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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-SB
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GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(B)
OR 12(G) OF THE SECURITIES ACT OF 1934
BRIDGE VIEW BANCORP
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(Name of Small Business Issuer in Its Charter)
NEW JERSEY 22-3461336
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(State or Other Jurisdiction of (I.R.S.Employer
Incorporation or Organization) Identification No.)
457 SYLVAN AVENUE, ENGLEWOOD CLIFFS, NEW JERSEY 07632
- ----------------------------------------------- -----------
(Address of Principal Executive Offices) (Zip Code)
201-871-7800
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(Issuer's Telephone Number)
Securities to be registered under Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
To be so Registered Each Class Is to be Registered
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Common Stock, No Par Value American Stock Exchange
Securities to be registered under Section 12(g) of the Act: NONE
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<PAGE>
PART I
ITEM 1 -- BUSINESS
General
Bridge View Bancorp (the "Company") is a New Jersey corporation organized
in May, 1996 at the direction of the Board of Directors of Bridge View Bank (the
"Bank") for the purpose of acquiring all the capital stock of the Bank (the
"Acquisition"). As part of the Acquisition, shareholders of the Bank will
receive shares of the Company's common stock, no par value per share (the
"Common Stock"), in a ratio of two shares of Common Stock for each outstanding
share of the common stock of the Bank, $5.00 per share par value (the "Bank
Common Stock"). The Acquisition is subject to the approval or non-objection of
the New Jersey Department of Banking (the "Department") and the Board of
Governors of the Federal Reserve System (the "FRB"). Upon consummation of the
Acquisition, the only significant asset of the Company will be its investment in
the Bank. The Company's main office is located at 457 Sylvan Avenue, Englewood
Cliffs, Bergen County, New Jersey 07632.
The Bank is a commercial bank formed under the laws of New Jersey on
October 11, 1988. The Bank received its Certificate of Authority to transact
business from the Commissioner of the Department on April 7, 1989 and the Bank
commenced operations on March 15, 1990.
As of May 2, 1996, the Bank Common Stock was held by 458 holders of record.
As of May 2, 1996, the Bank also had outstanding Non-Transferable Warrants
("Warrants") to purchase shares of Bank Common Stock. As described above, upon
consummation of the Acquisition, shareholders of the Bank will receive shares of
the Common Stock in exchange for their shares of Bank Common Stock. In addition,
the Company will assume the Bank's obligations under both its outstanding
options and Warrants. See "COMPENSATION OF DIRECTORS AND OFFICERS -- Stock
Option Plans" and "RECENT SALES OF SECURITIES."
The Bank operates from its main office at 457 Sylvan Avenue, Englewood
Cliffs, New Jersey and a branch office at 1605 Lemoine Avenue, Fort Lee, Bergen
County, New Jersey 07024. In addition, the Bank has recently opened a second
branch at 115 River Road, Edgewater, Bergen County, New Jersey 07020. See
"PROPERTIES."
The Bank engages in the general business of commercial banking. The Bank
offers traditional commercial banking services such as savings and checking
accounts and provides commercial, consumer and mortgage loans. Bank deposits are
insured by the Federal Deposit Insurance Corporation ("FDIC") up to applicable
limits. The Bank provides a wide range of commercial banking products and
services, including personal and business checking accounts and time deposits,
money market accounts and regular savings accounts. The Bank does not presently
have any trust powers and, therefore, does not offer any trust services.
<PAGE>
The Bank structures its specific services and charges in a manner designed
to attract the business of small and medium-sized businesses and the
professional community, as well as that of individuals, in the eastern Bergen
County, New Jersey area. As a general rule, specific banking services are
offered only on a basis believed to be profitable. Such services are charged for
fully unless other aspects of the account relationship provide sufficient
earnings to offset the cost of the services provided.
The Bank engages in a wide range of lending activities and offers
commercial, consumer, mortgage, construction and personal loans. All lending
decisions are made primarily on the basis of soundness and in compliance with
all applicable laws. The Bank from time to time participates in multi-bank
credit arrangements in order to take part in loans for amounts which are in
excess of the Bank's legal lending limit. In commercial lending, the Bank offers
loans for equipment and working capital needs, as well as for financing of
commercial real estate. The Bank also bids for tax anticipation notes and bond
anticipation notes for local governments. In consumer lending, the Bank offers
cash reserve credit lines and personal, automobile, bridge, home equity, home
improvement loans and Visa and Mastercard credit cards. The Bank also makes
one-to-four-family residential real estate loans. See "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Financial
Condition -- Loan Portfolio."
The Bank believes it offers competitive rates for its services, thereby
enabling consumers and business entities in its service area to avail themselves
of the Bank's credit and non-credit services. See "COMPETITION".
The Bank is fully computerized and outsources its data processing and
management information services to Electronic Data Systems, Inc. (EDS) of
Belpre, Ohio. All Bank departments are automated, and the Bank believes the data
processing services available to Bank customers compare favorably with those of
competing financial institutions. The Bank is also a member of the MAC(TM) money
access service.
As of May 2, 1996, the Bank had 35 full time employees and one part time
employee. The Bank's employees are not members of any collective bargaining
group.
Competition
The Bank faces stiff competition for deposits and credit worthy borrowers.
The Bank competes with commercial banks, savings banks and savings and loan
associations, most of which have assets, capital and lending limits greater than
the Bank. In addition to competing with local institutions, the Bank faces
competition for customers, many of whom work in New York City, from large money
center banks and other institutions based in New York. The Bank competes with
these established institutions, with regional and national insurance companies
and
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non-bank banks, with regulated small loan companies and local credit unions,
and with regional and national issuers of money market funds.
In addition to having established deposit bases and loan portfolios,
competitive institutions, particularly the large regional commercial and savings
banks, have the ability to finance extensive advertising campaigns and to
allocate considerable resources to locations and products perceived as
profitable. Significantly, these institutions have larger lending limits and, in
certain cases, lower funding costs (the price a bank must pay for deposits and
other borrowed monies used to make loans to customers). Many of these
institutions also offer certain services, such as trust services, which are not
currently offered by the Bank.
Supervision and Regulation
The Bank is subject to a variety of Federal and New Jersey statutes and
regulations applicable to commercial banks, all of which impact the operations
of the Bank. Since the Company's sole business initially will be ownership of
the Bank, any regulations which effect the operations of the Bank will effect
the Company's results. In addition, upon consummation of the Acquisition, the
Company will become a bank holding company subject to regulation under the BHCA.
General -- Recent Regulatory Enactments
On September 29, 1994, the Riegle-Neal Interstate Banking and Branching
Efficiency Act (the "Interstate Act") was enacted. The Interstate Act generally
enhances the ability of bank holding companies to conduct their banking business
across state boarders. The Interstate Act has two main provisions. The first
provision generally provides that commencing on September 29, 1995, bank holding
companies may acquire banks located in any state regardless of the provisions of
state law. These acquisitions are subject to certain restrictions, including
caps on the total percentage of deposits that a bank holding company may control
both nationally and in any single state. New Jersey law currently allows
interstate acquisitions by bank holding companies whose home state has
"reciprocal" legislation which would allow acquisitions by New Jersey based bank
holding companies.
The second major provision of the Interstate Act permits, beginning on
June 1, 1997, banks located in different states to merge and continue to
operate as a single institution in more than one state. States may, by
legislation passed before June 1, 1997, opt out of the interstate bank merger
provisions of the Interstate Act. In addition, states may elect to opt in and
allow interstate bank mergers prior to June 1, 1997.
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A final provision of the Interstate Act permits banks located in one state
to establish new branches in another state without obtaining a separate bank
charter in that state, but only if the state in which the branch is located has
adopted legislation specifically allowing interstate de novo branching.
In April of 1996, the New Jersey legislature passed legislation which would
permit interstate bank mergers prior to June 1, 1997, provided that the home
state of the institution acquiring the New Jersey institution permits interstate
mergers prior to June 1, 1997. In addition, the legislation permits an
out-of-state institution to acquire an existing branch of a New Jersey based
institution, and thereby conduct business in New Jersey. The legislation does
not permit interstate de novo branching. This legislation is likely to enhance
competition in the New Jersey marketplace as bank holding companies located
outside of New Jersey become freer to acquire institutions located within the
State of New Jersey.
Bank Regulation
Insurance of Deposits
The deposits of the Bank are insured up to applicable limits by the FDIC.
Accordingly, the Bank is subject to deposit insurance assessments to maintain
the Bank Insurance Fund ("BIF") of the FDIC. Under the FDIC's insurance premium
assessment system, each institution will be assigned to one of nine assessment
risk classifications based on its capital ratios and supervisory evaluations.
Initially, the lowest risk institutions will only pay the statutory required
minimum premium of $2,000 while the highest risk institutions will be assessed
at the rate of .27% of domestic deposits. Each institution's classification
under the system is re-examined semiannually. In addition, the FDIC is
authorized to increase or decrease such rates on a semiannual basis.
Capital Adequacy Guidelines
The Bank is subject to capital adequacy guidelines promulgated by the FDIC.
The FDIC has issued regulations to define the adequacy of capital based upon the
sensitivity of assets and off-balance sheet exposures to risk factors. Four
categories of risk weights (0%, 20%, 50% and 100%) were established to be
applied to different types of balance sheet assets and off-balance sheet
exposures. The aggregate of the risk weighted items (risk-based assets) is the
denominator of the ratio, the numerator of which is defined risk-based capital.
Under the regulations, risk-based capital has been classified into two
categories. Tier 1 capital includes common and qualifying perpetual preferred
stockholders' equity, less goodwill. Tier 2 capital includes mandatory
convertible debt, allowance for loan losses, subject to certain limitations, and
certain subordinated and term debt securities. Total qualifying capital consists
of Tier 1 capital and Tier 2
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capital; however, the amount of Tier 2 capital may not exceed the amount of
Tier 1 capital in the computation of total qualifying capital. The minimum
capital ratio required under the above formula was 4% for Tier 1 capital and 8%
for total qualifying capital. The Bank at June 30, 1996 maintained a Tier 1
capital ratio of 11.05% and total qualifying capital ratio of 11.83%.
The FDIC has also issued leverage capital adequacy standards. Under these
standards, in addition to the risk-based capital ratios, a bank must also
maintain a ratio of Tier 1 capital (using the risk-based capital definition) to
total assets of at least 3%. Institutions which are not "top-rated" will be
expected to maintain a ratio 100 to 200 basis points above this ratio. The
Bank's leverage ratio at June 30, 1996 was 11.95%.
Bank Holding Company Regulation
The Company will be a bank holding company within the meaning of the Bank
Holding Company Act of 1956, as amended (the "BHCA"). As a bank holding company,
the Company will be required to file with the Federal Reserve Board an annual
report and such additional information as the Board may require pursuant to the
BHCA. The Federal Reserve Board may also make examinations of the Company and
its subsidiaries.
A bank holding company is generally prohibited from engaging in, or
acquiring direct or indirect control of more than five percent of the
outstanding voting shares of any company engaged in, activities other than
banking and those deemed closely related to banking by the Federal Reserve
Board. Notice to or review by the Federal Reserve Board of such "closely
related" activities is necessary before the Company can engage in such
activities.
Federal Reserve Regulation "Y" sets out those activities which are regarded
as closely related to banking or managing or controlling banks and, thus, are
permissible activities that may be engaged in by bank holding companies subject
to approval by or notice to the Federal Reserve Board. These activities include,
among other things, operating savings associations, providing data processing
services, providing investment or financial advisory services, and, subject to
various restrictions, engaging in securities brokerage and underwriting
activities.
A holding company and its banking subsidiary are prohibited from engaging
in certain tie-in arrangements in connection with any extension of credit or
lease or sale of any property or the furnishing of services.
In addition to Federal bank holding company regulation, the Company will be
required to register as a bank holding company with the New Jersey Department of
Banking. The Company will be required to file copies of the reports it files
with the Federal banking and securities regulators with the Department.
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Federal Securities Regulation
Upon effectiveness of this Registration Statement, the Company will become
a reporting company under the Securities and Exchange Act of 1934 (the "34 Act")
and will therefore be required to file quarterly and annual reports, as well as
certain other material, with the SEC.
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results of
operations should be read in conjunction with the Bank's financial statements
and the notes relating thereto including herein. When necessary,
reclassifications have been made to prior years' data throughout the following
discussion and analysis for purposes of comparability with 1995 data.
OVERVIEW AND STRATEGY
The Bank began full service operation as a commercial bank on March 15,
1990. The Bank accepts deposits from the general public, including individuals,
businesses, non-profit corporations and governmental units within its trade
area. The Bank makes commercial loans, consumer loans and both residential and
commercial real estate loans. In addition, the Bank provides other customer
services and makes investments in securities, as permitted by law. The Bank has
sought to offer an alternative, community-oriented style of banking in an area
which at present is mainly dominated by larger, statewide and national
institutions. The Bank has sought to be a positive force in the area by
assisting in the development of the residential sector, by serving the needs of
small and medium-sized businesses and the local professional community, and by
meeting the requirements of individuals residing, working and shopping in the
Bank's eastern Bergen County, New Jersey market area by extending consumer,
commercial and real estate loans and by offering depository services. The Bank
believes that the following attributes of the Bank have made the Bank attractive
to local business people and residents:
O competitively priced services;
O full-service business hours of 7:00 a.m. to 7:00 p.m. weekdays and
9:00 a.m. to 1:00 p.m. Saturdays;
O direct access to Bank management by members of the community, whether
during or after business hours;
O local conditions and needs are taken into account by the Bank when
deciding loan applications and making other business decisions
affecting members of the community;
O responsiveness of the Bank's personnel for requests for information
and services by depositors and others;
O positive involvement of the Bank in the community affairs of Eastern
Bergen County.
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Since opening in 1990, the Bank has established two branches in addition to
its main office. The Bank expects to continue to seek additional
strategically-located de novo branch locations within the Bank's eastern Bergen
County trade area. Particular emphasis will be placed on presenting an
alternative banking culture in communities which are dominated by larger
non-local competitors and where no community banking approach exists and in
locations which the Bank perceives to be economically emerging.
RESULTS OF OPERATIONS
The Bank's results of operations depend primarily on its net interest
income, which is the difference between the interest earned on its
interest-earning assets and the interest paid on funds borrowed to support those
assets, such as deposits. Net interest margin is a function of the difference
between the weighted average rate received on interest-earning assets and the
weighted average paid on interest-bearing liabilities, as well as the average
level of interest-bearing assets as compared with that of interest-bearing
liabilities. Net income is also affected by the amount of non-interest income
and operating expenses.
NET INCOME
For the six months ended June 30, 1996, net income increased by $294,000,
or 68.0%, to $726,000 from $432,000 for the comparable period of 1995. The
increase in net income is attributable to an increase in interest income of
$646,000, or 21.7%, partially offset by an $80,000, or 8.9%, increase in
interest expense. The increase in interest income was primarily attributable to
a 35% increase in total loans. In addition to the increases in net interest
income, other income, consisting primarily of service charges on deposit
accounts increased by $104,000, or 40.0%.
The Bank's net income increased from 1994 to 1995 by $495,000, or 66.9% to
$1,235,000 for the year ended December 31, 1995 from $740,000 for the year ended
December 31, 1994. This increase was primarily attributable to an increase in
net interest income of $851,000, or 23.1%, during 1995. The increase in net
interest income was attributable to an increase in interest income of
$1,334,000, or 26.4%, to $6,378,000 for the year ended December 31, 1995
compared to year ended December 31, 1994, primarily as a result of an increase
in the Bank's loan portfolio. The volume increases in the Bank's loan portfolio
were primarily funded through the maturation of lower yielding securities,
thereby increasing the Bank's average yield and net margin. The Bank's average
yield on interest earning assets decreased to 8.17% for the six months ended
June 30, 1996 from 8.18% for the year ended December 31, 1995 and 6.64% for the
year ended December 31, 1994, reflecting changes in market rates of interest.
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<PAGE>
Interest expense rose $80,000, or 8.9%, for the six months ended June 30,
1996 compared to the comparable period of 1995, and $483,000, or 35.5%, from
1994 to 1995. This increase, at June 30, 1996, is attributable to an increase in
interest-bearing deposits of $8,039,000, or 13.4% compared to the June 30, 1995
interest bearing deposits.
Operating expenses increased by $157,000, or 10.1%, for the six months
ended June 30, 1996 compared to the comparable period of 1995. Operating
expenses increased by $107,000, or 3.7%, for the year ended December 31, 1995
compared to the year ended December 31, 1994. These increases in operating
expenses reflect the Bank's continued growth and, during the first six months of
1996, the opening of the Bank's new Edgewater branch.
On a per share basis, earnings were $1.39 for the six months ended June 30,
1996, $2.40 for the year ended December 31, 1995, and $1.50 for the year ended
December 31, 1994.
COMPARATIVE AVERAGE BALANCE SHEETS
The following table reflects the components of the Bank's net interest
income, setting forth for the periods presented herein, (1) average assets,
liabilities and stockholders' equity, (2) interest income earned on
interest-earning assets and interest expenses paid on interest-bearing
liabilities, (3) average yields earned on interest-earning assets and average
rates paid on interest-bearing liabilities, (4) the Bank's net interest spread
(i.e., the average yield on interest-earnings assets less the average rate on
interest-bearing liabilities) and (5) the Bank's net yield on interest-earning
assets. Rates are computed on a taxable equivalent basis.
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<TABLE>
<CAPTION>
Year Ended December 31,
Six Months Ended June 30, ----------------------------------------------------------------
1996 1995 1994
(Unaudited)
------------------------------ ------------------------------- ------------------------------
Interest Average Interest Average Interest Average
Average Income/ Rates Average Income/ Rates Average Income/ Rates
Balance Expense Earned/Paid Balance Expense Earned/Paid Balance Expense Earned/Paid
------- ------- ----------- ------- -------- ----------- ------- -------- -----------
(Dollars In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-Earning Assets:
Taxable Loans (net of
unearned income) ............ $60,703 $2,779 9.16% $50,181 $4,712 9.39% $39,268 $3,383 8.62%
Tax Exempt Securities ......... 4,878 149 6.11 3,822 250 6.54 1,552 101 6.51
Taxable Investment
Securities .................. 21,654 623 5.75 22,410 1,207 5.39 32,881 1,462 4.45
Federal Funds Sold ............ 4,823 125 5.18 4,997 294 5.88 3,114 132 4.24
------- ------ ------- ------ ------- ------
Total Interest-Earning
Assets ..................... 92,058 3,676 7.99 81,410 6,463 7.94 76,815 5,078 6.61
------- ------ ------ ------
Non-Interest Earning
Assets ...................... 7,679 8,081 7,711
Allowance for possible
loan losses ................. (747) (695) (615)
------- ------- -------
Total Assets ................ $98,990 $88,796 $83,911
======= ======= =======
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-Bearing Liabilities:
NOW Deposits .................. $13,846 $ 75 1.08% $12,381 $ 173 1.40% $12,557 $ 166 1.32%
Savings Deposits .............. 12,964 139 2.14 14,345 347 2.42 15,391 360 2.34
Money Market Deposits ......... 11,916 131 2.20 10,770 260 2.41 12,932 291 2.25
Time Deposits ................. 27,018 632 4.68 22,425 1,065 4.75 17,062 544 3.19
------- ------ ------- ------ ------- ------
Total Interest-Bearing
Liabilities ................. 65,744 977 2.97 59,921 1,845 3.08 57,942 1,361 2.35
Non-Interest Bearing Liabilities:
Demand Deposits ............... 21,245 18,108 15,774
Other Liabilities ............. 730 577 950
------- ------- -------
Total Non-Interest Bearing
Liabilities ................. 21,975 18,685 16,724
Shareholders' Equity .......... 11,271 10,190 9,245
Total Liabilities and
Shareholders' Equity ........ $98,990 $88,796 $83,911
======= ======= =======
Net Interest Income ........... $2,699 $4,618 $3,717
====== ====== ======
Net Interest Rate Spread ...... 5.01% 4.86% 4.26%
==== ==== ====
Net Interest Margin ........... 5.86% 5.67% 4.84%
==== ==== ====
Rate of Interest Earning
Assets to interest-bearing
liabilities ................. 1.40 1.36 1.33
==== ==== ====
</TABLE>
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The following table presents by category the major factors that
contributed to the changes in net interest income for each of the years ended
December 31, 1995 and 1994 and for the six months ended June 30, 1996, as
compared to each respective previous period. Amounts have been computed on a
fully tax-equivalent basis, assuming a Federal income tax rate of 39%.
<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended December 31,
1996 versus 1995 1995 versus 1994
(Unaudited)
-------------------------------- -----------------------------------
Increase (Decrease)
Due to Change in:
------------------------------------------------------------------------------
Average Average Average Average
Volume Rate Net Volume Rate Net
------- ------- --- ------- ------- -------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest Income:
Taxable Loans (net of unearned income) ....... $591 $ (3) $588 $1,006 $323 $1,329
Tax Exempt Securities ........................ 52 (11) 41 149 - 149
Taxable Investment Securities ................ (52) 80 28 (517) 262 (255)
Federal Funds Sold ............................. 26 (16) 10 99 63 162
---- ---- ---- ------ ---- ------
Total Interest Income .......................... $617 $ 50 $667 $ 737 $648 $1,385
---- ---- ---- ------ ---- ------
Interest Expense:
NOW Deposits ................................. 12 (34) (22) (2) 9 7
Savings Deposits ............................. (14) (31) (45) (25) 12 (13)
Money Market Deposits ........................ 21 (16) 5 (52) 21 (31)
Time Deposits ................................ 122 15 137 204 317 521
---- ---- ---- ------ ---- ------
Total Interest Expense ......................... 141 (66) 75 125 359 484
---- ---- ---- ------ ---- ------
Increase (Decrease) in net interest income ..... $476 $116 $592 $ 612 $289 $ 901
==== ==== ==== ====== ==== ======
</TABLE>
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PROVISION FOR LOAN LOSSES
For the six months ended June 30, 1996, the Bank's provision for loan
losses was $113,000, an increase of $21,000 over the provision of $92,000 for
the six month period ended June 30, 1995. For the year ended December 31, 1995,
the Bank's provision for loan losses was $92,000, an increase of $17,000 over
the provision of $75,000 for the year ended December 31, 1994. The increased
provisions reflect the continued growth in the Bank's loan portfolio.
OTHER INCOME
Other income, which was primarily attributable to service fees received
from deposit accounts, amounted to $363,000 for the six months ended June 30,
1996 an increase of $104,000 or 40.0%, from the comparable period of 1995. Other
income for the year ended December 31, 1995 increased by $200,000 to $578,000
compared to $378,000 in 1994, an increase of 52.9%. These increases were
primarily related to the Bank's increasing levels of deposits.
OTHER EXPENSES
Other expenses for the six month period ended June 30, 1996 amounted to
$1,702,000, an increase of $157,000 from the comparable period of 1995. For the
year ended December 31, 1995, other expenses increased by $107,000 to $3,004,000
compared to the year ended December 31, 1994. These increases were primarily
attributable to customary increases in salary and employee benefits, occupancy
expenses and data processing expenses attributable to the Bank's continued
growth, partially offset by a reduction in FDIC insurance premiums and other
operating expenses.
INCOME TAX EXPENSE
The income tax provision, which includes both federal and state taxes, for
the six months ended June 30, 1996 and for the years ended December 31, 1995 and
1994 was $464,000, $781,000 and $349,000, respectively. Increase in income taxes
were primarily attributable to increases in income before taxes and all periods
reported.
