UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000 Commission File No. 0-23271
RICHMOND COUNTY FINANCIAL CORP.
(Exact name of Registrant as specified in its charter)
Delaware 06-1498455
(State of Incorporation) (I.R.S. Employer Identification Number)
1214 Castleton Avenue
Staten Island, New York 10310
(Address of principal executive offices) (Zip Code)
718-448-2800
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
As of May 10, 2000, there were 28,275,272 shares of the common stock
outstanding.
<PAGE>2
FORM 10-Q
RICHMOND COUNTY FINANCIAL CORP.
INDEX
Page
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
Consolidated Statements of Financial Condition
at March 31, 2000 and June 30, 1999..................................... 3
Consolidated Statements of Operations
for the three and nine months ended March 31, 2000 and 1999............. 4
Consolidated Statement of Changes in Stockholders' Equity
for the nine months ended March 31, 2000 and 1999....................... 5
Consolidated Statements of Cash Flows
for the nine months ended March 31, 2000 and 1999....................... 6
Notes to Unaudited Consolidated Financial Statements.................... 7
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations........................ 9
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk..... 18
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.............................................. 19
ITEM 2. Changes in Securities and Use of Proceeds...................... 19
ITEM 3. Defaults Upon Senior Securities................................ 19
ITEM 4. Submission of Matters to a Vote of Security Holders............ 19
ITEM 5. Other Information.............................................. 19
ITEM 6. Exhibits and Reports on Form 8-K............................... 19
Exhibit Index........................................................... 20
Signature Page.......................................................... 21
================================================================================
Statements contained in this Form 10-Q which are not historical facts are
forward-looking statements, as that term is defined in the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are subject to
risks and uncertainties which could cause actual results to differ materially
from those projected. Such risks and uncertainties include potential changes in
interest rates, competitive factors in the financial services industry, general
economic conditions, the effect of new legislation and other risks detailed in
documents filed by the Company with the Securities and Exchange Commission from
time to time.
================================================================================
<PAGE>3
RICHMOND COUNTY FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
2000 1999
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks ............................................ $ 50,729 $ 55,773
Federal funds sold ................................................. - 17,775
Securities available for sale:
Investment securities ......................................... 252,096 297,611
Mortgage-backed and mortgage-related securities ............... 780,397 866,844
Mortgage loans:
1-4 family .................................................... 908,557 853,103
Multi-family .................................................. 501,070 290,066
Commercial real estate ........................................ 109,016 107,280
Construction .................................................. 62,525 51,044
--------- ----------
Total mortgage loans ............................................... 1,581,168 1,301,493
Other loans ........................................................ 21,096 26,374
Less: Unearned loan costs/(fees), net ......................... 1,024 (455)
Allowance for loan losses ............................... (14,556) (13,885)
--------- ----------
Loans, net ......................................................... 1,588,732 1,313,527
Federal Home Loan Bank stock ....................................... 43,873 38,388
Banking premises and equipment, net ................................ 26,943 27,353
Accrued interest receivable ........................................ 18,211 15,568
Other real estate owned ............................................ 705 997
Goodwill ........................................................... 41,165 43,382
Other assets ....................................................... 99,671 82,877
---------- ----------
TOTAL ASSETS ........................................... $2,902,522 $2,760,095
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits .................................................... $ 204,004 $ 169,007
Savings, N.O.W. and Money market accounts .......................... 878,543 851,993
Certificates of deposit ............................................ 664,357 598,470
---------- ----------
Total deposits ........................................... 1,746,904 1,619,470
Borrowings ......................................................... 825,532 757,832
Accrued expenses and other liabilities ............................. 13,152 12,582
