any other period. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) that are necessary
for a fair presentation for such periods or dates have been made.
<PAGE>
At or For the Three
Months Ended
March 31, At or For the Years Ended December 31,
-------------------- -------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
--------- --------- --------- --------- --------- --------- ----------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Results of Operations
Interest income............................. $25,268 $19,059 $84,673 $46,699 $28,981 $20,698 $12,194
Net interest income......................... 11,799 8,737 39,579 22,291 16,447 13,011 8,256
Provision for loan losses................... 667 483 2,213 1,665 900 808 383
Net interest income after
provision for loan losses................ 11,132 8,254 37,365 20,626 15,547 12,203 7,873
Other income................................ 2,326 1,271 5,517 2,236 1,746 1,651 732
Other expenses.............................. 10,097 6,974 30,368 16,958 12,918 9,895 5,991
Net income.................................. 2,396 1,805 8,784 4,171 3,013 2,819 1,840
Net income excluding goodwill amortization.. 3,864 2,749 12,693 5,676 3,839 3,162 1,974
Per Share Data
Net income
Basic.................................... 0.32 0.27 1.30 0.82 0.64 0.63 0.55
Diluted.................................. 0.29 0.24 1.14 0.74 0.60 0.59 0.55
Book value.................................. 10.18 8.52 10.43 8.23 5.69 5.46 4.83
Selected Balance Sheet Data
Assets...................................... 1,521,510 1,057,266 1,515,403 1,099,973 436,795 369,895 217,351
Cash and investments........................ 701,066 506,200 739,274 610,339 117,388 164,251 70,809
Loans receivable (net)...................... 730,264 456,010 689,852 427,761 295,501 183,634 134,861
Deposits.................................... 1,006,904 731,436 1,025,398 695,388 385,987 335,248 196,019
Borrowings and securities sold
under agreements to repurchase............ 369,866 235,494 337,665 316,314 21,253 8,000 --
Shareholders' equity........................ 77,264 56,649 78,333 54,632 27,415 24,671 20,571
Performance Ratios(1)
Return on average assets.................... 0.64% 0.68% 0.75% 0.66% 0.74% 1.03% 1.09%
Return on average equity.................... 12.32% 12.97% 14.29% 12.89% 11.99% 12.42% 11.74%
Return on average assets, excluding
goodwill amortization..................... 1.03% 1.03% 1.08% 0.89% 0.94% 1.16% 1.17%
Return on average equity, excluding.........
goodwill amortization..................... 19.87% 19.75% 20.65% 17.54% 15.28% 13.93% 12.60%
Net yield on interest-earning assets 3.42% 3.58% 3.76% 3.89% 4.57% 5.30% 5.39%
Asset Quality Ratios
Nonperforming loans to total loans.......... 0.39% 0.55% 0.36% 0.51% 0.81% 1.72% 1.82%
Nonperforming assets to total loans.........
and other real estate owned............... 0.44% 0.61% 0.40% 0.57% 1.06% 2.19% 2.56%
Net charge-offs to average total loans...... 0.02% 0.01% 0.05% 0.02% 0.16% 0.23% 0.29%
Total allowance for loan losses to
total nonperforming loans................. 262.94% 181.84% 286.41% 189.77% 107.26% 64.47% 64.74%
Capital Ratios
Leverage ratio.............................. 4.52% 4.77% 4.83% 5.38% 5.43% 5.74% 8.44%
Tier 1 risk-based capital ratio............. 7.37% 8.10% 7.08% 8.17% 7.44% 8.67% 14.01%
Total risk-based capital ratio.............. 11.75% 10.48% 11.45% 10.75% 8.28% 9.64% 15.22%
</TABLE>
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(1) Ratios are annualized for the three months ended March 31, 1999 and 1998.
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<PAGE>
SPECIAL NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This prospectus (including information included or incorporated by
reference into this prospectus) contains forward-looking statements with respect
to our financial condition, results of operations and cash flows, plans,
objectives, future performance and business. The words "believes," "expects,"
"anticipates" or similar words are intended to identify forward-looking
statements. The forward-looking statements are based on our management's
beliefs, assumptions and expectations of our future economic performance, taking
into account the information currently available to them. Forward-looking
statements involve risks and uncertainties that may cause our actual results,
performance or financial condition to be materially different from the
expectations of future results, performance or financial condition we express or
imply in any forward-looking statements.
Factors that may cause our actual results to differ materially from our
expectations include the following possibilities in addition to those described
in "Risk Factors":
o expected cost savings from past and/or future acquisitions not being fully
realized or not being realized within the expected time frame;
o earnings following the First Union acquisition being lower than expected;
o a significant increase in competitive pressures among depository and other
financial institutions;
o costs or difficulties related to the integration of the First Union
branches being greater than expected;
o changes in the interest rate environment resulting in reduced margins;
o general economic or business conditions, either nationally or in New Jersey
or Delaware, being less favorable than expected, which would result in,
among other things, a deterioration in credit quality and/or a reduced
demand for credit;
o legislative or regulatory changes adversely affecting the businesses in
which we and our subsidiaries engage;
o changes in the securities markets; and
o changes in the banking industry including the effects of consolidation
resulting from possible mergers of financial institutions.
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<PAGE>
RISK FACTORS
In addition to the other information in this prospectus, you should
carefully consider the following risk factors in deciding whether to invest in
the common stock.
We may not continue to experience the same rate of growth that we have
in the past and may not be able to manage our current growth rate.
During the last five years, we have experienced rapid and significant
growth. Our total assets have increased from $112.0 million at December 31,
1993, to $1.521 billion at March 31, 1999. Although we believe that we have
adequately managed our growth in the past, there can be no assurance that we
will continue to experience such rapid growth, or any growth, in the future. If
we do experience continued growth, we can not assure you that we will be able to
adequately and profitably manage such growth or that our earnings will
adequately provide the necessary capital to maintain required regulatory capital
levels.
If we are unable to maintain a low cost of funds on the deposits
acquired in the First Union acquisition, our financial condition, results of
operation and cash flows could be negatively affected.
Our future earnings will be affected by how well we deploy and manage
the assets that we acquire with the First Union branches. The acquisition of the
First Union branches will result in the acquisition of a significant amount of
deposits. These deposits are predominantly core deposits. If we are unable to
maintain the current low cost of funds on these deposits or if we are unable to
retain a substantial portion of these deposits, the First Union acquisition
could have an negative effect on our financial condition, results of operations
and cash flows. See "First Union Acquisition."
We will pay a premium of $24.6 million for the deposits acquired in the
First Union acquisition. This premium must be accounted for on our balance sheet
as goodwill, which will be amortized over a period of ten years. Our past
acquisitions have resulted in additions to the amount of goodwill on our balance
sheet, and we now carry a significant amount of goodwill. This will affect our
earnings because the accounting procedure by which goodwill is amortized
requires that an equal amount be taken out of our earnings each year.
Most of the growth in our loan portfolio over the past five years has
come from commercial and industrial loans. The risk related to these types of
loans is greater than the risk related to residential loans.
Commercial and industrial loans generally involve a greater degree of
risk of nonpayment or late payment than home equity loans or residential
mortgage loans and carry larger loan balances. Any failure to pay or late
payments by our customers would hurt our earnings. The increased credit risk
associated with these types of loans is a result of several factors, including
the concentration of principal in a limited number of loans and borrowers, the
effects of general economic conditions on income-producing properties and the
increased difficulty of evaluating and monitoring these types of loans. A
significant portion of our commercial real estate and commercial and industrial
loan portfolios includes a balloon payment feature. A number of factors may
affect a borrower's ability to make or
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refinance a balloon payment, including the financial condition of the borrower,
the prevailing local economic conditions, and the prevailing interest rate
environment.
Furthermore, the repayment of loans secured by commercial real estate
is typically dependent upon the successful operation of the related real estate
or commercial project. If the cash flow from the project is reduced, the
borrower's ability to repay the loan may be impaired. This cash flow shortage
may result in the failure to make loan payments. In such cases, we may be
compelled to modify the terms of the loan. In addition, the nature of these
loans is such that they are generally less predictable and more difficult to
evaluate and monitor. As a result, repayment of these loans may be subject to a
greater extent than residential loans to adverse conditions in the real estate
market or economy.
Our loan portfolio increased to $730.3 million at March 31, 1999, from
$83.4 million at December 31, 1993. Much of this loan growth has occurred in the
portfolio of commercial and industrial loans. Our commercial and industrial loan
portfolio was $586.6 million at March 31, 1999, comprising 79.5% of total loans.
The concentration of our commercial and industrial loans in specific
business sectors and geographic areas exposes us to the risk of a possible
economic downturn affecting those sectors and areas.
A significant portion of our commercial and industrial loans are
concentrated in the hospitality, entertainment and leisure industries. Many of
these industries are dependent upon seasonal business and other factors beyond
the control of the industries, such as weather and beach conditions along the
New Jersey seashore. Any significant or prolonged adverse weather or beach
conditions along the New Jersey seashore could have an adverse impact on the
borrowers' ability to repay loans. In addition, because these loans are
concentrated in southern and central New Jersey, a decline in the general
economic conditions of southern or central New Jersey could have a material
adverse effect on our financial condition, results of operations and cash flows.
If we have failed to provide an adequate allowance for loan losses,
there could be a significant negative impact on our earnings.
The risk of loan losses varies with, among other things, general
economic conditions, the type of loan being made, the creditworthiness of the
borrower over the term of the loan and, in the case of a collateralized loan,
the value of the collateral for the loan. Based upon factors such as historical
experience, an evaluation of economic conditions and a regular review of
delinquencies and loan portfolio quality, our management makes various
assumptions and judgments about the ultimate collectibility of the loan
portfolio and provides an allowance for loan losses. If our management's
assumptions and judgments prove to be incorrect and the allowance for loan
losses is inadequate to absorb future credit losses, or if the bank regulatory
authorities require the banks to increase their allowance for loan losses, our
earnings could be significantly and adversely affected.
As our loan portfolio has increased, we have increased our allowance
for loan losses. Future additions to the allowance in the form of provisions for
loan losses may be necessary due to changes in economic conditions or growth of
our loan portfolio. As a result of the recent growth in our lending practices, a
significant portion of our total loan portfolio may be considered unseasoned.
Accordingly,
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specific payment and loss experience for this portion of the portfolio has not
yet been fully established, and there is the potential for additional loan
losses.
If we do not compete successfully against other financial institutions
in our market area, our profitability may be hurt.
The banking business is highly competitive. In our primary market
areas, we compete with other commercial banks, savings and loan associations,
credit unions, finance companies, mutual funds, insurance companies, and
brokerage and investment banking firms operating locally and elsewhere. Many of
our competitors have greater resources and lending limits than we do. Our
profitability depends upon our ability to compete in our primary market areas.
Our profitability could also be hurt by the introduction and growth of new
investment instruments and transaction accounts by non-bank financial
competitors.
Future changes in interest rates may reduce our profits.
Our ability to make a profit largely depends on our net interest
income, which could be negatively affected by changes in interest rates. Net
interest income is the difference between:
o the interest income we earn on interest-earning assets, such as mortgage
loans and investment securities; and
o the interest expense we pay on our interest-bearing liabilities, such as
deposits and amounts we borrow.
If more interest-earning assets than interest-bearing liabilities
reprice or mature during a time when interest rates are declining, then our net
interest income may be reduced. If more interest-bearing liabilities than
interest-earning assets reprice or mature during a time when interest rates are
rising, then our net interest income may be reduced. At March 31, 1999, our
interest-bearing liabilities maturing or repricing within one year exceeded our
interest-earning assets maturing or repricing within one year by $164.4 million.
As a result, the yield on our interest-earning assets should adjust to changes
in interest rates at a slower rate than the cost of our interest-bearing
liabilities and our net interest income may be reduced when interest rates
increase significantly for long periods of time.
Fluctuations in interest rates are not predictable or controllable. We
have attempted to structure our asset and liability management strategies to
mitigate the impact of changes in market interest rates on our net interest
income. However, there can be no assurance that we will be able to manage
interest rate risk so as to avoid significant adverse effects in our net
interest income.
The amount of common stock held by our executive officers and directors
gives them significant influence over the election of our Board of Directors and
other matters that require stockholder approval.
A total of ________ shares of our common stock, or ______% of the
common stock outstanding, will be beneficially owned by our directors and
executive officers following this offering, assuming that directors and
executive officers purchase 150,000 shares that have been reserved for them in
the offering and that the underwriters do not exercise the over-allotment
option. Therefore, if
11
<PAGE>
they vote together, our directors and executive officers have the ability to
exert significant influence over the election of our Board of Directors and
other corporate actions requiring stockholder approval, including the adoption
of proposals made by stockholders. As of July __, 1999, Bernard A. Brown,
Chairman of our Board of Directors, beneficially owned _________ shares, or
_____% of our common stock.
A downturn in the health of the economy or changes in the Federal
Reserve's monetary policy could affect our net interest income and reduce our
profitability.
A downturn in the economy could affect us in the following ways, among
others:
o the amount of funds available for deposit could be reduced;
o the ability of borrowers to repay their loans could be hurt; and
o the strength of credit demands by customers could decline.
In addition, the banking business is affected not only by general
economic conditions, but also by the monetary policies of the Federal Reserve.
These monetary policies have significant effects on the operating results of
banks. Changes in monetary policies may affect the ability of the banks to
attract deposits, make loans and manage interest rate risk.
Changes in laws or regulations could hurt our profitability.
We operate in a highly regulated industry and are subject to the
supervision and examination by several federal regulatory agencies, including
the Federal Reserve, the Office of the Comptroller of the Currency, the Federal
Deposit Insurance Corporation and the Federal Home Loan Bank of New York. The
federal and state banking laws and regulations limit the manner in which we and
the banks may conduct business and obtain financing. Changes in the laws and
regulations that govern us could restrict our operations or impose burdensome
requirements upon us. This could reduce our profitability.
Our ability to make cash dividend payments to our stockholders is
limited by the federal laws and regulations that restrict the payment of
dividends by the banks to us.
We have not in the past paid cash dividends on our common stock. Any
decision by our Board of Directors to do so in the future would be subject to
limitations imposed by federal laws and regulations. As dividend payments to us
from the banks are our principal source of income, our ability to pay dividends
would also be limited by the financial condition of the banks. Because the banks
are depository institutions insured by the Federal Deposit Insurance
Corporation, they may not pay dividends or distribute any capital assets if
either bank is in default on any assessment due the Federal Deposit Insurance
Corporation. Regulations of the Office of the Comptroller of the Currency also
impose certain minimum capital requirements that affect the amount of cash
available for the payment of dividends by the banks. See "Price Range of Our
Common Stock and Dividends."