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FINANCIAL CONDITION
At June 30, 1996, the Bank's total assets were $105,016,000, compared to
$96,794,000 at December 31, 1995 and $86,592,000 at December 31, 1994. Total
loans increased to $67,740,000 at June 30, 1996 from $56,141,000 at December 31,
1995 and $44,076,000 at December 31, 1994. Total deposits increased to
$90,105,000 at June 30, 1996 from $85,225,000 at December 31, 1995 and
$77,005,000 at December 31, 1994.
LOAN PORTFOLIO
At June 30, 1996, the Bank's total loans were $67,740,000, an increase of
$11,599,000, or 20.6%, over total loans at December 31, 1995. The Bank's loan
portfolio at December 31, 1995 totaled $56,141,000, an increase of $12,065,000,
or 27.4%, over total loans at December 31, 1994. The increases in the Bank's
loan portfolio represent increased penetration by the Bank of the local small
business market. Management believes the Bank's success in penetrating this
market is attributable to the fact that through mergers and acquisitions, the
Bank's trade area is primarily served through large institutions frequently
headquartered out of state. Management believes it is not cost efficient for
these larger institutions to provide the level of personal service to small
business borrowers that the Bank provides.
The Bank's loan portfolio consists of commercial and industrial loans, real
estate loans and consumer loans. Commercial and industrial loans are made for
the purpose of providing working capital, financing the purchase of equipment or
inventory and for other business purposes. Real estate loans consist of loans
secured by commercial or residential real property and loans for the
construction of commercial or residential property. Consumer loans are made for
the purpose of financing the purchase of consumer goods, home improvements, and
other personal needs, and are generally secured by the personal property being
purchased.
The Bank's loans are primarily to businesses and individuals located in
eastern Bergen County, New Jersey. The Bank has not made loans to borrowers
outside of the United States. Commercial lending activities are focused
primarily on lending to small business borrowers. The Bank believes that its
strategy of customer service, competitive rate structures and selective
marketing have enabled the Bank to gain market entry to local loans. Bank
mergers and lending curtailments at larger banks competing with the Bank have
also contributed to the Bank's efforts to attract borrowers.
The following table sets forth the classification of the Bank's loans by
major category at June 30, 1996 and as of December 31, 1995 and 1994,
respectively.
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<TABLE>
<CAPTION>
December 31,
June 30, ---------------------------------------------------
1996 1995 1994
-------------------- ---------------------- -----------------------
(Dollars in Thousands)
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Commercial and Industrial .... $14,698 21.6% $11,277 19.9% $ 9,347 21.2%
Real Estate--
Non-residential Properties .. 18,756 27.7 14,001 24.9 10,914 24.7
Residential Properties ...... 30,504 45.1 28,224 50.1 21,217 48.0
Construction ................ 2,163 3.2 1,320 2.3 549 1.2
Consumer ..................... 1,619 2.4 1,473 2.6 1,135 2.6
------- ----- ------- ----- -------- -----
Total Loans .................. $67,740 100.0% $56,295 100.0% $ 43,162 100.0%
======= ===== ======= ===== ======== =====
</TABLE>
The following table sets forth fixed and adjustable rate loans as of June
30, 1996 in terms of interest rate sensitivity.
<TABLE>
<CAPTION>
Within 1 Year 1 to 5 Years After 5 years Total
------------- ------------ ------------- -----
(In Thousands)
<S> <C> <C> <C> <C>
Loans with fixed rate .......... $ 2,627 $30,263 $3,745 $36,635
Loans with adjustable rate ..... $30,985 -- -- $30,985
</TABLE>
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<PAGE>
ASSET QUALITY
The Bank's principal earning assets are its loans. Inherent in the lending
function is the risk of the borrower's inability to repay their loan under its
existing terms. Risk elements include non accrual loans, past due and
restructured loans, potential problem loans, loan concentrations and other real
estate.
Non-performing assets include loans that are not accruing interest
(non-accruing loans) as a result of principal or interest being in default for a
period of 90 days or more. When a loan is classified as non-accrual, interest
accruals discontinue and all past due interest, including interest applicable to
prior years, is reversed and charged against current income. Until the loan
becomes current, any payments received from the borrower are applied to
outstanding principal until such time as management determines that the
financial condition of the borrower and other factors merit recognition of such
payments as interest.
The Bank attempts to minimize overall credit risk through loan
diversification and its loan approval procedures. The Bank's due diligence
begins at the time a borrower and the Bank begin to discuss the origination of a
loan. Documentation, including a borrower's credit history, materials
establishing the value and liquidity of potential collateral, the purpose of the
loan, the source and timing of the repayment of the loan, and other factors are
analyzed before a loan is submitted for approval. Loans made are also subject to
periodic review.
The following table sets forth information concerning the Bank's
non-performing assets as of the dates indicated:
Non-Performing Loans
December 31,
-------------------
June 30, 1996 1995 1994
------------- ---- ----
(Unaudited)
(In Thousands)
Non-accrual loans ......................... $163 $163 $.00
Non-accrual loans to total loans .......... 0.24% 0.29% 0%
Non-performing assets to total assets ..... 0.16% 0.17% 0%
Allowance for possible loan losses as a
percentage of non-performing loans ....... 501% 424% N/A
14
<PAGE>
The $163,000 in non-accrual loans at June 30, 1996 and December 31, 1995
represents one non-accruing residential mortgage in process of foreclosure. The
Bank has no other non-performing loans, no loans contractually more than 90 days
past due, no REO and no restructured loans. If the above-described non-accruing
loan had been current, the Bank's interest income would have increased by
$1,000.
At the dates indicated in the above table, there were no concentrations of
loans exceeding 10% of the Bank's total loans and the Bank had no foreign loans.
ALLOWANCE FOR LOAN LOSSES
The Bank attempts to maintain allowance for loan losses at a sufficient
level to provide for potential losses in the loan portfolio. Loan losses are
charged directly to the allowance when they occur and any recovery is credited
to the allowance. Risks within the loan portfolio are analyzed on a continuous
basis by the Bank's officers, by outside, independent loan review auditors and
by the Bank's Audit Committee. A risk system, consisting of multiple grading
categories, is utilized as an analytical tool to assess risk and appropriate
reserves. Along with the risk system, management further evaluates risk
characteristics of the loan portfolio under current and anticipated economic
conditions and considers such factors as the financial condition of the
borrower, past and expected loss experience, and other factors management feels
deserve recognition in establishing an appropriate reserve. These estimates are
reviewed at least quarterly, and, as adjustments become necessary, they are
realized in the periods in which they become known. Additions to the allowance
are made by provisions charged to expense and the allowance is reduced by net
charge-offs (i.e. - loans judged to be uncollectible and charged against the
reserve, less any recoveries on such loans). Although management attempts to
maintain the allowance at a level deemed adequate, future additions to the
allowance may be necessary based upon changes in market conditions. In addition,
various regulatory agencies periodically review the Bank's allowance for loan
losses. These agencies may require the Bank to take additional provisions based
on their judgments about information available to them at the time of their
examination.
The Bank's allowance for possible loan losses totalled $817,000, $692,000
and $626,000 at June 30, 1996, December 31, 1995 and 1994, respectively. The
increases in the allowance are due to the continued increase in the Bank's total
loan portfolio.
The following is a summary of the reconciliation of the allowance for loan
losses for the six month periods ended June 30, 1996 and 1995 and for the years
ended December 31, 1995 and 1994.
15
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, December 31,
---------------- ------------------
(Unaudited)
1996 1995 1995 1994
---- ---- ---- ----
(Dollars In Thousands)
<S> <C> <C> <C> <C>
Balance at Beginning of Year ..................... $692 $626 $626 $567
Net Charge Offs .................................. 12 (4) (26) (16)
Provision Charged to Expense .................... 113 92 92 75
---- ---- ---- ----
Balance of Allowance at End of Period ............ $817 $714 $692 $626
==== ==== ==== ====
Ratio of Net Charge-Offs to Average Loans
Outstanding ..................................... (0.02%) 0.01% 0.05% 0.04%
Balance of Allowance at End of Period as
a % of Loans at End of Period ................... 1.21% 1.42% 1.23% 1.42%
</TABLE>
The following table sets forth, for each of the Bank's major lending areas,
the amount and percentage of the Bank's allowance for loan losses attributable
to such category, and the percentage of total loans represented by such
category, as of the periods indicated:
16
<PAGE>
Allocation of the Allowance for Loan Losses by Category
<TABLE>
<CAPTION>
December 31,
June 30, 1996 -----------------------------------------------------------------
-------------------------------- 1995 1994
(Unaudited) -------------------------------- ------------------------------
% of % of Total % of % of Total % of % of Total
Amount ALL loans Amount ALL loans Amount ALL loans
------ ---- ---------- ------ ---- ---------- ------ ---- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance Applicable to:
Commercial and Industrial .... $229 28.03% 27.49% $147 21.24% 23.34% $123 19.65% 24.84%
Real Estate --
Non-Residential ............. 199 24.36% 29.47% 157 22.69% 27.74% 101 16.13% 22.89%
Properties
Residential Properties ...... 199 24.36% 37.44% 196 28.32% 43.98% 173 27.64% 48.52%
Construction ................ 22 2.69% 3.21% 13 1.88% 2.35% 5 .80% 1.24%
Consumer ..................... 20 2.45% 2.39% 18 2.60% 2.59% 14 2.24% 2.51%
---- ------- ------- ---- ------- ------- ---- ------- -------
Subtotal .................... 669 81.89% 100% 531 76.73% 100.00% 416 66.46% 100.00%
Unallocated Reserves ......... 148 18.11% --- 161 23.27% -- 210 33.54% --
---- ------- ------- ---- ------- ------- ---- ------- -------
Total ....................... $817 100.00% 100.00% $692 100.00% 100.00% $626 100.00% 100.00%
==== ======= ======= ==== ======= ======= ==== ======= =======
</TABLE>
17
<PAGE>
INVESTMENT SECURITIES
The Bank maintains an investment portfolio to fund increased loans or
decreased deposits and other liquidity needs and to provide an additional source
of interest income. The portfolio is composed of U.S. Treasury Securities,
obligations of U.S. Government agencies and selected municipal and state
obligations.
The Bank adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," (SFAS 115),
effective January 1, 1994. Under SFAS 115, securities are classified as
securities held to maturity based on management's intent and the Bank's ability
to hold them to maturity. Such securities are stated at cost, adjusted for
unamortized purchase premiums and discounts. Securities that are bought and held
principally for the purpose of selling them in the near term are classified as
trading securities, which are carried at market value. Realized gains and losses
and gains and losses from marking the portfolio to market value are included in
trading revenue. Securities not classified as securities held to maturity or
trading securities are classified as securities available for sale, and are
stated at fair value. Unrealized gains and losses on securities available for
sale are excluded from results of operations, and are reported as a separate
component of stockholders' equity, net of taxes. Securities classified as
available for sale include securities that may be sold in response to changes in
interest rates, changes in prepayment risks, the need to increase regulatory
capital or other similar requirement.
Management determines the appropriate classification of securities at the
time of purchase. At June 30, 1996, $22,839,000 of the Bank's investment
securities were classified as held to maturity and the remainder were classified
as available for sale. At June 30, 1996, no investment securities were
classified as trading securities.
At June 30, 1996, total investment securities were $28,531,000 an increase
from total investment securities of $24,410,000 at December 31, 1995, which was
a decrease from total securities of $32,821,000 at December 31, 1994. The
increase in investment securities from December 31, 1995 to June 30, 1996
reflects increases in the Bank's total deposits in excess of funds needed for
new loan originations. The decline in investment securities from December 31,
1994 to December 31, 1995 is attributable to the Bank using the proceeds of
maturing investment securities to fund new loan demand during 1995.
The following table sets forth the carrying value of the Bank's security
portfolio as of the dates indicated.
18
<PAGE>
A comparative summary of securities available for sale at June 30, 1996,
December 31, 1995 and 1994 is as follows (in thousands):
<TABLE>
<CAPTION>
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Market Value
-------------- ---------------------- ----------------------- ------------
<S> <C> <C> <C> <C>
(Unaudited) June 30, 1996:
U.S. Government and Agency Obligations ...... $5,710 $-- $ (18) $5,692
December 31, 1995:
U.S. Government and Agency Obligations ...... 6,762 38 (20) 6,780
December 31, 1994:
U.S. Government and Agency Obligations ...... 7,836 -- (323) 7,513
</TABLE>
19
<PAGE>
A comparative summary of investment securities held to maturity at June 30,
1996, December 31, 1995 and 1994 is as follows (in thousands):
<TABLE>
<CAPTION>
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Market Value
-------------- ---------------------- ----------------------- ------------
<S> <C> <C> <C> <C>
(Unaudited) June 30, 1996:
U.S. Government and Agency Obligations ...... $15,695 $ -- $ (66) $15,629
Municipal Obligations ....................... 7,144 11 -- 7,156
------- ---- ----- -------
$22,839 11 (66) $22,785
December 31, 1995:
U.S. Government and Agency Obligations ...... $12,668 120 (11) 12,777
Municipal Obligations ....................... 4,962 28 -- 4,990
------- ---- ----- -------
$17,630 148 (11) 17,767
December 31, 1994:
U.S. Government and Agency Obligations ...... $21,889 4 (319) 21,574
Municipal Obligations ....................... 3,419 1 (5) 3,415
------- ---- ----- -------
$25,308 $ 5 $(324) $24,989
======= ==== ===== =======
</TABLE>
20
<PAGE>
The following table sets forth as of June 30, 1996 and December 31, 1995 the
maturity distribution of the Bank's investment portfolio.
<TABLE>
<CAPTION>
MATURITY SCHEDULE OF INVESTMENT SECURITIES
June 30, 1996 December 31, 1995
--------------------------------------------------------- ------------------------------------------------
(Unaudited)
Investment Securities Securities Available Investment Securities Securities Available
for Sale for Sale
----------------------- ----------------------- --------------------- ------------------------
(In Thousands)
Amortized Market Amortized Market Amortized Market Amortized Market
Cost Value Cost Value Cost Value Cost Value
--------- ------- --------- ------- --------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Within One Year ..... $12,486 $12,514 $ 4,998 $ 5,002 $ 9,800 $ 9,816 $ 4,011 $ 4,020
One to Five Years ... 9,962 9,871 712 682 7,439 7,539 2,751 2,760
Six to Ten Years .... 391 400 -- -- 391 412 -- --
------- ------- ------- ------- ------- ------- ------- -------
$22,839 $22,785 $ 5,710 $ 5,684 $17,630 $17,767 $ 6,762 $ 6,780
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
The Bank sold no securities from its portfolio during the first six months of
1996. Proceeds from the sales of securities available for sale during the year
ended December 31, 1995 were $2.9 million. Gross gains of $31,000 and gross
losses of $36,000 were realized on those sales in 1995.
DEPOSITS
Deposits are the Bank's primary source of funds. The Bank experienced a
growth in average deposit balances of $8,960,000, or 11.5% to $86,989,000 for
the six months ended June 30, 1996, and $4,313,000, or 5.9% during the year
ended December 31, 1995 as compared to the year ended December 31, 1994 when
total average deposits were $73,716,000. This growth was accomplished through
the Bank's emphasis on customer service, extended hours of operations,
competitive rate structures and selective marketing. Among the increase in
deposits, average time deposits grew 31.4% or $5,363,000, from 1994 to 1995,
while average demand deposits,
21
<PAGE>
which are non-interest bearing, grew 14.8% or $2,334,000 during 1995 as compared
to 1994. The aggregate amount of average non-interest-bearing deposits has been
24.4%, 23.2% and 21.4% of average total deposits during the first six months of
1996 and the years ended December 31, 1995 and 1994, respectively. The Bank has
no foreign deposits, nor are there any material concentrations of deposits.
The following table sets forth the average amounts of various types of
deposits for each of the periods indicated:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------
June 30, 1996 1995 1994
---------------------- ----------------------- -----------------------
(Unaudited)
Amount % Amount % Amount %
------ ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Non-interest-bearing demand ........... $21,245 24.4% $18,108 23.2% $15,774 21.4%
Interest-bearing demand ............... 25,762 29.6% 23,151 29.7% 25,489 34.6%
Savings deposit ....................... 12,964 14.9% 14,345 18.4% 15,391 20.9%
Time deposits ......................... 27,018 31.1% 22,425 28.7% 17,062 23.1%
------- ---- ------- ---- ------- ----
Total ................................. $86,989 100% $78,029 100% $73,716 100%
======= ==== ======= ==== ======= ====
</TABLE>
The Bank does not actively solicit short-term deposits of $100,000 or more
because of the liquidity risks posed by such deposits. The following table
summarizes the maturity distribution of certificates of deposits of
denominations of $100,000 or more as of June 30, 1996.
Time Deposits ($100,000 and over)
(In Thousands)
Three months or less ........................................... $ 6,568
Over three months through six months ........................... $ 3,711
Over six months through twelve months .......................... $ 2,465
Over twelve months ............................................. $ 492
Total ................................................. $13,236
22
<PAGE>
LIQUIDITY
The Bank's liquidity is a measure of its ability to fund loans, withdrawals
or maturities of deposits and other cash outflows in a cost-effective manner.
The Bank's principal sources of funds are deposits, scheduled amortization and
prepayments of loan principal, sales and maturities of investment securities and
funds provided by operations. While scheduled loan payments and maturing
investments are relatively predictable sources of funds, deposit flows and loan
prepayments are greatly influenced by general interest rates, economic
conditions and competition.
The Bank's total deposits equaled $90,105,000, $85,225,000 and $76,637,000
as of June 30, 1996, December 31, 1995, and December 31, 1994, respectively. The
increase in funds provided by deposit inflows during these years has been more
than sufficient to provide for the Bank's lending demand.
Through the Bank's investment portfolio the Bank has generally sought to
obtain a safe yet slightly higher yield than would have been available to the
Bank as a net seller of overnight Federal Funds while still maintaining
liquidity. Through its investment portfolio, the Bank also attempts to manage
its maturity gap by seeking maturities of investments which coincide as closely
as possible with maturities of deposits. The Bank's investment portfolio also
includes securities held for sale to provide liquidity for anticipated loan
demand and other liquidity needs.
Although the Bank has traditionally been a net "seller" of Federal Funds
(or overnight loans to large banks), the Bank does maintain lines of credit with
the Federal Home Loan Bank of New York, Summit Bank and Bank of New York for
"purchase" of Federal Funds in the event that temporary liquidity needs arise.
Management believes that the Bank's current sources of funds provide
adequate liquidity for the current cash flow needs of the Bank.
CAPITAL
A significant measure of the strength of a financial institution is its
capital base. The Bank's federal regulators have classified and defined bank
capital into the following components: (1) Tier I capital, which includes
tangible shareholders' equity for common stock and qualifying perpetual
preferred stock, and (2) Tier II capital, which includes a portion of the
allowance for possible loan losses, certain qualifying long-term debt and
preferred stock which does not qualify for Tier I capital. Minimum capital
levels for banks are regulated by risk-based capital adequacy guidelines which
require a bank to maintain certain capital as a percent of the bank's assets and
certain off-balance sheet items adjusted for predefined credit risk factors
(risk-adjusted assets).
23
<PAGE>
A bank is required to maintain, at a minimum, Tier I capital as a percentage of
risk-adjusted assets of 4.0% and combined Tier I and Tier II capital as a
percentage of risk-adjusted assets of 8.0%.
In addition to the risk-based guidelines, the Bank's regulators require
that a bank which meets the regulator's highest performance and operation
standards maintain a minimum leverage ratio (Tier I capital as a percentage of
tangible assets) of 3%. For those banks with higher levels of risk or that are
experiencing or anticipating significant growth, the minimum leverage ratio will
be proportionately increased. Minimum leverage ratios for each bank are
evaluated through the ongoing regulatory examination process.
The following table summarizes the risk-based and leverage capital ratios
for the Bank at June 30, 1996, as well as the required minimum regulatory
capital ratios:
CAPITAL ADEQUACY
June 30, 1996 Minimum
(Unaudited) Regulatory Requirements
------------- ----------------------
Risk-based Capital:
Tier I capital ratio .......... 15.95% 4.00%
Total capital ratio ........... 17.08 8.00
Leverage ratio ..................... 11.95 3.00-5.00
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements of the Bank and notes thereto, presented elsewhere
herein, have been prepared in accordance with generally accepted accounting
principles, which require the measurement of financial position and operating
results in terms of historical dollars without considering the change in the
relative purchasing power of money over time and due to inflation. The impact of
inflation is reflected in the increased cost of the Bank's operations. Unlike
most industrial companies, nearly all the assets and liabilities of the Bank are
monetary. As a result, interest rates have a greater impact on the Bank's
performance than do the effects of general levels of inflation. Interest rates
do not necessarily move in the same direction or to the same extent as the
prices of goods and services.
24
<PAGE>
RECENTLY ISSUED ACCOUNTING STANDARDS
In October 1995 the Financial Accounts Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). This statement establishes financial accounting and
reporting standards for stock-based employee compensation plans. SFAS 123
encourages all entities to adopt the "fair value based method" of accounting for
employee stock compensation plans. However, SFAS 123 also allows an entity to
continue to measure compensation cost under such plans using the "intrinsic
value based method." The accounting requirements of this statement are effective
for transactions entered into in fiscal years that begin after December 15,
1995. The Company intends to continue accounting for compensation cost under the
intrinsic value based method and will provide pro forma disclosures for all
awards granted after December 31, 1994. Such disclosures include net income and
earnings per share as if the fair value based method had been applied.
On June 28, 1996, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities". This
Statement provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities based on
consistent application of a financial-components approach that focuses on
control. It distinguishes transfers of financial assets that are sales from
transfers that are secured borrowings.
Under the financial-components approach, after a transfer of financial
assets, an entity recognizes all financial and servicing assets it controls and
liabilities it has incurred and derecognizes financial assets it no longer
controls and liabilities that have been extinguished. The financial-components
approach focuses on the assets and liabilities that exist after the transfer.
Many of these assets and liabilities are components of financial assets that
existed prior to the transfer. If a transfer does not meet the criteria for a
sale, the transfer is accounted for as a secured borrowing with pledge of
collateral.
It is important to note that this Statement extends the
"available-for-sale" or "trading" approach in SFAS 115, Accounting for Certain
Investments in Debt and Equity Securities, to non-security financial assets that
can contractually be prepaid or otherwise settled in such a way that the holder
of the asset would not recover substantially all of its recorded investment.
Thus, non-security financial assets (no matter how acquired) such as loans,
other receivables, interest-only strips or residual interests in securitization
trusts (for example, tranches subordinate to other tranches, cash reserve
accounts or rights to future interest from serviced assets that exceed
contractually specified servicing fees) that are subject to prepayment risk that
could prevent recovery of substantially all of the recorded amount are to be
reported at fair value with the change in fair value accounted for depending on
the asset's classification as "available-for-sale" or "trading." The Statement
also amends SFAS 115 to prevent a security from being classified as
25
<PAGE>
held-to-maturity if the security can be prepaid or otherwise settled in such a
way that the holder of the security would not recover substantially all of its
recorded investment.
This Statement requires that a liability be derecognized if and only if
either (a) the debtor pays the creditor and is relieved of its obligation for
the liability or (b) the debtor is legally released from being the primary
obligor under the liability either judicially or by the creditor. Therefore, a
liability is not considered extinguished by an in-substance defeasance.
This Statement provides implementation guidance for accounting for (1)
securitizations, (2) transfers of partial interests, (3) servicing of financial
assets, (4) securities lending transactions, (5) repurchase agreements including
"dollar rolls", (5) "wash salos," (6) loan syndications and participations, (7)
risk participations in banker's acceptances, (8) factoring arrangements, (9)
transfers of receivables with recourse, (10) transfers of sales-type and direct
financing lease receivables and (11) extinguishments of liabilities.