---------- ----------
Total liabilities ........................................ 2,585,588 2,389,884
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 5,000,000 shares authorized;
none issued ........................................................ - -
Common stock, $.01 par value, 75,000,000 shares authorized;
32,737,134 shares issued; 28,913,272 and 31,662,839 shares
outstanding at March 31, 2000 and June 30, 1999, respectively .... 327 327
Additional paid-in-capital ......................................... 330,111 330,122
Retained earnings-substantially restricted ......................... 139,506 122,784
Unallocated common stock held by
Employee Stock Ownership Plan ("ESOP") ........................... (30,681) (31,978)
Unearned compensation MRP Stock .................................... (14,016) (16,885)
Treasury stock, at cost, 3,823,862 and 1,074,295 shares
at March 31, 2000 and June 30, 1999, respectively................. (67,016) (17,967)
Accumulated other comprehensive loss:
Unrealized loss on securities available for sale, net of tax ..... (41,297) (16,192)
---------- ----------
Total stockholders' equity ............................... 316,934 370,211
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............ $2,902,522 $2,760,095
========== ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>4
RICHMOND COUNTY FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
-------------------- ------------------
(Unaudited) (Unaudited)
2000 1999 2000 1999
--------- --------- -------- --------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans $29,470 $17,638 $83,563 $47,399
Debt and equity securities 6,062 4,246 18,643 12,781
Mortgage-backed and mortgage-related securities 13,546 8,844 41,817 26,923
Federal funds sold and interest-earning bank balances 58 260 305 689
--------- --------- --------- --------
Total interest income 49,136 30,988 144,328 87,792
--------- --------- --------- --------
INTEREST EXPENSE:
Deposits 13,946 7,769 39,873 23,641
Borrowed funds 11,390 6,654 32,805 17,012
--------- --------- --------- --------
Total interest expense 25,336 14,423 72,678 40,653
--------- --------- --------- --------
Net interest income 23,800 16,565 71,650 47,139
Provision for loan losses 300 600 900 1,950
--------- --------- --------- --------
Net interest income after provision for loan losses 23,500 15,965 70,750 45,189
--------- --------- --------- --------
NON-INTEREST INCOME:
Fee income 2,323 1,332 7,435 3,355
Net gain on sale of securities and loans 24 81 734 2,604
Other 812 100 2,366 110
--------- --------- --------- --------
Total non-interest income 3,159 1,513 10,535 6,069
--------- --------- --------- --------
NON-INTEREST EXPENSE:
Salaries and employee benefits 6,871 5,197 20,877 14,168
Occupancy costs 1,559 985 4,560 2,616
Computer service fees 1,391 959 4,180 2,599
Advertising 467 354 1,386 1,195
FDIC insurance premiums 99 54 337 131
Other 1,717 1,063 5,184 3,178
--------- --------- --------- --------
Total general and administrative 12,104 8,612 36,524 23,887
Amortization of goodwill and other intangibles 821 195 2,456 352
--------- --------- --------- --------
Total non-interest expense 12,925 8,807 38,980 24,239
--------- --------- --------- --------
Income before income taxes 13,734 8,671 42,305 27,019
Provision for income taxes 4,925 3,291 15,359 10,265
--------- --------- --------- --------
NET INCOME $ 8,809 $ 5,380 $26,946 $16,754
========= ========= ========= ========
EARNINGS PER SHARE:
Basic $ 0.34 $ 0.24 $ 0.99 $ 0.73
Diluted $ 0.34 $ 0.24 $ 0.98 $ 0.73
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>5
RICHMOND COUNTY FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
RETAINED ACCUMULATED UNALLOCATED UNEARNED
ADDITIONAL EARNINGS OTHER COMMON COMMON
COMMON PAID-IN SUBSTANTIALLY COMPREHENSIVE STOCK HELD STOCK HELD TREASURY
STOCK CAPITAL RESTRICTED (LOSS)/INCOME BY ESOP BY MRP STOCK TOTAL
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JUNE 30, 1999 $ 327 $ 330,122 $ 122,784 $ (16,192) $ (31,978) $ (16,885) $(17,967) $370,211
Comprehensive income:
Net income - - 26,946 - - - - 26,946
Net unrealized loss on
certain securities, net of tax - - - (25,105) - - - (25,105)
---------
Comprehensive income 1,841
---------
Adjustments - 624 - - - - - 624
Allocation of ESOP and MRP stock - (276) - - 1,297 2,869 - 3,890
Common stock repurchased
(2,797,184 shares) - - - - - - (49,871) (49,871)
Treasury stock issued for
options exercised (47,617 shares) - (359) - - - - 822 463
Cash dividends paid on common stock - - (10,224) - - - - (10,224)
-----------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 2000 $ 327 $ 330,111 $ 139,506 $ (41,297) $ (30,681) $ (14,016) $(67,016) $316,934
===============================================================================================
BALANCE AT JUNE 30, 1998 $ 264 $ 254,307 $ 103,760 $ 3,970 $ (33,706) $ - $ - $328,595
Comprehensive income:
Net income - - 16,754 - - - - 16,754
Net unrealized loss on
certain securities, net of tax - - - (7,404) - - - (7,404)
---------
Comprehensive income 9,350
---------
Purchase of MRP stock - - - - - (16,118) - (16,118)