Even if the banks are able to generate sufficient earnings to pay
dividends, there is no assurance that their respective Boards of Directors might
not decide or be required to retain a greater
12
<PAGE>
portion of their earnings in order to maintain existing capital or achieve
additional capital necessary because of:
o an increase in the capital requirements established by the Office of the
Comptroller of the Currency;
o a significant increase in the total of risk-weighted assets held by the
banks;
o a significant decrease in the banks' income;
o a significant deterioration of the quality of the banks' loan portfolios;
o a determination by the Office of the Comptroller of the Currency that the
payment of a dividend would (under the circumstances) constitute an "unsafe
or unsound" banking practice; or
o new regulations.
The occurrence of any of these events would decrease the amount of
funds potentially available for the payment of dividends to us from the banks,
and thus, indirectly, to our stockholders. In addition, under Federal Reserve
policy, we are required to maintain adequate regulatory capital and are expected
to act as a source of financial strength to the banks and to commit resources to
support them in circumstances where we might not otherwise do so. This policy
could have the effect of reducing the amount of dividends declarable by us.
If we deferred payment of the interest that we owe on our debt
obligations, we would be prohibited from paying cash dividends.
Although we have not in the past paid cash dividends on our common
stock, our ability to do so is subject to our continued payment of interest that
we owe on junior subordinated debentures. As of the date of this prospectus, we
have $58.6 million of junior subordinated debentures outstanding. We have the
right to defer payment of interest on the junior subordinated debentures for a
period not exceeding 20 consecutive quarters. If we defer interest payments on
the junior subordinated debentures, we will be prohibited, subject to certain
exceptions, from paying cash dividends on our common stock until we resume
interest payments on the junior subordinated debentures.
If the Federal Deposit Insurance Corporation were to incur losses in
connection with one of the banks, the other bank could be held liable for that
loss, which could have a material adverse affect on our financial condition.
Federal law contains a "cross-guarantee" provision which allows an
insured depository institution owned by us, such as Sun New Jersey or Sun
Delaware, to be held liable for losses incurred by the FDIC in connection with
assistance provided to, or the failure of, another depository institution
"commonly controlled" by us. As the banks are "commonly controlled" by us,
losses incurred by the FDIC in connection with assistance provided to, or
failure of, one bank could result in an assessment against the other bank. That
assessment could have a material adverse effect on our financial condition.
13
<PAGE>
Provisions in our certificate of incorporation and bylaws and the laws
of New Jersey discourage takeover attempts and may make it difficult to remove
current management.
Provisions in our certificate of incorporation and bylaws, the laws of
New Jersey, and federal regulations may make it difficult for someone to pursue
a tender offer, change in control or takeover attempt which is opposed by our
management and Board of Directors. These provisions include:
o requirements relating to meetings of stockholders;
o denial of cumulative voting to stockholders in the election of directors,
which ensures that the holders of a majority of the shares will be able to
elect all of the directors;
o the ability to issue preferred stock and additional shares of common stock
without shareholder approval; and
o super majority provisions for the approval of certain business
combinations.
As a result, stockholders who might desire to participate in a takeover
transaction may not have an opportunity to do so. The effect of these provisions
could be to limit the trading price potential of our common stock.
Our operations may be adversely affected if we, or certain persons with
whom we do business, fail to resolve Year 2000 issues.
Rapid and accurate data processing is essential to our operations. Many
computer programs that can only distinguish the final two digits of the year
entered are expected to read entries for the year 2000 as the year 1900 and
compute payment, interest or delinquency based on the wrong date or are expected
to be unable to compute payment, interest, or delinquency.
Failure to resolve year 2000 issues presents the following risks to us:
(1) the banks could lose customers to other financial institutions,
resulting in a loss of revenue, if our data processing operation
is unable to process properly customer transactions;
(2) the Federal Home Loan Bank, the Federal Reserve System, and
correspondent banks could fail to provide funds to the banks
which could materially impair their liquidity and affect their
ability to fund loans and deposit withdrawals;
(3) concern on the part of depositors that year 2000 issues could
impair access to their deposit account balances could result in
the banks experiencing deposit outflows prior to December 31,
1999;
(4) the failure of our commercial and industrial borrowers to
adequately resolve their own year 2000 issues could render them
unable to continue to make timely loan payments; and
14
<PAGE>
(5) we could incur increased personnel costs if additional staff is
required to perform functions that inoperative systems would have
otherwise performed.
Our primary system software is licensed from a third party, Kirchman
Corporation, which has advised us that it has made all the necessary programming
changes to its systems and is year 2000 compliant. We have received the results
of an independent testing group that verified the compliance of Kirchman
Corporation. If, however, Kirchman Corporation software malfunctions, we would
likely experience significant data processing delays, mistakes or failures.
These delays, mistakes or failures could have a significant adverse impact on
our financial condition and profitability.
15
<PAGE>
RECENT OPERATING RESULTS
Financial Condition
Total assets at March 31, 1999 increased $6.1 million, or less than 1%,
to $1.522 billion as compared to $1.515 billion at December 31, 1998. During the
quarter ended March 31, 1999, we used cash that we received from the acquisition
in December 1998 of the Household Bank, fsb branches to originate primarily
commercial and industrial loans and purchase investment securities, both of
which provide higher yields than cash. As a result, net loans increased $40.4
million to $730.3 million at March 31, 1999, and investment securities increased
$9.5 million to $630.9 million at March 31, 1999. These increases were offset by
decreases in cash and cash equivalents of $47.7 million, from $89.5 million at
December 31, 1998, to $41.8 million at March 31, 1999. Federal funds sold
decreased $34.7 million and cash and due from banks decreased $13.0 million at
March 31, 1999, from December 31, 1998.
The ratio of non-performing assets to total loans and real estate owned
at March 31, 1999 was 0.44% compared to 0.40% at December 31, 1998. The ratio of
allowance for loan losses to total non-performing loans was 262.94% at March 31,
1999 compared to 286.41% at December 31, 1998. The decreases in these two ratios
were the result of slightly higher amount of accruing loans contractually past
due 90 days or more at March 31, 1999. The ratio of allowance for loan losses to
total loans was 1.03% at March 31, 1999 compared to 1.02% at December 31, 1998.
For the three-month period ended March 31, 1999, we had net charge-offs
of $174,000 compared to $56,000 for the same period in 1998. The percentage of
net charge-offs to average loans outstanding was 0.02% at March 31, 1999
compared to 0.01% at March 31, 1998.
Excess of cost over fair value of assets acquired decreased $808,000,
from $43.0 million at December 31, 1998 to $42.2 million at March 31, 1999. The
decrease was a result of scheduled amortization of $1.5 million offset by the
addition of a $660,000 premium paid for the acquisition of the two branches in
southern and central New Jersey from Summit Bank in January, 1999.
Total deposits amounted to $1.007 billion at March 31, 1999 an $18.5
million decrease from December 31, 1998 deposits of $1.025 billion. The decrease
was the result of a decrease of approximately $34.3 million in deposits
partially offset by $15.8 million in deposits acquired in connection with the
Summit branch transaction. The decrease in deposits is primarily attributable to
the nonrenewal of a special rate deposit program acquired in the Household Bank,
fsb branch acquisition.
Advances from the Federal Home Loan Bank amounted to $29.3 million at
March 31, 1999 compared to $4.4 million at December 31, 1998, an increase of
$24.9 million. Federal funds purchased at March 31, 1999 amounted to $13.4
million. There were no federal funds purchased at December 31, 1998. These
liabilities were increased, in part, to fund new loans and deposit withdrawals.
Total shareholders' equity decreased by $1.0 million, from $78.3
million at December 31, 1998, to $77.3 million at March 31, 1999. The net
decrease was a result of a $3.4 million increase in
16
<PAGE>
the unrealized loss on securities available for sale, net of taxes, partially
offset by earnings of $2.4 million for the three months ended March 31, 1999.
Comparison of Operating Results for the Three Months Ended March 31, 1999 and
1998
General. Net income increased by $591,000 for the three months ended
March 31, 1999 to $2.4 million from $1.8 million for the three months ended
March 31, 1998. Net interest income increased $3.1 million and the provision for
loan losses increased $184,000 for the three months ended March 31, 1999
compared to the same period in 1998. Other income increased by $965,000 to $2.3
million for the three months ended March 31, 1999 as compared to $1.3 million
for the three months ended March 31, 1998. Other expenses increased by $3.1
million to $10.1 million for the three months ended March 31, 1999 as compared
to $7.0 million for the three months ended March 31, 1998.
Net Interest Income. The growth in our balance sheet, as a result of
our acquisition and expansion program, has significantly affected our operating
results. In addition, beginning in 1997, to more fully leverage our capital, we
entered into certain structured transactions in which the banks borrow funds
from the Federal Home Loan Bank at a rate similar to the London Inter-Bank
Offered Rate ("LIBOR"). The borrowed funds are invested in mortgage-backed
securities that are priced to yield a spread over LIBOR. The securities are
pledged as collateral for Federal Home Loan Bank borrowings. For the three
months ended March 31, 1999, net interest income related to structured
transactions amounted to $782,775, or a 1.08% weighted average net spread.
Partly as a result of the implementation of this strategy, our net interest
margin has narrowed to 3.42% for the three months ended March 31, 1999 as
compared to 3.58% for the three months ended March 31, 1998. Excluding the
effect of the structured transactions, our net interest margin would have been
4.04% for current period and 4.32% for the same period in 1998.
Additionally, for the three months ended March 31, 1999, we reported a
return on average assets, a return on average equity and an efficiency ratio of
0.64%, 12.32% and 71.48%, respectively. On a cash earnings basis (computed
excluding the amortization of goodwill) the return on average assets, the return
on average equity and the efficiency ratio for the same period would have been
1.03%, 19.87% and 61.08%, respectively. Amortization of goodwill resulting from
the First Union acquisition is expected to further reduce our profitability
ratios, while the transaction is expected to be accretive to our earnings.
The increase in net interest income was due to a $6.2 million increase
in interest income partially offset by a $3.1 million increase in interest
expense.
Interest Income. Interest income for the three months ended March 31,
1999 increased approximately $6.2 million, or 32.6%, from $19.1 million for the
same period in 1998 to $25.3 million in 1999. The increase was primarily the
result of an increase of $5.0 million in interest and fees on loans resulting
from acquisitions and internal growth and $1.2 million in interest on investment
securities resulting from the deployment of cash received from branch
acquisitions and growth of our investment portfolio.
Interest Expense. Interest expense for the three months ended March 31,
1999 increased
17
<PAGE>
approximately $3.1 million, from $10.3 million for the same period in 1998 to
$13.4 million in 1999. This increase was primarily due to a $2.4 million
increase in interest on deposit accounts resulting from significantly higher
deposit balances due to acquisitions and internal growth, a $121,000 increase in
short-term borrowed funds resulting from higher levels of securities sold under
agreements to repurchase and a $670,000 increase in interest on guaranteed
preferred beneficial interest in subordinated debt, resulting from the issuance
of additional trust preferred securities during the fourth quarter of 1998.
Provision for Loan Losses. For the three months ended March 31, 1999,
the provision for loan losses amounted to $667,000, an increase of $184,000,
compared to $483,000 for the same period in 1998.
Other Income. Other income increased $1.1 million for the three-month
period ended March 31, 1999 compared to the three-month period ended March 31,
1998. In most part, the increase was a result of $484,000 in additional service
charges generated by a larger deposit base due to acquisitions and internal
growth, augmented by $695,000 in loan fees, slightly offset by lower gains from
the sale of loans of $67,000 and a decrease of $282,000 in gains on the sale of
investment securities from the first quarter of 1998.
Other Expenses. Other expenses increased approximately $3.1 million, to
$10.1 million for the three months ended March 31, 1999 as compared to $7.0
million for the same period in 1998. Of the increase, $1.4 million was in
salaries and employee benefits, $438,000 was in occupancy expense, $189,000 was
in equipment expense, $225,000 was in data processing expense, $132,000 was in
postage and supplies, and $524,000 was in amortization of excess of cost over
fair value of assets acquired. The increase in other expenses reflects our
strategy to support planned expansion. Salaries and benefits increased due to
additional staff positions in financial service centers, and lending, loan
review and audit departments. The increase in occupancy, equipment, data
processing expenses and postage and supplies were the result of internal growth
and the effect of our acquisitions.
Income Taxes. Applicable income taxes increased $219,000 for the three
months ended March 31, 1999 as compared to the same period in 1998. The increase
resulted from higher pre-tax earnings.
USE OF PROCEEDS
The net proceeds that we will receive from the sale of 1,700,000 shares
of our common stock (after giving effect to the payment of estimated offering
expenses) are estimated to be approximately $30.3 million ($34.8 million if the
underwriters' over-allotment option is exercised in full). The proceeds from
this offering will qualify under the capital adequacy guidelines of the Federal
Reserve as Tier 1 capital for us. We will use substantially all of the net
proceeds from this offering to provide sufficient capital to Sun New Jersey to
consummate the First Union acquisition and any remaining proceeds will be used
for our general corporate purposes.
FIRST UNION ACQUISITION
We have entered into an agreement to acquire certain account loans, and
assume certain deposits, of First Union. As part of the First Union acquisition,
we will acquire fourteen branch offices, located in Burlington, Cape May,
Cumberland, Hunterdon and Mercer Counties in New
18
<PAGE>
Jersey. These branch locations will enhance Sun New Jersey's financial service
center network in these counties.
This is an in-market acquisition of eight branches and approximately
$220 million of deposits in Cumberland and Cape May Counties in New Jersey. Our
market share, as measured by deposits, will increase from 10.3% to 22.1% in
Cumberland County and from 8.4% to 16.8% in Cape May County. In addition, two
branches and $35 million of deposits will be acquired in Burlington County, one
branch and $14 million of deposits will be acquired in Mercer County and one
branch with $16 million of deposits will be acquired in Hunterdon County.
Due to the overlap with our existing financial service center
locations, we plan to consolidate six of the acquired branches with our existing
financial service centers and thereby reduce the associated operating expenses.
We expect that the acquired branches, deposits and operations will be
immediately profitable and will contribute to our future net income.
At March 31, 1999, deposits to be assumed under the agreement with
First Union were as follows:
Weighted
Average
Amount Interest Cost
------ -------------
(In thousands)
Demand deposits $79,409 0.77%
Savings deposits 54,165 2.11%
Time deposits 119,482 5.12%
-------
Total deposits $253,056 3.28%
=======
The closing of the First Union acquisition is subject to pending
regulatory approvals and certain other conditions and is expected to occur in
the third quarter of 1999.
19
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
March 31, 1999
The following table sets forth the unaudited pro forma consolidated
statement of our financial condition as if the First Union acquisition had been
consummated as of March 31, 1999. You should read the pro forma consolidated
statement of financial condition together with our consolidated financial
statements and the notes thereto included in (1) our 1998 Annual Report to
Stockholders, which is incorporated by reference into this prospectus as part of
our Annual Report on Form 10-K for the fiscal year ended December 31, 1998 and
(2) our Quarterly Report on Form 10-Q for the quarter ended March 31, 1999,
which is incorporated by reference into this prospectus. See "Incorporation of
Certain Documents by Reference." We have prepared the pro forma consolidated
statement of financial condition, which is unaudited and which may not be
indicative of results on an annualized basis or for any other period.