A number of existing FASB Statements are superseded or amended by SFAS 125.
SFAS 125 is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996, and is to be
applied prospectively. Earlier or retroactive application is not permitted.
Also, the extension of the SFAS 115 approach to certain non-security financial
assets and the amendment to SFAS 115 is effective for financial assets held on
or acquired after January 1, 1997. Reclassifications that are necessary because
of the amendment do not call into question an entity's intent to hold other debt
securities to maturity in the future. The Company, at this time, does not
believe that SFAS 125 will have a significant impact on the consolidated
financial position or results of operations in 1997.
ITEM 3 -- PROPERTIES
The Bank's main office is located at 457 Sylvan Avenue, Englewood Cliffs,
New Jersey. The Bank owns the 10,000 square foot building at this location and
leases the land under a lease which expires on March 31, 1999. The lease
provides the Bank options to renew at various intervals for an additional
twenty-five years. The Bank has an option to purchase the land during the
six-month period prior to the tenth anniversary of the lease and again six
months prior to the sixteenth anniversary. The purchase price is to be fixed
according to an appraisal of vacant land only. A Director of the Bank is a
general partner in the partnership which leases the land to the Bank. The terms
of the Bank's lease were negotiated by the Bank Board and are considered to be
as favorable to the Bank as the terms of a comparable lease with an unaffiliated
party would be. See "INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS."
The Bank has a branch office at 1605 Lemoine Avenue, Fort Lee, New Jersey
in the Whiteman Park Plaza Shopping Center and a branch office at 115 River
Road, Edgewater, New Jersey, both of which it leases. The office at 1605 Lemoine
Avenue, Fort Lee, New Jersey is
26
<PAGE>
leased at $11,113 monthly under a lease which expires in November 1997. The Bank
has the option to renew for three further periods of five years each. The Bank
also pays a proportionate share of common charges, taxes and insurance equipment
to 21% of those charges for the Whiteman Park Plaza Shopping Center.
The office at 115 River Road, Edgewater, New Jersey is leased at $2,000
monthly until April 1997, $2,350 monthly until April 1998, $2,600 monthly until
April 1999, $3,000 monthly until April 2000 and $4,198 monthly until April 2006.
The Bank has the option to renew for four additional five year terms after the
2006 expiration and pays no common charges, taxes or insurance but has agreed to
pay a proportionate share of any increase in taxes.
ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of May 2, 1996, certain information
concerning the ownership of shares of the Bank's Common Stock by (i) each person
who is known by the Company to own beneficially more than five percent (5%) of
the issued and outstanding Bank Common Stock, (ii) each director of the Company,
(iii) each named executive officer described in the section of this Registration
Statement captioned "Executive Compensation," and (iv) all directors and
executive officers as a group. Except as otherwise indicated, each individual
named has sole investment and voting power with respect to the securities shown.
Name and Address of Amount and Nature of Percent of
Beneficial Owner(1) Beneficial Owner Class
------------------- -------------------- ----------
Albert F. Buzzetti(2) ................... 6,860 1.31%
Gerald A. Calabrese, Jr.(3) ............. 16,295 3.11%
Glenn L. Creamer(4) ..................... 4,791 0.92%
Bernard Mann(5) ......................... 20,272 3.8%
Mark Metzger(6) ......................... 28,299 5.41%
Jeremiah F. O'Connor, Jr.(7) ............ 16,503 3.15%
Joseph C. Parisi(8) ..................... 18,232 3.46%
John A. Schepisi(9) ..................... 23,168 4.43%
------- -----
Directors and Executive
Officers as a Group ................... 134,420 25.67%
======= =====
27
<PAGE>
- ---------------
(1) Beneficially owned shares include shares over which the named person
exercised either sole or shared voting power or sole or shared investment
power. It also includes shares owned (i) by a spouse, minor children or by
relatives sharing the same home, (ii) by entities owned or controlled by
the named person, or (iii) by other persons if the named person has the
right to acquire such shares within 60 days by the exercise of any right or
option. Unless otherwise noted, all shares are owned of record and
beneficially by the named person, either directly or through the dividend
reinvestment plan.
(2) Includes 1,014 shares owned by Mr. Buzzetti's wife and does not include
shares owned by Mr. Buzzetti's emancipated children. Mr. Buzzetti disclaims
beneficial ownership of the shares owned by his wife and of shares owned by
other family members.
(3) Includes 869 shares owned by Mr. Calabrese's minor children. Mr. Calabrese
disclaims any beneficial ownership of shares owned by other family members
who are not dependents.
(4) Mr. Creamer disclaims any beneficial ownership of shares owned by family
members who are not dependents.
(5) Includes 7,019 shares owned by Mr. Mann's wife. Mr. Mann disclaims any
beneficial ownership of shares owned by his wife as well as shares by other
family members.
(6) Includes 289 shares owned by Mr. Metzger's wife and 175 shares owned by the
Metzger Family Partnership of which he is trustee. Mr. Metzger disclaims
beneficial ownership of shares owned by his wife and of any other shares
held by emancipated members of his family.
(7) Includes 173 shares owned by Mr. O'Connor's wife; 1,353 shares owned by Mr.
O'Connor's dependent children; and 3,229 shares held by the AtHome Medical
Pension Plan. Mr. O'Connor disclaims beneficial ownership of shares owned
by his wife and of any shares held by emancipated family members.
(8) Includes 13,346 shares owned jointly by Mr. Parisi and his wife. Mr. Parisi
disclaims beneficial ownership of any shares owned by emancipated family
members.
28
<PAGE>
(9) Includes 1,158 shares owned by Mr. Schepisi's wife; and 2,990 shares owned
by Homaro Co., a partnership, which Mr. Schepisi manages but disclaims
beneficial interest. Mr. Schepisi disclaims beneficial ownership of any
shares owned by his wife or by any emancipated family members.
29
<PAGE>
ITEM 5 - DIRECTORS AND EXECUTIVE OFFICERS
Direction of the Bank is vested in the Board of Directors which must
consist of not less than five nor more than twenty five persons who are elected
under the Bank's Certificate of Incorporation. The term of each Director is one
year. The board presently consists of eight Directors, each of whom has served
as a Director of the Bank since its inception.
The Board of Directors of the Company will initially consist of the members
of the Board of Directors of the Bank. Each Director of the Company is to serve
a one-year term and until his successor is duly elected by the shareholders of
the Company and qualified to serve on the Board of Directors.
Set forth below are the names and certain biographical information
regarding the Directors of the Bank:
Name, Age and Position Principal Occupation Director
with the Bank for Past Five Years Since
- ----------------------- -------------------- --------
Albert F. Buzzetti, 56, President and Chief Executive
President and Chief Officer of the Bank 1988
Executive Officer
Gerald A. Calabrese, Jr., 45 President, Century 21 Calabrese
Realty and Chairman and Chief
Executive Officer, Metropolitan
Mortgage Company 1988
Glenn L. Creamer, 43 Treasurer and Safety Director, J.
Fletcher Creamer & Son, Inc.
(Construction) 1988
Bernard Mann, 66 President and Chief Executive
Officer, Carolace Industries
(textiles) 1988
Mark Metzger, 54 Managing Director, BEM Management,
Inc. (equity investment fund) 1988
Jeremiah F. O'Connor, Jr., 39 President, AtHome Medical, Inc.,
(supplier of medical equipment) 1988
Joseph C. Parisi, 70, President and Chief Executive
Chairman of the Board Officer, Otterstedt Insurance Agency 1988
John A. Schepisi, 51, Senior Partner, Schepisi &
Vice Chairman McLaughlin (attorneys) 1988
30
<PAGE>
No director of the Bank is also a director of a company having a class of
securities registered under Section 12 of the Securities Exchange Act of 1934 or
subject to the requirements of Section 15(d) of such Act or any company
registered as an investment company under the Investment Company Act of 1940.
PRINCIPAL OFFICERS
Set forth below is the name of and certain biographical information
regarding the additional principal officer of the Bank who does not also serve
as a Director. The term of office for each officer is one year.
THOMAS W. THOMASMA
Mr. Thomasma, 42, has been Senior Vice President and Senior Lending Officer
of the bank since 1994. He previously serviced in Senior Lending capacities at
Independence Bank and at First Fidelity Bank for more than five years.
ITEM 6 -- EXECUTIVE COMPENSATION
The following table sets forth a summary for the last three (3) fiscal
years of the cash and non-cash compensation awarded to, earned by, or paid to,
the Chief Executive Officer of the Bank and each of the four (4) most highly
compensated executive officers whose individual remuneration exceeded $100,000
for the last fiscal year.
31
<PAGE>
SUMMARY COMPENSATION TABLE
Cash and Cash Equivalent Forms
of Remuneration
<TABLE>
<CAPTION>
Long Term
Compensation
Name and Principal Annual Annual Other Annual Securities
Position Year Salary Bonus Compensation(1) Underlying Options
----------------- ---- ------ ----- --------------- ------------------
<S> <C> <C> <C> <C> <C>
Albert F. Buzzetti,
President and Chief
Executive Officer 1995 $160,000 $15,000 $2,700 5,000
1994 $140,000 $15,000 $2,700 2,500
1993 $125,000 $15,000 $2,700 --
- -----------------
</TABLE>
(1) Other annual compensation includes the estimated personal benefit of usage
of bank-leased automobiles.
STOCK OPTION PLANS
During 1994, the Bank's stockholders approved the 1994 Employee Stock
Option Plan (the "Employees' Plan"). The Employees' Plan provides for the
granting of options to purchase up to 26,103 shares of the Bank Common Stock to
employees of the Bank adjusted to reflect stock dividends declared subsequent to
the adoption of the Employee's Plan. Under the Employee Plan, the exercise price
of the options is to be the fair market value of the Bank Common Stock on the
date of grant. Upon consummation of the Acquisition, the Company will assume the
Employee's Plan.
32
<PAGE>
The following table sets forth information concerning individual grants of
stock options made during 1995 to each of the named executive officers:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
<TABLE>
<CAPTION>
Number of Percent of
Securities Total Options/
Underlying SARs Granted Exercise or
Options/SAR's to Employees Base Price Expir.
Name Granted (#) in Fiscal Year ($/Sh) Date
---- ------------ -------------- ----------- ------
<S> <C> <C> <C> <C>
Albert F. Buzzetti. ........ 5,000 78.1 % $21.00 2005
</TABLE>
The following table sets forth information concerning the fiscal year-end
value of unexercised options held by the executive officers of the Bank named in
the table above. No stock options were exercised by such executive officers
during 1995.
AGGREGATED OPTIONS/SARS EXERCISED IN LAST FISCAL
YEAR AND FISCAL YEAR END OPTION VALUES
(INDIVIDUAL GRANTS)
<TABLE>
<CAPTION>
Value of Unexercised
Number of Securities In-the-Money Options at
Underlying Unexercised FY-End ($) (based on
Options at FY-End (#) $23.00 per share)
Shares Acquired Value Exercise/ Exercisable/
Name On Exercise (#) Realized $ Unexercisable Unexercisable
- ---- --------------- ---------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Albert F. Buzzetti ...... N/A $ N/A 7,500/0 $18,800/$0
</TABLE>
33
<PAGE>
COMPENSATION OF DIRECTORS
Directors of the Bank, other than full-time employees of the Bank, receive
fees of $500 per Board meeting attended and $250 per committee meeting attended.
The Bank maintains a Stock Option Plan for Non-employee Directors (the
"Outside Directors' Plan"). Under the Outside Directors' Plan, 26,103 shares of
Bank Common Stock have been reserved for issuance, adjusted to reflect stock
dividends declared subsequent to the adoption of the Outside Directors' Plan.
Non-employee Directors of the Bank and any other subsidiaries which the Bank may
acquire or incorporate participate in the Outside Directors' Plan. Under the
Outside Directors' Plan, each current non-employee member of the Board of
Directors has received options to purchase 3,728 shares of Common Stock at
exercise prices ranging from $18.50 to $19.95, 100% of the fair market value on
the date the options were granted.
ITEM 7 -- INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
By Board policy, the Bank does not extend credit to any director of officer
or their affiliates or immediate family members.
RELATED-PARTY TRANSACTIONS
Director Bernard Mann is a 30% partner in Three R Realty Associates, a
partnership which owns the land at 457 Sylvan Avenue, Englewood Cliffs, New
Jersey which is leased by the Bank. See "PROPERTIES." In approving this lease,
the Board conducted an independent appraisal to determine that the terms of the
lease were fair to the Bank. The Bank intends to exercise its option to purchase
the land in October, 1998. Lease payments to Three R Realty Associates were
$299,680 in 1994 and $306,804 in 1995.
The firm of Breslin & Trovini, Attorneys at Law, acted as the Bank's
general counsel during 1994. Michael J. Breslin, Jr., the firm's Senior Partner,
was a Director of the Bank during 1994 and part of 1995. During 1994 the Bank
paid legal fees totaling $4,059 to Breslin & Trovini while in 1995 those fees
totaled $124.
The firm of Schepisi & McLaughlin, Attorneys at Law, have acted as the
Bank's general counsel since April 1995. John A. Schepisi, the firm's Senior
Partner, is a Director and Vice Chairman of the Bank's Board. During 1994 the
Bank paid legal fees totaling $910 to Schepisi & McLaughlin while in 1995 these
fees totaled $7,642.
34
<PAGE>
The Bank's Blanket Bond as well as other policies have been placed with
various insurance carriers by the Otterstedt Agency of which the Bank Board
Chairman, Joseph C. Parisi, is Chief Executive Officer. 1994 gross insurance
premiums totaled $49,781 while 1995 premiums were $35,247.
Residential appraisals on the Bank's home equity lines of credit are
conducted at the expense of the Bank. Certain of those appraisals were conducted
by Gerald A. Calabrese, Jr., a state-licensed appraiser and a Bank Director.
Cost of 1994 appraisals was $11,225 while 1995 totaled $15,500.
ITEM 8 -- DESCRIPTION OF SECURITIES
COMMON STOCK
The authorized capital stock of the Company consists of one class of
5,000,000 shares of common stock, no par value. The Bank currently has 523,644
shares issued and outstanding. In addition, the Bank has issued options for an
aggregate of 40,524 shares of common stock and has reserved 79,244 shares for
issuance upon the exercise of outstanding common stock purchase warrants. Upon
consummation of the Acquisition, the Company will issue two shares of Common
Stock for each share of Bank Common Stock, and so will have approximately
1,047,288 shares outstanding. In addition, the Company will assume both the
Employee's Plan and the Outside Directors Plan, reserving 81,048 shares for
issuance thereunder after the terms of such Plans are adjusted to reflect the
terms of the Acquisition. The Company will also assume the Bank's obligations
under its common stock purchase warrants, reserving 158,720 shares for issuance
upon their exercise, after such warrants are adjusted to reflect the terms of
the Acquisition.
Dividends. The Company may pay dividends as declared from time to time by
the Company's Board of Directors out of funds legally available therefor,
subject to certain restrictions. Since dividends from the Bank will be the
Company's sole source of income, any restriction on the Bank's ability to pay
dividends will act as a restriction on the Company's ability to pay dividends.
Under the New Jersey Banking Act of 1948 (the "Banking Act"), no cash dividend
may be paid by the Bank unless, following the payment of such dividend, the
capital stock of the Bank will be unimpaired and the Bank will have a surplus of
no less than 50% of its capital stock or, if not, the payment of such dividend
will not reduce the surplus of the Bank. In addition, the Bank cannot pay
dividends in such amounts as would reduce its capital below the regulatorily
imposed minimums.
Voting Rights. Each holder of the Common Stock is entitled to one vote for
each share held on all matters voted upon by the shareholders, including the
election of directors. There is no cumulative voting in the election of
directors.
35
<PAGE>
Rights in Liquidation. In the event of a liquidation, dissolution or
winding up of the Company, each holder of the Common Stock would be entitled to
receive a pro rata portion of all assets of the Company available for
distribution to holders of the Common Stock after payment of all debts and
liabilities of the Company.
No Preemptive Rights; Redemption. Holders of shares of the Common Stock are
not entitled to preemptive rights with respect to any shares of the Common Stock
that may be issued. The Common Stock is not subject to call or redemption and is
fully paid and nonassessable.
WARRANTS
Each warrant will entitle the holder to purchase one share of the Common
Stock at a purchase price equal to $17.28, subject to adjustment as hereinafter
described. The Warrants are non-transferable and will expire on September 30,
1997. Any warrant not exercised on or before the expiration date shall expire
and will not thereafter be exercisable.
The number of shares purchasable upon exercise and the exercise price of
each warrant will be proportionately adjusted upon the occurrence of certain
events, including stock dividends, stock splits, reclassifications and
reorganizations.
TRANSFER AGENT
The Company's transfer agent for the Common Stock will be American Stock
Transfer & Trust Co., with offices at 40 Wall Street, New York, New York 10005.
Part II
ITEM 1 -- MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
The Bank's Common Stock is not traded on any established market nor do any
brokerage firms of which the Bank is aware make a market in the Bank Common
Stock. As of June 30, 1996, there were 455 holders of the Bank Common Stock and
the Company anticipates there will be the same number of holders of the Common
Stock upon consummation of the Acquisition. In connection with the Acquisition,
the Company intends to apply to have the Common Stock listed for trading on the
American Stock Exchange. The Company has made application for such listing.
Although the Company intends to have the Common Stock included on the American
Stock Exchange, there can be no assurance that an active or liquid trading
market for the Common Stock will develop, or, if it is developed, that it will
be maintained.
36
<PAGE>
Commencing in January 1996, the Bank began paying a quarterly cash dividend
of $.18 per share. Although the amount of dividends to be paid by the Company
will be determined by the Board of Directors of the Company based upon the
Company's earnings, capital needs, financial condition and other relevant
factors, the Board of Directors of the Company currently intends to adhere to
the dividend policy previously established by the Bank.
As of June 30, 1996, options to purchase 40,524 shares of Bank Common Stock
were outstanding. These options will be assumed by the Company and, after giving
effect to the terms of the Acquisition, the Company will have outstanding
options to purchase 63,890 shares of Common Stock. All of these options are
immediately exercisable.
ITEM 2 -- LEGAL PROCEEDINGS
The Bank is not a party to any legal proceedings other than routine
litigation incidental to the Bank's business. The Bank believes that none of
these proceedings would, if adversely determined, have a material effect on the
bank's consolidated financial condition or results of operations.
ITEM 3 -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Not applicable.
ITEM 4 -- RECENT SALES OF UNREGISTERED SECURITIES
The Company has not sold any securities over the past three years. Other
than for purposes of stock dividends, the Bank has not issued any securities
over the past three years. Issuance of the Common Stock in the Acquisition will
be exempt from registration pursuant to Section 3(a)(12) of the Securities Act
of 1933, as amended.
ITEM 5 -- INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article VII of the Certificate of Incorporation of the Company provides
that the Company shall indemnify its present and former officers, directors,
employees and agents and persons serving at its request against expenses,
including attorneys' fees, judgments, fines or amounts paid in settlement
incurred in connection with any pending or threatened civil or criminal
proceeding to the fullest extent permitted by the New Jersey Business
Corporation Act. Article VII also provides that such indemnification shall not
exclude any other rights to indemnification to which a person may otherwise be
entitled, and authorizes the Company to purchase insurance on behalf
37
<PAGE>
of any of the persons enumerated against any liability whether or not the
Company would have the power to indemnify him under the provisions of Article
VII.
The New Jersey Business Corporation Act empowers a corporation to indemnify
a corporate agent against his expenses and liabilities incurred in connection
with any proceeding (other than a derivative lawsuit) involving the corporate
agent by reason of his being or having been a corporate agent if (a) the agent
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and (b) with respect to any
criminal proceeding, the corporate agent had not reasonable cause to believe his
conduct was unlawful. For purposes of the Act, the term "corporate agent"
includes any present or former director, officer, employee or agent of the
corporation, and a person serving as a "corporate agent" for any other
enterprise at the request of the corporation.
With respect to any derivative action, the corporation is empowered to
indemnify a corporate agent against his expenses (but not his liabilities)
incurred in connection with any proceeding involving the corporate agent by
reason of his being or having been a corporate agent if the agent acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation. However, only the court in which the proceeding
was brought can empower a corporation to indemnify a corporate agent against
expenses with respect to any claim, issue or matter as to which the agent was
adjudged liable for negligence or misconduct.
The corporation may indemnify a corporate agent in a specific case if a
determination is made by any of the following that the applicable standard of
conduct was met: (i) the Board of Directors, or a committee thereof, acting by a
majority vote of a quorum consisting of disinterested directors; (ii) by
independent legal counsel if there is not a quorum of disinterested directors or
if the disinterested quorum empowers counsel to make the determination; or (iii)
by the stockholders.
A corporate agent is entitled to mandatory indemnification to the extent
that the agent is successful on the merits or otherwise in any proceeding, or in
defense of any claim, issue or matter in the proceeding. If a corporation fails
or refuses to indemnify a corporate agent, whether the indemnification is
permissive or mandatory, the agent may apply to a court to grant him the
requested indemnification. In advance of the final disposition of a proceeding,
the corporation may pay an agent's expenses if the agent agrees to repay the
expenses unless it is ultimately determined that he is entitled to
indemnification.