Allocation of ESOP and MRP stock - (67) - - 1,296 1,237 - 2,466
Common stock repurchased
(3,474,106 shares) - - - - - - (56,647) (56,647)
Issuance of common stock for
Ironbound Bankcorp 14 25,851 - - - - - 25,865
Issuance of common stock for
Bayonne Bancshares 49 50,676 - - - (2,820) 56,647 104,552
Cash dividends paid on common stock - - (4,810) - - - - (4,810)
-----------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 1999 $ 327 $ 330,767 $ 115,704 $ (3,434) $ (32,410) $ (17,701) $ - $393,253
===============================================================================================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>6
RICHMOND COUNTY FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
FOR THE
NINE MONTHS ENDED
MARCH 31,
---------------------
(Unaudited)
2000 1999
--------- ---------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES ............................ $ 26,957 $ 15,288
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in loans receivable ................................... (362,886) (357,457)
Loans purchased .................................................... - (1,500)
Loans sold ......................................................... 87,346 15,300
Investment securities available for sale:
Sales and redemptions ............................................ 67,772 72,771
Purchases ........................................................ (38,538) (67,816)
Mortgage-backed and mortgage-related securities available for sale:
Sales and redemptions ............................................ 14,542 34,726
Principal collected .............................................. 92,420 199,663
Purchases ........................................................ (39,585) (202,888)
Purchases of Federal Home Loan Bank of New York stock .............. (5,485) (11,990)
Net addition to banking premises and equipment ..................... (1,241) (3,559)
Proceeds from sales of other real estate owned ..................... 377 134
Cash and cash equivalents acquired in Ironbound Bankcorp
acquisition, net ................................................ - 40,434
Cash and cash equivalents acquired in Bayonne Bancshares
acquisition, net ................................................ - 124,413
--------- ---------
Net cash used in investing activities ........................ (185,278) (157,769)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits ........................................... 127,434 84,117
Decrease in securities sold under repurchase agreements ............ (79,000) -
Increase in borrowings from the Federal Home Loan Bank ............. 146,700 219,000
Cash dividends paid on common stock ................................ (10,224) (4,810)
Net proceeds from issuance of common stock upon exercise
of stock options ................................................ 463 -
Purchase of MRP stock .............................................. - (16,118)
Purchase of treasury shares ........................................ (49,871) (56,647)
--------- ---------
Net cash provided by financing activities .................... 135,502 225,542
--------- ---------
Net (decrease) increase in cash and cash equivalents ............... (22,819) 83,061
Cash and cash equivalents at beginning of period ................... 73,548 57,884
--------- ---------
Cash and cash equivalents at end of period ......................... $ 50,729 $ 140,945
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest on deposits and borrowed funds ............................ $ 72,752 $ 39,058
Income taxes ....................................................... 12,464 8,125
NON-CASH INVESTING ACTIVITIES:
Additions to other real estate owned, net .......................... $ 88 $ 90
Securitization of mortgage loans ................................... - 78,495
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>7
RICHMOND COUNTY FINANCIAL CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
---------------------
The accompanying unaudited consolidated financial statements include the
accounts of Richmond County Financial Corp. (the "Company"), its direct
wholly-owned subsidiary, Richmond County Savings Bank (the "Bank"), and the
subsidiaries of the Bank.
The unaudited consolidated financial statements included herein reflect all
normal recurring adjustments which are, in the opinion of management, necessary
for a fair presentation of the results for the interim periods presented. The
results of operations for the three and nine-month periods ended March 31, 2000
are not necessarily indicative of the results of operations that may be expected
for the entire fiscal year. Certain information and note disclosures normally
included in the financial statements, prepared in accordance with generally
accepted accounting principles, have been condensed or omitted pursuant to the
rules and regulations of the Securities and Exchange Commission (the "SEC"). The
unaudited consolidated financial statements should be read in conjunction with
the audited consolidated financial statements and notes thereto included in the
Company's 1999 Annual Report and Form 10-K.