<TABLE>
<CAPTION>
Pro Forma
Consolidated Pro Forma
Sun Bancorp Consolidated
First Union Before This Sun Bancorp After
Sun Bancorp Acquisition(1) this Offering Offering(3) This Offering
----------- -------------- ------------- ----------- -------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Assets
Cash and amounts due from banks........ $ 41,827 $ 2,400 $44,227 $ -- $ 44,227
Federal funds sold..................... - 204,650
(24,640) 180,010 30,315 210,325
Investment securities
available-for-sale..................... 630,902 630,902 630,902
Loans receivable (net)................. 730,264 730,264 730,264
Restricted equity investments.......... 28,337 28,337 28,337
Bank properties and equipment, net..... 26,754 4,550 31,304 31,304
Real estate owned...................... 373 373 373
Accrued interest receivable............ 11,598 11,598 11,598
Excess of cost over fair value
of net assets acquired............... 42,153 24,640(2) 66,793 66,793
Deferred taxes......................... 4,496 4,496 4,496
Other assets........................... 4,806 4,806 -- 4,806
--------- ------- ------- ----- -----
Total............................... $1,521,510 $211,600 $1,733,110 $30,315 $1,763,425
========= ======= ========= ====== =========
Liabilities and Shareholders' Equity
Liabilities:
Deposits............................... $1,006,904 $250,000 $1,256,904 $ -- $1,256,904
Advances from the Federal Home Loan....
Bank................................... 29,256 (25,000) 4,256 4,256
Loans payable.......................... 1,160 1,160 1,160
Federal funds purchased................ 13,400 (13,400)
Securities sold under agreements
to repurchase........................ 326,050 326,050 326,050
Other liabilities...................... 8,881 -- 8,881 -- 8,881
--------- -------- --------- ----- ---------
Total liabilities.................... 1,385,651 211,600 1,597,251 -- 1,597,251
--------- -------- --------- ----- ---------
Guaranteed preferred beneficial
interest in subordinated debt.......... 58,595 58,595 58,595
Shareholders' equity:
Preferred stock
Common stock........................... 7,590 7,590 1,700 9,290
Surplus................................ 62,433 62,433 28,615 91,048
Retained earnings...................... 11,590 11,590 11,590
Accumulated other comprehensive
income.............................. (3,870) (3,870) (3,870)
Treasury stock at cost, 27,440 shares.. (479) -- (479) -- (479)
-------- ------- --------- ------ ----------
Total shareholders' equity........... 77,264 -- 77,264 30,315 107,579
--------- ------- --------- ------ ---------
Total................................ $1,521,510 $211,600 $1,733,110 $30,315 $1,763,425
========= ======= ========= ====== =========
</TABLE>
- ------------
(1) To record branch purchase.
(2) To record premium paid on the assumption of the deposit liabilities ($24.6
million). The excess of cost over fair value of assets acquired will be
amortized over a ten-year period.
(3) To record the net proceeds from this offering.
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<PAGE>
CAPITALIZATION
The following table sets forth (1) our consolidated capitalization at
March 31, 1999, (2) our consolidated capitalization giving effect to the
issuance of the shares of common stock in this offering, assuming the
underwriters' over-allotment option is not exercised, (3) the pro forma effect
of branch purchases from First Union, (4) our actual and pro forma capital
ratios, and (5) Sun New Jersey's actual and pro forma capital ratios. For this
table we have assumed that our net proceeds will be approximately $30.3 million
after expenses and that all of the net proceeds will be contributed to Sun New
Jersey. Sun New Jersey will reduce overnight borrowings and invest the remaining
proceeds in 20% risk weighted assets for regulatory capital purposes. Sun New
Jersey will be "well capitalized" on a pro forma basis for federal bank
regulatory purposes. We expect that our leverage ratio will be in excess of 4%,
and that we will be "adequately capitalized" for federal bank regulatory
purposes, at the time of the consummation of the First Union acquisition and as
of September 30, 1999.
<TABLE>
<CAPTION>
As Adjusted
--------------------------------------
Sale of Shares of
Sale of Common Stock and
Shares of the First Union
Actual Common Stock(1) Branch Purchase(1)
------ --------------- ------------------
(Dollars in thousands)
<S> <C> <C> <C>
Guaranteed preferred beneficial interest in
subordinated debt ........................ $ 58,595 $ 58,595 $ 58,595
SHAREHOLDERS' EQUITY:
Preferred stock $1 par value, 1,000,000
shares authorized, none issued
Common stock $1 par value - 25,000,000
shares authorized; 7,590,206 outstanding 7,590 9,290 9,290
Surplus .................................. 62,433 91,048 91,048
Retained earnings ........................ 11,590 11,590 11,590
Accumulated other comprehensive income .... (3,870) (3,870) (3,870)
Treasury stock at cost, 27,440 shares ..... (479) (479) (479)
--------- --------- ---------
Total shareholders' equity ........... 77,264 107,579 107,579
--------- --------- ---------
Total capitalization ..................... $ 135,859 $ 166,174 $ 166,174
========= ========= =========
SUN BANCORP CAPITAL RATIOS:
Tier 1 risk-based capital ratio .......... 7.37% 10.68% 7.60%
Total risk-based capital ratio ........... 11.75% 15.03% 11.77%
Leverage ratio ........................... 4.52% 6.46% 4.89%
SUN NEW JERSEY CAPITAL RATIOS:
Tier 1 risk-based capital ratio .......... 9.08% 12.90% 9.26%
Total risk-based capital ratio ........... 9.93% 13.74% 10.06%
Leverage ratio ........................... 5.57% 7.65% 5.06%
</TABLE>
21
<PAGE>
PRICE RANGE OF OUR COMMON STOCK AND DIVIDENDS
Our common stock has been quoted on the Nasdaq National Market under
the symbol "SNBC" since November 1997. From August 29, 1996, until November
1997, our common stock was quoted on the Nasdaq SmallCap Market, with limited
and infrequent trading in the common stock during this period. The following
table sets forth the high and low closing sale prices (adjusted for stock splits
and dividends) for our common stock for the calendar quarters indicated, as
published by the Nasdaq SmallCap and National Markets.
High Low
---- ---
1997
First quarter ........................... $8.92 $7.87
Second quarter .......................... 9.58 8.26
Third quarter ........................... 13.30 8.97
Fourth quarter .......................... 20.56 13.00
1998
First quarter ........................... $29.25 $18.74
Second quarter .......................... 29.52 24.05
Third quarter ........................... 28.10 18.33
Fourth quarter .......................... 20.60 15.71
1999
First quarter ........................... $19.05 $16.31
Second quarter ..........................
Third quarter (through July __, 1999) ...
The last reported sale price of our common stock on the Nasdaq National
Market as of July ___, 1999 was $______. There were ____ holders of record of
our common stock as of July _, 1999.
Historically, we have not paid cash dividends on our common stock.
Currently, our Board of Directors does not intend to pay cash dividends, but it
may consider such a policy in the future. No decision, however, has been made as
to the amount or timing if cash dividends were to be paid. We paid 5% stock
dividends on October 30, 1996, June 25, 1997, May 26, 1998 and June 21, 1999. We
declared three for two common stock splits effected by means of 50% stock
dividends paid in September 1997 and March 1998. Future declarations of
dividends by the Board of Directors will depend upon a number of factors,
including the following:
o our financial condition;
o the results of operations;
o investment opportunities available to us;
o capital requirements;
o regulatory limitations;
o tax considerations;
o the amount of net proceeds retained by us; and
o general economic conditions.
22
<PAGE>
We make no assurances, however, that any dividends will be paid or, if
payment is made, that dividends will continue to be paid.
Our ability to pay dividends is dependent upon the ability of Sun New
Jersey and Sun Delaware to pay dividends to us. Because the banks are depository
institutions insured by the FDIC, they may not pay dividends or distribute
capital assets if either one is in default on any assessment due the FDIC. In
addition, regulations of the Office of the Comptroller of the Currency impose
certain minimum capital requirements that affect the amount of cash available
for the payment of dividends by the banks. Under Federal Reserve policy, we are
required to maintain adequate regulatory capital and are expected to act as a
source of financial strength to the banks and to commit resources to support the
banks in circumstances where we might not do so absent such a policy. This
policy could have the effect of reducing the amount of dividends we are allowed
to declare.
At March 31, 1999, under applicable regulations, the amount available
to be paid as dividends from the banks to Sun Bancorp without prior regulatory
approval was $15.4 million.
UNDERWRITING
Subject to the terms and conditions stated in the underwriting
agreement dated July ___, 1999 among Advest, Inc. and Wheat First Securities, a
division of First Union Capital Markets Corp. (a subsidiary of First Union
Corporation, which is also the parent of First Union) , as representatives of
the underwriters named below, the underwriters have agreed to purchase, and we
have agreed to sell to the underwriters, the number of shares of common stock
set forth opposite the name of the underwriters. If one underwriter is not able
to sell all of the shares that it has agreed to buy from us, no other
underwriter is responsible for those unsold shares.
Underwriter: Number of Shares:
Advest, Inc.......................
Wheat First Securities............
[to be named] ...................
----------
Total
==========
The underwriting agreement provides that the obligations of the
underwriters to purchase the shares of common stock that are being offered are
subject to approval of legal matters by counsel and to other conditions. The
underwriters are obligated to purchase all of the shares being offered (other
than those covered by the over-allotment option described below) if they
purchase any of the shares.
The underwriters propose to offer some of the shares (including the
shares to be purchased by our directors, officers and employees, and their
affiliates) directly to the public at the public offering price set forth on the
cover page of this prospectus and some of the shares to certain dealers at the
public offering price less a concession not in excess of $0.__ per share. The
underwriters may allow, and the dealers may reallow, a concession not in excess
of $0.__ per share on sales to other dealers. After the public offering, the
offering price and other selling terms may be changed by the
23
<PAGE>
underwriters. In addition, we have agreed to pay a financial advisory fee to
Advest, Inc. of $100,000 in connection with the offering.
We have granted to the underwriters an option, exercisable for up to 30
days after the date of the underwriting agreement, to purchase up to an
additional 255,000 shares of common stock at the public offering price set forth
on the cover page less underwriting discounts and commissions. To the extent
that the underwriters exercise this option, we will be obligated to sell that
amount of shares of common stock to the underwriters. The underwriters may
exercise this option only to cover over-allotments made in connection with this
offering. If purchased, the underwriters will offer the additional shares of
common stock on the same terms as those on which the 1,700,000 shares of common
stock are being offered.
The underwriters have reserved 150,000 shares of common stock being
offered for sale, at the public offering price, for our directors, officers and
employees (and their affiliates). The underwriters will not receive any
discounts or commissions on shares of common stock purchased by our officers,
directors or employees (and their affiliates). The number of shares of common
stock available for sale to the general public will be reduced to the extent
that the reserved shares are purchased. Any reserved shares which are not
purchased will be offered by the underwriters to the general public on the same
basis as the other shares being offered.
In connection with the offering the underwriters may purchase and sell
shares of our common stock in the open market. These transactions may include
over-allotment, syndicate covering transactions and stabilizing transactions.
Over-allotment involves syndicate sales of shares of common stock in excess of
the number of shares of common stock to be purchased by the underwriters in the
offering, which creates a syndicate short position. Syndicate covering
transactions involve purchases of shares of common stock in the open market
after the distribution has been completed in order to cover syndicate short
positions. Stabilizing transactions consist of bids or purchases of shares of
common stock made for the purpose of preventing or retarding a decline in the
market price of the common stock while the offering is in progress.
The underwriters may also impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when the
shares of common stock originally sold by that syndicate member are purchased in
a stabilizing transaction or syndicate covering transaction to cover syndicate
short positions. The imposition of a penalty bid may have an effect on the price
of the common stock to the extent that it may discourage resales of the common
stock.
Any of these transactions may cause the price of the common stock to be
higher than it would otherwise be in the absence of the transactions. These
transactions, if commenced, may be discontinued at any time.
We have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
The underwriters have in the past, and may in the future, perform
various services for us, including investment banking services, for which they
have or may receive customary fees. Advest, Inc. also served as managing
underwriter in our public offerings of shares of common stock and trust
preferred securities in 1997 and 1998, and advised us in some of our branch
purchases.
24
<PAGE>
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be
passed upon for Sun Bancorp by Malizia Spidi & Fisch, P.C., Washington, D.C.,
counsel to Sun Bancorp. Certain legal matters will be passed upon for the
underwriters by Arnold & Porter, Washington, D.C. and New York, New York.
EXPERTS
The consolidated financial statements incorporated in the prospectus by
reference from Sun Bancorp's Annual Report on Form 10-K for the year ended
December 31, 1998, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein, and has been
so incorporated in reliance upon the report of such firm given upon their
authority as expert in accounting and auditing.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended. Accordingly, we file periodic reports, proxy
statements and other information with the Securities and Exchange Commission.
You may inspect or copy these materials at the Public Reference Room at the SEC
at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional
offices of the SEC located at 7 World Trade Center, 13th Floor, Suite 1300, New
York, New York 10048 and Suite 1400, Citicorp Center, 14th Floor, 500 West
Madison Street, Chicago, Illinois 60661. For a fee, you may also obtain copies
of these materials by writing to the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549. Our filings are also
available to the public on the SEC's website on the Internet at
http://www.sec.gov.
We have filed with the SEC a registration statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") with respect to the shares of common stock offered by this
prospectus. This prospectus does not contain all of the information included in
the registration statement. Please refer to the registration statement and its
exhibits, and to the documents incorporated by reference into the registration
statement, for further information about us and the shares of common stock
offered by this prospectus. You may obtain a copy of the registration statement
through the public reference facilities of the SEC described above. You may also
access a copy of the registration statement by means of the SEC's website at
http://www.sec.gov.
Our common stock is traded on the Nasdaq National Market under the
symbol "SNBC." Documents that we have filed with the SEC can also be inspected
at the offices of the National Association of Securities Dealers, Inc., at 1735
K Street, N.W., Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference documents that we have
filed with the SEC. This means that we can disclose important information to you
by referring to those documents, and the information in those documents is
considered to be part of this prospectus. Documents that we file later with the
SEC will automatically update and supersede this information. We incorporate by
reference the documents listed below:
25
<PAGE>
(1) Sun Bancorp's Annual Report on Form 10-K for the year ended
December 31, 1998;
(2) Sun Bancorp's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999;
(3) Sun Bancorp's Current Reports on Form 8-K filed with the
Commission on May 21, 1999, May 17, 1999 and January 15, 1999;
(4) Sun Bancorp's Registration Statement on Form 10 declared
effective by the SEC in August 1996 and any amendment or report
filed for the purpose of updating such description; and
(5) All reports and other documents Sun Bancorp files with the SEC
under Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended, after the date of this
prospectus and prior to the termination of this offering.
You may request from the Secretary of Sun Bancorp a copy of any
document incorporated by reference, excluding exhibits unless they are
specifically incorporated into this prospectus, at no cost, by writing or
calling us at:
Sun Bancorp, Inc.