38
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF BRIDGE VIEW BANK
Consolidated Condensed Balance Sheet as of June 30, 1996.................. F-1
Consolidated Condensed Statements of Income for the six months ended
June 30, 1996 and 1995.................................................. F-2
Consolidated Statements of Cash Flows for the six months ended
June 30, 1996 and 1995.................................................. F-3
AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY
Report of Independent Accountants......................................... F-4
Consolidated Statement of Financial Condition as of December 31, 1995
and 1994................................................................ F-5
Consolidated Statements of Income for the years ended December 31, 1995
and 1994................................................................ F-6
Consolidated Statement of Stockholders' Equity for the years ended
December 31, 1995 and 1994.............................................. F-7
Consolidated Statements of Cash Flows for the years ended
December 31, 1995 and 1994.............................................. F-8
Notes to Consolidated Condenced Financial Statements...................... F-10
<PAGE>
BRIDGE VIEW BANK
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
June 30, June 30,
1996 1995
-------- -------
Assets
Cash and Due from Banks ........................... $ 6,372 $ 5,203
Federal Funds Sold ................................ 0 4,800
Investment Securities:
Held to Maturity Securities
(Market Value $22.785 6/30/96 and
$18.502 on 6/30/95) ........................... 22,839 18,453
Available for Sale Securities
(Net of unrealized holding losses of
$26 on 6/30/96 and $6 on 6/30/95) ............. 5,692 7,824
Federal Home Loan Bank Stock ...................... 283 0
Loans, Less Allowance for Loan Losses of
$817 on 6/30/96 and $720 on 6/30/95 ............. 66,803 50,292
Net Deferred Loan Fees ............................ (120) (51)
Premises and Equipment, Net ....................... 1,539 1,620
Other Real Estate Owned ........................... 0 0
Accrued Interest Receivable and Other Assets ...... 1,608 1,114
-------- -------
Total Assets ................................ $105,016 $89,255
======== =======
Liabilities and Stockholders' Equity
Deposits
Non-Interest Bearing Demand Deposits ............ $ 22,286 $18,734
Interest Bearing
Savings, NOW and Money Market Deposits ........ 40,741 37,997
Other Time Deposits ........................... 14,360 13,298
Certificates of Deposit $100,000 and over ..... 12,718 8,485
-------- -------
Total Deposits .............................. 90,105 78,514
Federal Funds Borrowed ............................ 2,500 0
Accrued Interest Payable and Other Liabilities .... 846 450
-------- -------
Total Liabilities ........................... 93,451 78,964
Stockholders' Equity
Common Stock, authorized 2,500,000 shares,
issued and outstanding 523,544 shares
on 6/30/96 and 497,253 shares on 6/30/95 ...... 4,986 4,973
Capital Surplus ................................... 5,076 5,066
Undivided Profits ................................. 1,519 154
Reserve for Unrealized Losses on Available
For Sale Securities ............................. 16 (27)
Total Stockholders' Equity .................. 11,565 10,291
-------- -------
Total Liabilities and Stockholders' Equity .. $105,016 $89,255
======== =======
F-1
<PAGE>
BRIDGE VIEW BANK
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(DOLLARS IN THOUSANDS--EXCEPT PER SHARE DATA)
Six Months Ended
---------------------
June 30, June 30,
1996 1995
-------- --------
Interest Income:
Interest and Fees on Loans ......................... $2,774 $2,195
Interest on Federal Funds Sold ..................... 125 115
Interest on Investment Securities:
Taxable Interest Income .......................... 625 597
Tax-Exempt Interest Income ....................... 100 71
------ ------
Total Interest Income .......................... 3,624 2,978
Interest Income:
Savings, NOW and Money Market Deposits ............. 345 407
Other Time Deposits ................................ 346 304
Certificates of Deposit $100,000 and over .......... 285 191
Borrowed Funds ..................................... 6 0
------ ------
Total Interest Expense ......................... 982 902
Net Interest Income ............................ 2,642 2,076
Provision for Loan Losses .......................... 113 92
------ ------
Net Interest Income After Provision
for Loan Losses .............................. 2,529 1,984
Non-Interest Income:
Service Fees on Deposits ........................... 220 124
Other Fees and Commissions ......................... 143 141
Investment Securities Gains (Losses) ............... 0 (6)
------ ------
Total Non-Interest Income ...................... 363 259
------ ------
Non-Interest Expense:
Salaries and Wages ................................. 640 547
Employee Benefits .................................. 128 99
Occupancy Expense .................................. 382 369
Furniture and Equipment ............................ 73 67
Other .............................................. 479 463
------ ------
Total Non-Interest Expense ..................... 1,702 1,545
------ ------
Income Before Income Taxes ..................... 1,190 698
Income Tax Expense ................................... 464 266
------ ------
Net Income ..................................... $ 726 $ 432
====== ======
Net Income Per Share ................................. $ 1.39 $ 0.82
Weighted Average Shares Outstanding .................. 523,544 523,544
F-2
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
(DOLLARS IN THOUSANDS)
Six Months Ended
---------------------
June 30, June 30,
1996 1995
-------- --------
Cash Flows from Operating Activities:
Net Income ....................................... $ 726 $ 432
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Provision for Loan Losses .................... 113 92
Depreciation ................................. 73 81
Net Amortization and Accretion of Premiums
and Discounts on Investment Securities ..... 1 24
Proceeds from Sale of Loans Held for Sale .... 0 87
Gain on Sale of Loans Held for Sale .......... 0 (1)
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Accrued Interest
Receivable ............................... (117) 20
Increase in Other Assets ................... (581) (355)
Increase in Accounts Payable and Accrued
Liabilities .............................. 312 82
Other ...................................... (185) 55
-------- -------
Net Cash Provided by Operating Activities .... 342 517
-------- -------
Cash Flows from Investing Activities:
Purchases of Investment Securities ............... (10,093) (7,366)
Maturities of Investment Securities .............. 4,881 14,250
Proceeds from Repayments of Securities
Available for Sale ............................. 46 58
Proceeds from Sale of Securities Available
for Sale ....................................... 0 2,896
Maturities of Securities Available for Sale ...... 1,000 0
Purchase of Securities Available for Sale ........ 0 (2,982)
Net Increase in Loans ............................ (11,388) (6,895)
Purchase of Federal Home Loan Bank Stock ......... (283) 0
Purchase of Premises and Equipment ............... (59) (14)
-------- -------
Net Cash Used in Investing Activities .......... (15,896) (53)
-------- -------
Cash Flows from Financing Activities:
Net Increase in Deposits ......................... 4,880 1,877
Issuance of Common Stock and Options
and Warrants Exercised ......................... 15 1
Purchase of Federal Funds ........................ 2,500 0
-------- -------
Net Cash Provided by Financing Activities ...... 7,395 1,878
-------- -------
Increase in Cash and Cash Equivalents .......... (8,159) 2,342
Cash and Cash Equivalents at Beginning of Year ... 14,531 7,661
-------- -------
Cash and Cash Equivalents at End of Year ......... $ 6,372 $10,003
======== =======
Supplemental Information:
Cash Paid During the Year for:
Interest on Deposits ........................... $ 955 $ 874
Income Taxes ................................... $ 767 $ 377
F-3
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Bridge View Bank:
We have audited the accompanying consolidated statements of financial
condition of Bridge View Bank and subsidiary as of December 31, 1995 and 1994,
and the related consolidated statements of income, stockholders' equity, and
cash flows for the years then ended. These consolidated financial statements are
the responsibility of the Bank's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Bridge View
Bank and subsidiary at December 31, 1995 and 1994, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
As discussed in note 1 to the consolidated financial statements, the Bank
adopted Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," in 1994.
KPMG Peat Marwick LLP
February 16, 1996
F-4
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, 1995 and 1994
(Dollars in Thousands)
1995 1994
-------- --------
ASSETS
Cash and cash equivalents:
Cash and due from banks ............................ $ 8,331 $ 4,011
Federal funds sold ................................. 6,200 3,650
-------- --------
Total cash and cash equivalents ................ 14,531 7,661
-------- --------
Securities available for sale (note 2) ............... 6,780 7,513
Investment securities, estimated market value of
$17,767 in 1995 and $24,989 in 1994 (note 2) ....... 17,630 25,308
Loans held for sale .................................. -- 86
Loans (note 3):
Commercial ......................................... 30,013 21,597
Mortgage ........................................... 9,818 7,879
Consumer and other ................................. 16,310 14,600
-------- --------
Total loans .................................... 56,141 44,076
Deferred loan fees ................................. (41) (13)
Allowance for loan losses .......................... (692) (626)
-------- --------
Net loans ...................................... 55,408 43,437
-------- --------
Premises and equipment, net (note 4) ................. 1,553 1,687
Accrued interest receivable .......................... 738 608
Other assets (note 5) ................................ 154 292
-------- --------
Total assets ................................... $ 96,794 $ 86,592
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand deposits ................ 23,244 19,502
Interest-bearing deposits:
Savings and time deposits ........................ 53,300 49,416
Certificates of deposit of $100,000 or more ...... 8,681 7,719
-------- --------
Total deposits ................................. 85,225 76,637
Accounts payable and accrued liabilities ............. 534 368
-------- --------
Total liabilities .............................. 85,759 77,005
-------- --------
Stockholders' equity (note 8):
Capital stock, par value $10 per share .............
Authorized 2,500,00 shares in
1995 and 600,000 shares in 1994;
issued and outstanding 497,752
shares in 1995 and 473,750 shares in 1994 ........ 4,978 4,738
Surplus ............................................ 5,069 4,783
Net unrealized gain (loss) on securities
available for sale ............................... 11 (194)
Retained earnings .................................. 977 260
-------- --------
Total stockholders' equity ..................... 11,035 9,587
-------- --------
Commitments and contingencies (notes 6 and 9)
Total liabilities and stockholders' equity ..... $ 96,794 $ 86,592
======== ========
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Consolidated Statements of Income
Years ended December 31, 1995 and 1994
(Dollars in Thousands, Except Share Data)
1995 1994
------ ------
Interest income:
Interest and fees on loans .......................... $4,712 $3,383
Interest on investments available for sale .......... 384 382
Interest on municipals--nontaxable .................. 165 67
Interest on investments ............................. 823 1,080
Interest on Federal funds sold ...................... 294 132
------ ------
Total interest income .......................... 6,378 5,044
------ ------
Interest expense:
Savings and time deposits ........................... 1,431 1,132
Certificates of deposit of $100,000 or more ......... 413 229
------ ------
1,844 1,361
Net interest income ............................ 4,534 3,683
Provision for loan losses (note 3) .................... 92 75
------ ------
Net interest income after pro-
vision for loan losses ...................... 4,442 3,608
------ ------
Other income--fees and service charges ................ 578 378
------ ------
Other expenses:
Salaries and employee benefits ...................... 1,361 1,155
Occupancy (note 6) .................................. 534 511
Furniture and equipment expense (note 6) ............ 239 254
Advertising and business promotion .................. 63 64
Data processing ..................................... 173 147
FDIC insurance ...................................... 87 161
Other insurance ..................................... 32 42
Other operating expenses ............................ 515 563
------ ------
Total other expenses ........................... 3,004 2,897
------ ------
Income before income tax expense ............... 2,016 1,089
Income tax expense (note 5) ........................... 781 349
------ ------
Net income ..................................... $1,235 $ 740
====== ======
Earnings per share:
Primary ............................................. $ 2.40 $ 1.50
Fully diluted ....................................... 2.40 1.50
====== ======
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1995 and 1994
(Dollars in Thousands)
<TABLE>
<CAPTION>
Net unrealized
gain (loss)
on securities
Capital Sur- Retained available
stock plus earnings for sale Total
------ ----- ----- -------------- ------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 ..................................... $4,507 $ 508 $ 15 $ -- $ 9,030
Cumulative effect of accounting change--
investments ................................................. -- -- -- 8 8
Net income ....................................................... -- -- 740 -- 740
5% stock dividend ................................................ 225 270 (495) -- --
Common stock issued upon exercise of stock warrants .............. 6 5 -- -- 11
Net change in unrealized loss on securities
available for sale, net of tax .............................. -- -- -- (202) (202)
------ ------ ----- --- -------
Balance at December 31, 1994 ..................................... 4,738 4,783 260 (194) 9,587
Net income ....................................................... -- -- 1,235 -- 1,235
5% stock dividend ................................................ 236 282 (518) -- --
Common stock issued upon exercise of stock warrants .............. 4 4 -- -- 8
Net change in unrealized loss on securities
available for sale, net of tax .............................. -- -- -- 205 205
------ ------ ----- --- -------
Balance at December 31, 1995 ..................................... $4,978 $5,069 $ 977 $ 11 $11,035
====== ====== ===== ==== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years ended December 31, 1995 and 1994
(Dollars in Thousands)
<TABLE>
<CAPTION>
1995 1994
------- ------
<S> <C> <C>
Cash flows from operating activities:
Net income ........................................................................ $ 1,235 $ 740
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for loan losses ................................................... 92 75
Depreciation ................................................................ 155 180
Net amortization and accretion of premiums and discounts on
investment securities ................................................... (21) 7
Net loss on sale of securities available for sale ........................... 5 --
Loans originated for sale ................................................... (1,188) (1,693)
Proceeds from sales of loans held for sale .................................. 1,285 1,701
Gain on sale of loans held for sale ......................................... (11) (14)
Changes in operating assets and liabilities:
Increase in accrued interest receivable ................................. (130) (107)
Decrease in other assets ................................................ 2 8
Increase in accounts payable and accrued liabilities .................... 166 145
------- ------
Net cash provided by operating activities ............................ 1,590 1,042
------- ------
Cash flows from investing activities:
Purchases of investment securities ................................................ (14,310) (10,602)
Maturities of investment securities ............................................... 22,012 10,500
Proceeds from repayments of investment securities ................................. -- 50
Proceeds from repayments of securities available for sale ......................... 133 89
Proceeds from sale of securities available for sale ............................... 2,915 --
Maturities of securities available for sale ....................................... 1,000 5,000
Purchase of securities available for sale ......................................... (2,982) (2,952)
Net increase in loans ............................................................. (12,063) (8,282)
Purchases of premises and equipment ............................................... (21) (23)
------- ------
Net cash used in investing activities ................................ (3,316) (6,220)
------- ------
Cash flows from financing activities:
Net increase in deposits .......................................................... 8,588 4,010
Issuance of common stock and options and warrants exercised ....................... 8 11
------- ------
Net cash provided by financing activities ............................ 8,596 4,021
------- ------
Increase (decrease) in cash and cash equivalents ..................... 6,870 (1,157)
Cash and cash equivalents at beginning of year ...................................... 7,661 8,818
------- ------
Cash and cash equivalents at end of year ............................................ $14,531 $7,661
======= ======
</TABLE>
F-8
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Consolidated Statements of Cash Flows, Continued
(Dollars in Thousands)
1995 1994
------ ------
Supplemental information:
Cash paid during the year for:
Interest on deposits ................................ $1,801 $1,326
====== ======
Income taxes ........................................ $ 408 $ 249
====== ======
Transfer of investment securities to
securities available for sale ...................... $ -- $9,982
====== ======
See accompanying notes to consolidated financial statements.
F-9
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1995 and 1994
(1) Summary of Significant Accounting Policies
The accompanying consolidated financial statements include the accounts
of Bridge View Bank and its wholly-owned subsidiary, Bridge View
Investment Company (the Bank). All intercompany accounts and
transactions have been eliminated in consolidation.
Organization
The Bank is a commercial bank which provides a full range of banking
services to individuals and corporate customers in New Jersey. The Bank
is subject to competition from other financial institutions. The Bank
is regulated by state and Federal agencies and is subject to periodic
examinations by those regulatory authorities.
Basis of Financial Statement Presentation
The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles. In preparing the
consolidated financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets
and liabilities as of the date of the consolidated statement of
financial condition and revenues and expenses for the year. Actual
results could differ significantly from those estimates.
Material estimates that are particularly susceptible to significant
change in the near term relate to the determination of the allowance
for loan losses. In connection with the determination of the allowance
for loan losses, management generally obtains independent appraisals
for significant properties.
Securities Available for Sale
Management determines the appropriate classification of securities at
the time of purchase. If management has the intent and the Bank has the
ability at the time of purchase to hold securities until maturity, they
are classified as investment securities. Securities to be held for
indefinite periods of time and not intended to be held to maturity are
classified as securities available for sale. Gains or losses on sales
of securities available for sale are based upon the specific
identification method.
As of January 1, 1994, the Bank has adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" (SFAS 115). SFAS 115 requires that
securities available for sale be reported at fair value with changes in
the carrying value from period to period included as a separate
component of stockholders' equity.
F-10
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, cont.
Investment Securities
Investment securities are carried at the principal amount outstanding,
adjusted for amortization of premiums and accretion of discounts using
a method that approximates the level-yield method over the terms of the
securities. Gains or losses on sales of investment securities are based
upon the specific identification method. Investment securities are
carried at the principal amount outstanding because the Bank has the
ability and it is management's intention to hold these securities to
maturity.
Premises and Equipment
Premises and equipment are stated at historical cost, less accumulated
depreciation and amortization. Depreciation of fixed assets is
accumulated on a straight-line basis over the estimated useful lives of
the related asset. Leasehold improvements are amortized on a
straight-line basis over the shorter of their estimated useful lives or
the term of the lease. Maintenance and repairs are charged to expense
in the year incurred.
Loans
Loans are stated at their principal amount outstanding, net of deferred
loan origination fees and costs. Interest income on loans is accrued
and credited to interest income when earned. The accrual of income on
loans is discontinued when certain factors indicate reasonable doubt as
to the collectibility of such income, and the interest income on such
loans is recognized only when subsequently collected. Loan origination
fees and certain direct loan origination costs are deferred and
recognized over the life of the loan as an adjustment to yield using a
method which approximates the interest method.
Loans Held for Sale
Mortgage loans intended for sale are carried at the lower of unpaid
principal balance, net, or market value on an aggregate basis.
Allowance for Loan Losses
Losses on loans are charged to the allowance for loan losses. Additions
to this allowance are made by recoveries of loans previously charged
off and by a provision charged to expense. The determination of the
balance of the allowance for loan losses is based on an analysis of the
loan portfolio, economic conditions and other factors warranting
recognition. Management believes that the allowance for loan losses is
adequate. While management uses available information to recognize
losses on loans, future additions may be necessary based on changes in
economic conditions, particularly in
F-11
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, cont.
Allowance for Loan Losses, cont.
New Jersey. In addition, various regulatory agencies, as an integral
part of their examination process, periodically review the Bank's
allowance for loan losses. Such agencies may require the Bank to
recognize additions to the allowance based on their judgments about
information available to them at the time of their examination.
Income Taxes
The Bank uses the asset and liability method of accounting for income
taxes. Under this method, deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax
rates in effect for the year in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
Earnings Per Share
For the year ended December 31, 1995, earnings per share is based on
the weighted average number of shares outstanding, including common
stock equivalents (514,007), utilizing the modified treasury stock
method.
For the year ended December 31, 1994, earnings per share was computed
by dividing net income by the weighted average number of shares
outstanding (493,373), retroactively adjusted for stock dividends.
Common stock equivalents were not included in the calculation as they
were not material.
Cash and Cash Equivalents
Cash and cash equivalents include cash and due from banks and Federal
funds sold, which are generally sold for one-day periods.
Reclassifications
Certain reclassifications have been made to amounts reported in 1994 to
conform to the 1995 presentation.
F-12
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(2) Securities Available for Sale and Investment Securities
A comparative summary of securities available for sale at December 31,
1995 and 1994 is as follows (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amor- unreal- unreal-
tized ized ized Market
cost gains losses value
------- ------ ------ -------
<S> <C> <C> <C> <C>
1995--U.S. Government and agency
obligations ............................... $6,762 $38 $(20) $6,780
====== === ==== ======
1994--U.S. Government and agency
obligations ............................... $7,836 -- (323) 7,513
====== === ==== ======
</TABLE>
A comparative summary of investment securities at December 31, 1995 and
1994 is as follows (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amor- unreal- unreal-
tized ized ized Market
cost gains losses value
------- ------ ------ ------
<S> <C> <C> <C> <C>
1995:
U.S. Government and agency obligations ............ $12,668 $120 $ (11) $12,777
Municipal obligations ............................. 4,962 28 -- 4,990
------- ---- ----- -------
$17,630 $148 $ (11) $17,767
======= ==== ===== =======
1994:
U.S. Government and agency obligations ............ 21,889 4 (319) 21,574
Municipal obligations ............................. 3,419 1 (5) 3,415
------- ---- ----- -------
$25,308 $ 5 $(324) $24,989
======= ==== ===== =======
</TABLE>
F-13
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(2) SECURITIES AVAILABLE FOR SALE AND INVESTMENT SECURITIES, CONT.
The investments held at December 31, 1995 mature as follows (in thousands):
Investment Securities available
securities for sale
--------------------- ---------------------
Amortized Market Amortized Market
cost value cost value
-------- ------ --------- -------
Within one year ........... $ 9,800 $9,816 $4,011 $4,020
One to five years ......... 7,439 7,539 2,751 2,760
Six to ten years .......... 391 412 -- --
------- ------ ------ ------
$17,630 $7,767 $6,762 $6,780
======= ====== ====== ======
Proceeds from the sales of securities available for sale during 1995 were
$2.9 million. Gross gains of $31,000 and gross losses of $36,000 were realized
on those sales in 1995. For the year ended December 31, 1994, there were no
sales of securities. Securities with a carrying value of $1.5 million at
December 31, 1995 and 1994 were pledged to secure public funds on deposit.
(3) LOANS AND ALLOWANCE FOR LOAN LOSSES
Transactions in the allowance for loan losses for the years ended December
31, 1995 and 1994 are as follows (in thousands):
1995 1994
---- ----
Balance at beginning of year ..................... $626 $567
Provision charged to expense ..................... 92 75
Loans charged off, net of recoveries ............. (26) (16)
---- ----
Balance at end of year ........................... $692 $626
==== ====
Nonaccrual loans that are contractually past due 90 days or more amount to
$163,000 and $0 as of December 31, 1995 and 1994, respectively. Interest on
nonaccrual loans excluded from interest income was insignificant for 1995; there
was no interest on nonaccrual loans excluded from income in 1994.
The Bank grants commercial, mortgage and installment loans to those New
Jersey residents and businesses within its local trading area. Its borrowers'
abilities to repay their obligations are dependent upon various factors,
including the borrowers' income and net worth, cash flows generated by the
underlying collateral, value of the underlying collateral and priority of the
Bank's lien on the property. Such factors are dependent upon various economic
conditions and individual circumstances beyond the Bank's control; the Bank is
therefore subject to risk of loss. The Bank believes its lending policies and
procedures adequately minimize the potential exposure to such risks and that
adequate provisions for loan losses are provided for all known and inherent
risks.
F-14
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(4) PREMISES AND EQUIPMENT
At December 31, 1995 and 1994, premises and equipment consists of the
following (in thousands):
1995 1994
------ -----
Building ........................................ $1,677 $1,677
Furniture, fixtures and equipment ............... 492 472
Leasehold improvements .......................... -- 15
------ ------
Total fixed assets .............. 2,169 2,164
Less accumulated depreciation and amortization .. 616 477
Net carrying value .............. $1,553 $1,687
====== ======
(5) INCOME TAXES
Income tax expense from operations for the years ended December 31, 1995
and 1994 aggregated $781,000 and $349,000, respectively. The current and
deferred amounts of such provisions are as follows (in thousands):
1995 1994
---- ----
Federal:
Current ............... $585 $272
Deferred .............. 35 18
---- ----
620 290
State:
Current ............... 156 40
Deferred .............. 5 19
---- ----
161 59
$781 $349
==== ====
Total income tax expense for the years ended December 31, 1995 and 1994 was
allocated as follows (in thousands):
1995 1994
----- ----
Income tax expense from operations ............................ $ 781 $349
Stockholders' equity--unrealized (gain) loss on securities
available for sale ......................................... (136) 129
----- ----
$ 645 $478
===== ====
F-15
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(5) INCOME TAXES, CONT.
Income tax expense from operations differed from the amounts computed by
applying the U.S. Federal income tax rate (34% in 1995 and 1994) to income taxes
as a result of the following (in thousands):
1995 1994
---- ----
Computed "expected" tax expense ......................... $685 $370
Increase (decrease) in taxes resulting from:
State taxes, net of Federal income tax benefit ..... 106 39
Tax-exempt income .................................. (29) (15)
Other .............................................. 19 (45)
---- ----
$781 $349
==== ====
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities as of December
31, 1995 and 1994 are as follows (in thousands):
1995 1994
---- ----
Deferred tax assets:
Start-up costs .............................................. $ 1 $ 5
Bank premises, furniture and equipment, principally due to
differences in depreciation .............................. 50 40
Unrealized loss on securities available for sale ............ -- 129
Loans, principally due to allowance for loan losses and
deferred fee income ...................................... 273 247
--- ----
Total gross deferred tax assets .................. 324 421
--- ----
Deferred tax liabilities:
Deferred fee income ......................................... 31 --
Unrealized gain on securities available for sale 7 --
Investment securities, principally due to accretion of
discounts ................................................ 22 11
Accrual to cash adjustment .................................. 200 181
--- ----
Total gross deferred tax liabilities ............. 260 192
---- ----
Net deferred tax asset ........................... $ 64 $229
==== ====
F-16
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(5) INCOME TAXES, CONT.
At December 31, 1995, management believes that no valuation allowance for
the deferred tax asset is necessary due to sufficient taxes paid in the
statutory carryback period.
(6) LEASES
The Bank leases its land in Englewood Cliffs, New Jersey from a general
partnership owned partly by a director under a ten-year operating lease with
five five-year renewal options. The Bank has the option to purchase the land six
months prior to expiration of the original ten-year term or six months prior to
the end of the 16th year of the lease. The purchase price shall be the market
value of the land only as determined by an appraisal. The Bank also leases a
branch facility in Fort Lee, New Jersey.