2. EARNINGS PER SHARE
------------------
Basic earnings per share ("EPS") is calculated by dividing net income by the
weighted average number of common shares outstanding. Diluted EPS is calculated
using the same method as basic EPS, but reflects potential dilution of common
stock equivalents. Shares of common stock held by the ESOP that have not been
allocated to participants' accounts or are not committed to be released for
allocation and non-vested 1998 Management Recognition Plan (the "MRP") shares
are not considered to be outstanding for the calculation of basic EPS, however,
a portion of such shares are considered in the calculation of diluted EPS as
common stock equivalents of basic EPS. Basic and diluted weighted-average common
shares outstanding were 25,923,987 and 26,013,515 shares, for the third quarter
of fiscal 2000, respectively. For the nine months ended March 31, 2000, basic
and diluted weighted-average common shares were 27,181,803 and 27,408,508
shares, respectively.
3. CONVERSION TO STOCK FORM OF OWNERSHIP
-------------------------------------
On July 31, 1997, the Board of Trustees of the Bank unanimously adopted a Plan
of Conversion whereby the Bank would convert from a New York State chartered
mutual bank to a New York State chartered stock institution with the concurrent
formation of a holding company, Richmond County Financial Corp. (the
"Conversion").
The Conversion was completed on February 18, 1998, with the issuance by the
Company of 24,466,250 shares of common stock, at a price of $10.00 per share, in
an initial public offering. The Company received gross proceeds from the
Conversion of $244.7 million, before the reduction from gross proceeds of $9.8
million for estimated conversion related expenses. The Company used $117.4
million, or 50% of the net proceeds, to purchase all of the outstanding stock of
the Bank.
Concurrent with the completion of the Conversion, an additional 1,957,300 shares
of authorized but unissued shares of common stock were contributed by the
Company to the Richmond County Savings Foundation (the "Foundation"), a private
foundation dedicated to charitable purposes
<PAGE>8
within the Bank's communities that it serves. The Company recorded a one-time
charge of $19.6 million, the full amount of the contribution made to the
Foundation and a corresponding deferred tax benefit of $8.4 million, in the
third quarter ended March 31, 1998. The contribution to the Foundation will be
fully tax deductible, subject to an annual limitation based upon the Company's
annual taxable income.
4. RECENT DEVELOPMENTS
-------------------
On February 17, 2000, the Company announced that it had completed its fifth
stock repurchase plan of 5%, or 1,520,467 shares of the Company's common shares
outstanding. Additionally, as previously announced, after receiving approval
from the State of New York Banking Department, on January 19, 2000, the Board
has authorized the Company to commence its sixth stock repurchase plan of
1,444,444 shares, or 5%, of the Company's outstanding common stock. The sixth
stock repurchase plan commenced on February 18, 2000, the second anniversary of
Richmond County Savings Bank's conversion to stock form.
The repurchases will be made in unsolicited purchases pursuant to the federal
securities laws relating to activities by issuers having a distribution, subject
to the availability of stock, acceptable pricing of the stock and such timing
limitations as may be applicable.
On March 15, 2000, the Company and South Jersey Financial Corporation, Inc.
("South Jersey") entered into a definitive agreement pursuant to which South
Jersey, the holding company of South Jersey Savings and Loan Association, a
community savings association which operates three full-service banking offices
in the New Jersey counties of Gloucester and Camden, will merge with a wholly
owned subsidiary of the Company, Richmond County Acquisition, Inc. Under the
terms of the agreement, South Jersey shareholders will receive $20 per share in
cash for each outstanding share of common stock of South Jersey. The total
transaction value is estimated to be $68.0 million. As of March 31, 2000
(unaudited), the total assets of South Jersey were $328.1 million, deposits were
$240.5 million and total stockholders' equity was $53.2 million. The acquisition
is subject to the approval of South Jersey shareholders, as well as certain
regulatory approvals. The acquisition is expected to be completed in the third
quarter of calendar year 2000, and will be accounted for under the purchase
method of accounting.
5. SUBSEQUENT EVENT
----------------
On April 18, 2000, the Company announced that its Board of Directors declared a
quarterly cash dividend of fourteen cents ($0.14) per common share. The dividend
is payable on May 30, 2000 to shareholders of record as of May 10, 2000.