226 Landis Avenue
Vineland, New Jersey 08360
Telephone: (609) 691-7700.
26
<PAGE>
<TABLE>
<CAPTION>
============================================================================= ====================================================
<S> <C>
You should rely only on the information contained in this prospectus.
We have not authorized anyone to provide you with information that is 1,700,000 Shares
different. This prospectus does not constitute an offer to sell, or the
solicitation of an offer to buy, any of the securities offered hereby
to any person in any jurisdiction in which the offer or solicitation [LOGO]
would be unlawful. You should not assume that the information provided
by this prospectus is accurate as of any date after the date of this SUN BANCORP, INC.
prospectus.
--------------------
TABLE OF CONTENTS Common Stock
Page
----
Prospectus Summary.................................................
Selected Consolidated Financial Data...............................
Special Note of Caution Regarding
Forward-Looking Statements.......................................
Risk Factors.......................................................
Recent Operating Results........................................... --------------------
Use of Proceeds....................................................
First Union Acquisition............................................ PROSPECTUS
Pro Forma Consolidated Statement of
Financial Condition.............................................. --------------------
Capitalization.....................................................
Price Range of Our Common Stock and
Dividends........................................................ Advest, Inc.
Underwriting.......................................................
Legal Matters...................................................... Wheat First Securities
Experts............................................................
Available Information..............................................
Incorporation of Certain Documents by
Reference........................................................ July ___, 1999
============================================================================= ====================================================
</TABLE>
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
* Registration Fees..................... $ 10,326
* Legal Services........................ 125,000
* Financial Advisory Fees............... 100,000
* Printing Costs........................ 15,000
* Nasdaq Listing Fees................... 17,500
* Accounting Fees....................... 75,000
* Miscellaneous......................... 10,000
--------
* TOTAL................................. $352,826
========
Item 15. Indemnification of Directors and Officers.
Section 14A:3-5 of the New Jersey Business Corporation Law ("BCL")
provides that an officer, director, employee or agent may be indemnified by the
Company against expenses and liabilities actually and reasonably incurred in
connection with any threatened, pending or completed "proceeding" (including
civil, criminal, administrative or investigative proceedings or arbitrative
action) in which such person is involved by reason of such person's position
with the Company, provided that a determination has been made (by the Board of
Directors or a committee thereof, acting by a majority vote of a quorum
consisting of directors who were not parties to such proceeding, or by
independent legal counsel in a written opinion, or by the shareholders) that
such person acted in good faith and in a manner that such person reasonably
believes to be in, or not opposed to, the best interests of the Company. Such
person may not be indemnified if the person has been adjudged to be in breach of
his duty of loyalty to the corporation or its shareholders, or if his/her
conduct were determined not to be in good faith or to have involved a knowing
violation of law, or to have resulted in receipt by the officer, director,
employee or agent of an improper personal benefit.
Provisions regarding indemnification of directors, officers, employees
or agents of the Company are contained in Article VI of the Company's Amended
and Restated Bylaws.
Under a directors' and officers' liability insurance policy, directors
and officers of the Company are insured against certain liabilities, including
certain liabilities under the Securities Act, as amended.
II-1
<PAGE>
Item 16. Exhibits and Financial Statement Schedules:
The financial statements and exhibits filed as part of this
Registration Statement are as follows:
(a) List of Exhibits:
1 Form of Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation*
3.2 Amended and Restated Bylaws**
4 Common Stock Specimen***
5 Opinion of Malizia Spidi & Fisch, P.C.
23.1 Consent of Deloitte & Touche LLP****
23.2 Consent of Malizia Spidi & Fisch, P.C.
(included in Exhibit 5)
(b) Financial Statements Schedules*****
- ------------------------
* Incorporated by reference to the registrant's Registration Statement on
Form S-3 filed with the Commission on August 25, 1998 (File No. 333-62223).
** Incorporated by reference to the registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997 (File No. 0-20957).
*** Incorporated by reference to the registrant's Registration Statement on
Form S-1 filed with the Commission on February 14, 1997 (File No.
333-21903).
**** To be filed by amendment.
*****All schedules are omitted because they are not required or applicable or
the required information is shown in the financial statements or the notes
thereto incorporated in this Registration Statement by reference to the
registrant's Annual Report on Form 10-K for the fiscal year ended December
31, 1998 and the registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999 (File No. 0-20957).
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) 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 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.
(2) That, for purposes of determining any liability under the
Securities Act, as amended, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4)
II-2
<PAGE>
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(3) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, 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
Securities 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 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 whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Vineland, New Jersey, on June 11, 1999.
SUN BANCORP, INC.
By: /s/ Philip W. Koebig, III
-------------------------------------
Philip W. Koebig, III
President and Chief Executive Officer
(Duly Authorized Representative)
We, the undersigned directors and officers of Sun Bancorp, Inc., do
hereby severally constitute and appoint Philip W. Koebig, III and Robert F. Mack
our true and lawful attorneys and agents, to do any and all things and acts in
our names in the capacities indicated below and to execute all instruments for
us and in our names in the capacities indicated below which said Philip W.
Koebig, III and Robert F. Mack may deem necessary or advisable to enable Sun
Bancorp, Inc. to comply with the Securities Act of 1933, as amended, and any
rules, regulations and requirements of the Securities and Exchange Commission,
in connection with this Registration Statement on Form S-3, including
specifically, but not limited to, power and authority to sign for us or any of
us, in our names in the capacities indicated below, the Registration Statement
and any and all amendments (including post-effective amendments) thereto; and we
hereby ratify and confirm all that Philip W. Koebig, III and Robert F. Mack do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below by the following persons in
the capacities indicated on June 11, 1999.
/s/ Philip W. Koebig, III /s/ Bernard A. Brown
- -------------------------------------- -----------------------
Philip W. Koebig, III Bernard A. Brown
President, Chief Executive Officer and Director Chairman of the Board
(Principal Executive Officer)
/s/ Sidney R. Brown /s/ Adolph F. Calovi
- -------------------------------------- -----------------------
Sidney R. Brown Adolph F. Calovi
Vice Chairman, Treasurer and Secretary Director
/s/ Peter Galetto, Jr. /s/ Anne E. Koons
- -------------------------------------- -----------------------
Peter Galetto, Jr. Anne E. Koons
Director Director
/s/ Robert F. Mack /s/ Ike Brown
- -------------------------------------- -----------------------
Robert F. Mack Ike Brown
Executive Vice President and Chief Financial Officer Director
(Principal Financial and Accounting Officer)
/s/ Jeffrey S. Brown
- ----------------------------------------
Jeffrey S. Brown
Director
II-4
EXHIBIT NO. 1
<PAGE>
[______] Shares
(plus [______] Shares to cover over-allotments, if any)
SUN BANCORP, INC.
COMMON STOCK, PAR VALUE $1.00 PER SHARE
UNDERWRITING AGREEMENT
----------------------
July __, 1999
ADVEST, INC.
WHEAT FIRST SECURITIES
As Representatives (the "Representatives")
of the Several Underwriters
Named in Schedule I hereto
c/o Advest, Inc.
One Rockefeller Plaza, 20th Floor
New York, New York 10020
Ladies and Gentlemen:
Sun Bancorp, Inc., a New Jersey corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to sell to the several
Underwriters named in Schedule I hereto (the "Underwriters"), an aggregate of
[______] shares (the "Firm Shares") of the Company's common stock, par value
$1.00 per share (the "Common Stock"). If the Representatives are the only firms
named in Schedule I hereto, then the terms "Underwriters" and "Representatives,"
as used herein, shall each be deemed to refer to such firms.
In addition, in order to cover over-allotments in the sale of the Firm
Shares, the Underwriters may, at the Underwriters' election and subject to the
terms and conditions stated herein, purchase ratably in proportion to the
amounts set forth opposite their respective names in Schedule I hereto, up to
[______] additional shares of Common Stock from the Company (such additional
shares of Common Stock, the "Optional Shares"). The Firm Shares and the Optional
Shares are referred to collectively as the "Shares."
As part of the offering of [______] Firm Shares contemplated by this
Agreement, the Underwriters have agreed to reserve out of the Firm Shares up to
an aggregate amount of [______] Shares, for sale to the Company's employees,
officers and directors (collectively, the "Participants"), as set forth in the
Prospectus in the section entitled "Underwriting" (the "Directed Share
Program"). The Shares to be sold by the Underwriters pursuant to the Directed
Share Program (the "Directed Shares") will be sold by the Underwriters pursuant
to this Agreement at the public offering price specified in
<PAGE>
the Prospectus. Any Directed Shares not orally confirmed for purchase by any
Participants by the end of the first business day after the date on which this
Agreement is executed will be offered to the public by the Underwriters as set
forth in the Prospectus.
The Company and the Underwriters, intending to be legally bound, hereby
confirm their agreement as follows:
1. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, each of the Underwriters that:
(a) The Company meets the requirements for the use of Form S-3 under the
Securities Act of 1933, as amended (the "Act"). A registration statement on Form
S-3 (File No. 333-_____) with respect to the Shares, including a prospectus
subject to completion, has been filed by the Company with the Securities and
Exchange Commission (the "Commission") under the Act, and one or more amendments
to such registration statement may have been so filed. After the execution of
this Agreement, the Company will file with the Commission either (i) if such
registration statement, as it may have been amended, has become effective under
the Act and information has been omitted therefrom in accordance with Rule 430A
under the Act, a prospectus in the form most recently included in an amendment
to such registration statement (or, if no such amendment shall have been filed,
in such registration statement) with such changes or insertions as are required
by Rule 430A or permitted by Rule 424(b) under the Act and as have been provided
to and approved by the Representatives, or (ii) if such registration statement,
as it may have been amended, has not become effective under the Act, an
amendment to such registration statement, including a form of prospectus, a copy
of which amendment has been provided to and approved by the Representatives
prior to the execution of this Agreement. As used in this Agreement, the term
"Registration Statement" means such registration statement, as amended at the
time when it was or is declared effective, including (A) all financial
statements, schedules and exhibits thereto, (B) all documents (or portions
thereof) incorporated by reference therein, and (C) any information omitted
therefrom pursuant to Rule 430A under the Act and included in the Prospectus (as
hereinafter defined); the term "Preliminary Prospectus" means each prospectus
subject to completion included in such registration statement or any amendment
or post-effective amendment thereto (including the prospectus subject to
completion, if any, included in the Registration Statement at the time it was or
is declared effective), including all documents (or portions thereof)
incorporated by reference therein; and the term "Prospectus" means the
prospectus first filed with the Commission pursuant to Rule 424(b) under the Act
or, if no prospectus is required to be so filed, such term means the prospectus
included in the Registration Statement, in either case, including all documents
(or portions thereof) incorporated by reference therein. As used herein, any
reference to any statement or information as being "made," "included,"
"contained," "disclosed" or "set forth" in any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto, or the Registration Statement
or any amendment thereto (or other similar references) shall refer both to
information and statements actually appearing in such document as well as
information and statements incorporated by reference therein.
2
<PAGE>
(b) No order preventing or suspending the use of any Preliminary Prospectus
has been issued and no proceeding for that purpose has been instituted or, to
the knowledge of the Company, threatened, by the Commission or the securities
authority of any state or other jurisdiction. If the Registration Statement has
become effective under the Act, no stop order suspending the effectiveness of
the Registration Statement or any part thereof has been issued and no proceeding
for that purpose has been instituted or, to the knowledge of the Company,
threatened or contemplated by the Commission or the securities authority of any
state or other jurisdiction.
(c) When any Preliminary Prospectus was filed with the Commission it
contained all material statements required to be stated therein in accordance
with, and complied in all material respects with the requirements of, the Act
and the rules and regulations of the Commission thereunder. When the
Registration Statement or any amendment thereto was or is declared effective,
and at each Time of Delivery (as hereinafter defined), it (i) contained and will
contain all material statements required to be stated therein in accordance
with, and complied or will comply in all material respects with the requirements
of, the Act and the rules and regulations of the Commission thereunder and (ii)
did not and will not include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not misleading.
When the Prospectus or any amendment or supplement thereto is filed with the
Commission pursuant to Rule 424(b) (or, if the Prospectus or such amendment or
supplement is not required to be so filed, when the Registration Statement or
the amendment thereto containing such amendment or supplement to the Prospectus
was or is declared effective) and at each Time of Delivery, the Prospectus, as
amended or supplemented at any such time, (i) contained and will contain all
material statements required to be stated therein in accordance with, and
complied or will comply in all material respects with the requirements of, the
Act and the rules and regulations of the Commission thereunder and (ii) did not
and will not include any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
foregoing provisions of this paragraph (c) do not apply to statements or
omissions made in the Registration Statement or any amendment thereto or the
Prospectus or any amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through you specifically for use therein. It is understood that the statements
set forth in the Registration Statement or any amendment thereto or the
Prospectus or any amendment or supplement thereto (W) in the last paragraph of
the cover page of the Prospectus, (X) on the inside cover page with respect to
stabilization and passive market making, and (Y) in the third, sixth, and
seventh paragraphs and the list of Underwriters under the section entitled
"Underwriting," constitute the only written information furnished to the Company
by or on behalf of any Underwriter through you specifically for use in the
Registration Statement or any amendment thereto or the Prospectus and any
amendment or supplement thereto, as the case may be.
(d) There are no legal or governmental proceedings pending or, to the
knowledge of the Company, threatened to which the Company or any of its
3
<PAGE>
subsidiaries is a party or to which any of the properties of the Company or any
subsidiary are subject that are required to be described in the Registration
Statement or the Prospectus and are not so described or any statutes,
regulations, contracts or other documents that are required to be described in
the Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not described or filed as required.
(e) Each of the Company and its subsidiaries has been duly incorporated, is
validly existing as a corporation or banking association in good standing under
the laws of its jurisdiction of incorporation and has full power and authority
(corporate and other) to own or lease its properties and conduct its business as
described in the Prospectus. The Company is duly registered under the Bank
Holding Company Act of 1956, as amended. The Company has full power and
authority (corporate and other) to enter into this Agreement and to perform its
obligations hereunder. Each of the Company and its subsidiaries is duly
qualified to transact business as a foreign corporation and is in good standing
under the laws of each other jurisdiction in which it owns or leases properties,
or conducts any business, so as to require such qualification, except where the
failure to so qualify would not have a material adverse effect on the financial
position, results of operations or business of the Company and its subsidiaries
taken as a whole.
(f) The Company's authorized, issued and outstanding capital stock is as
disclosed in the Prospectus. All of the issued shares of capital stock of the
Company, have been duly authorized and validly issued, are fully paid and
nonassessable and conform to the descriptions of the Common Stock contained in
the Prospectus. None of the issued shares of capital stock of the Company or any
of its subsidiaries has been issued or is owned or held in violation of any
statutory (or to the knowledge of the Company, any other) preemptive rights of
shareholders, and no person or entity (including any holder of outstanding
shares of capital stock of the Company or its subsidiares) has any statutory (or
to the knowledge of the Company, any other) preemptive or other rights to
subscribe for any of the Shares. None of the capital stock of the Company has
been issued in violation of applicable federal or state securities laws.