The following is a schedule of future minimum lease payments (exclusive of
payments for maintenance, insurance, taxes and additional rental payments based
on increases in certain indexes) for operating leases (which include both
branches) with initial or remaining terms in excess of one year from December
31, 1995 (in thousands):
Year ending December 31:
1996 ................................... $443
1997 ................................... 423
1998 ................................... 292
1999 ................................... 76
====
Rental expense amounted to $432,000 and $411,000 for the years ended
December 31, 1995 and 1994, respectively.
(7) RELATED-PARTY TRANSACTIONS
Certain directors of the Bank are associated with professional firms that
rendered various professional services for the Bank. The Bank paid the firms,
excluding rental payments, approximately $58,000 and $19,000 during the years
ended December 31, 1995 and 1994, respectively. It is the Bank's policy not to
originate loans to directors, executive officers or their affiliates.
(8) STOCKHOLDERS' EQUITY AND DIVIDEND RESTRICTIONS
Warrants to purchase common stock were distributed to stockholders of
record as of October 1, 1992. One warrant was issued for each five shares of
common stock owned on that date. Each warrant entitles the holder to purchase
one share of common stock at a price of $18.14 per share. The warrants are
exercisable on or before September 30, 1997. During 1995 and 1994, 442 and 629
warrants, respectively, were exercised, and 76,012 and 76,454 warrants were
outstanding at December 31, 1995 and 1994, respectively.
F-17
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(8) STOCKHOLDERS' EQUITY AND DIVIDEND RESTRICTIONS, CONT.
During 1994, the Bank's stockholders approved the 1994 Stock Option Plan
for Non Employee Directors (Directors' Plan) and the 1994 Employee Stock Option
Plan (Employees' Plan). The Directors' Plan provides for options to purchase up
to 24,860 shares of the Bank's common stock to be issued to directors who are
not employees of the Bank. The Employees' Plan provides for the option to
purchase up to 24,860 shares of the Bank's common stock to be issued to
employees of the Bank. Previously issued options to an employee of the Bank were
terminated upon adoption of these plans. The option price per share approximates
the market value of the Bank's stock on the date of grant.
A summary of the stock option plans for the years ended December 31, 1995
and 1994 is as follows:
Number
of Option price
shares per share($)
------ ---------------
Outstanding at December 31, 1993 -- --
Granted 23,625 19.52
Exercised -- --
------
Outstanding at December 31, 1994 23,625 19.52
Granted 12,882 21.00
Exercised -- --
------
Outstanding at December 31, 1995 36,507 21.00 -- 19.52
====== ==============
The Bank declared a 5% stock dividend effective March 17, 1995 and February
28, 1994.
New Jersey law provides that no dividend may be paid unless, after the
payment of such dividend, the capital of the Bank will not be impaired and
either the Bank will have statutory surplus of not less than 50% of its capital
stock or the payment of such dividend will not reduce the statutory surplus of
the Bank.
(9) COMMITMENTS AND CONTINGENCIES
The Bank is a party to transactions with off-balance-sheet risk in the
normal course of business in order to meet the financing needs of its customers.
These transactions consist of commitments to extend credit and involve, to
varying degrees, elements of credit and interest rate risk in excess of the
amount recognized in the accompanying consolidated statements of financial
condition.
F-18
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(9) COMMITMENTS AND CONTINGENCIES, CONT.
The Bank uses the same credit policies and collateral requirements in
making commitments and conditional obligations as it does for on-balance-sheet
loans. Commitments to extend credit are agreements to lend to customers as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since the commitments may expire without being
drawn upon, the total commitment amounts do not necessarily represent future
cash requirements. The Bank evaluates each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained, if deemed necessary by
the Bank upon extension of credit, is based on management's credit evaluation of
the borrower. Outstanding available loan commitments, primarily variable rate
home equity loans, at December 31, 1995 and 1994 totaled $21.1 million and $17.1
million, respectively. Additionally, unused credit card commitments totaled
$394,000 at December 31, 1995.
Most of the Bank's lending activity is with customers located in Bergen
County, New Jersey. The Bank has issued letters of credit to customers totaling
$382,000 and $668,000 at December 31, 1995 and 1994, respectively, whereby the
Bank guarantees performance to a third party. These letters of credit generally
have fixed expiration dates of less than one year.
(10) REGULATORY MATTERS
On December 19, 1991, the Federal Deposit Insurance Corporation Improvement
Act of 1991 (FDICIA) became law. Regulations implementing the prompt corrective
action provisions of FDICIA became effective on December 19, 1992. In addition
to the prompt corrective action requirements, FDICIA includes significant
changes to the legal and regulatory environment for insured depository
institutions, including reductions in insurance coverage for certain kinds of
deposits, increased supervision by the Federal regulatory agencies, increased
reporting requirements for insured institutions, and new regulations concerning
internal controls, accounting and operations.
The prompt corrective action regulations define specific capital categories
based on an institution's capital ratios. The capital categories, in declining
order, are "well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized," and "critically undercapitalized." To be
considered "well capitalized," an institution must generally have a leverage
ratio of at least 5%, a Tier 1 risk-based capital ratio of at least 10%, and a
total risk-based capital ratio of at least 6%. An institution is deemed to be
"critically undercapitalized" if it has a tangible equity ratio of 2% or less.
At December 31, 1995, the Bank's (unaudited) leverage ratio, Tier 1 risk-based
capital ratio and total risk-based capital ratio were 12.4%, 17% and 18%,
respectively. The Bank currently meets the criteria of a "well capitalized"
institution.
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments" (SFAS 107), requires that the Bank disclose
F-19
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS, CONT.
the estimated fair value of its financial instruments whether or not
recognized in the consolidated balance sheet. Fair value estimates and
assumptions are set forth below for the Bank's financial instruments at December
31, 1995 (in thousands):
Estimated
Carrying fair
amount value
-------- ---------
Financial assets:
Cash and cash equivalents ............ $14,531 $14,531
Securities available for sale ........ 6,780 6,780
Investment securities ................ 17,630 17,767
Net loans ............................ 55,408 55,659
Accrued interest receivable .......... 738 738
Financial liabilities--deposits ........... 85,225 85,313
====== =======
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
CASH AND CASH EQUIVALENTS
The carrying amount approximates fair value.
SECURITIES AVAILABLE FOR SALE
All securities available for sale are valued using quoted market prices.
INVESTMENT SECURITIES
All investment securities are valued using quoted market prices.
NET LOANS
Fair values are estimated for portfolios of loans with similar financial
characteristics. Loans are segregated by type, such as residential and
commercial real estate, commercial and other consumer. The fair value of loans
is estimated by discounting contractual cash flows using estimated market
discount rates which reflect the credit and interest rate risk inherent in the
loans.
ACCRUED INTEREST RECEIVABLE
The carrying amount approximates fair value.
F-20
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS, CONT.
DEPOSITS
The fair value of deposits with no stated maturity, such as
non-interest-bearing demand deposits is equal to the amount payable on demand as
of December 31, 1995. The fair value of certificates of deposit is based on the
discounted value of contractual cash flows. The discount rate is estimated using
the rates currently offered for deposits of similar remaining maturities.
COMMITMENTS TO EXTEND CREDIT
The fair value of commitments is estimated using the fees currently charged
to enter into similar agreements, taking into account the remaining terms of the
agreements; at December 31, 1995 such amounts were not material.
LIMITATION
The preceding fair value estimates were made at December 31, 1995, based on
pertinent market data and relevant information on the financial instrument.
These estimates do not include any premium or discount that could result from an
offer to sell at one time the Bank's entire holdings of a particular financial
instrument or category thereof. Since no market exists for a substantial portion
of the Bank's financial instruments, fair value estimates were necessarily based
on judgments regarding future expected loss experience, current economic
conditions, risk assessment of various financial instruments, and other factors.
Given the innately subjective nature of these estimates, the uncertainties
surrounding them and the matter of significant judgment that must be applied,
these fair value estimates cannot be calculated with precision. Modifications in
such assumptions could meaningfully alter these estimates.
Since these fair value approximations were made solely for on- and
off-balance-sheet financial instruments at December 31, 1995, no attempt was
made to estimate the value of anticipated future business. Furthermore, certain
tax implications related to the realization of the unrealized gains and losses
could have a substantial impact on these fair value estimates and have not been
incorporated into the estimates.
(12) RECENT ACCOUNTING PRONOUNCEMENTS
In March 1995 the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
(SFAS 121). This statement requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever
F-21
<PAGE>
BRIDGE VIEW BANK AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(12) RECENT ACCOUNTING PRONOUNCEMENTS, CONT.
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Goodwill is included in the scope of SFAS 121,
while core deposit intangibles and mortgage servicing rights are specifically
excluded. SFAS 121 is effective for fiscal years beginning after December 15,
1995 and was adopted by the Bank in 1996. The effect of adopting SFAS 121 is
expected to be immaterial.
In May 1995 the FASB issued Statement of Financial Accounting Standards No.
122, "Accounting for Mortgage Servicing Rights" (SFAS 122). This statement
requires recognition of the rights to service mortgage loans for others, whether
those rights were acquired through purchase or origination. SFAS 122 also
requires that capitalized mortgage servicing rights be evaluated for impairment
based on the fair value of those rights with impairment recognized through a
valuation allowance. The accounting requirements of this statement are effective
for fiscal years beginning after December 15, 1995. The impact of adopting SFAS
122 on the consolidated financial statements of the Bank is expected to be
immaterial.
In October 1995, FASB issued Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation (SFAS 123). This statement
establishes financial accounting and reporting standards for stock-based
employee compensation plans. SFAS 123 encourages all entities to adopt the "fair
value based method" of accounting for employee stock compensation plans.
However, SFAS 123 also allows an entity to continue to measure compensation cost
under such plans using the "intrinsic value based method." The accounting
requirements of this statement are effective for transactions entered into in
fiscal years that begin after December 15, 1995.
F-22
<PAGE>
PART III
ITEM 1 - INDEX TO EXHIBITS
(a) The following exhibits are filed as part of this Registration
Statement:
Exhibit Number Description
- -------------- -----------
2(a) Certificate of Incorporation of Bridge View Bancorp
2(b) By Laws of Bridge View Bancorp
3 Form of Non-Transferable Warrant Certificate
5 Not Applicable
6(a) Bridgeview Bank 1994 Stock Option Plan
6(b) Bridgeview Bank Stock Option Plan for Non-Employee Directors
39
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned thereunto duly authorized.
BRIDGE VIEW BANCORP
By: /s/ ALBERT F. BUZZETTI
-----------------------------------
Albert F. Buzzetti, President
Dated: September 13, 1996
40
CERTIFICATE OF INCORPORATION
OF
BRIDGE VIEW BANCORP
THIS IS TO CERTIFY THAT, there is hereby organized a corporation under and
by virtue of N.J.S. 14A:1-1 et seq., the "New Jersey Business Corporation Act."
ARTICLE I
CORPORATE NAME
The name of the Corporation shall be Bridge View Bancorp.
---------------------------------------------------------
ARTICLE II
REGISTERED OFFICE AND REGISTERED AGENT
The address of the Corporation's registered office is:
Bridge View Bancorp
457 Sylvan Avenue
Englewood Cliffs, NJ 07632
The name of the registered agent at that address is:
Albert E. Buzzetti,
President and Chief Executive Officer
Bridge View Bancorp
457 Sylvan Avenue
Englewood Cliffs, NJ 07632
ARTICLE III
INITIAL BOARD OF DIRECTORS AND NUMBER OF DIRECTORS
The number of directors shall be governed by the By-laws of the
Corporation. The number of directors constituting the initial Board of Directors
shall be eight (8). The names and addresses of the initial Board of Directors
are as follows:
<PAGE>
Name Address
---- -------
Albert F. Buzzetti ........................... c/o Bridge View Bank
457 Sylvan Avenue
Englewood Cliffs, NJ 07632
Gerald A. Calabrese, Jr. ..................... c/o Bridge View Bank
457 Sylvan Avenue
Englewood Cliffs, NJ 07632
Glenn L. Creamer ............................. c/o Bridge View Bank
457 Sylvan Avenue
Englewood Cliffs, NJ 07632
Bernard Mann ................................. c/o Bridge View Bank
457 Sylvan Avenue
Englewood Cliffs, NJ 07632
Mark Metzger ................................. c/o Bridge View Bank
457 Sylvan Avenue
Englewood Cliffs, NJ 07632
Jeremiah F. O'Connor, Jr. .................... c/o Bridge View Bank
457 Sylvan Avenue
Englewood Cliffs, NJ 07632
Joseph L. Parisi ............................. c/o Bridge View Bank
457 Sylvan Avenue
Englewood Cliffs, NJ 07632
John A. Schepisi ............................. c/o Bridge View Bank
457 Sylvan Avenue
Englewood Cliffs, NJ 07632
ARTICLE IV
CORPORATE PURPOSE
The purpose for which the Corporation is organized is to engage in any
activities for which corporations may be organized under the New Jersey Business
Corporation Act.
ARTICLE V
CAPITAL STOCK
The Corporation is authorized to issue 5,000,000 shares of common stock,
without par value.
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<PAGE>
ARTICLE VI
LIMITATION OF LIABILITY
Subject to the following, a director or officer of the Corporation shall
not be personally liable to the Corporation or its shareholders for damages for
breach of any duty owed to the Corporation or its shareholders. The preceding
sentence shall not relieve a director or officer from liability for any breach
of duty based upon an act or omission (i) in breach of such person's duty of
loyalty to the Corporation or its shareholders, (ii) not in good faith or
involving a knowing violation of law, or (iii) resulting in receipt by such
person of an improper personal benefit. If the New Jersey Business Corporation
Act is amended to authorize corporate action further eliminating or limiting the
personal liability of directors or officers, then the liability of a director or
officer or both of the Corporation shall be eliminated or limited to the fullest
extent permitted by the New Jersey Business Corporation Act as so amended. Any
amendment to this Certificate of Incorporation, or change in law which
authorizes this paragraph shall not adversely affect any then existing right or
protection of a director or officer of the Corporation.
ARTICLE VII
INDEMNIFICATION
The Corporation shall indemnify its officers, directors, employees and
agents and former officers, directors, employees and agents, and any other
persons serving at the request of the Corporation as an officer, director,
employee or agent of another corporation, association, partnership, joint
venture, trust, or other enterprise, against expenses (including attorneys'
fees, judgments, fines and amounts paid in settlement) incurred in connection
with any pending or threatened action, suit, or proceeding, whether civil,
criminal, administrative or investigative, with respect to which such officer,
director, employee, agent or other person is a party, or is threatened to be
made a party, to the full extent permitted by the New Jersey Business
Corporation Act. The indemnification provided herein (i) shall not be deemed
exclusive of any other right to which any person seeking indemnification may be
entitled under any by-law, agreement, or vote of shareholders or disinterested
directors or otherwise, both as to action in his or her official capacity and as
to action in any other capacity, and (ii) shall inure to the benefit of the
heirs, executors, and the administrators of any such person. The Corporation
shall have the power, but shall not be obligated, to purchase and maintain
insurance on behalf of any person or persons enumerated above against any
liability asserted
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<PAGE>
against or incurred by them or any of them arising out of their status as
corporate directors, officers, employees, or agents whether or not the
Corporation would have the power to indemnify them against such liability under
the provisions of this article.
The Corporation shall, from time to time, reimburse or advance to any
person referred to in this article the funds necessary for payment of expenses,
including attorneys' fees, incurred in connection with any action, suit or
proceeding referred to in this article, upon receipt of a written undertaking by
or on behalf of such person to repay such amount(s) if a judgment or other final
adjudication adverse to the director or officer establishes that the director's
or officer's acts or omissions (i) constitute a breach of the director's or
officer's duty of loyalty to the corporation or its shareholders, (ii) were not
in good faith, (iii) involved a knowing violation of law, (iv) resulted in the
director or officer receiving an improper personal benefit, or (v) were
otherwise of such a character that New Jersey law would require that such
amount(s) be repaid.
ARTICLE VIII
NAME AND ADDRESS OF INCORPORATOR
The name and address of the incorporator is:
Robert A. Schwartz, Esq.
McCarter & English
Four Gateway Center
100 Mulberry Street
P.O. Box 652
Newark, New Jersey 07101-0652
IN WITNESS WHEREOF, I, the incorporator of the above named Corporation,
being over eighteen years of age, have signed this Certificate of Incorporation
on the 30th day of May, 1996.
/s/ ROBERT A. SCHWARTZ, ESQ.
--------------------------------------
Robert A. Schwartz, Esq.
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BY-LAWS
OF
BRIDGE VIEW BANCORP
Section 1. LAW, CERTIFICATE OF INCORPORATION AND BY-LAWS
1.1. These by-laws are subject to the certificate of incorporation of the
corporation. In these by-laws, references to law, the certificate of
incorporation and by-laws mean the law, the provisions of the certificate of
incorporation and the by-laws as from time to time in effect.
Section 2. SHAREHOLDERS
2.1. Annual Meeting. The annual meeting of shareholders shall be held at
such date and time as shall be designated from time to time by the board of
directors and stated in the notice of the meeting, at which they shall elect a
board of directors and transact such other business as may be required by law or
these by-laws or as may properly come before the meeting.
2.2. Special Meetings. A special meeting of the shareholders may be called
at any time by the chairman of the board, if any, the president or the board of
directors. A special meeting of the shareholders shall be called by the
secretary, or in the case of the death, absence, incapacity or refusal of the
secretary, by an assistant secretary or some other officer, upon application of
a majority of the directors. Any such application shall state the purpose or
purposes of the proposed meeting. Any such call shall state the place, date,
hour, and purposes of the meeting.
2.3. Place of Meeting. All meetings of the shareholders for the election of
directors or for any other purpose shall be held at such place within or without
the State of New Jersey as may be determined from time to time by the board of
directors. Any adjourned session of any meeting of the shareholders shall be
held at the place designated in the vote of adjournment.
2.4. Notice of Meetings. Except as otherwise provided by law, a written
notice of each meeting of shareholders stating the place, day and hour thereof
and, in the case of a special meeting, the purposes for which the meeting is
called,
<PAGE>
shall be given not less then ten nor more than sixty days before the meeting, to
each shareholder entitled to vote thereat, and to each shareholder who, by law,
by the certificate of incorporation or by these by-laws, is entitled to notice,
by leaving such notice with him or at his residence or usual place of business,
or by depositing it in the United States mail, postage prepaid, and addressed to
such shareholder at his address as it appears in the records of the corporation.
Such notice shall be given by the secretary, or by an officer or person
designated by the board of directors, or in the case of a special meeting by the
officer calling the meeting. As to any adjourned session of any meeting of
shareholders, notice of the adjourned meeting need not be given if the time and
place thereof are announced at the meeting at which the adjournment was taken
except that if after the adjournment a new record date is set for the adjourned
session, notice of any such adjourned session of the meeting shall be given in
the manner heretofore described. No notice of any meeting of shareholders or any
adjourned session thereof need be given to a shareholder if a written waiver of
notice, executed before or after the meeting or such adjourned session by such
shareholder, in person or by proxy, is filed with the records of the meeting or
if the shareholder attends such meeting, in person or by proxy, without
objecting at the beginning of the meeting to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any meeting of the shareholders or any
adjourned session thereof need be specified in any written waiver of notice.
2.5. Quorum of Shareholders. At any meeting of the shareholders a quorum as
to any matter shall consist of a majority of the votes entitled to be cast on
the matter, except where a larger quorum is required by law, by the certificate
of incorporation or by these by-laws. Any meeting may be adjourned from time to
time by a majority of the votes properly cast upon the question, whether or not
a quorum is present. If a quorum is present at an original meeting, a quorum
need not be present at an adjourned session of that meeting. Shares of its own
stock belonging to the corporation or to another corporation, if a majority of
the shares entitled to vote in the election of directors of such other
corporation is held, directly or indirectly, by the corporation, shall neither
be entitled to vote nor be counted for quorum purposes; provided, however, that
the foregoing shall not limit the right of any corporation to vote stock,
including but not limited to its own stock, held by it in a fiduciary capacity.
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<PAGE>
2.6. Action by Vote. When a quorum is present at any meeting, a plurality
of the votes properly cast for election to any office shall elect to such office
and a majority of the votes properly cast upon any question other than an
election to an office shall decide the question, except when a larger vote is
required by law, by the certificate of incorporation or by these by-laws. No
ballot shall be required for any election unless requested by a shareholder
present or represented at the meeting and entitled to vote in the election.
2.7. Action without Meetings. Unless otherwise provided in the certificate
of incorporation or by applicable law, any action required or permitted to be
taken by shareholders for or in connection with any corporate action may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by all of the
holders of outstanding stock entitled to vote thereon. The writing or writings
comprising such unanimous consent shall be filed with the records of the
meetings of shareholders.
Unless otherwise provided in the certificate of incorporation or by
applicable law, any action required or permitted to be taken by shareholders for
or in connection with any corporate action may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of that number of shares of
outstanding stock which would have been entitled to cast the minimum number of
votes necessary to approve the action taken at a meeting of shareholders at
which all of the shareholders entitled to vote on the action were present and
voting, and the provisions of N.J.S.A. ss.14A:5-6(2) are complied with.
2.8. Proxy Representation. Every shareholder may authorize another person
or persons to act for him by proxy in all matters in which a shareholder is
entitled to participate, whether by waiving notice of any meeting, objecting to
or voting or participating at a meeting, or expressing consent or dissent
without a meeting. Every proxy must be signed by the shareholder or by his
attorney-in-fact. No proxy shall be voted or acted upon after eleven months from
its date unless such proxy provides for a longer period. A duly executed proxy
shall be irrevocable if it states that it is irrevocable and, if, and only as
long as, it is coupled with an interest sufficient in law to support an
-3-
<PAGE>
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally. The authorization of a proxy may but need
not be limited to specified action, provided, however, that if a proxy limits
its authorization to a meeting or meetings of shareholders, unless otherwise
specifically provided such proxy shall entitle the holder thereof to vote at any
adjourned session but shall not be valid after the final adjournment thereof.
2.9. Inspectors. The directors or the person presiding at the meeting may,
but need not, appoint one or more inspectors of election and any substitute
inspectors to act at the meeting or any adjournment thereof. Each inspector,
before entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. The inspectors, if any,
shall determine the number of shares of stock outstanding and the voting power
of each, the shares of stock represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the result, and do such acts as are proper to conduct the election or
vote with fairness to all shareholders. On request of the person presiding at
the meeting, the inspectors shall make a report in writing of any challenge,
question or matter determined by them and execute a certificate of any fact
found by them.
2.10. List of Shareholders. The secretary shall prepare and make, at least
ten days before every meeting of shareholders, a complete list of the
shareholders entitled to vote at such meeting, arranged in alphabetical order
and showing the address of each shareholder and the number of shares registered
in his name. The stock ledger shall be the only evidence as to who are
shareholders entitled to examine such list or to vote in person or by proxy at
such meeting.
Section 3. BOARD OF DIRECTORS
3.1. Number. The number of directors which shall constitute the whole board
shall not be less than one nor more than twenty-five in number. Thereafter,
within the foregoing limits, the shareholders at the annual meeting shall
determine the number of directors and shall elect the number of directors
-4-
<PAGE>
as determined. Within the foregoing limits, the number of directors may be
increased at any time or from time to time by the shareholders or by the
directors by vote of a majority of the directors then in office. The number of
directors may be decreased to any number permitted by the foregoing at any time
either by the shareholders or by the directors by vote of a majority of the
directors then in office, but only to eliminate vacancies existing by reason of
the death, resignation or removal of one or more directors. Directors need not
be shareholders.
3.2. Tenure. Except as otherwise provided by law, by the certificate of
incorporation or by these by-laws, each director shall hold office until the
next annual meeting and until his successor is elected and qualified, or until
he sooner dies, resigns, is removed or becomes disqualified.