<PAGE>9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Richmond County Financial Corp. is a savings and loan holding company regulated
by the Office of Thrift Supervision. The primary operating subsidiary of
Richmond County Financial Corp. is Richmond County Savings Bank (the "Bank"), a
New York State chartered stock savings bank. While the following discussion of
financial condition and results of operations includes the collective results of
Richmond County Financial Corp. and the Bank (collectively the "Company"), this
discussion reflects the Bank's activities as the Company currently does not
engage in any significant business activities other than the management of the
Bank and the investment of net proceeds from the Bank's mutual to stock
conversion, which occurred on February 18, 1998 (the "Conversion").
BAYONNE BANCSHARES, INC.
At the close of business on March 22, 1999, the Company completed its
acquisition of Bayonne Bancshares, Inc. ("Bayonne"), the holding company of
First Savings Bank of New Jersey, SLA, a New Jersey State chartered savings and
loan association with four full service banking offices located in Bayonne, New
Jersey in a transaction which was accounted for as a purchase. The cost of the
acquisition was approximately $118.5 million for which the Company issued 1.05
shares of its common stock for each outstanding share of Bayonne common stock
for a total of 8,668,615 common shares, of which 3,938,731 shares were issued
from its treasury shares. Options to purchase 683,577 shares of Bayonne common
stock were also converted into options to purchase 717,755 shares of the
Company's common stock. The goodwill attributable to the transaction was $28.8
million, which is being amortized on a straight line basis over 15 years.
IRONBOUND BANKCORP, NJ.
At the close of business on March 5, 1999, the Company completed its acquisition
of Ironbound Bankcorp, NJ ("Ironbound"), the holding company of Ironbound Bank,
a New Jersey chartered commercial bank with three full service commercial
banking offices located in the New Jersey counties of Union and Essex, in a
transaction which was accounted for as a purchase. The cost of the acquisition
was approximately $27.7 million. The Company issued 1.463 shares of its common
stock for each outstanding share of Ironbound common stock for a total of
1,458,842 common shares. The goodwill attributable to the transaction was $15.3
million, which is being amortized on a straight line basis over 15 years.
FINANCIAL CONDITION
Total assets increased by $142.4 million, or 5.2%, to $2.9 billion at March 31,
2000 from June 30, 1999. The increase in overall assets was primarily due to an
increase in net loans of $275.2 million, or 21.0%, offset in part by a decrease
in mortgage-backed and mortgage-related securities and investment securities.
Mortgage-backed and mortgage-related securities decreased by $86.4 million, or
10.0%, from $866.8 million at June 30, 1999 to $780.4 million at March 31, 2000.
Investment securities at March 31, 2000 totaled $252.1 million, a decrease of
$45.5 million, or 15.3%, compared to $297.6 million at June 30, 1999. The
overall increase in the level of assets was primarily the result of an increase
in borrowed funds to fund growth in the mortgage loan portfolio, as well as
significant deposit inflows.
<PAGE>10
The Bank continues to experience increased loan growth. For the nine-month
period ended March 31, 2000, gross loans receivable increased by $274.4 million,
or 20.7%, to $1.6 billion, compared to $1.3 billion at June 30, 1999. The
substantial increase in net loans was due primarily to originations of $472.6
million generated during the nine-months ended March 31, 2000, offset by the
sale of $85.8 million of one- to four-family mortgage loans, $1.6 million in
student loan sales and net amortization and prepayments of $109.3 million. Loan
originations for the nine-month period ended March 31, 2000 were primarily
comprised of multifamily and one- to four-family mortgage loans. Multifamily
mortgage loan originations for the nine-months ended March 31, 2000 totaled
$217.6 million, bringing the total multifamily loan portfolio to $501.1 million,
or 31.3% of gross loans at March 31, 2000. Total one- to four-family loan
production for the nine-months ended March 31, 2000 was $200.4 million.
Total liabilities at March 31, 2000 were $2.6 billion, an increase of $195.7
million, or 8.2%, from $2.4 billion at June 30, 1999. Total deposits increased
by $127.4 million, or 7.9%, to $1.7 billion at March 31, 2000. The Bank's core
deposits increased by $61.5 million, or 6.0%, at March 31, 2000 to $1.1 billion.