(g) All of the issued shares of capital stock of each subsidiary have been
duly authorized and validly issued, are fully paid and nonassessable, except to
the extent such shares may be deemed assessable under 12 U.S.C. Section 55, and
are owned beneficially by the Company or one of its subsidiaries, free and clear
of all liens, security interests, pledges, charges, encumbrances, defects,
shareholders' agreements, voting agreements, proxies, voting trusts, equities or
claims of any nature whatsoever. Other than the outstanding capital stock of Sun
National Bank and Sun National Bank, Delaware, the outstanding common securities
of Sun Capital Trust and Sun Capital Trust II, the outstanding common stock of
Med-Vine, Inc., the outstanding common stock of Sun Mortgage Company, and the
equity securities held in the investment portfolios of the Company and such
subsidiaries (the composition of which is not materially different from the
disclosures in the Prospectus as of specific dates), the Company does not own,
directly or indirectly, any capital stock or other equity securities of any
other corporation or any ownership interest in any partnership, joint venture or
other association.
4
<PAGE>
(h) Except as disclosed in the Prospectus, there are no outstanding (i)
securities or obligations of the Company or any of its subsidiaries convertible
into or exchangeable for any capital stock of the Company or any of its
subsidiaries, (ii) warrants, rights or options to subscribe for or purchase from
the Company or any of its subsidiaries any such capital stock or any such
convertible or exchangeable securities or obligations or (iii) obligations of
the Company or any of its subsidiaries to issue any shares of capital stock, any
such convertible or exchangeable securities or obligations, or any such
warrants, rights or options.
(i) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, and prior to the Closing Date and
Option Closing Date (as such terms are hereinafter defined), (i) neither the
Company nor any of its subsidiaries has incurred any liabilities or obligations,
direct or contingent, or entered into any transactions, not in the ordinary
course of business, that are material to the Company and its subsidiaries, (ii)
the Company has not purchased any of its outstanding capital stock or declared,
paid or otherwise made any dividend or distribution of any kind on its capital
stock, (iii) there has not been any change in the capital stock, long-term debt
or short-term debt of the Company or any of its subsidiaries, and (iv) there has
not been any material adverse change, or any development involving a prospective
material adverse change, in or affecting the financial position, results of
operations or business of the Company and its subsidiaries, in each case other
than as disclosed in or contemplated by the Prospectus.
(j) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the Company to
file a registration statement under the Act with respect to any securities of
the Company owned or to be owned by such person or, requiring the Company to
include such securities in the securities registered pursuant to the
Registration Statement (or any such right has been effectively waived) or
requiring the registration of any securities pursuant to any other registration
statement filed by the Company under the Act. Neither the filing of the
Registration Statement nor the offering or sale of Shares as contemplated by
this Agreement gives any security holder of the Company any rights for or
relating to the registration of any shares of Common Stock or any other capital
stock of the Company, except such that have been satisfied or waived.
(k) Neither the Company nor any of its subsidiaries is, or with the giving
of notice or passage of time or both would be, in violation of its Amended and
Restated Certificate of Incorporation or Bylaws or in default under any
indenture, mortgage, deed of trust, loan agreement, lease or other agreement or
instrument to which the Company or any of its subsidiaries is a party or to
which any of their respective properties or assets are subject.
(l) The Company and its subsidiaries have good and marketable title in fee
simple to all real property, if any, and good title to all personal property
owned by them, in each case free and clear of all liens, security interests,
pledges, charges, encumbrances, mortgages and defects, except such as are
disclosed in the Prospectus or such as would not have a material adverse effect
on the financial
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position, results of operations or business of the Company and its subsidiaries
taken as a whole and do not interfere with the use made or proposed to be made
of such property by the Company and its subsidiaries; and any real property and
buildings held under lease by the Company or any of its subsidiaries are held
under valid, subsisting and enforceable leases, with such exceptions as are
disclosed in the Prospectus or are not material and do not interfere with the
use made or proposed to be made of such property and buildings by the Company or
any subsidiary.
(m) The Company does not require any consent, approval, authorization,
order or declaration of or from, or registration, qualification or filing with,
any court or governmental agency or body in connection with the sale of the
Shares or the consummation of the transactions contemplated by this Agreement,
except the registration of the Shares under the Act (which, if the Registration
Statement is not effective as of the time of execution hereof, shall be obtained
as provided in this Agreement) and such as may be required by the National
Association of Securities Dealers, Inc. (the "NASD") or under state securities
or blue sky laws in connection with the offer, sale and distribution of the
Shares by the Underwriters.
(n) Other than as disclosed in the Prospectus, there is no litigation,
arbitration, claim, proceeding (formal or informal) or investigation (including
without limitation, any bank regulatory proceeding) pending or, to the Company's
knowledge, threatened in which the Company or any of its subsidiaries is a party
or of which any of their respective properties or assets are the subject which,
if determined adversely to the Company or any subsidiary, would individually or
in the aggregate have a material adverse effect on the financial position,
results of operations or business of the Company and its subsidiaries taken as a
whole. Neither the Company nor any subsidiary is in violation of, or in default
with respect to, any law, statute, rule, regulation, order, judgment or decree,
except as described in the Prospectus or such as do not and will not
individually or in the aggregate have a material adverse effect on the financial
position, results of operations or business of the Company and its subsidiaries
taken as a whole, and neither the Company nor any subsidiary is required to take
any action in order to avoid any such violation or default. (o) Deloitte &
Touche LLP, which has certified certain financial statements of the Company and
its consolidated subsidiaries included in the Registration Statement and the
Prospectus, are independent public accountants as required by the Act, the
Exchange Act and the respective rules and regulations of the Commission
thereunder.
(p) The consolidated financial statements and schedules (including the
related notes) of the Company and its consolidated subsidiaries included or
incorporated by reference in the Registration Statement, the Prospectus and/or
any Preliminary Prospectus were prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved and
fairly present the financial position and results of operations of the Company
and its subsidiaries, on a consolidated basis, at the dates and for the periods
presented. The selected financial data and operating and statistical information
set forth under the captions "Summary,"
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"Selected Consolidated Financial Data," "Recent Operating Results," "Use of
Proceeds" and "Capitalization," in the Prospectus fairly present, on the basis
stated in the Prospectus, the information included therein, and have been
compiled on a basis consistent with that of the audited financial statements
included in the Registration Statement. The supporting notes and schedules
included in the Registration Statement, the Prospectus and/or any Preliminary
Prospectus fairly state in all material respects the information required to be
stated therein in relation to the financial statements taken as a whole. The
unaudited interim consolidated financial statements included or incorporated by
reference in the Registration Statement comply as to form in all material
respects with the applicable accounting requirements of Rule 10-01 of the
Regulation S-X under the Act.
(q) This Agreement has been duly authorized, executed and delivered by the
Company and, assuming due execution by the Representatives of the Underwriters,
constitutes the valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms, subject, as to enforcement, to
applicable bankruptcy, insolvency, reorganization and moratorium laws and other
laws relating to or affecting the enforcement of creditors' rights generally and
to general equitable principles and except as the enforceability of rights to
indemnity and contribution under this Agreement may be limited under applicable
securities laws or the public policy underlying such laws.
(r) The sale of the Shares and the performance of this Agreement and the
consummation of the transactions herein contemplated will not (with or without
the giving of notice or the passage of time or both) (i) conflict with or
violate any term or provision of the Amended and Restated Certificate of
Incorporation or Bylaws or other organizational documents of the Company or any
subsidiary, (ii) result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which the
Company or any subsidiary is a party or to which any of their respective
properties or assets is subject, (iii) conflict with or violate any law,
statute, rule or regulation or any order, judgment or decree of any court or
governmental agency or body having jurisdiction over the Company or any
subsidiary or any of their respective properties or assets or (iv) result in a
breach, termination or lapse of the corporate power and authority of the Company
or any subsidiary to own or lease and operate their respective assets and
properties and conduct their respective business as described in the Prospectus.
(s) When the Shares to be sold by the Company hereunder have been duly
delivered against payment therefor as contemplated by this Agreement, the Shares
will be validly issued, fully paid and nonassessable, and the holders thereof
will not be subject to personal liability solely by reason of being such
holders. The certificates representing the Shares are in proper legal form
under, and conform in all respects to the requirements of, the New Jersey
Business Corporation Act and the requirements of the NASD.
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(t) The Company has not distributed and will not distribute any offering
material in connection with the offering and sale of the Shares other than the
Registration Statement, a Preliminary Prospectus, the Prospectus and other
material, if any, permitted by the Act.
(u) Neither the Company nor any of its officers, directors or affiliates
has (i) taken, directly or indirectly, any action designed to cause or result
in, or that has constituted or might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares or (ii) since the filing of the
Registration Statement (A) sold, bid for, purchased or paid anyone any
compensation for soliciting purchases of, the Shares or (B) paid or agreed to
pay to any person any compensation for soliciting another to purchase any other
securities of the Company.
(v) The operations of the Company and its subsidiaries with respect to any
real property currently leased or owned or by any means controlled by the
Company or any subsidiary (the "Real Property") are in compliance in all
material respects with all federal, state, and local laws, ordinances, rules,
and regulations relating to occupational health and safety and the environment
(collectively, "Laws"), and the Company and its subsidiaries have not violated
any Laws in a way which would have a material adverse effect on the financial
position, results of operations or business of the Company and its subsidiaries
taken as a whole. Except as disclosed in the Prospectus, there is no pending or,
to the Company's knowledge, threatened material claim, litigation or any
administrative agency proceeding, nor has the Company or any subsidiary received
any written or oral notice from any governmental entity or third party, that:
(i) alleges a violation of any Laws by the Company or any subsidiary or (ii)
alleges the Company or any subsidiary is a liable party under the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. ss. 9601 et
seq. or any state superfund law.
(w) Neither the Company nor any subsidiary owns or has the right to use
patents, patent applications, trademarks, trademark applications, trade names,
service marks, copyrights, franchises, trade secrets, proprietary or other
confidential information and intangible properties and assets (collectively,
"Intangibles"), the loss of any of which would have a material adverse effect on
the financial position, results of operations or business of the Company and its
subsidiaries taken as a whole; and, to the best knowledge of the Company,
neither the Company nor any subsidiary has infringed or is infringing, and
neither the Company nor any subsidiary has received notice of infringement with
respect to, asserted Intangibles of others.
(x) Each of the Company and its subsidiaries makes and keeps accurate books
and records reflecting its assets and maintains internal accounting controls
which provide reasonable assurance that (i) transactions are executed in
accordance with management's authorization, (ii) transactions are recorded as
necessary to permit preparation of the Company's consolidated financial
statements in accordance with generally accepted accounting principles and to
maintain accountability for the assets of the Company, (iii) access to the
assets of the Company and each of its subsidiaries is
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<PAGE>
permitted only in accordance with management's authorization, and (iv) the
recorded accountability for assets of the Company and each of its subsidiaries
is compared with existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(y) The Company and its subsidiaries have filed all foreign, federal, state
and local tax returns that are required to be filed by them and have paid all
taxes shown as due on such returns as well as all other taxes, assessments and
governmental charges that are due and payable; and no material deficiency with
respect to any such return has been assessed or proposed.
(z) Except for such plans that are expressly disclosed in the Prospectus,
the Company and its subsidiaries do not maintain, contribute to or have any
material liability with respect to any employee benefit plan, profit sharing
plan, employee pension benefit plan, employee welfare benefit plan, equity-based
plan or deferred compensation plan or arrangement ("Plans") that are subject to
the provisions of the Employee Retirement Income Security Act of 1974, as
amended, or the rules and regulations thereunder ("ERISA"). All Plans are in
compliance in all material respects with all applicable laws, including but not
limited to ERISA and the Internal Revenue Code of 1986, as amended (the "Code"),
and have been operated and administered in all material respects in accordance
with their terms. No Plan is a defined benefit plan or multi-employer plan. The
Company does not provide retiree life and/or retiree health benefits or coverage
for any employee or any beneficiary of any employee after such employee's
termination of employment, except as required by Section 4980B of the Code or
under a Plan which is intended to be "qualified" under Section 401(a) of the
Code. No material liability has been, or could reasonably be expected to be,
incurred under Title IV of ERISA or Section 412 of the Code by any entity
required to be aggregated with the Company or any of the subsidiaries pursuant
to Section 4001(b) of ERISA and/or Section 414(b) or (c) of the Code (and the
regulations promulgated thereunder) with respect to any "employee pension
benefit plan" which is not a Plan. As used in this subsection, the terms
"defined benefit plan," "employee benefit plan," "employee pension benefit
plan," "employee welfare benefit plan" and "multi-employer plan" shall have the
respective meanings assigned to such terms in Section 3 of ERISA.
(aa) No material labor dispute exists with the Company's or any
subsidiary's employees, and no such labor dispute is threatened. The Company has
no knowledge of any existing or threatened labor disturbance by the employees of
any of its principal agents, suppliers, contractors or customers that would have
a material adverse effect on the financial position, results of operations or
business of the Company and its subsidiaries taken as a whole.
(bb) The Company and its subsidiaries have received all permits, licenses,
franchises, authorizations, registrations, qualifications and approvals
(collectively, "Permits") of governmental or regulatory authorities (including,
without limitation, state or federal bank regulatory authorities) as may be
required of them to own their properties and conduct their businesses in the
manner described in the Prospectus, subject to such qualifications as may be set
forth in the Prospectus; and the Company and
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<PAGE>
its subsidiaries have fulfilled and performed all of their material obligations
with respect to such Permits, and no event has occurred which allows or, after
notice or lapse of time or both, would allow revocation or termination thereof
or result in any other mateiral impairment of the rights of the holder of any
such Permit, subject in each case to such qualification as may be set forth in
the Prospectus; and, except as described in the Prospectus, such Permits contain
no restrictions that materially affect the ability of the Company and its
subsidiaries to conduct their businesses and no state or federal bank regulatory
agency or body has issued any order or decree impairing, restricting or
prohibiting the payment of dividends by any of its subsidiaries to the Company.
(cc) The Company and each of its subsidiaries has filed, or has had filed
on its behalf, on a timely basis, all materials, reports, documents and
information, including but not limited to annual reports, call reports and
reports of examination with each applicable bank regulatory authority, board or
agency, which are required to be filed by it, except where the failure to have
timely filed such materials, reports, documents and information would not have a
material adverse effect on the financial position, results of operations or
business of the Company and its subsidiaries taken as a whole.
(dd) Neither the Company, nor any subsidiary is an "investment company" or
a company "controlled" by an investment company as such terms are defined in
Sections 3(a) and 2(a)(9), respectively, of the Investment Company Act of 1940,
as amended (the "Investment Company Act"), and, if the Company or any subsidiary
conducts its business as set forth in the Registration Statement and the
Prospectus, will not become an "investment company" and will not be required to
register under the Investment Company Act.