3.3. Powers. The business and affairs of the corporation shall be managed
by or under the direction of the board of directors who shall have and may
exercise all the powers of the corporation and do all such lawful acts and
things as are not by law, the certificate of incorporation or these by-laws
directed or required to be exercised or done by the shareholders.
3.4. Vacancies. Vacancies and any newly created directorships resulting
from any increase in the number of directors may be filled by vote of the
shareholders at a meeting called for the purpose, or by a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. When one or more directors shall resign from the board, effective at a
future date, a majority of the directors then in office, including those who
have resigned, shall have power to fill such vacancy or vacancies, the vote or
action by writing thereon to take effect when such resignation or resignations
shall become effective. The directors shall have and may exercise all their
powers notwithstanding the existence of one or more vacancies in their number,
subject to any requirements of law or of the certificate of incorporation or of
these by-laws as to the number of directors required for a quorum or for any
vote or other actions.
3.5. Committees. The board of directors may, by vote of a majority of the
whole board, (a) designate, change the membership of or terminate the existence
of any committee or committees, each committee to consist of one or more of the
directors; (b) designate one or more directors as alternate members of any such
committee who may replace any absent or
-5-
<PAGE>
disqualified member at any meeting of the committee; and (c) determine the
extent to which each such committee shall have and may exercise the powers of
the board of directors in the management of the business and affairs of the
corporation, including the power to authorize the seal of the corporation to be
affixed to all papers which require it and the power and authority to declare
dividends or to authorize the issuance of stock; excepting, however, such powers
which by law, by the certificate of incorporation or by these by-laws they are
prohibited from so delegating. In the absence or disqualification of any member
of such committee and his alternate, if any, the member or members thereof
present at any meeting and not disqualified from voting, whether or not
constituting a quorum, may unanimously appoint another member of the board of
directors to act at the meeting in the place of any such absent or disqualified
member. Except as the board of directors may otherwise determine, any committee
may make rules for the conduct of its business, but unless otherwise provided by
the board or such rules, its business shall be conducted as nearly as may be in
the same manner as is provided by these by-laws for the conduct of business by
the board of directors. Each committee shall keep regular minutes of its
meetings and report the same to the board of directors upon request.
3.6. Regular Meetings. Regular meetings of the board of directors may be
held without call or notice at such places within or without the State of New
Jersey and at such times as the board may from time to time determine, provided
that notice of the first regular meeting following any such determination shall
be given to absent directors. A regular meeting of the directors may be held
without call or notice immediately after and at the same place as the annual
meeting of shareholders.
3.7. Special Meetings. Special meetings of the board of directors may be
held at any time and at any place within or without the State of New Jersey
designated in the notice of the meeting, when called by the chairman of the
board, if any, the president, or by one-third or more in number of the
directors, reasonable notice thereof being given to each director by the
secretary or by the chairman of the board, if any, the president or any one of
the directors calling the meeting.
3.8. Notice. It shall be reasonable and sufficient notice to a director to
send notice by mail at least forty-eight hours or by telegram at least
twenty-four hours before the
-6-
<PAGE>
meeting addressed to him at his usual or last known business or residence
address or to give notice to him in person or by telephone at least twenty-four
hours before the meeting. Notice of a meeting need not be given to any director
if a written waiver of notice, executed by him before or after the meeting, is
filed with the records of the meeting, or to any director who attends the
meeting without protesting prior thereto or at its commencement the lack of
notice to him. Neither notice of a meeting nor a waiver of a notice need specify
the purposes of the meeting.
3.9. Quorum. Except as may be otherwise provided by law, by the certificate
of incorporation or by these by-laws, at any meeting of the directors a majority
of the directors then in office shall constitute a quorum; a quorum shall not in
any case be less than one-third of the total number of directors constituting
the whole board. Any meeting may be adjourned from time to time by a majority of
the votes cast upon the question, whether or not a quorum is present, and the
meeting may be held as adjourned without further notice.
3.10. Action by Vote. Except as may be otherwise provided by law, by the
certificate of incorporation or by these by-laws, when a quorum is present at
any meeting the vote of a majority of the directors present shall be the act of
the board of directors.
3.11. Action Without a Meeting. Any action required or permitted to be
taken at any meeting of the board of directors or a committee thereof may be
taken without a meeting if all the members of the board or of such committee, as
the case may be, consent thereto in writing, and such writing or writings are
filed with the records of the meetings of the board or of such committee. Such
consent shall be treated for all purposes as the act of the board or of such
committee, as the case may be.
3.12. Participation in Meetings by Conference Telephone. Members of the
board of directors, or any committee designated by such board, may participate
in a meeting of such board or committee by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other or by any other means permitted by law. Such
participation shall constitute presence in person at such meeting.
-7-
<PAGE>
3.13. Compensation. In the discretion of the board of directors, each
director may be paid such fees for his services as director and be reimbursed
for his reasonable expenses incurred in the performance of his duties as
director as the board of directors from time to time may determine. Nothing
contained in this section shall be construed to preclude any director from
serving the corporation in any other capacity and receiving reasonable
compensation therefor.
3.14. Interested Directors and Officers.
(a) No contract or transaction between the corporation and one or more of
its directors or officers, or between the corporation and any other corporation,
partnership, association, or other organization in which one or more of the
corporation's directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the board or committee thereof which authorizes the contract or transaction, or
solely because his or their votes are counted for such purpose, if any one of
the following is true:
(1) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the board of
directors or the committee, and the board or committee in good faith
authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum; or
(2) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the shareholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the shareholders; or
(3) The contract or transaction is fair as to the corporation as of
the time it is authorized, approved or ratified, by the board of directors,
a committee thereof, or the shareholders.
(b) Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the board of directors or of a committee
which authorizes the contract or transaction.
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<PAGE>
Section 4. OFFICERS AND AGENTS
4.1. Enumeration; Qualification. The officers of the corporation shall be a
president, a treasurer, a secretary and such other officers, if any, as the
board of directors from time to time may in its discretion elect or appoint
including without limitation a chairman of the board, one or more vice
presidents and a controller. The corporation may also have such agents, if any,
as the board of directors from time to time may in its discretion choose. Any
officer may be but none need be a director or shareholder. Any two or more
offices may be held by the same person. Any officer may be required by the board
of directors to secure the faithful performance of his duties to the corporation
by giving bond in such amount and with sureties or otherwise as the board of
directors may determine.
4.2. Powers. Subject to law, to the certificate of incorporation and to the
other provisions of these by-laws, each officer shall have, in addition to the
duties and powers herein set forth, such duties and powers as are commonly
incident to his office and such additional duties and powers as the board of
directors may from time to time designate.
4.3. Election. The officers may be elected by the board of directors at
their first meeting following the annual meeting of the shareholders or at any
other time. At any time or from time to time the directors may delegate to any
officer their power to elect or appoint any other officer or any agents.
4.4. Tenure. Each officer shall hold office until the first meeting of the
board of directors following the next annual meeting of the shareholders and
until his respective successor is chosen and qualified unless a shorter period
shall have been specified by the terms of his election or appointment, or in
each case until he sooner dies, resigns, is removed or becomes disqualified.
Each agent shall retain his authority at the pleasure of the directors, or the
officer by whom he was appointed or by the officer who then holds agent
appointive power.
4.5. Chairman of the Board of Directors, President and Vice President. The
chairman of the board, if any, shall have such duties and powers as shall be
designated from time to time by the board of directors. Unless the board of
directors otherwise specifies, the chairman of the board, or if there is
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<PAGE>
none the chief executive officer, shall preside, or designate the person who
shall preside, at all meetings of the shareholders and of the board of
directors.
Unless the board of directors otherwise specifies, the president shall be
the chief executive officer and shall have direct charge of all business
operations of the corporation and, subject to the control of the directors,
shall have general charge and supervision of the business of the corporation.
Any vice presidents shall have such duties and powers as shall be set forth
in these by-laws or as shall be designated from time to time by the board of
directors or by the president.
4.6. Treasurer and Assistant Treasurers. The treasurer shall be the chief
financial officer of the corporation and shall be in charge of its funds and
valuable papers, and shall have such other duties and powers as may be
designated from time to time by the board of directors or by the president. If
no controller is elected, the treasurer shall also have the duties and powers of
the controller.
Any assistant treasurers shall have such duties and powers as shall be
designated from time to time by the board of directors, the president or the
treasurer.
4.7. Controller and Assistant Controllers. If a controller is elected, he
shall be the chief accounting officer of the corporation and shall be in charge
of its books of account and accounting records, and of its accounting
procedures. He shall have such other duties and powers as may be designated from
time to time by the board of directors, the president or the treasurer.
Any assistant controller shall have such duties and powers as shall be
designated from time to time by the board of directors, the president, the
treasurer or the controller.
4.8. Secretary and Assistant Secretaries. The secretary shall record all
proceedings of the shareholders, of the board of directors and of committees of
the board of: directors in a book or series of books to be kept therefor and
shall file therein all actions by written consent of shareholders or directors.
In the absence of the secretary from any meeting, an assistant secretary, or if
there be none or he is absent, a temporary secretary chosen at the meeting,
shall record the
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<PAGE>
proceedings thereof. Unless a transfer agent has been appointed the secretary
shall keep or cause to be kept the stock and transfer records of the
corporation, which shall contain the names and record addresses of all
shareholders and the number of shares registered in the name of each
shareholder. He shall have such other duties and powers as may from time to time
be designated by the board of directors or the president.
Any assistant secretaries shall have such duties and powers as shall be
designated from time to time by the board of directors, the president or the
secretary.
Section 5. RESIGNATIONS AND REMOVALS
5.1. Any director or officer may resign at any time by delivering his
resignation in writing to the chairman of the board, if any, the president, or
the secretary or to a meeting of the board of directors. Such resignation shall
be effective upon receipt unless specified to be effective at some other time,
and without in either case the necessity of its being accepted unless the
resignation shall so state. A director (including persons elected by directors
to fill vacancies in the board) may be removed from office with or without cause
by the vote of the holders of a majority of the shares issued and outstanding
and entitled to vote in the election of directors. The board of directors may at
any time remove any officer either with or without cause. The board of directors
may at any time terminate or modify the authority of any agent. No director or
officer resigning and (except where a right to receive compensation shall be
expressly provided in a duly authorized written agreement with the corporation)
no director or officer removed shall have any right to any compensation as such
director or officer for any period following his resignation or removal, or any
right to damages on account of such removal, whether his compensation be by the
month or by the year or otherwise; unless, in the case of a resignation, the
directors, or, in the case of removal, the body acting on the removal, shall in
their or its discretion provide for compensation.
Section 6. VACANCIES
6.1. If the office of the president or the treasurer or the secretary
becomes vacant, the directors may elect a successor by vote of a majority of the
directors then in office. If the office of any other officer becomes vacant, any
person or body empowered to elect or appoint that officer may choose a
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successor. Each such successor shall hold office for the unexpired term, and in
the case of the president, the treasurer and the secretary until his successor
is chosen and qualified or in each case until he sooner dies, resigns, is
removed or becomes disqualified. Any vacancy of a directorship shall be filled
as specified in Section 3.4 of these by-laws.
Section 7. CAPITAL STOCK
7.1. Stock Certificates. Each shareholder shall be entitled to a
certificate stating the number and the class and the designation of the series,
if any, of the shares held by him, in such form as shall, in conformity to law,
the certificate of incorporation and the by-laws, be prescribed from time to
time by the board of directors. Such certificate shall be signed by the chairman
or vice chairman of the board, if any, or the president or a vice president and
may be countersigned by the treasurer or an assistant treasurer or by the
secretary or an assistant secretary. Any of or all the signatures on the
certificate may be a facsimile. In case an officer, transfer agent, or registrar
who has signed or whose facsimile signature has been placed on such certificate
shall have ceased to be such officer, transfer agent, or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if he were such officer, transfer agent, or registrar at the time of its
issue.
7.2. Loss of Certificates. In the case of the alleged theft, loss,
destruction or mutilation of a certificate of stock, a duplicate certificate may
be issued in place thereof, upon such terms, including receipt of a bond
sufficient to indemnify the corporation against any claim on account thereof, as
the board of directors may prescribe.
Section 8. TRANSFER OF SHARES OF STOCK
8.1. Transfer on Books. Subject to the restrictions, if any, stated or
noted on the stock certificate, shares of stock may be transferred on the books
of the corporation by the surrender to the corporation or its transfer agent of
the certificate therefor properly endorsed or accompanied by a written
assignment and power of attorney properly executed, with necessary transfer
stamps affixed, and with such proof of the authenticity of signature as the
board of directors or the transfer agent of the corporation may reasonably
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require. Except as may be otherwise required by law, by the certificate of
incorporation or by these by-laws, the corporation shall be entitled to treat
the record holder of stock as shown on its books as the owner of such stock for
all purposes, including the payment of dividends and the right to receive notice
and to vote or to give any consent with respect thereto and to be held liable
for such calls and assessments, if any, as may lawfully be made thereon,
regardless of any transfer, pledge or other disposition of such stock until the
shares have been properly transferred on the books of the corporation.
It shall be the duty of each shareholder to notify the corporation of his
post office address.
8.2. Record Date and Closing Transfer Books. In order that the corporation
may determine the shareholders entitled to notice of or to vote at any meeting
of shareholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the board of directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days (or such longer period as may be required by law) before the date of such
meeting, nor more than sixty days prior to any other action.
If no record date is fixed
(a) The record date for determining shareholders entitled to notice of
or to vote at a meeting of shareholders shall be at the close of business
on the day next preceding the day on which notice is given, or, if notice
is waived, at the close of business on the day next preceding the day on
which the meeting is held.
(b) The record date for determining shareholders entitled to express
consent to corporate action in writing without a meeting, when no prior
action by the board of directors is necessary, shall be the day on which
the first written consent is expressed.
(c) The record date for determining shareholders for any other purpose
shall be at the close of business on the
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day on which the board of directors adopts the resolution relating thereto.
A determination of shareholders of record entitled to notice of or to vote
at a meeting of shareholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
Section 9. CORPORATE SEAL
9.1. Subject to alteration by the directors, the seal of the corporation
shall consist of a flat-faced circular die with the word "New Jersey" and the
name of the corporation cut or engraved thereon, together with such other words,
dates or images as may be approved from time to time by the directors.
Section 10. EXECUTION OF PAPERS
10.1. Except as the board of directors may generally or in particular cases
authorize the execution thereof in some other manner, all deeds, leases,
transfers, contracts, bonds, notes, checks, drafts or other obligations made,
accepted or endorsed by the corporation shall be signed by the chairman of the
board, if any, the president, a vice president or the treasurer.
Section 11. FISCAL YEAR
11.1. The fiscal year of the corporation shall be determined from time to
time by the board of directors.
Section 12. INDEMNIFICATION
12.1. Indemnification of Directors and Officers. The corporation shall, to
the fullest extent permitted by applicable law, indemnify any person (and the
heirs, executors and administrators thereof) who was or is made, or threatened
to be made, a party to an action, suit or proceeding, whether civil, criminal,
administrative or investigative, whether involving any actual or alleged breach
of duty, neglect or error, any accountability, or any actual or alleged
misstatement, misleading statement or other act or omission and whether brought
or threatened in any court or administrative or legislative body or agency,
including an action by or in the right of the corporation to procure a judgment
in its favor and an action by or in the right of any other corporation of any
type or kind, domestic or
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<PAGE>
foreign, or any partnership, joint venture, trust, employee benefit plan or
other enterprise, which any director or officer of the corporation is serving or
has served in any capacity at the request of the corporation, by reason of the
fact that he, his testator or intestate is or was a director or officer of the
corporation, or is serving or has served such other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise in any capacity,
against judgments, fines, amounts paid in settlement, and costs, charges and
expenses, including attorneys' fees, incurred therein or in any appeal thereof.
12.2. Indemnification of Others. The Corporation shall indemnify other
persons and reimburse the expenses thereof, to the extent required by applicable
law, and may indemnify any other person to whom the Corporation is permitted to
provide indemnification or the advancement of expenses, whether pursuant to
rights granted pursuant to, or provided by, the New Jersey Business Corporation
Act or otherwise.
12.3. Advances or Reimbursement of Expenses. The corporation shall, from
time to time, reimburse or advance to any person referred to in Section 12.1 the
funds necessary for payment of expenses, including attorneys' fees, incurred in
connection with any action, suit or proceeding referred to in Section 12.1, upon
receipt of a written undertaking by or on behalf of such person to repay such
amount(s) if a judgment or other final adjudication adverse to the director or
officer establishes that his acts or omissions (i) constitute a breach of his
duty of loyalty to the corporation or its shareholders, (ii) were not in good
faith, (iii) involved a knowing violation of law, (iv) resulted in his receiving
an improper personal benefit, or (v) were otherwise of such a character that New
Jersey law would require that such amount(s) be repaid.
12.4. Service of Certain Entities Deemed Requested. Any director or officer
of the corporation serving (i) another corporation, of which a majority of the
shares entitled to vote in the election of its directors is held by the
corporation, or (ii) any employee benefit plan of the corporation or any
corporation referred in clause (i), in any capacity shall be deemed to be doing
so at the request of the Corporation.
12.5. Interpretation. Any person entitled to be indemnified or to the
reimbursement or advancement of expenses as
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a matter of right pursuant to this Article may elect to have the right to
indemnification (or advancement of expense) interpreted on the basis of the
applicable law in effect at the time of the occurrence of the event or events
giving rise to the action, suit or proceeding, to the extent permitted by
applicable law, or on the basis of the applicable law in effect at the time
indemnification is sought.
12.6. Indemnification Right. The right to be indemnified or to the
reimbursement or advancement of expenses pursuant to this Article (i) is a
contract right pursuant to which the person entitled thereto may bring suit as
if the provisions hereof were set forth in a separate written contract between
the corporation and the director or officer, (ii) is intended to be retroactive
and shall be available with respect to events occurring prior to the adoption
hereof, (iii) shall continue to exist after any elimination of or amendment to
this Article 12 hereof with respect to events occurring prior thereto, and (iv)
and shall not be deemed exclusive of any other rights to which any person
claiming indemnification hereunder may be entitled.
12.7. Indemnification Claims. If a request to be indemnified or for the
reimbursement or advancement of expenses pursuant hereto is not paid in full by
the corporation within thirty days after a written claim has been received by
the corporation, the claimant may at any time thereafter bring suit against the
corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled also to be paid the expenses of
prosecuting such claim. Neither the failure of the corporation (including its
Board of Directors, independent legal counsel, or its shareholders) to have made
a determination prior to the commencement of such action that indemnification of
or reimbursement or advancement of expenses to the claimant is proper in the
circumstances, nor an actual determination by the corporation (including its
Board of Directors, independent legal counsel, or its shareholders) that the
claimant is not entitled to indemnification or to the reimbursement or
advancement of expenses, shall be a defense to the action or create a
presumption that the claimant is not so entitled.
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<PAGE>
Section 13. AMENDMENTS
13.1. These by-laws may be adopted, amended or repealed by vote of a
majority of the directors then in office or by vote of a majority of the stock
outstanding and entitled to vote. Any by-law, whether adopted, amended or
repealed by the shareholders or directors, may be amended or reinstated by the
shareholders or the directors.
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EXERCISABLE ON OR BEFORE
5:00 P.M. NEW YORK TIME,
SEPTEMBER 30, 1997
No. of Shares: ______________ Warrant No._________________
NON-TRANSFERABLE WARRANT CERTIFICATE
1. GRANT. THIS WARRANT CERTIFICATE CERTIFIES THAT for value received, the
registered holder hereof, _________________ ______________, whose address is
______________________________
_______________________________________________________________ is the
registered holder ("Holder" or "Holders" of _______________________ warrants
("Warrants") to purchase at any time from the date hereof until 5:00 P.M. New
York time on September 30, 1997 ("Expiration Date"), up to a total of
____________________ fully paid and non-assessable shares (each a "Share"), of
common stock, par value $10.00 per share ("Common Stock") of BRIDGE VIEW BANK, a
New Jersey chartered state bank (the "Bank"), at the Exercise Price (as defined
in Section 2 below), upon surrender of this Warrant Certificate and payment of
the Exercise Price at the offices or agency of the Bank, but subject to the
conditions set forth herein. Payment of the Exercise Price shall be made by
check or money order payable to the order of the Bank. No Warrant may be
exercised after 5:00 P.M. New York time, on the Expiration Date, at which time
all Warrants evidenced hereby, unless exercised prior thereto, shall become
void. Neither this Warrant Certificate (nor any replacement Warrant Certificate)
nor any rights of the holder hereof may be transferred or assigned without the
prior written consent of the Bank which consent may be given or withheld in the
sole discretion of the Bank.
2. EXERCISE PRICE. The exercise price of each Warrant shall be $20.00 per
share, subject to adjustment as provided herein.
3. EXERCISE OF WARRANT. Subject to the terms and conditions hereof, the
Warrants are exercisable upon payment of the Exercise Price payable to the Bank
by check or money order. Upon surrender of a Warrant Certificate with the
annexed Form of Election to Purchase duly executed, together with payment of the
Exercise Price for the Shares purchased at the Bank's principal offices, 457
Sylvan Avenue, Englewood Cliffs, New Jersey 07632 and subject to satisfaction of
the terms and conditions hereof, the Holder hereof shall be entitled to receive
a certificate or certificates for the Shares so purchased. The rights
represented hereby are exercisable at the option of the Holder hereof, in
<PAGE>
whole or in part (but not as to fractional Shares), subject to the terms of this
Warrant Certificate. In the case of the purchase of less than all the Shares
purchasable hereunder the Bank shall cancel this Warrant Certificate upon the
surrender hereof and shall execute and deliver a new Warrant Certificate of like
tenor for the balance of the Shares purchasable hereunder. The Bank may deem and
treat the register holder(s) hereof as the absolute owner(s) of this Warrant
Certificate (notwithstanding any notation of ownership or other writing hereon
made by anyone), for the purpose of any exercise hereof, and of any distribution
to the holder(s) hereof, and for all other purposes, and the Bank shall not be
affected by any notice to the contrary. Notwithstanding anything contained
herein to the contrary, exercise of the Warrants shall be subject to the
acceptance by the Bank of the Holder's executed Form of Election to Purchase,
which acceptance may be delayed for such period of time as the Bank may deem
necessary if such delay would, in the judgement of the Board of Directors of the
Bank, be in the best interests of the Bank and its shareholders.
4. ISSUANCE OF CERTIFICATES. (a) Upon the exercise of the Warrants in
accordance with the provisions hereof, certificates for Shares issuable upon
exercise of the Warrants shall be issued forthwith (and in any event within
three business days thereafter); provided, however, that the issuance of Shares
upon the exercise of any Warrants in each case will be contingent upon prior
approval by the Commissioner of Banking of the State of New Jersey (the
"Commissioner") and each other appropriate regulatory authority, if required.
Notwithstanding anything contained herein to the contrary, the Bank shall be
obligated to seek approval from the Commissioner and each other appropriate
regulatory authority for issuance of Shares upon exercise of Warrants no more
frequently than once in any 12 consecutive month period, except that the Bank
shall promptly seek such approval (i) upon receipt of executed forms of Election
to Purchase relating to at least 10% of the total number of Shares remaining
purchasable pursuant to Warrants issued contemporaneously herewith (but not less
than (100 Shares), or (ii) at least thirty (30) days prior to the record date
for any event of which notice is required to be given to Holders of Warrants
pursuant to Section 9 hereof.