The increase in the Bank's core deposits were attributable to a $35.0 million
increase in total demand deposits and a $26.6 million increase in savings,
N.O.W. and money market accounts. The Bank also experienced an increase of $65.9
million, or 11.0%, in certificates of deposit from $598.5 million at June 30,
1999 to $664.4 million at March 31, 2000.
Additionally, the Bank continues to place a level of emphasis on the utilization
of borrowed funds to fund asset growth. In this regard, at March 31, 2000 and
June 30, 1999, the Bank had total borrowings of $825.5 million and $757.8
million, respectively. The Bank may continue to increase such emphasis, which
may result in an increase in the Bank's overall cost of funds. The Bank's
current strategy is to invest such borrowed funds primarily in mortgage loans
and mortgage-backed and mortgage-related securities with similar estimated
maturities. This strategy is intended to incrementally increase net interest
income, although it may have the effect of incrementally decreasing net interest
rate spread.
Total stockholders' equity decreased by $53.3 million to $316.9 million at March
31, 2000 from $370.2 million at June 30, 1999. The overall decrease was
primarily due to the repurchase of 2.8 million shares of the Company's common
stock, year to date cash dividends paid of $10.2 million and a $25.1 million
decrease in the fair value on securities available-for-sale, net of tax. These
decreases were offset by the earnings reported for the nine-month period ended
March 31, 2000 of $26.9 million and the amortization of $4.2 million for the
unallocated and unearned shares of common stock held by the Company's
stock-related benefit plans.
NON-PERFORMING ASSETS
Non-performing loans totaled $5.0 million, or 0.3% of total loans at March 31,
2000, as compared to $5.9 million, or 0.5% of total loans, at June 30, 1999. At
March 31, 2000, the Bank's real estate owned consisted of foreclosed assets
totaling $705,000, which at such date was comprised of four one- to four-family
properties and two commercial properties.
At March 31, 2000, the Bank had $2.5 million of assets designated as
"Substandard," consisting of 21 loans, no assets classified as "Doubtful," and
four consumer loans classified as "Loss," respectively.
Non-accrual loans totaled $5.0 million as of March 31, 2000, which included 51
one- to four-family loans, with an aggregate balance of $4.2 million, and four
non-residential loans totaling
<PAGE>11
$800,000.
For the nine-month period ended March 31, 2000, the Company's loan loss
provision was $900,000 as compared to $2.0 million for the prior year's period.
The Company's allowance for loan losses totaled $14.6 million at March 31, 2000
and $13.9 million at June 30, 1999, which represents a ratio of allowance for
loan losses to non-performing loans of 289.2% and 237.1%, respectively. The
Company continues to increase its overall loan loss reserves due to the increase
in lending of all loan products. Management believes the allowance for loan
losses at March 31, 2000 is adequate and sufficient reserves are presently
maintained to cover potential losses. For the quarter ended March 31, 2000, the
Company experienced net charge-offs of $140,000.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND
1999
General. The Company reported net income for the third quarter ended March 31,
2000 of $8.8 million, or diluted earnings per share of $0.34, an increase of
$3.4 million or 63.7% as compared to the $5.4 million, or diluted earnings per
share of $0.24 reported for the same period last year.
Interest Income. The Company reported total interest income of $49.1 million for
the third quarter ended March 31, 2000, representing an increase of $18.1
million, or 58.6%, as compared to the same period in 1999. The increase in
interest income was attributable primarily to the growth in average
interest-earning assets of $948.4 million and a 25 basis point increase in the
average yield on interest-earning assets. The overall increase in the level of
interest-earning assets was primarily the result of an increase in borrowed
funds to fund growth in the mortgage loan and securities portfolios, assets
acquired from Bayonne and Ironbound, as well as deposit inflows.
Interest income on loans increased $11.8 million, or 67.1%, to $29.5 million for
the third quarter ended March 31, 2000, as compared to the $17.6 million
reported for the comparable period in 1999. This increase was the result of
growth in the average balance of loans outstanding of $632.4 million, due
primarily to increased originations of multifamily and one- to four-family real
estate loans and loans acquired through the recently completed acquisitions. The
average yield on the overall loan portfolio remained unchanged at 7.49% for the
third quarter ended March 31, 2000 and 1999.
Interest income on debt and equity securities increased $1.8 million, or 42.8%,
from $4.2 million for the third quarter ended March 31, 1999, to $6.1 million
for the same period in 2000. This increase is mainly attributable to the growth
in the average balance of debt and equity securities, primarily investments in
financial bonds and FHLB stock, as well as a 78 basis point increase in the
average yield on the debt and equity portfolio.