(ee) The Company has not offered, or caused the Underwriters to offer,
Shares to any person pursuant to the Directed Share Program with the specific
intent to unlawfully influence (i) a customer or supplier of the Company to
alter the customer's or supplier's level or type of business with the Company,
or (ii) a trade journalist or publication to write or publish favorable
information about the Company or its products.
(ff) Sun National Bank and Sun National Bank, Delaware are members in good
standing of the Federal Reserve System and their deposits are insured by the
Federal Deposit Insurance Corporation up to the legal limits.
(gg) The Company and each subsidiary have in place and effective such
policies of insurance, with limits of liability in such amounts, as are normal
and prudent in the ordinary scope of business similar to that of the Company and
such subsidiary in the respective jurisdiction in which they conduct business.
2. Purchase and Sale of Shares.
-------------------------------
(a) Subject to the terms and conditions herein set forth, the Company
agrees to sell to each of the Underwriters, and each of the Underwriters agrees,
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<PAGE>
severally and not jointly, to purchase from the Company, at a purchase price of
[_____] ($_____) per share (the "Per Share Price"), the number of Firm Shares
(to be adjusted by the Representatives so as to eliminate fractional shares)
determined by multiplying the aggregate number of Firm Shares to be sold by the
Company as set forth in the first paragraph of this Agreement by a fraction, the
numerator of which is the aggregate number of Firm Shares to be purchased by
such Underwriter as set forth opposite the name of such Underwriter in Schedule
I hereto, and the denominator of which is the aggregate number of Firm Shares to
be purchased by the several Underwriters hereunder.
(b) The Company hereby grants to the Underwriters the right to purchase at
their election in whole or in part from time to time up to [_____] Optional
Shares, at the Per Share Price, for the sole purpose of covering over-allotments
in the sale of the Firm Shares. Any such election to purchase Optional Shares
may be exercised by written notice from the Representatives to the Company,
given at any time (but not more than once) within a period of 30 calendar days
after the date of this Agreement and setting forth the aggregate number of
Optional Shares to be purchased and the date on which such Optional Shares are
to be delivered, as determined by the Representatives but in no event earlier
than the First Time of Delivery (as hereinafter defined) or, unless the
Representatives otherwise agree in writing, earlier than two or later than ten
business days after the date of such notice. In the event the Underwriters elect
to purchase all or a portion of the Optional Shares, the Company agrees to
furnish or cause to be furnished to the Representatives the certificates,
letters and opinions, and to satisfy all conditions, set forth in Section 7
hereof at the Subsequent Time of Delivery (as hereinafter defined).
(c) In making this Agreement, each Underwriter is contracting severally,
and not jointly, and except as provided in Sections 2(b) and 9 hereof, the
agreement of each Underwriter is to purchase only that number of shares
specified with respect to that Underwriter in Schedule I hereto. No Underwriter
shall be under any obligation to purchase any Optional Shares prior to an
exercise of the option with respect to such Shares granted pursuant to Section
2(b) hereof.
3. Offering by the Underwriters. Upon the authorization by the
Representatives of the release of the Shares, the several Underwriters propose
to offer the Shares for sale upon the terms and conditions disclosed in the
Prospectus.
4. Delivery of Shares; Closing. Certificates in definitive form for the
Shares to be purchased by each Underwriter hereunder, and in such denominations
and registered in such names as the Representatives may request upon at least 48
hours' prior notice to the Company, shall be delivered by or on behalf of the
Company to the Representatives for the account of such Underwriter, against
payment by such Underwriter on its behalf of the purchase price therefor by wire
transfer of immediately available funds to such accounts as the Company shall
designate in writing. The closing of the sale and purchase of the Shares shall
be held at the offices of Arnold & Porter, 555 12th Street, N.W., Washington, DC
20004. The time and date of such delivery and payment shall be, with respect to
the Firm Shares, at 9:00 a.m., Washington, DC time, on the fourth (4th) full
business day after this Agreement is executed or at such other time and date as
the Representatives and the Company may agree upon in writing, and, with
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<PAGE>
respect to the Optional Shares, at 9:00 a.m., Washington, DC time, on the date
specified by the Representatives in the written notice given by the
Representatives of the Underwriters' election to purchase all or part of such
Optional Shares, or at such other time and date as the Representatives and the
Company may agree upon in writing. Such time and date for delivery of the Firm
Shares is herein called the "First Time of Delivery," such time and date for
delivery of any Optional Shares, if not the First Time of Delivery, is herein
called a "Subsequent Time of Delivery," and each such time and date for delivery
is herein called a "Time of Delivery." The Company will make such certificates
available for checking and packaging at least 24 hours prior to each Time of
Delivery at the office of Arnold & Porter, 555 12th Street, N.W., Washington, DC
20004 or at such other location specified by the Representatives in writing at
least 48 hours prior to such Time of Delivery.
5. Covenants of the Company. The Company covenants and agrees with each of
the Underwriters that:
(a) The Company will use its best efforts to cause the Registration
Statement, if not effective prior to the execution and delivery of this
Agreement, to become effective. If the Registration Statement has been declared
effective prior to the execution and delivery of this Agreement, the Company
will file the Prospectus with the Commission pursuant to and in accordance with
subparagraph (1) (or, if applicable and if consented to by the Representatives,
subparagraph (4)) of Rule 424(b) within the time period required under Rule
424(b) under the Act. The Company will advise the Representatives promptly of
any such filing pursuant to Rule 424(b).
(b) The Company will not file with the Commission the Prospectus or the
amendment referred to in Section 1(a) hereof, any amendment or supplement to the
Prospectus or any amendment to the Registration Statement unless the
Representatives have received a reasonable period of time to review any such
proposed amendment or supplement and consented to the filing thereof and will
use its best efforts to cause any such amendment to the Registration Statement
to be declared effective as promptly as possible. Upon the reasonable request of
the Representatives or counsel for the Underwriters, the Company will promptly
prepare and file with the Commission, in accordance with the rules and
regulations of the Commission, any amendments to the Registration Statement or
amendments or supplements to the Prospectus that may be necessary or advisable
in connection with the distribution of the Shares by the several Underwriters
and will use its best efforts to cause any such amendment to the Registration
Statement to be declared effective as promptly as possible. If required, the
Company will file any amendment or supplement to the Prospectus with the
Commission in the manner and within the time period required by Rule 424(b)
under the Act. The Company will advise the Representatives, promptly after
receiving notice thereof, of the time when the Registration Statement or any
amendment thereto has been filed or declared effective or the Prospectus or any
amendment or supplement thereto has been filed and will provide evidence to the
Representatives of each such filing or effectiveness.
(c) The Company will advise the Representatives promptly after receiving
notice or obtaining knowledge of (i) when any post-effective amendment
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<PAGE>
to the Registration Statement is filed with the Commission, (ii) the receipt of
any comments from the Commission concerning the Registration Statement, (iii)
when any post-effective amendment to the Registration Statement becomes
effective, or when any supplement to the Prospectus or any amended Prospectus
has been filed, (iv) the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or any part thereof or any order
preventing or suspending the use of any Preliminary Prospectus or the Prospectus
or any amendment or supplement thereto, (v) the suspension of the qualification
of the Shares for offer or sale in any jurisdiction or of the initiation or
threatening of any proceeding for any such purpose, or (vi) any request made by
the Commission or any securities authority of any other jurisdiction for
amending the Registration Statement, for amending or supplementing the
Prospectus or for additional information. The Company will use its best efforts
to prevent the issuance of any such stop order or suspension and, if any such
stop order or suspension is issued, to obtain the withdrawal thereof as promptly
as possible.
(d) If the delivery of a prospectus relating to the Shares is required
under the Act at any time prior to the expiration of nine months after the date
of the Prospectus and if at such time any events have occurred as a result of
which the Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, or if for any reason it is necessary during such same
period to amend or supplement the Prospectus, the Company will promptly notify
the Representatives and upon its request (but at the Company's expense) prepare
and file with the Commission an amendment or supplement to the Prospectus that
corrects such statement or omission or effects such compliance and will furnish
without charge to each Underwriter and to any dealer in securities as many
copies of such amended or supplemented Prospectus as the Representatives may
from time to time reasonably request.
(e) The Company promptly from time to time will take such action as the
Representatives may reasonably request to qualify the Shares for offering and
sale under the securities or blue sky laws of such jurisdictions as the
Representatives may request and will continue such qualifications in effect for
as long as may be necessary to complete the distribution of the Shares, provided
that in connection therewith the Company shall not be required to qualify as a
foreign corporation or as a dealer in securities or to file a general consent to
service of process in any jurisdiction. The Company will file such statements
and reports as may be required by the laws of each jurisdiction in which the
Shares have been qualified as above provided.
(f) The Company will promptly provide each of the Representatives, without
charge, (i) two manually executed copies of the Registration Statement as
originally filed with the Commission and of each amendment thereto, including
all exhibits and all documents or information incorporated by reference therein,
(ii) for each other Underwriter, a conformed copy of the Registration Statement
as originally filed and of each amendment thereto, without exhibits but
including all documents or information incorporated by reference therein and
(iii) so long as a prospectus relating to the Shares is required to be delivered
under the Act, as many copies
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<PAGE>
of each Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto as the Representatives may reasonably request.
(g) As soon as practicable, but not later than the Availability Date (as
defined below), the Company will make generally available to its security
holders an earnings statement of the Company and its subsidiaries, if any,
covering a period of at least 12 months beginning after the effective date of
the Registration Statement (which need not be audited) complying with Section
11(a) of the Act and the rules and regulations thereunder. "Availability Date"
means the forty-fifth (45th) day after the end of the fourth fiscal quarter
following the fiscal quarter in which the Registration Statement went effective,
except that if such fourth fiscal quarter is the last quarter of the Company's
fiscal year, "Availability Date" means the ninetieth (90th) day after the end of
such fourth fiscal quarter.
(h) During the period beginning from the date hereof and continuing to and
including the date 180 days after the date of the Prospectus, the Company will
not, and will cause its officers and directors not to, without the prior written
consent of the Representatives, directly or indirectly (i) offer, sell, contract
to sell or otherwise dispose of, any shares of Common Stock or securities
convertible into or exercisable or exchangeable for shares of Common Stock or
(ii) enter into any swap or other agreement or any transaction that transfers,
in whole or in part, the economic consequences of ownership of shares of Common
Stock whether any such swap or other agreement is to be settled by delivery of
shares of Common Stock, other securities, cash or otherwise; except for the sale
of the Shares hereunder and except for the issuance of Common Stock upon the
exercise of stock options or warrants or the conversion of convertible
securities outstanding on the date of this Agreement or to the extent that such
stock options, warrants and convertible securities are disclosed in the
Prospectus or except for the grant to employees of stock options to purchase
Common Stock which are not exercisable within such 180 days.
(i) During the period of three years after the effective date of the
Registration Statement, the Company will furnish to the Representatives and,
upon request, to each of the other Underwriters, without charge, (i) copies of
all reports or other communications (financial or other) furnished to
shareholders and (ii) as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission, the NASD or any
national securities exchange.
(j) Prior to the termination of the underwriting syndicate contemplated by
this Agreement, neither the Company nor any of its officers, directors or
affiliates will (i) take, directly or indirectly, any action designed to cause
or to result in, or that might reasonably be expected to cause or result in, the
stabilization or manipulation of the price of any security of the Company or
(ii) sell, bid for, purchase or pay anyone any compensation for soliciting
purchases of, the Shares.
(k) In case of any event, at any time within the period during which a
prospectus is required to be delivered under the Act, as a result of which any
Preliminary Prospectus or the Prospectus, as then amended or supplemented, would
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<PAGE>
contain an untrue statement of a material fact, or omit to state any material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, or, if it is necessary
at any time to amend any Preliminary Prospectus or the Prospectus to comply with
the Act or any applicable securities or blue sky laws, the Company promptly will
prepare and file with the Commission, and any applicable state securities
commission, an amendment, supplement or document that will correct such
statement or omission or effect such compliance and will furnish to the several
Underwriters such number of copies of such amendment(s), supplement(s) or
document(s) as the Representatives may reasonably request. For purposes of this
subsection (k), the Company will provide such information to the
Representatives, the Underwriters' counsel and counsel to the Company as shall
be necessary to enable such persons to consult with the Company with respect to
the need to amend or supplement the Registration Statement, any Preliminary
Prospectus or the Prospectus or file any document, and shall furnish to the
Representatives and the Underwriters' counsel such further information as each
may from time to time reasonably request.
(l) The Company will use its best efforts to obtain, and thereafter
maintain, the qualification or listing of the shares of Common Stock (including,
without limitation, the Shares) on the Nasdaq National Market System.
6. Expenses and Fees.
(a) The Company will pay all costs and expenses incident to the performance
of the obligations of the Company under this Agreement, whether or not the
transactions contemplated hereby are consummated or this Agreement is terminated
pursuant to Section 10 hereof, including, without limitation, all costs and
expenses incident to (i) the printing of and mailing expenses associated with
the Registration Statement, any Preliminary Prospectus and the Prospectus and
any amendments or supplements thereto, this Agreement, the Agreement among
Underwriters, the Underwriters' Questionnaire submitted to each of the
Underwriters by the Representatives in connection herewith, the power of
attorney executed by each of the Underwriters in favor of Advest, Inc. in
connection herewith, the Dealer Agreement and related documents (collectively,
the "Underwriting Documents") and the preliminary Blue Sky memorandum relating
to the offering prepared by Arnold & Porter, counsel to the Underwriters
(collectively with any supplement thereto, the "Preliminary Blue Sky
Memorandum"); (ii) the fees, disbursements and expenses of the Company's counsel
and accountants in connection with the registration of the Shares under the Act
and all other expenses in connection with the preparation and, if applicable,
filing of the Registration Statement (including all amendments thereto), any
Preliminary Prospectus, the Prospectus and any amendments and supplements
thereto, the Underwriting Documents and the Preliminary Blue Sky Memorandum;
(iii) the delivery of copies of the foregoing documents to the Underwriters;
(iv) the filing fees of the Commission and the NASD relating to the Shares; (v)
the preparation, issuance and delivery to the Underwriters of any certificates
evidencing the Shares, including transfer agent's and registrar's fees; (vi) the
qualification of the Shares for offering and sale under state securities and
blue sky laws, including filing fees and fees and disbursements of counsel for
the Underwriters (and local counsel therefor) relating thereto; (vii) any
listing of the Shares
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<PAGE>
on the Nasdaq National Market System; (viii) any expenses for travel, lodging
and meals incurred by the Company and any of its officers, directors and
employees in connection with any meetings with prospective investors in the
Shares; and (ix) all other costs and expenses reasonably incident to the
performance of the Company's obligations hereunder that are not otherwise
specifically provided for in this Section 6.
(b) The Representatives and the Underwriters will pay their own expenses,
including the fees of their counsel (except as provided in Section 6(a)(vi)
hereof), public advertisement of the offering and their own marketing and due
diligence expenses.