(b) Subject to the terms thereof, certificates for such Shares will be
issued without charge (including, without limitation, any tax which may be
payable in respect of the issuance thereof) to the Holder(s) hereof and such
certificates shall be issued in the name of, or in such names as may be directed
by, the Holder hereof; provided, however, that if the
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<PAGE>
Bank permits in its sole discretion any transfer of any Warrants, the Bank shall
not be required to pay any tax which may be payable in respect of any such
transfer involved in the issuance and delivery of any such certificates in the
name other than that of the Holder and the Bank shall not be required to issue
or deliver such certificates unless or until the person or persons requesting
the issuance thereof shall have paid to the Bank the amount of such tax or shall
have established to the satisfaction of the Bank that such tax has been paid.
5. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF SHARES. The Exercise Price
and number of Shares purchasable upon exercise of each Warrant shall be subject
to adjustment from time-to-time as follows:
5.1 DIVIDENDS, SUBDIVISIONS AND COMBINATION. In case the Bank shall at any
time declare a dividend or other distribution payable solely in shares of Common
Stock or subdivide or combine the outstanding shares of Common Stock, the
Exercise Price shall forthwith be proportionately decreased in the case of any
such dividend, distribution or subdivision and increased in the case of any such
combination.
5.2 ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of the Exercise
Price pursuant to the provisions of this Section 5, the number of shares
issuable upon the exercise of each Warrant shall be adjusted to the nearest full
Share by multiplying a number equal to the Exercise Price in effect immediately
prior to such adjustment by the number of Shares issuable upon exercise of this
Warrant immediately prior to such adjustment and dividing the product so
obtained by the adjusted Exercise Price.
5.3 MERGER OR CONSOLIDATION. In case of any consolidation of the Bank with,
or merger of the Bank with, or merger of the Bank into, another Bank or other
entity (other than a consolidation or merger which does not result in any
reclassification or change of the outstanding Common Stock), the Bank or other
entity formed by such consolidation or merger shall execute and deliver to the
holder an instrument in writing providing that the holder of each Warrant then
outstanding or to be outstanding shall have the right thereafter (until the
expiration of such Warrant) to receive, upon exercise of such Warrant, the kind
and amount of shares of stock and other securities and property receivable upon
such consolidation or merger by a holder of the number of shares of Common Stock
of the Bank for which such Warrant might have been exercised immediately prior
to such consolidation or merger. Such instrument shall
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<PAGE>
provide for adjustments which shall be identical to the adjustments provided in
this Section 5. The above provision of this subsection shall similarly apply to
successive consolidations or mergers through the Expiration Date.
5.4 DIVIDENDS AND DISTRIBUTIONS. In case at any time the Bank shall declare
a dividend upon the Common Stock payable otherwise than out of current earnings,
retained earnings or earned surplus and otherwise than in Common Stock, the
Exercise Price in effect immediately prior to the declaration of such dividend
shall be reduced by an amount equal, in the case of a dividend, in cash, to the
amount thereof payable per share of Common Stock or, in the case of any other
dividend, to the fair value thereof per share of Common Stock as determined in
good faith by the Board of Directors of the Bank. For the purposes of the
foregoing sentence, a dividend other than in cash shall be considered payable
out of current earnings, retained earnings or earned surplus only to the extent
that such earnings, retained earnings or earned surplus are charged an amount
equal to the fair value of such dividends as determined in good faith by the
Board of Directors of the Bank. Such reductions shall take effect as of the date
on which a record is taken for the purpose of such dividend, or, if a record is
not taken, the date as of which the holders of record of Common Stock entitled
to such dividend are to be determined. As used in this paragraph 5.4, the term
"dividend" shall mean any distribution to the holders of Common Stock.
5.5 NOTICE OF ADJUSTMENTS. Upon the occurrence of each adjustment of the
Exercise Price pursuant to this Section 5, the Bank at its expense shall
promptly compute such adjustment in accordance with the terms hereof and furnish
to the Holder of this Warrant Certificate a notice setting forth such
adjustment.
5.6 RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. If the Common Stock
issuable on exercise of this Warrant Certificate shall be changed into the same
or a different number of shares of any other class or classes of stock, whether
by capital reorganization, reclassification, stock split, reverse stock split or
otherwise (other than a subdivision or combination or shares provided for above)
the holder of this Warrant Certificate shall, upon its exercise, be entitled to
purchase in lieu of the Common Stock which the holder would have become entitled
to purchase but for such change, a number of shares of such other class or
classes of stock which the holder would have received had he exercised this
Warrant immediately before such change.
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<PAGE>
5.7 NO CHANGE NECESSARY. The form of this Warrant Certificate need not be
changed because of any adjustment in the Exercise Price. A Warrant Certificate
issued after any adjustment upon any partial exercise or upon replacement or
transfer may continue to express the same Exercise Price as is stated in this
Warrant Certificate as initially issued, and the Exercise Price shall be
considered to have been so changed as to the close of business on the date or
dates of adjustment.
6. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES. Each Warrant
Certificate is exchangeable without expense, upon the surrender thereof by the
registered Holder at the principal executive office of the Bank, for a new
Warrant Certificate of like tenor and date representing in the aggregate the
right to purchase the same number of Warrant Securities in such denominations as
shall be designated by the Holder thereof at the time of such surrender. Upon
receipt by the Bank of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of any Warrant Certificate, and in the case of
loss, theft or destruction, of indemnity or security reasonably satisfactory to
it, and reimbursement to the Bank of all reasonable expenses incidental thereto,
and upon surrender and cancellation of the Warrants, if mutilated, the Bank will
make and deliver a new Warrant Certificate of like tenor, in lieu thereof.
7. ELIMINATION OF FRACTIONAL INTERESTS. The Bank shall not be required to
issue certificates representing fractions of shares of Common Stock on the
exercise of the Warrants, nor shall it be required to issue scrip or pay cash in
lieu of fractional interests, it being the intent of all the parties that all
fractional interests shall be eliminated by rounding any fraction equal to or
greater than one-half up to the nearest whole number of shares of Common Stock
and by rounding any fraction less than one-half down to the nearest whole number
of shares of Common Stock.
8. RESERVATION OF SECURITIES. The Bank shall at all times reserve and keep
available out of its authorized shares of Common Stock, solely for the purpose
of issuance upon the exercise of the Warrants such number of shares of Common
Stock as shall be issuable upon the exercise thereof. The Bank covenants and
agrees that, upon exercise of the Warrants and payment of the Exercise Price
therefor, all Shares of Common Stock issuable upon such exercise shall be duly
and validly issued subject only to the prior approval of issuance by the
Commissioner (and any other appropriate regulatory authority, if required) and
upon issuance, such Shares shall be fully paid and non-assessable.
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<PAGE>
9. NOTICES TO WARRANT HOLDERS. Nothing contained in this Warrant shall be
construed as conferring upon the Holders the right to vote or to consent or to
receive notice as a shareholder in respect of any meetings of shareholders for
the election of directors or any other matter, or as having any rights
whatsoever as a shareholder of the Bank. If, however, at any time prior to the
expiration of the Warrants and their exercise, any of the following events shall
occur:
(a) the Bank shall take a record of the holders of its shares of
Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash or a cash dividend or
distribution payable otherwise than out of current or retained earnings, as
indicated by the accounting treatment of such dividend or distribution on
the books of the Bank; or
(b) the Bank shall offer to all the holders of its Common Stock any
additional shares of capital stock of the Bank or securities convertible
into or exchangeable for shares of capital stock of the Bank, or any
option, right or warrant to subscribe therefore; or
(c) a dissolution, liquidation or winding up of the Bank (other than
in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall
be proposed;
then, in any one or more of said events, the Bank shall give written notice of
such event at least sixty (60) days prior to the date fixed as a record date or
the date of closing the transfer books for the determination of the shareholders
entitled to receive such dividend, distribution, convertible or exchangeable
securities or subscription rights, or entitled to vote on such proposed
dissolution, liquidation, winding up or sale. Such notice shall specify such
record date or the date of closing the transfer books, as the case may be.
Failure to give such notice or any defect therein shall not affect the validity
of any action taken in connection with the declaration or payment of any such
dividend, or the issuance of any convertible or exchangeable securities, or
subscription rights, options or warrants, or any proposed dissolution,
liquidation, winding up or sale.
10. NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made:
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<PAGE>
(a) If to the registered Holder of the Warrants, when deposited in
regular First Class mail, postage paid, to the address of such Holders as
Known on the books of the Bank; or
(b) If to the Bank, when delivered, or mailed by registered or
certified mail, return receipt requested to 457 Sylvan Avenue, Englewood
Cliffs, New Jersey 07632 or to such other address as the Bank may designate
by notice to the Holder(s).
11. TERMINATION. The rights and benefits evidenced by this Warrant
Certificate shall terminate and expire at 5:00 p.m. New York time on September
30,1997 or on any earlier date when all Warrants have been exercised. In the
event of the dissolution, liquidation or winding up of the Bank, the rights to
purchase stock evidenced by this Warrant Certificate shall terminate and expire
and the Holder(s) of this Warrant Certificate shall be entitled to receive from
the Bank, after payment of all debts, obligations and liabilities of the Bank
and after payment of any liquidation preference on any class of capital stock of
the Bank having a preference as to such payments over the holders of Common
Stock, payment in an amount equal to the product of (a) the amount by which the
liquidating dividend per share of Common Stock (computed as if all Warrants to
purchase Common Stock issued simultaneously herewith had been exercised on the
day prior to the record date for determining such liquidating distribution)
exceeds the Exercise Price, multiplied by (b) the number of shares of Common
Stock purchasable pursuant to this Warrant Certificate.
12. GOVERNING LAW. This Warrant Certificate shall be deemed to be a
contract made under the laws of the State of New Jersey and for all purposes
shall be construed in accordance with its laws without giving effect to the
rules governing the conflicts of laws.
13. HEADINGS. The Article and Section headings in this Warrant Certificate
are inserted for purposes of convenience only and shall have no substantive
effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
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<PAGE>
By:_____________________________
Albert F. Buzzetti, President
By:___________________________
Doris M. Willcox, Secretary
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<PAGE>
No. ____
ELECTION TO PURCHASE
(To be Executed by the Registered Holder
in order to Exercise the Warrants)
The undersigned hereby irrevocably elects to exercise the right to purchase
_________ Shares covered by this Warrant Certificate according to the conditions
hereof and herewith makes payment of the Purchase Price of such Shares in full.
----------------------------------
Signature
----------------------------------
Address
----------------------------------
Dated: _______________, 199__
----------------------------------
Social Security Number or
Taxpayer's Identification Number
-9-
BRIDGE VIEW BANK
1994 STOCK OPTION PLAN
SECTION 1. PURPOSE
The purpose of the Bridge View Bank 1994 Stock Option Plan is to enable
Bridge View Bank (the "Bank") to attract, retain and motivate its key employees
and to enable key employees to participate in the long-term growth of the Bank
by providing for or increasing the proprietary interests of such persons in the
Bank thereby assisting the Bank to achieve its long-range goals.
SECTION 2. DEFINITIONS
Capitalized terms not specifically defined elsewhere herein shall have the
following meaning:
"Act" means the Securities Exchange Act of 1934, as amended from time to
time, and the rules and regulations promulgated thereunder, and any successor
provision thereto.
"Bank" means Bridge View Bank and any present or future subsidiary
corporations of Bridge View Bank (as defined in Section 424 of the Code) or any
successor to such corporations.
"Board" means the Board of Directors of the Bank.
"Cause" shall mean with respect to any employee (i) willful misconduct by
such employee in the performance of their duties as an employee of the Bank,
(ii) conviction of a crime, other than a traffic violation, (iii) being the
subject of a non-appealable order of any regulatory agency having jurisdiction
over the Bank requiring the separation of such employee from the Bank or (iv)
habitual alcohol or drug abuse by such employee.
"Change in Control" means the happening of either of the following events:
(1) Any person within the meaning of Section 13(d) and 14(d) of the Act other
than the Bank or any officer or director of the Bank, becomes the beneficial
owners, within the meaning of Rule 13d-3 under the Act, of 50% or more of the
combined voting securities of the Bank; or (2) a change of 30% or more in the
composition of the Board occurs without the approval of the majority of the
Board as it exists at the time immediately preceding such change in composition.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the regulations promulgated thereunder, and any successor provision
thereto.
<PAGE>
"Committee" means the Stock Option Committee of the Board (or any successor
committee of the Board responsible for administering the Plan), which shall
consist of two or more directors, each of whom shall be a "disinterested person"
within the meaning of Rule 16b-3(c) under the Act, to administer the Plan and
perform the functions set forth herein.
"Common Stock" or "Stock" means the common stock, $10 per share par value,
of the Bank.
"Date of Grant" means the date on which the Committee grants an Option to
Participant.
"Disability" means total disability as determined in accordance with the
terms of the Bank's long-term disability plan (or, if the Bank has no such plan,
its retirement plan) as in effect from time to time; provided, however, with
respect to a Participant who has been granted an Incentive Stock Option such
term shall have the meaning set forth in Section 422(c)(6) of the Code.
"Fair Market Value" means, with respect to shares of Common Stock, the fair
market value as determined by the Committee in good faith and in a manner
established by the Committee from time to time; provided, however, so long as
the shares of Common Stock are last sale reported over the counter securities,
then the "fair market value" of such shares on any date shall be the average of
the high and low prices reported in the consolidated reporting system, or the
average of the bid and asked prices (if the shares of Common Stock are over the
counter securities), on the business day immediately preceding the date in
question, as reported on the NASDAQ system, or if listed on a national exchange,
the closing price of a share of Common Stock.
"Incentive Stock Option" means an option to purchase shares of Common Stock
granted to a Participant under the Plan which is intended to meet the
requirements of Section 422 of the Code.
"Non-Qualified Stock Option" means an option to purchase shares of Common
Stock granted to a Participant under the Plan which is not intended to be an
Incentive Stock Option.
"Option" means an Incentive Stock Option or a Non-Qualified Stock Option.
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"Participant" means a person selected by the Committee to receive an Option
under the Plan.
"Plan" means the Bridge View Bank 1994 Stock Option Plan.
"Retirement" means termination of employment in accordance with the
retirement provisions of any retirement or pension plan maintained by the Bank
or any of its subsidiaries.
SECTION 3. ADMINISTRATION
(a) The Plan shall be administered by the Committee. Among other things,
the Committee shall have authority, subject to the terms of the Plan to grant
Options, to determine the individuals to whom and the time or times at which
Options may be granted, and to determine the terms and conditions of any Option
granted hereunder, and the exercise price thereof.
(b) Subject to the other provisions of the Plan, the Committee shall have
authority to adopt, amend, alter and repeal such administrative rules,
guidelines and practices governing the operation of the Plan as it shall from
time to time consider advisable, to interpret the provisions of the Plan and any
Option and to decide all disputes arising in connection with the Plan. The
Committee may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any option agreement in the manner and to the
extent it shall deem appropriate to carry the Plan into effect, in its sole and
absolute discretion. The Committee's decision and interpretations shall be final
and binding. Any action of the Committee with respect to the administration of
the Plan shall be taken pursuant to a majority vote or by the unanimous written
consent of its members.
(c) The Committee may employ such legal counsel, consultants and agents as
it may deem desirable for the administration of the Plan and may rely upon any
opinion received from any such counsel or consultant and any computation
received from any such consultant or agent.
SECTION 4. ELIGIBILITY AND PARTICIPATION
Officers and other key employees of the Bank (including officers and
employees who are directors) who are from time to time responsible for the
management, growth and protection of the business of the Bank, shall be eligible
to participate in the Plan. The Participants under the Plan shall be selected
from
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time to time by the Committee, in its sole discretion, from among those
eligible, and the Committee shall determine in its sole discretion the numbers
of shares to be covered by the Option or Options granted to each Participant.
Options intended to qualify as Incentive Stock Options shall be granted only to
persons who are eligible to receive such options under Section 422 of the Code.
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SECTION 5. SHARES OF STOCK AVAILABLE FOR OPTIONS
(a) The maximum number of shares of Common Stock which may be issued and
purchased pursuant to Options granted under the Plan is 23,677, subject to the
adjustments as provided in Section 5 and Section 9, to the extent applicable. If
an Option granted under this Plan expires or terminates before exercise or is
forfeited for any reason, without a payment in the form of Common Stock being
granted to the Participant, the shares of Common Stock subject to such Option,
to the extent of such expiration, termination or forfeiture, shall again be
available for subsequent Option grant under Plan. Shares of Common Stock issued
under the Plan may consist in whole or in part of authorized but unissued shares
or treasury shares.
(b) In the event that the Committee determines, in its sole discretion,
that any stock dividend, stock split, reverse stock split or combination,
extraordinary cash dividend, creation of a class of equity securities,
recapitalization, reclassification, reorganization, merger, consolidation,
split-up, spin-off, combination, exchange of shares, warrants or rights offering
to purchase Common Stock at a price substantially below Fair Market Value, or
other similar transaction affects the Common Stock such that an adjustment is
required in order to preserve the benefits or potential benefits intended to be
granted or made available under the Plan to Participants, the Committee shall
have the right to proportionately and appropriately adjust equitably any or all
of (i) the maximum number and kind of shares of Common Stock in respect of which
Options may be granted under the Plan to Participants, (ii) the number and kind
of shares of Common Stock subject to outstanding Options held by Participants,
and (iii) the exercise price with respect to any Options held by Participants,
without changing the aggregate purchase price as to which such Options remains
exercisable, and if considered appropriate, the Committee may make provision for
a cash payment with respect to any outstanding Options held by a Participant,
provided that no adjustment shall be made pursuant to this Section if such
adjustment would cause the Plan to fail to comply with Section 422 of the Code
or with Rule 16b-3 of the Act. No fractional shares shall be issued on account
of any such adjustment.
(c) Any adjustments under this Section will be made by the Committee, whose
determination as to what adjustments, if any, will be made and the extent
thereof will be final, binding and conclusive.
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SECTION 6. OPTION PRICE
(a) Subject to Federal and state statutes then applicable and the
provisions of the Plan, the Committee may grant Incentive Stock Options and
Non-Qualified Stock Options and determine the number of shares to be covered by
each Option, the Option price therefor, the term of the Option, and the other
conditions and limitations applicable to the exercise of the Option. The terms
and conditions of Incentive Stock Options shall be subject to and comply with
Section 422 of the Code. Anything in the Plan to the contrary notwithstanding,
no term of the Plan relating to Incentive Stock Options shall be interpreted,
amended or altered, nor shall any discretion or authority granted to the
Committee under the Plan be so exercised, so as to disqualify the Plan, or
without the consent of the Participant, any Incentive Stock Option granted under
the Plan pursuant to Section 422 of the Code.
(b) The Option price per share of Common Stock purchasable under an Option
shall not be less than 100% of the Fair Market Value of the Common Stock on the
Date of Grant with respect to Incentive Stock Options, and shall be the price
determined by the Committee, which may be less than, equal to or greater than
the Fair Market Value of the Common Stock on the Date of Grant but in no event
less than 85% of the Fair Market Value of the Common Stock (or the par value of
such shares, if higher), with respect to Non-Qualified Stock Options. If the
Participant owns or is deemed to own (by reason of the attribution rules
applicable under Section 424(d) of the Code) more than 10% of the combined
voting power of all classes of stock of the Bank or any subsidiary or parent
corporation of the Bank and an Incentive Stock Option is granted to such
Participant, the Option price shall be not less than 110% of Fair Market Value
of the Common Stock on the Date of Grant.
SECTION 7. EXERCISE AND PAYMENT OF OPTIONS
(a) No Incentive Stock Option shall be exercisable more than ten (10) years
after the date the Option is granted. No Non-Qualified Stock Option shall be
exercisable more than ten (10) years after the date the Option is granted. If a
Participant owns or is deemed to own (by reason of the attribution rules of
Section 424(d) of the Code) more than 10% of the total combined voting power of
all classes of stock of the Bank or any subsidiary or parent corporation of the
Bank and an Incentive Stock Option is granted to such Participant, such Option
shall not be exercisable after the expiration of five (5) years from the Date of
Grant.
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(b) No shares of Common Stock shall be delivered pursuant to any exercise
of an Option until payment in full of the Option price therefor is received by
the Bank. Such payment may be made in whole or in part in cash or by certified
or bank check or, to the extent permitted by the Committee at or after the grant
of the Option, by delivery of shares of Common Stock owned by the Participant
valued at their Fair Market Value on the date of delivery, or such other lawful
consideration as the Committee may determine.
SECTION 8. TERMINATION OF OPTIONS
(a) Unless otherwise determined by the Committee at the time of grant of an
Option, in the event a Participant's employment with the Bank terminates by
reason of death or Disability, any Option granted to such Participant which is
then outstanding may be exercised at any time prior to the expiration of the
term of such Option or within twelve (12) months following the Participant's
termination of employment by reason of death or Disability, whichever period is
shorter.
(b) Unless otherwise determined by the Committee at the time of grant of an
Option, in the event a Participant's employment with the Bank is terminated for
Cause, any Option granted to such Participant, whether or not exercisable at
such time, shall immediately terminate.
(c) Unless otherwise determined by the Committee at the time of grant of an
Option, in the event the Participant's employment with the Bank terminates for
any reason other than death, Disability, Retirement, or Cause, any Option
granted to such Participant which is then outstanding may be exercised at any
time prior to the expiration of the term of such Option, or within one (1) month
of such termination, whichever period is shorter.
(c) Unless otherwise determined by the Committee at the time of grant of an
Option, in the event the Participant's employment with the Bank terminates by
reason of Retirement, any Option granted to such Participant which is then
outstanding may be exercised at any time prior to the expiration of the term of
such Option, or within three (3) months of such Retirement, whichever period is
shorter.
SECTION 9. GENERAL PROVISIONS APPLICABLE TO OPTIONS
(a) Notwithstanding any other provision of the Plan, in order to qualify
for the exemption provided by Rule 16b-3 of
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the Act, any Common Stock acquired by a Participant subject to Section 16 of the
Act (a "Section 16 Participant") upon exercise of an Option may not be sold for
six (6) months after the Date of Grant of the Option. The Committee shall have
no authority to take any action if the authority to take such action, or the
taking of such action, would disqualify the Plan from the exemption provided by
Rule 16b-3 of the Act.
(b) Each Option under the Plan shall be evidenced by a writing delivered to
the Participant specifying the terms and conditions thereof and containing such
other terms and conditions not inconsistent with the provisions of the Plan as
the Committee considers necessary or advisable to achieve the purposes of the
Plan or comply with applicable tax and regulatory laws and accounting
principles.
(c) Each Option may be granted alone, in addition to or in relation to any
other Option. The terms of each Option need not be identical, and the Committee
need not treat Participants uniformly. Except as otherwise provided by the Plan
or a particular Option, any determination with respect to an Option may be made
by the Committee at the time of grant or at any time thereafter.
(d) In the event of a Change in Control, a consolidation, reorganization,
merger or sale of all or substantially all of the assets of the Bank in each
case in which outstanding shares of Common Stock are exchanged for securities,
cash or other property of any other corporation or business entity or in the
event of a liquidation of the Bank, the committee of the board of directors of
any corporation assuming the obligations of the Bank, may, in its discretion,
take any one or more of the following actions, as to outstanding options: (i)
provide that such options shall be assumed, or equivalent options shall be
substituted, by the acquiring or succeeding corporation (or an affiliate
thereof), provided that any such options substituted for Incentive Stock Options
shall meet the requirements of Section 424(a) of the Code, (ii) upon written
notice to the Participants, provide that all unexercised options will terminate
immediately prior to the consummation of such transaction unless exercised (to
the extent then exercisable) by the Participant within a specified period
following the date of such notice, (iii) in the event of a merger under the
terms of which holders of the Common Stock of the Bank will receive upon
consummation thereof a cash payment for each share surrendered in the merger
(the "Merger Price"), make or provide for a cash payment to the Participants
equal to the difference between (A) the Merger Price times the number of shares
of Common Stock subject to such
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<PAGE>
outstanding Options (to the extent then exercisable at prices not in excess of
the Merger Price) and (B) the aggregate exercise price of all such outstanding
Options in exchange for the termination of such Options, and (iv) provide that
all or any outstanding Options shall become exercisable in full immediately
prior to such event.