Interest income on mortgage-backed and mortgage-related securities increased
$4.7 million, or 53.2%, from $8.8 million reported for the third quarter ended
March 31, 1999, to $13.5 million for the same period in 2000. This increase was
due primarily to an increase in the average balance of mortgage-backed and
mortgage-related securities of $263.6 million as a result of the investment of
borrowed funds and mortgage-backed and mortgage-related securities acquired
through the recently completed acquisitions. Additionally, interest income on
mortgage-backed and mortgage-related securities increased as a result of an
increase in the average yield on the mortgage-backed and mortgage-related
securities portfolio to 6.54% for the third quarter ended March 31, 2000, as
compared to 6.26% for the same period in 1999.
Interest Expense. Interest expense increased $10.9 million, or 75.7%, from $14.4
million for the
<PAGE>12
third quarter ended March 31, 1999, to $25.3 million for the third quarter ended
March 31, 2000. The average cost of the Bank's interest-bearing liabilities
increased from 4.11% for the third quarter ended March 31, 1999, to 4.31% for
the third quarter ended March 31, 2000. Interest expense on deposits increased
$6.2 million, or 79.5%, from $7.8 million for the third quarter ended March 31,
1999, to $13.9 million for the third quarter ended March 31, 2000. The increase
reflects a $611.0 million increase in the average balance of interest-bearing
deposits, primarily attributable to a $277.5 million increase in the average
balance of certificates of deposit and a $333.5 million increase in the average
balance of money market, savings and N.O.W. deposit accounts. This increase can
be primarily attributable to the opening of two full-service banking facilities
and one public accommodation office on Staten Island, the opening of an
Ironbound Bank divisional full-service banking facility in Union, New Jersey and
deposits acquired through the recently completed acquisitions. In addition, the
Bank's strategy over the past several years has been to attract more
certificates of deposit through the offering of additional certificate of
deposit products and related marketing of commercial deposit accounts.
Interest expense on borrowed funds for the quarter ended March 31, 2000 was
$11.4 million, an increase of $4.7 million as compared to the $6.7 million
reported in the same period in 1999. The increase in interest expense on
borrowed funds was attributable to the growth in the average balance of borrowed
funds of $330.2 million and a 21 basis point increase in the average cost on
borrowed funds. The Bank continues to place a greater level of emphasis on the
utilization of borrowed funds to fund asset growth and to leverage the Bank's
capital position to improve returns on equity. As of March 31, 2000, the Bank
had $825.5 million of borrowings outstanding, an increase of $67.7 million, or
8.9%, as compared to the $757.8 million of borrowings outstanding as of June 30,
1999. The Bank may continue to increase such emphasis on borrowed funds, which
may result in an increase in the Bank's overall cost of funds. The Bank's
current strategy is to invest such borrowed funds primarily in mortgage loans
and mortgage-backed and mortgage-related securities with similar estimated
maturities. This strategy is intended to incrementally increase net interest
income, although it may have the effect of incrementally decreasing net interest
rate spread.
Provision for Loan Losses. The Bank's provision for loan losses for the third
quarter ended March 31, 2000 was $300,000, as compared to $600,000 reported for
the same period in the prior year. The provision for the third quarter ended
March 31, 2000 was based on management's evaluation of its loan portfolio and
real estate market conditions. In particular, management considered the
continued growth in the portfolio, the introduction of new lending products by
the Bank and the seasoning of such new products, as well as the level of its
non-performing loans. Management believes, based upon information currently
available, that its allowance for loan losses is adequate to cover future loan
losses. To the extent the Bank increases its investment in multifamily loans,
commercial real estate, commercial and other loans, which entail higher risk
than one- to four-family loans, the Bank may decide to increase its allowance
for loan losses through additional loan loss provisions, which may adversely
affect net income. In addition, if general economic conditions and real estate
values within the Bank's primary lending area decline, the level of
non-performing loans may increase, resulting in larger provisions for loan
losses which, in turn, would also adversely affect net income.