(c) At the First Time of Delivery, the Company shall pay to Advest, Inc.
the sum of [_____] ($_____) as a financial advisory fee.
7. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters hereunder to purchase and pay for the Shares to be delivered at
each Time of Delivery shall be subject, in their discretion, to the accuracy of
the representations and warranties of the Company contained herein as of the
date hereof and as of such Time of Delivery, to the accuracy of the statements
of the Company's officers made pursuant to the provisions hereof, to the
performance by the Company of its covenants and agreements hereunder, and to the
following additional conditions precedent:
(a) If the registration statement as amended to date has not become
effective prior to the execution of this Agreement, such registration statement
shall have been declared effective not later than 11:00 a.m., New York City
time, on the date of this Agreement or such later date and/or time as shall have
been consented to by the Representatives in writing. If required, the Prospectus
and any amendment or supplement thereto shall have been filed with the
Commission pursuant to Rule 424(b) within the applicable time period prescribed
for such filing and in accordance with Section 5(a) of this Agreement; no stop
order suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceedings for that purpose shall have
been instituted, threatened or, to the knowledge of the Company and the
Representatives, contemplated by the Commission; and all requests for additional
information on the part of the Commission shall have been complied with to the
Representatives' reasonable satisfaction.
(b) The Representatives shall each have received a copy of an executed
lock-up agreement from the Company and each of the Company's executive officers
and directors and certain shareholders of Common Stock, in the form attached
hereto as Exhibit A.
(c) The Representatives shall each have received an opinion, dated such
Time of Delivery, of Malizia, Spidi, Sloane & Fisch, P.C., special counsel for
the Company, in form and substance satisfactory to the Representatives and their
respective counsel, to the effect that:
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(i) The Company is validly existing as a corporation in good standing under
the laws of the State of New Jersey and has the corporate power and authority to
own or lease its properties and conduct its business as described in the
Registration Statement and the Prospectus and to enter into this Agreement and
perform its obligations hereunder. The Company is duly qualified to transact
business as a foreign corporation in each jurisdiction in which it owns or
leases property, or conducts any business, so as to require such qualification,
except where the failure to so qualify would not have a material adverse effect
on the financial position, results of operations or business of the Company and
its subsidiaries taken as a whole. The Company is a registered bank holding
company under the Bank Holding Company Act of 1956, as amended.
(ii) Each of the Company's subsidiaries is validly existing as a
corporation in good standing under the laws of its jurisdiction of incorporation
and has the corporate power and authority to own or lease its properties and
conduct its business as described in the Registration Statement and the
Prospectus. Each subsidiary is duly qualified to transact business as a foreign
corporation in each jurisdiction in which it owns or leases property, or
conducts any business, so as to require such qualification, except where the
failure to so qualify would not have a material adverse effect on the financial
position, results of operations or business of the Company and its subsidiaries
taken as a whole.
(iii) All of the issued shares of capital stock of the Company, including
the Shares to be sold by the Company pursuant hereto when delivered against
payment therefor as contemplated hereby, have been duly authorized and validly
issued, are fully paid and nonassessable and conform to the description of the
Common Stock contained in the Prospectus. None of the issued shares of Common
Stock of the Company or capital stock of Sun National Bank or Sun National Bank,
Delaware has been issued or is owned or held in violation of any statutory (or,
to the knowledge of such counsel, any other) preemptive rights of shareholders,
and no person or entity (including any holder of outstanding shares of Common
Stock of the Company or capital stock of its subsidiaries) has any statutory
(or, to the knowledge of such counsel, any other) preemptive or other rights to
subscribe for any of the Shares.
(iv) All of the issued shares of capital stock of Sun National Bank and Sun
National Bank, Delaware have been duly authorized and validly issued, are fully
paid and nonassessable, except to the extent such shares may be deemed
assessable under 12 U.S.C. Section 55, and, to such counsel's knowledge, are
owned beneficially by the Company or its subsidiaries, free and clear of all
liens, security interests, pledges, charges, encumbrances, shareholders'
agreements, voting agreements, proxies, voting trusts, defects, equities or
claims of any nature whatsoever (collectively, "Encumbrances"), including,
without limitation, any Encumbrance arising or resulting from any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement of or entered
into by the Company, Sun National Bank, or Sun National Bank, Delaware.
(v) Except as disclosed in the Prospectus, there are, to such counsel's
knowledge, no outstanding (A) securities or obligations of the Company
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or any of its subsidiaries convertible into or exchangeable for any capital
stock of the Company or any subsidiary, (B) warrants, rights or options to
subscribe for or purchase from the Company or any of its subsidiaries any such
capital stock or any such convertible or exchangeable securities or obligations
or (C) obligations of the Company or any of its subsidiaries to issue any shares
of capital stock, any such convertible or exchangeable securities or
obligations, or any such warrants, rights or options.
(vi) There are no contracts, agreements or understandings known to such
counsel between the Company and any person granting such person the right to
require the Company to file a registration statement under the Act with respect
to any securities of the Company owned or to be owned by such person or,
requiring the Company to include such securities in the securities registered
pursuant to the Registration Statement (or any such right has been effectively
waived) or requiring the registration of any securities pursuant to any other
registration statement filed by the Company under the Act.
(vii) The sale of the Shares being sold at such Time of Delivery and the
performance of this Agreement and the consummation of the transactions herein
contemplated will not conflict with or violate any provision of the articles of
incorporation or bylaws of the Company or any of its subsidiaries, in each case
as amended to date, or to such counsel's knowledge, any existing law, statute,
rule or regulation, or in any material respect, conflict with, or (with or
without the giving of notice or the passage of time or both) result in a breach
or violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement, lease or other
agreement or instrument known to such counsel to which the Company or any of its
subsidiaries is a party or to which any of their respective properties or assets
is subject, or, conflict with or violate any order, judgment or decree known to
such counsel, of any court or governmental agency or body having jurisdiction
over the Company or any of its subsidiaries or any of their respective
properties or assets.
(viii) To such counsel's knowledge, no consent, approval, authorization,
order or declaration of or from, or registration, qualification or filing with,
any court or governmental agency or body is required for the sale of the Shares
or the consummation of the transactions contemplated by this Agreement, except
such as have been or will have been obtained and are or will be in effect, and
except the registration of the Shares under the Act, and such as may be required
by the NASD or under state securities or blue sky laws in connection with the
offer, sale and distribution of the Shares by the Underwriters.
(ix) To such counsel's knowledge and other than as disclosed in or
contemplated by the Prospectus, there is no litigation, arbitration, claim,
proceeding (formal or informal) or investigation pending or threatened, in which
the Company or any of its subsidiaries is a party or of which any of their
respective properties or assets is the subject which, if determined adversely to
the Company or any of its subsidiaries, would individually or in the aggregate
have a material adverse effect on the financial position, results of operations
or business of the Company and its subsidiaries taken as a whole.
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<PAGE>
(x) This Agreement has been duly authorized, executed and delivered by the
Company and, assuming due execution by the Representatives of the Underwriters,
constitutes the valid and binding agreement of the Company, enforceable against
the Company, in accordance with its terms, subject, as to enforcement, to
applicable bankruptcy, insolvency, reorganization and moratorium laws and other
laws relating to or affecting the enforcement of creditors' rights generally and
to general equitable principles and except as the enforceability of rights to
indemnity and contribution under this Agreement may be limited under applicable
securities laws or the public policy underlying such laws.
(xi) Neither the Company nor any of its subsidiaries is an "investment
company" or a company "controlled" by an investment company as such terms are
defined in Sections 3(a) and 2(a)(9), respectively, of the Investment Company
Act.
(xii) The Registration Statement and the Prospectus and each amendment or
supplement thereto (other than the financial statements, the notes and schedules
thereto and other financial data included therein, to which such counsel need
express no opinion), as of their respective effective or issue dates, complied
as to form in all material respects with the requirements of the Act and the
respective rules and regulations thereunder. Such counsel do not know of any
contracts or other documents of a character required to be filed as an exhibit
to the Registration Statement or required to be described in the Registration
Statement or the Prospectus which are not so filed or described as required.
(xiii) The Registration Statement was declared effective under the Act as
of the date and time specified in such opinion and, to such counsel's knowledge,
no stop order suspending the effectiveness of the Registration Statement has
been issued under the Act and no proceedings therefor have been initiated or
threatened by the Commission.
Such counsel shall also state that they have participated in the
preparation of the Registration Statement and the Prospectus and in conferences
with officers and other representatives of the Company, representatives of the
independent public accountants for the Company, and representatives of and
counsel to the Underwriters at which the contents of the Registration Statement,
the Prospectus and related matters were discussed and, although such counsel has
not passed upon or assumed any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement or the
Prospectus, and although such counsel has not undertaken to verify independently
the accuracy or completeness of the statements in the Registration Statement or
the Prospectus, nothing has come to such counsel's attention to lead them to
believe that the Registration Statement, or any further amendment thereto made
prior to such Time of Delivery, on its effective date and as of such Time of
Delivery, contained or contains any untrue statement of a material fact or
omitted or omits to state any material fact required to be stated therein or
necessary to make the statements therein, not misleading, or that the
Prospectus, or any amendment or supplement thereto made prior to such Time of
Delivery, as of its issue date and as of such Time of Delivery, contained
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or contains any untrue statement of a material fact or omitted or omits to state
a material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading (provided that
such counsel need express no belief regarding the financial statements, the
notes and schedules thereto and other financial data contained in the
Registration Statement, any amendment thereto, or the Prospectus, or any
amendment or supplement thereto).
In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deems proper, on certificates of officers of
the Company, public officials and letters from officials of the NASD. Copies of
such certificates of officers of the Company and other opinions shall be
addressed and furnished to the Underwriters and furnished to counsel for the
Underwriters.
(d) Arnold & Porter, counsel for the Underwriters, shall have furnished to
each of the Representatives such opinion or opinions, dated such Time of
Delivery, with respect to such matters as the Representatives may reasonably
request, and the Company shall have furnished to such counsel such documents as
they request for the purpose of enabling them to pass upon such matters.
(e) The Representatives shall each have received from Deloitte & Touche
LLP, independent public accountants, in form and substance satisfactory to the
Representatives, letters dated as of the date hereof, the date of delivery of
the Firm Securities and the date(s) of delivery of any Option Securities,
containing statements and information of the type ordinarily included in
accountants' "comfort letters" to Underwriters with respect to the financial
statements and certain financial information contained in the Registration
Statement and Prospectus; provided that the letter dated as of the date of
delivery of the Firm Securities shall use a "cut-off date" not earlier than the
date hereof.
(f) Since the date of the latest audited financial statements included in
the Prospectus, neither the Company nor any of the subsidiaries shall have
sustained any material adverse change, or any development involving a
prospective material adverse change (including, without limitation, a change in
management or control of the Company), in or affecting the position (financial
or otherwise), results of operations, net worth or business prospects of the
Company and its subsidiaries, otherwise than as disclosed in or contemplated by
the Prospectus, the effect of which, in either such case, in the
Representatives' reasonable judgment makes it impracticable or inadvisable to
proceed with the purchase, sale and delivery of the Shares being delivered at
such Time of Delivery as contemplated by the Registration Statement, as amended
as of the date hereof.
(g) Subsequent to the date hereof, there shall not have occurred any of the
following: (i) any suspension or limitation in trading in securities generally
on the New York Stock Exchange, and/or the American Stock Exchange or any
setting of minimum prices for trading on such exchange, or in the Common Stock
of the Company by the Commission or the NASD; (ii) a moratorium on commercial
banking activities in New York or New Jersey declared by either federal or state
authorities; or (iii) any
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outbreak or escalation of hostilities involving the United States, declaration
by the United States of a national emergency or war or any other national or
international calamity or emergency if the effect of any such event specified in
this clause (iii) in the Representatives' reasonable judgment makes it
impracticable or inadvisable to proceed with the purchase, sale and delivery of
the Shares being delivered at such Time of Delivery as contemplated by the
Registration Statement, as amended as of the date hereof.
(h) The Company shall have furnished to the Representatives at such Time of
Delivery certificates of the chief executive officer or an executive vice
president and the chief financial officer of the Company satisfactory to the
Representatives, as to the accuracy of the representations and warranties of the
Company herein at and as of such Time of Delivery with the same effect as if
made at such Time of Delivery, as to the performance by the Company of all of
its respective obligations hereunder to be performed at or prior to such Time of
Delivery, and as to such other matters as the Representatives may reasonably
request, and the Company shall have furnished or caused to be furnished
certificates of such officers as to such matters as the Representatives may
reasonably request.
(i) The representations and warranties of the Company in this Agreement and
in the certificates delivered by the Company pursuant to this Agreement shall be
true and correct in all material respects when made and on and as of each Time
of Delivery as if made at such time, and the Company shall have performed all
covenants and agreements and satisfied all conditions contained in this
Agreement required to be performed or satisfied by the Company at or before such
Time of Delivery.
(j) The Shares shall have been approved for quotation in the Nasdaq
National Market System.
(k) Each person purchasing Shares pursuant to the Directed Share Program
shall have executed and delivered to each of the Representatives a subscription
agreement in form and substance acceptable to the Representatives.
8. Indemnification and Contribution.
---------------------------------
(a) The Company agrees to indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon: (i) any untrue statement or alleged untrue statement made
by the Company in Section 1 of this Agreement; (ii) any untrue statement or
alleged untrue statement of any material fact contained in (A) the Registration
Statement or any amendment thereto, any Preliminary Prospectus or the Prospectus
or any amendment or supplement thereto, or (B) any application or other
document, or amendment or supplement thereto, executed by the Company or based
upon written information furnished by or on behalf of the Company filed in any
jurisdiction in order to qualify the Shares under the securities or blue sky
laws thereof or filed with the Commission or any securities association or
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securities exchange (each an "Application"); or (iii) the omission of or alleged
omission to state in the Registration Statement or any amendment thereto, any
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto,
or any Application of a material fact required to be stated therein or necessary
to make the statements therein not misleading; and will reimburse each
Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating, defending against or appearing as
a third-party witness in connection with any such loss, claim, damage, liability
or action; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage, liability or action arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in the Registration Statement or any amendment
thereto, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto or any Application in reliance upon and in conformity with
written information furnished to the Company by any Underwriter through the
Representatives expressly for use therein (which information is solely as set
forth in Section 1(c) hereof). The Company will not, without the prior written
consent of the Representatives of the Underwriters, which shall not be
unreasonably withheld, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding (or
related cause of action or portion thereof) in respect of which indemnification
may be sought hereunder (whether or not any Underwriter is a party to such
claim, action, suit or proceeding), unless such settlement, compromise or
consent includes an unconditional release of each Underwriter from all liability
arising out of such claim, action, suit or proceeding (or related cause of
action or portion thereof).