(e) The Committee may grant Options under the Plan in substitution for
options held by employees of another corporation who become employees of the
Bank, or a subsidiary of the Bank, as the result of a merger or consolidation of
the employing corporation with the Bank or a subsidiary of the Bank, or as a
result of the acquisition by the Bank, or one of its subsidiaries, of property
or stock of the employing corporation. The Bank may direct that substitute
options be granted on such terms and conditions as the Committee considers
appropriate in the circumstances.
(f) The Participant shall pay to the Bank, or make provision satisfactory
to the Committee for payment of, any taxes required by law to be withheld in
respect of Options under the Plan no later than the date of the event creating
the tax liability. In the Committee's sole discretion, and to the extent
permitted by law, a Participant (other than a Section 16 Participant, who shall
be subject to the following sentence) may elect to have such tax obligations
paid, in whole or in part, in shares of Common Stock, including shares retained
from the Option creating the tax obligation. With respect to Section 16
Participants, upon the issuance of shares of Common Stock in respect of an
Option, such number of shares issuable shall be reduced, to the extent permitted
by law, by the number of shares necessary to satisfy such Section 16
Participant's federal, and where applicable, state withholding tax obligations.
For withholding tax purposes, the value of the shares of Common Stock shall be
the Fair Market Value on the date the withholding obligation is incurred. To the
extent such reduction in the number of shares is not permitted under law, such
Participant shall be required to pay all applicable taxes. The Bank may, to the
extent permitted by law, deduct any such tax obligations from any payment of any
kind otherwise due to the Participant.
(g) For purposes of the Plan, the following events shall not be deemed a
termination of employment of a Participant:
(i) a transfer to the employment of the Bank from a subsidiary or from
the Bank to a subsidiary, or from one subsidiary to another, or
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<PAGE>
(ii) an approved leave of absence for military service or sickness, or
for any other purpose approved by the Bank, if the Participant's right to
reemployment is guaranteed either by a statute or by contract or under the
policy pursuant to which the leave of absence was granted or if the
Committee otherwise so provides in writing.
For purposes of the Plan, employees of a subsidiary of the Bank shall be
deemed to have terminated their employment on the date on which such subsidiary
ceases to be a subsidiary of the Bank.
(h) The Committee may at any time, and from time to time, amend, modify or
terminate the Plan or any outstanding Option held by a Participant, including
substituting therefor another Option of the same or a different type, changing
the date of exercise or realization, and converting an Incentive Stock Option to
a Non-Qualified Stock Option, provided that the Participant's consent to each
action shall be required unless the Committee determines that the action, taking
into account any related action, would not materially and adversely affect the
Participant.
(i) No Option shall be transferable by the Participant otherwise than by
will or by the laws of descent and distribution, and all Options shall be
exercisable during the Participant's lifetime only by the Participant or the
Participant's appointed guardian or legal representative. A Participant shall
notify the Committee in writing in the event that he disposes of Common Stock
acquired upon exercise of an Incentive Stock Option within the two-year period
following the date the Incentive Stock Option was granted or within the one-year
period following the date he received Common Stock upon the exercise of an
Incentive Stock Option and shall comply with any other requirements imposed by
the Bank in order to enable the Bank to secure the related income tax deduction
to which it will be entitled in such event under the Code.
(j) The Committee may in its sole discretion, (i) accelerate the date or
dates on which all or any particular Option or Options granted under the Plan
may be exercised or (ii) extend the dates during which all or any particular
Option or Options granted under the Plan may be exercised; provided, however,
that no such extension shall be permitted if it would cause the Plan to fail to
comply with Section 422 of the Code or with Rule 16b-3 of the Act.
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<PAGE>
(k) The aggregate Fair Market Value of shares of Common Stock with respect
to which Incentive Stock Options are exercisable for the first time by a
Participant who is an employee of the Bank during one calendar year (under all
plans of the Bank and its parent and subsidiary corporations) shall not exceed
the sum of One Hundred Thousand Dollars ($100,000.00). Such aggregate Fair
Market Value shall be determined as of the date such Option is granted.
SECTION 10. MISCELLANEOUS
(a) No person shall have any claim or right to be granted an Option, and
the grant of an Option shall not be construed as giving a Participant the right
to continued employment. The Bank expressly reserves the right at any time to
dismiss a Participant free from any liability or claim under the Plan, except as
expressly provided in the applicable Option.
(b) Nothing contained in the Plan shall prevent the Bank from adopting
other or additional compensation arrangements for its employees.
(c) Subject to the provisions of the applicable Option, no Participant
shall have any rights as a shareholder (including, without limitation, any
rights to receive dividends, or non cash distributions with respect to such
shares) with respect to any shares of Common Stock to be distributed under the
Plan until he or she becomes the holder thereof.
(d) Notwithstanding anything to the contrary expressed in this Plan, any
provisions hereof that vary from or conflict with any applicable Federal or
State securities laws (including any regulations promulgated thereunder) shall
be deemed to be modified to conform to and comply with such laws.
(e) No member of the Board of Directors or the Committee shall be liable
for any action or determination taken or granted in good faith with respect to
this Plan nor shall any member of the Board of Directors or the Committee be
liable for any agreement issued pursuant to this Plan or any grants under it.
Each member of the Board of Directors and the Committee shall be indemnified by
the Bank against any losses incurred in such administration of the Plan, unless
his action constitutes serious and willful misconduct.
(f) This Plan shall be effective upon its approval by the holders of
two-thirds (2/3) of the stock of the Bank entitled
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to vote. Prior to such stockholder approval, Options may be granted under the
Plan expressly subject to such approval.
(g) The Board may amend, suspend or terminate the Plan or any portion
thereof at any time, provided that no amendment shall be granted without
shareholder approval if such approval is necessary to comply with any applicable
tax laws or regulatory requirement, including any requirements for exemptive
relief under Section 16(b) of the Act.
(h) Options may not be granted under the Plan after the tenth anniversary
of the day before approval of the Plan by the Bank's shareholders, but then
outstanding Options may extend beyond such date.
(i) To the extent that State laws shall not have been preempted by any laws
of the United States, the Plan shall be construed, regulated, interpreted and
administered according to the other laws of the State of New Jersey.
(j) The Plan is intended to comply with N.J.S.A. ss.17:9A-27.50 and the
regulations promulgated thereunder and any successor provision thereto and Rule
16b-3 promulgated under the Act and is further intended to be administered in
the manner specified in paragraph (c)(2)(ii) of that Rule, and the Committee
shall interpret and administer the provisions of the Plan or any Stock Option in
a manner consistent therewith. Any provisions inconsistent with N.J.S.A.
ss.17:9A-27.50 and the regulations promulgated thereunder such provision and
such Rule and paragraph thereof shall be inoperative and shall not affect the
validity of the Plan.
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BRIDGE VIEW BANK
1994 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
SECTION 1. PURPOSE
The Bridge View Bank 1994 Stock Option Plan For Non-Employee Directors (the
"Plan") is hereby established to foster and promote the long-term success of
Bridge View Bank (the "Bank") and its shareholders by providing directors who
are not employees with an equity interest in the Bank. The Plan will assist the
Bank in attracting and retaining the highest quality of experienced persons as
directors and in aligning the interests of non-employee directors of the Bank
more closely with the interests of the Bank's shareholders.
SECTION 2. DEFINITIONS
Capitalized terms not specifically defined elsewhere herein shall have the
following meanings:
"Act" shall mean the Securities Exchange Act of 1934, as amended from time
to time, and the rules and regulations promulgated thereunder.
"Bank" shall mean Bridge View Bank and any present or future subsidiary
corporations of Bridge View Bank. (as defined in Section 424 of the Code) or any
successor to such corporations.
"Board" shall mean the Board of Directors of the Bank.
"Cause" shall mean a Non-Employee Director (i) being convicted of a crime,
other than a traffic violation, (ii) being the subject of non-appealable order
by any regulatory agency involving a breach of duty owed to the Bank by such
Non-Employee Director, or (iii) habitual abuse of alcohol or drugs.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and the regulations promulgated thereunder.
<PAGE>
"Committee" shall mean a committee of the Board, which shall consist of
twoE(2) or more directors of the Board to administer the Plan and perform the
functions set forth herein.
"Common Stock" or "Stock" shall mean the common stock, $10 per share par
value, of the Bank.
"Disability" shall mean permanent and total disability which if the
Non-Employee Director were an employee of the Bank would be treated as a total
disability under the term of the Bank's long-term disability plan for employees
as in effect from time to time.
"Fair Market Value" means, with respect to shares of Common Stock, the fair
market value as determined by the Committee in good faith and in a manner
established by the Committee from time to time; provided, however, so long as
the shares of Common Stock are last sale reported over the counter securities,
then the "fair market value" of such shares on any date shall be the average of
the high and low prices reported in the consolidated reporting system, or the
average of the bid and asked prices (if the shares of Common Stock are over the
counter securities), on the business day immediately preceding the date in
question, as reported on the NASDAQ system.
"Non-Employee Director" shall mean a member of the Board who is not a
common law employee of the Bank.
"Plan" shall mean the Bridge View Bank 1994 Stock Option Plan for
Non-Employee Directors.
"Stock Option" or "Option" shall mean a right to purchase Common Stock of
the Bank granted to a Non-Employee Director pursuant to the Plan which is not
intended to be an incentive stock option under Section 422 of the Code.
SECTION 3. ADMINISTRATION
(a) The Plan shall be administered by the Committee which shall hold
meetings at such times as may be necessary for the proper administration of the
Plan. Any action of the Committee with respect to the administration of the Plan
shall be taken by a majority vote, or by unanimous written consent of its
members.
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<PAGE>
(b) Subject to the express terms and conditions set forth herein, the
Committee shall have the power from time to time:
(i) to construe and interpret the Plan and the Stock Options granted
thereunder and to establish, amend and revoke rules, regulations, guidelines and
practices for the administration of the Plan as it shall from time to time
consider advisable, including, but not limited to, correcting any defect or
supplying any omission, or reconciling any inconsistency in the Plan or in any
Stock Option, in the manner and to the extent it shall deem necessary or
advisable to make the Plan fully effective; provided, however, that the
Committee shall have no discretion with respect to designating (x) the recipient
of a Stock Option, (y) the number of shares of Common Stock that are subject to
a Stock Option, or (z) the exercise price for a Stock Option. All decisions and
determinations by the Committee in the exercise of this power shall be final and
binding upon the Bank and the Non-Employee Directors; and
(ii) to exercise such powers and to perform such acts as are deemed
necessary or advisable to promote the best interests of the Bank with respect to
the Plan.
(c) The Committee may employ such legal counsel, consultants and agents as
it may deem desirable for the administration of the Plan and may rely upon any
opinion received from any such counsel or consultant and any computation
received from any such consultant or agent.
SECTION 4. ELIGIBILITY AND PARTICIPATION
Each Non-Employee Director of the Bank shall participate in the Plan.
SECTION 5. COMMON STOCK SUBJECT TO PLAN
(a) The maximum number of shares of Common Stock that may be made subject
to Stock Options granted pursuant to the Plan is 23,677, subject to the
adjustments pursuant to Section 9. The Bank shall reserve such number of shares
of Common Stock for the purposes of the Plan, out of its authorized but unissued
Common Stock or out of Common Stock held in the Bank's treasury, or partly out
of each, as shall be determined by the Board. No
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fractional shares of Common Stock shall be issued with respect to Stock Options
granted under the Plan.
(b) If any Stock Option in respect of shares of Common Stock expires or is
canceled without having been fully exercised, the number of shares subject to
such Stock Option but as to which such Stock Option was not exercised prior to
its expiration or cancellation may again be available for the grant of Stock
Options under the Plan.
SECTION 6. GRANT OF STOCK OPTIONS
(a) On the date upon which this Plan becomes effective or a Non-Employee
Director is first appointed or elected a member of the Bank's Board of
Directors, whichever is earlier, he shall receive the grant of a Non-Qualified
Stock Option to purchase 2,152 shares of Common Stock. Stock Options granted to
Non-Employee Directors shall be immediately exercisable. All Stock Options
granted under the Plan shall be non-statutory options not entitled to special
tax treatment under Section 422 of the Code.
(b) The grant of any Stock Option shall be evidenced by a written agreement
which shall state the number of shares of Common Stock that are subject to the
Stock Option, the exercise price, the term of the Stock Option, and other terms,
as the Committee may deem appropriate, that are not inconsistent with
requirements of this Plan.
SECTION 7. TERMS AND CONDITIONS
(a) The purchase price of the shares of Common Stock subject to each Stock
Option shall be 100% of the Fair Market Value of such Common Stock (or the par
value of such shares, if higher) on the day such Stock Option is granted. All
Stock Options shall have a term of ten (10) years from the date of grant,
subject to earlier termination pursuant to the terms set forth herein.
(b) In the event a Non-Employee Director's membership on the Board ceases
by reason of his Disability or death, all Stock Options then held and
exercisable by such Non-Employee Director may be exercised by the Non-Employee
Director or his executor or administrator at any time prior to the expiration of
the stated term of such Stock Option, or within one (1) year following his
cessation of Board membership, whichever period is shorter.
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<PAGE>
(c) In the event a Non-Employee Director's membership on the Board ceases
for Cause, all Stock Options then held by such Non-Employee Director, whether or
not exercisable, shall immediately terminate.
(d) In the event a Non-Employee Director's membership on the Board ceases
for any reason other than death, Disability or Cause, all Stock Options then
held and exercisable by such Non-Employee Director may be exercised at any time
prior to the expiration of the stated term of such Stock Option, or within a
period of three (3) months from the date of such cessation of Board membership,
whichever period is shorter.
(e) If a Non-Employee Director becomes an employee of the Bank or any of
its subsidiaries, the Non-Employee Director shall be treated as continuing in
service for purposes of this Plan, but shall not be eligible to receive future
grants hereunder while an employee. If the Non-Employee Director's services as
an employee terminates without his again becoming a Non-Employee Director, the
provisions of this Section 7 shall apply as if such termination of employment
were the termination of the Non-Employee Director's membership on the Board.
(f) Except as otherwise provided in this Section 7, no Stock Option under
the Plan shall be assignable or transferable by the Non-Employee Director, and
any attempted disposition thereof shall be null and void and of no effect.
Nothing in this Section 7 shall prevent transfers by will or by the applicable
laws of descent and distribution. During the life of a Non-Employee Director, a
Stock Option shall be exercisable only by such Non-Employee Director or the
Non-Employee Director's appointed guardian or legal representative.
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SECTION 8. EXERCISE OF OPTION
(a) Any Stock Option may be exercised in whole or in part at any time
subsequent to such Stock Option becoming exercisable, during the term of such
Stock Option; provided, however, that each partial exercise shall be for whole
shares of Common Stock only.
(b) Options may be exercised by written notice of exercise accompanied by
payment of the exercise price in full for the purchased shares of Common Stock
in cash or by certified or cashier's check payable to the Bank. Upon receipt of
such notice and payment of the exercise price, the Bank shall make application
to the New Jersey Department of Banking to issue the shares for which the Option
is being exercised.
(c) In the event that the Stock Option or portion thereof shall be
exercised pursuant to Section 7 by any person or persons other than the
Non-Employee Director, appropriate proof of the right of such person or persons
to exercise the Stock Option or portion thereof.
(d) Full payment to the Bank of all amounts which, under federal, state or
local law, it is required to withhold upon exercise of the Stock Option.
SECTION 9. CAPITAL ADJUSTMENTS AND CORPORATE REORGANIZATIONS
(a) If, through or as a result of any merger, consolidation, sale of all or
substantially all of the assets of the Bank, reorganization, recapitalization,
reclassification, stock dividend, stock split, split up, spin-off, combination,
exchange of shares, reverse stock split, or other similar transaction, (i) the
outstanding shares of Common Stock are increased or deceased or are exchanged
for a different number or kind of shares or other securities of the Bank, or
(ii) additional shares or new or different shares or other securities of the
Bank or other non-cash assets are distributed with respect to such shares of
Common Stock or other securities, an appropriate and proportionate adjustment
shall automatically be made in (x) the maximum number and kind of shares of
Common Stock reserved for issuance under the Plan, (y) the number and kind of
shares or other securities subject to the outstanding Options under the Plan,
and (z) the purchase price for each share of Common Stock subject to any then
outstanding Options under the Plan, without changing the aggregate purchase
price (except for any change resulting from rounding off of share quantities or
price) as to which such Options remain exercisable, provided that no adjustment
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shall be made pursuant to this Section 9 if such adjustment would cause the Plan
to fail to comply with Rule 16b-3 of the Act. No fractional shares will be
issued under the Plan on account of any such adjustment.
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(b) In the event of a consolidation, merger, reorganization or sale of all
or substantially all of the assets of the Bank in which outstanding shares of
Common Stock are exchanged for securities, cash or other property of any other
corporation or business entity or in the event of a liquidation of the Bank
(collectively an "Extraordinary Event"), the following rules shall apply: (i)
holders of Options shall continue to have the right to exercise their
unexercised but currently exercisable Options on or before the day before the
date of consummation of the Extraordinary Event, (ii) if any Option holders
shall not have exercised their Options on or before the date of such
consummation and if, under the terms of the Extraordinary Event holders of the
Common Stock of the Bank will receive upon consummation thereof payment in cash,
securities or other property (the "Event Payment") for each share surrendered in
the Extraordinary Event (the "Event Price"), then an Event Payment equal to the
difference between (A) the Event Price times the number of shares of Common
Stock subject to each Non-Employee Director's outstanding Options (to the extent
then exercisable at prices not in excess of the Event Price) and (B) the
aggregate exercise price of all such outstanding Options shall be made to each
Non-Employee Director in exchange for the termination of such Options, (iii)
notwithstanding the foregoing provisions of clause (ii), if the Extraordinary
Event involves an exchange by the acquiring party solely of its voting
securities in a reorganization pursuant to which holders of the Bank's Common
Stock will not recognize gain or loss on the exchange of such securities until
such holders dispose of the new voting securities acquired in such exchange,
then the acquiring party shall have the right to provide that such Options shall
be assumed, or equivalent options shall be substituted by the acquiring or
succeeding corporation (or an affiliate thereof); provided that the Non-Employee
Director shall not, as a result of such provision, be required to recognize gain
or loss on the exchange of Options, (iv) in no event shall the operation of the
foregoing provisions be permitted to cause the Non-Employee Director or the Plan
to fail to comply with Rule 16b-3 of the Act, and (v) in the unlikely event any
Options shall remain outstanding after giving effect to the foregoing provisions
such Options shall terminate on the date the Extraordinary Event is consummated.
SECTION 10. GENERAL PROVISIONS APPLICABLE TO OPTIONS
(a) Notwithstanding any other provision of the Plan, in order to qualify
for the exemption provided by Rule 16b-3 under the Act, any Common Stock
acquired by a Non-Employee Director upon exercise of an Option may not be sold
for six (6) months after the
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date of grant of the Option. The Committee shall have no authority to take any
action if the authority to take such action, or the taking of such action, would
disqualify the Plan from the exemption provided by Rule 16b-3 under the Act.
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(b) To the extent permitted by applicable law, upon the issuance of shares
of Common Stock in respect of an Option exercised by a Non-Employee Director,
such number of shares issuable shall be reduced by the number of shares
necessary to satisfy such Non-Employee Director's federal, and where applicable,
state withholding tax obligations. For withholding tax purposes, the value of
the shares of Common Stock shall be the Fair Market Value on the date the
withholding obligation is incurred. To the extent such reduction is not
permitted under law, such Non-Employee Director shall be required to pay all
applicable taxes. The Bank may, to the extent permitted by law, deduct any such
tax obligations from any payment of any kind otherwise due to the Non-Employee
Director.
SECTION 11. OTHER PROVISIONS
(a) The validity, interpretation and administration of the Plan and any
rules, regulations, determinations or decisions made thereunder, and the rights
of any and all persons having or claiming to have any interest therein or
thereunder, shall be determined exclusively in accordance with the laws of the
State of New Jersey, to the extent such state laws are not preempted by any laws
of the United States.
(b) As used herein, the masculine gender shall include the feminine gender.
(c) The headings in the Plan are for reference purposes only and shall not
affect the meaning or interpretation of the Plan.
(d) All notices or other communications made or given pursuant to this Plan
shall be in writing and shall be sufficiently made or given if hand-delivered or
mailed by certified mail, addressed to any Non-Employee Director at the address
contained in the records of the Bank, or to the Bank at its principal office.
(e) Nothing in this Plan or in any Stock Option granted hereunder shall
confer upon any Non-Employee Director any right to continue to serve as a
director of the Bank or shall interfere with or restrict in any way the right,
which right is hereby expressly reserved, to remove any Non-Employee Director as
a director in accordance with the by-laws and certificate of incorporation of
the Bank and applicable law.
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(f) The obligation of the Bank to sell or deliver shares of Common Stock
with respect to Stock Options granted under the Plan shall be subject to all
applicable laws, rules and regulations, including all applicable federal and
state securities laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Committee.
(g) The Plan is intended to comply with N.J.A.C. ss.3:4-2 and any successor
provision thereto and Rule 16b-3 promulgated under the Act and is further
intended to be administered in the manner specified in paragraph (c)(2)(ii) of
that Rule, and the Committee shall interpret and administer the provisions of
the Plan or any Stock Option in a manner consistent therewith. Any provisions
inconsistent with such provision of N.J.A.C. and such Rule and paragraph shall
be inoperative and shall not affect the validity of the Plan.
(h) All expenses and costs incurred in connection with the operation of the
Plan shall be borne by the Bank.
(i) The adoption of this Plan shall not affect any other compensation or
incentive plans in effect for the Bank. Nothing in this Plan shall be construed
to limit the right of the Bank to establish, alter or terminate any other forms
of incentives, benefits or compensation for directors of the Bank, including,
without limitation, conditioning the right to receive other incentives, benefits
or compensation on a director not participating in this Plan; or to grant or
assume options otherwise than under this Plan in connection with any proper
corporate purpose, including, without limitation, the grant or assumption of
stock options in connection with the acquisition by purchase, lease, merger,
consolidation or otherwise, of the business, stock, or assets of any
corporation, firm or association.
(j) Holders of Stock Options under the Plan shall have no rights as
shareholders of the Bank unless and until certificates for shares of Common
Stock of Common Stock are registered in their names in satisfaction of a
properly exercised Stock Option.
(k) The terms of the Plan shall be binding upon the Bank, the Non-Employee
Directors and their successors and assigns.
SECTION 12. AMENDMENT OR TERMINATION OF THE PLAN
The Board may not terminate, suspend, amend or modify the Plan without
approval by the Bank's shareholders. The termination
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or any modification or amendment of the Plan shall not, without the consent of a
Non-Employee Director, affect his rights under an Option previously granted to
him. The Plan shall not be amended more than once every six months, other than
to comport with changes in the Code.
SECTION 13. EFFECTIVE DATE AND TERM OF THE PLAN
This Plan shall become effective upon its approval by the holders of
two-thirds (2/3) of the Stock of the Bank entitled to vote. Prior to such
approval, Options granted under the Plan are expressly subject to such approval.
Options may not be granted under the Plan after the tenth anniversary of the day
before such shareholder approval.
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