(b) The Company agrees to indemnify and hold harmless the Underwriters and
each person, if any, who controls the Underwriters within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act ("Underwriter
Entities"), against any and all losses, claims, damages or liabilities
(including, without limitation, any legal or other expenses reasonably incurred
in connection with defending or investigating any such action or claim): (i)
caused by the failure of any Participant to pay for and accept delivery of the
Shares which, immediately following the effectiveness of the Registration
Statement, were subject to a properly confirmed agreement to purchase; or (ii)
related to, arising out of, or in connection with the Directed Share Program,
provided that the Company shall not be responsible under this subsection 8(b)
for any losses, claims, damages or liabilities (or expenses relating thereto)
that are finally judicially determined to have resulted from the bad faith or
gross negligence of the Underwriter Entities.
(c) Each Underwriter, severally but not jointly, agrees to indemnify and
hold harmless the Company against any losses, claims, damages or liabilities to
which the Company may become subject under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or any amendment thereto,
any Preliminary Prospectus, the Prospectus or any amendment or supplement
thereto, or any Application or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not
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<PAGE>
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company by such Underwriter through the Representatives expressly for use
therein (which information is solely as set forth in Section 1(c) hereof); and
will reimburse the Company for any legal or other expenses reasonably incurred
by the Company in connection with investigating or defending any such loss,
claim, damage, liability or action.
(d) Promptly after receipt by an indemnified party under subsection (a),
(b) or (c) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve the indemnifying party from any liability
which it may have to any indemnified party otherwise than under such subsection
(a), (b) or (c). In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel satisfactory to
such indemnified party (who shall not, except with the consent of the
indemnified party, be counsel to the indemnifying party); provided, however,
that if the defendants in any such action include both the indemnified party and
the indemnifying party and the indemnified party shall have reasonably concluded
that there may be one or more legal defenses available to it or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnifying party shall not have the right to
assume the defense of such action on behalf of such indemnified party and such
indemnified party shall have the right to select separate counsel to defend such
action on behalf of such indemnified party. After such notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof and approval by such indemnified party of counsel appointed to
defend such action, the indemnifying party will not be liable to such
indemnified party under this Section 8 for any legal or other expenses, other
than reasonable costs of investigation, subsequently incurred by such
indemnified party in connection with the defense thereof. Nothing in this
Section 8(d) shall preclude an indemnified party from participating at its own
expense in the defense of any such action so assumed by the indemnifying party.
Notwithstanding anything contained herein to the contrary, if indemnity may be
sought pursuant to Section 8(b) hereof in respect of such action or proceeding,
then in addition to such separate firm for the indemnified parties, the
indemnifying party shall be liable for the reasonable fees and expenses of
respective counsel for the Underwriters for the defense of any losses, claims,
damages and liabilities arising out of the Directed Share Program, and all
persons, if any, who control the Underwriters within the meaning of either
Section 15 of the Act or Section 20 of the Exchange Act.
(e) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a) or
(c) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount
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<PAGE>
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Underwriters on the other hand from the offering of the Shares. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law or if the indemnified party failed to give the
notice required under subsection (d) above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company on the one hand and the Underwriters on the
other hand in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities (or actions in respect thereof), as well
as any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the Underwriters on the other hand shall be
deemed to be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriters. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company on the one hand or the Underwriters on the other hand and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Underwriters agree that
it would not be just and equitable if contributions pursuant to this subsection
(e) were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this subsection (e). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this subsection (e) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (e), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (e) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(f) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each officer, director and employee of
the Underwriters and to each person, if any, who controls any Underwriter within
the meaning of the Act or the Exchange Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer,
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<PAGE>
trustee and director of the Company and to each person, if any, who controls the
Company within the meaning of the Act or the Exchange Act.
9. Default of Underwriters.
------------------------
(a) If any Underwriter defaults in its obligation to purchase Shares at a
Time of Delivery, the Representatives may in their discretion arrange for the
Representatives or another party or other parties to purchase such Shares on the
terms contained herein within thirty-six (36) hours after such default by any
Underwriter. In the event that, within the respective prescribed period, the
Representatives notify the Company that they have so arranged for the purchase
of such Shares, the Representatives shall have the right to postpone a Time of
Delivery for a period of not more than seven (7) days in order to effect
whatever changes may thereby be made necessary in the Registration Statement or
the Prospectus, or in any other documents or arrangements, and the Company
agrees to file promptly any amendments to the Registration Statement or the
Prospectus that in the Representatives' opinion may thereby be made necessary.
The cost of preparing, printing and filing any such amendments shall be paid for
by the Underwriters. The term "Underwriter" as used in this Agreement shall
include any person substituted under this Section with like effect as if such
person had originally been a party to this Agreement with respect to such
Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by the Representatives as
provided in subsection (a) above, if any, the aggregate number of such Shares
which remains unpurchased does not exceed one-eleventh (1/11) of the aggregate
number of Shares to be purchased at such Time of Delivery, then the Company
shall have the right to require each non-defaulting Underwriter to purchase the
number of Shares which such Underwriter agreed to purchase hereunder at such
Time of Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Shares which such
Underwriter agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made.
10. Termination.
-----------
(a) This Agreement may be terminated in the sole discretion of the
Representatives by notice to the Company given prior to the First Time of
Delivery or any Subsequent Time of Delivery, respectively, in the event that (i)
any condition to the obligations of the Underwriters set forth in Section 7
hereof has not been satisfied, or (ii) the Company shall have failed, refused or
been unable to deliver Certificates in definitive form for the Shares or the
Company shall have failed, refused or been unable to perform all obligations and
satisfy all conditions on its part to be performed or satisfied hereunder at or
prior to such Time of Delivery, in either case other than by reason of a default
by any of the Underwriters. If this Agreement is terminated pursuant to this
Section 10(a), the Company will reimburse the Underwriters severally upon demand
for all reasonable out-of-pocket expenses (including counsel fees and
disbursements) that shall have been incurred by them in connection with the
proposed purchase and sale of
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<PAGE>
the Shares. Any termination pursuant to this Section 10(a) shall be without
liability on the part of any Underwriter to the Company or on the part of the
Company to any Underwriter (except for expenses to be paid by the Company
pursuant to Section 6 hereof or reimbursed by the Company pursuant to this
Section 10(a) and except as to indemnification and contribution to the extent
provided in Section 8 hereof.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by the Representatives as
provided in Section 9(a), the aggregate number of such Shares which remains
unpurchased exceeds one-eleventh (1/11) of the aggregate number of Shares to be
purchased at such Time of Delivery, then this Agreement (or, with respect to a
Subsequent Time of Delivery, the obligations of the Underwriters to purchase and
of the Company to sell the Optional Shares) shall thereupon terminate, without
liability on the part of any non-defaulting Underwriter or the Company, except
for the expenses to be borne by the Company and the Underwriters as provided in
Section 6 hereof and the indemnity and contribution agreements in Section 8
hereof; but nothing herein shall relieve a defaulting Underwriter from liability
for its default.
11. Survival. The respective indemnities, agreements, representations,
warranties and other statements of the Company, its officers and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person referred to in
Section 8(f) or the Company, or any officer, trustee or director or controlling
person of the Company referred to in Section 8(f), and shall survive delivery of
and payment for the Shares. The respective agreements, covenants, indemnities
and other statements set forth in Sections 6 and 8 hereof shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement.
12. Notices. All communications hereunder shall be in writing and, if sent
to any of the Underwriters, shall be sufficient in all respects if mailed,
delivered or telegraphed and confirmed in writing to the Representatives c/o
Advest, Inc., One Rockefeller Plaza, 20th Floor, New York, New York 10020,
Attention: Michael T. Mayes (with a copy to Arnold & Porter, 555 12th Street,
N.W., Washington, D.C. 20004, Attention: Steven Kaplan); if to the Company,
shall be sufficient in all respects if mailed, delivered or telegraphed and
confirmed in writing to Sun Bancorp, Inc., 226 Landis Avenue, Vineland, New
Jersey 08360, Attention: Philip W. Koebig, III (with a copy to Malizia, Spidi,
Sloane & Fisch, P.C., One Franklin Square, 1301 K Street, N.W., Suite 700 East,
Washington, D.C. 20005, Attention: John J. Spidi).
13. Binding Effect. This Agreement shall be binding upon, and inure solely
to the benefit of, the Underwriters, the Company and, to the extent provided in
Sections 8 and 10 hereof, the officers, trustees, directors and employees and
controlling persons referred to therein and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by
26
<PAGE>
virtue of this Agreement. No purchaser of any of the Shares from any Underwriter
shall be deemed a successor or assign by reason merely of such purchase.
14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to any
provisions regarding conflicts of laws.
15. Counterparts. This Agreement may be executed by any one or more of the
parties hereto in any number of counterparts, each of which shall be deemed to
be an original, but all such counterparts shall together constitute one and the
same instrument.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
27
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us one of the counterparts hereof, and upon the
acceptance hereof by the Representatives, on behalf of each of the Underwriters,
this letter will constitute a binding agreement among the Underwriters and the
Company. It is understood that your acceptance of this letter on behalf of each
of the Underwriters is pursuant to the authority set forth in the Agreement
among Underwriters, a copy of which shall be submitted to the Company for
examination, upon request, but without warranty on your part as to the authority
of the signers thereof.
Very truly yours,
SUN BANCORP, INC.
By:
---------------------------------
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the
date first written above at New York,
New York.
ADVEST, INC. WHEAT FIRST SECURITIES
By: By:
---------------------------------- ------------------------------
Name: Name:
Title: Title:
On behalf of each of the On behalf of each of the
Underwriters Underwriters
28
<PAGE>
SCHEDULE I
Number of Optional
Total Number Shares to be Purchased
of Firm Shares if Maximum
Underwriter to be Purchased Option Exercised
- ----------- --------------- ----------------
Advest, Inc. [__________] [__________]
Wheat First Securities [__________] [__________]
----------- -----------
Total [__________] [__________]
<PAGE>
EXHIBIT A
FORM OF LOCK-UP AGREEMENT
<PAGE>
SUN BANCORP, INC.
LOCK-UP AGREEMENT
_______, 1999
Advest, Inc.
Wheat First Securities
As Representatives of the Several Underwriters
c/o Advest, Inc.
One Rockefeller Plaza, 20th Floor
New York, New York 10020
Ladies and Gentlemen:
The undersigned understands that you, as Representatives of the several
underwriters (the "Underwriters"), propose to enter into an underwriting
agreement (the "Underwriting Agreement") with Sun Bancorp, Inc. (the "Company")
providing for the public offering (the "Public Offering") by the Underwriters,
including yourself, of common stock of the Company (the "Common Stock") pursuant
to the Company's Registration Statement on Form S-3 (the "Registration
Statement").
In consideration of the Underwriters' agreement to purchase and make
the Public Offering of the Common Stock, and for other good and valuable
consideration, receipt of which is hereby acknowledged, the undersigned hereby
agrees, for a period of 180 days after the effective date of the Registration
Statement (the "Lock-Up Period"), not to sell, offer to sell, solicit an offer
to buy, contract to sell, encumber, distribute, pledge, grant any option for the
sale of, or otherwise transfer or dispose of, directly or indirectly, in one or
a series of transactions (collectively, a "Disposition"), any shares of Common
Stock or any securities convertible or exercisable into or exchangeable for
shares of Common Stock (collectively, "Securities"), now owned or hereafter
acquired by the undersigned or with respect to which the undersigned has
acquired or hereafter acquires the power of disposition, without the prior
written consent of the Representatives. Prior to the expiration of the Lock-Up
Period, the undersigned agrees that it will not announce or disclose any
intention to do anything after the expiration of such period which the
undersigned is prohibited, as provided in the preceding sentence, from doing
during the Lock-Up Period. In addition, for the benefit of the Company and the
Underwriters, the undersigned hereby (i) waives any right it may have to cause
the Company to register pursuant to the Securities Act of 1933, as amended,
shares of Common Stock now owned or hereafter acquired or received by the
undersigned as a result of the Public Offering and (ii) during the Lock-Up
Period, agrees not to exercise any such registration rights and further agrees
that the Company shall not be obligated to register any shares in violation of
the Underwriting Agreement.
<PAGE>
The undersigned acknowledges and agrees that the restrictions above are
expressly agreed to preclude the holder of the Securities from engaging in any
hedging or other transaction which is designed to or reasonably expected to lead
to or result in a Disposition of Securities (or the economic equivalent thereof)
during the Lock-Up Period even if such Securities would be disposed of by
someone other than the undersigned. Such prohibited hedging or other
transactions would include, without limitation, any short sale (whether or not
against the box) or any purchase, sale or grant of any right (including, without
limitation, any put or call option) with respect to any Securities or with
respect to any security (other than a broad-based marked basket or index) that
includes, relates to or derives any significant part of its value from the
Securities.
The undersigned hereby also agrees and consents to the entry of stop
transfer instructions with the Company's transfer agent against the transfer of
the Securities held by the undersigned except in compliance with the Lock-Up
Agreement.
It is understood that, if the Underwriting Agreement is not executed,
or if the Underwriting Agreement shall terminate or be terminated prior to
payment for and delivery of the Common Stock the subject thereof, this Lock-Up
Agreement shall automatically terminate and be of no further force or effect.
This Lock-Up Agreement shall be governed by and construed in accordance
with the laws of the State of New York (without giving effect to its conflict of
laws provisions).
Very truly yours,
---------------------------
Name:
EXHIBIT NO. 5
<PAGE>
MALIZIA SPIDI & FISCH, P.C.
ATTORNEYS AT LAW
1301 K STREET, N.W.
SUITE 700 EAST
WASHINGTON, D.C. 20005
(202) 434-4660
FACSIMILE: (202) 434-4661
WRITER'S DIRECT DIAL NUMBER
(202) 434-4660
June 11, 1999
Board of Directors
Sun Bancorp, Inc.
226 Landis Avenue
Vineland, New Jersey 08360
Re: Registration Statement Under the Securities Act of 1933
-------------------------------------------------------
Ladies and Gentlemen:
This opinion is rendered in connection with the Registration Statement
on Form S-3 filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, (the "Act") relating to the offer and sale
(the "Offering") of up to 1,955,000 shares of common stock, par value $1.00 per
share (the "Common Stock"), of Sun Bancorp, Inc. (the "Company"). As special
counsel to the Company, we have reviewed such legal matters as we have deemed
appropriate for the purpose of rendering this opinion.
Based on the foregoing, we are of the opinion that the shares of Common
Stock of the Company covered by the aforesaid Registration Statement will, when
issued in accordance with the terms of the Offering against full payment
therefor, be validly issued, fully paid, and non-assessable shares of Common
Stock of the Company.
We hereby consent to the use of this opinion and to the reference to
our firm appearing in the Company's Prospectus under the heading "Legal
Matters." In giving this consent, we do not admit that we come within the
category of persons whose consent is required under Section 7 of the Act or the
rules and regulations of the Securities and Exchange Commission adopted under
the Act.
This opinion is given as of the effective date of the Registration
Statement and we assume no obligation to advise you of changes that may
hereafter be brought to our attention.
Sincerely,
/s/Malizia Spidi & Fisch, P.C.
------------------------------
MALIZIA SPIDI & FISCH, P.C.