Non-Interest Income. Exclusive of net gains and losses from the sales of
securities and loans, total non-interest income for the third quarter ended
March 31, 2000 was $3.1 million, as compared to the $1.4 million reported for
the same period in 1999. The increased level of non-interest income is primarily
due to an overall increase in deposit fee income, fee income generated from the
Bayonne and Ironbound acquisitions, ATM fee income and advisory fee income from
our investment in Peter B. Cannell & Co. Inc. Additionally, the Bank purchased a
<PAGE>13
Bank Owned Life Insurance Policy ("BOLI"), which accounted for approximately
$739,000 of other income.
Non-Interest Expense. Non-interest expense totaled $12.9 million for the third
quarter ended March 31, 2000, an increase of $4.1 million, or 46.8%, as compared
to the $8.8 million reported for the same period of the prior year. The
increased level of non-interest expense was mainly attributable to increased
compensation and employee benefit expenses, goodwill amortization and other
expenses associated with the Bayonne and Ironbound acquisitions. Additionally,
the Bank recognized increases in non-interest expenses as a result of the Bank's
opening of a public accommodation office and the opening of two new full service
branches in Staten Island and a full service branch in Union, New Jersey.
Income Taxes. The Company's effective consolidated tax rate for the third
quarter ended March 31, 2000, was 35.8% as compared to 37.9% reported for the
comparable period in 1999. The reduction of the Company's effective tax rate is
primarily due to the Bank's utilization of various tax-planning strategies.
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED MARCH 31, 2000 AND
1999
General. The Company reported net income for the nine-month period ended March
31, 2000 of $26.9 million, or diluted earnings per share of $0.98, an increase
of $10.2 million as compared to the $16.8 million reported for the same period
last year. Core earnings for the nine-month period ended March 31, 2000
increased 74.9% to a record $26.5 million, or core diluted earnings per share of
$0.97, as compared to $15.1 million, or core diluted earnings per share of $0.65
reported for the same period last year. Core earnings for the nine-month period
ended March 31, 2000 and 1999, excludes net gains on sales of securities and
loans of $734,000 and $2.6 million, respectively.
Interest Income. The Company reported total interest income of $144.3 million
for the nine-month period ended March 31, 2000, representing an increase of
$56.5 million, or 64.4%, as compared to the same period in 1999. The increase in
interest income was attributable primarily to the growth in average
interest-earning assets of $1.0 billion and a 17 basis point increase in the
average yield on interest-earning assets. The overall increase in the level of
interest-earning assets was primarily the result of an increase in borrowed
funds to fund growth in the mortgage loan and securities portfolios, assets
acquired from Bayonne and Ironbound, as well as deposit inflows.
Interest income on loans increased $36.2 million, or 76.3%, to $83.6 million for
the nine-month period ended March 31, 2000, as compared to the $47.4 million
reported for the comparable period in 1999. This increase was the result of
growth in the average balance of loans outstanding of $637.2 million, due
primarily to increased originations of multifamily and one- to four-family real
estate loans and loans acquired through the recently completed acquisitions. The
average yield on the overall loan portfolio remained relatively unchanged at
7.56% and 7.55% for the nine-month period ended March 31, 2000 and 1999,
respectively.
Interest income on debt and equity securities increased $5.9 million, or 45.9%,
from $12.8 million for the nine-month period ended March 31, 1999, to $18.6
million for the same period in 2000. This increase is mainly attributable to the
growth in the average balance of debt and equity securities, primarily
investments in financial bonds and FHLB stock, as well as a 57 basis point
increase in the average yield on the debt and equity portfolio.
<PAGE>14
Interest income on mortgage-backed and mortgage-related securities increased
$14.9 million, or 55.3%, from $26.9 million reported for the nine-month period
ended March 31, 1999, to $41.8 million for the same period in 2000. This
increase was due primarily to an increase in the average balance of
mortgage-backed and mortgage-related securities of $297.4 million as a result of
the investment of borrowed funds and mortgage-backed and mortgage-related
securities acquired through the recently completed acquisitions and a 10 basis
point increase in the average yield on the mortgage-backed and mortgage-related
securities portfolio.
Interest Expense. Interest expense increased $32.0 million, or 78.8%, from $40.7
million for the nine-month period ended March 31, 1999, to $72.7 million for the
nine-month period ended March 31, 2000. The average cost of the Bank's
interest-bearing liabilities remained constant at 4.20% for the nine-month
period ended March 31, 2000 and 1999. Interest expense on deposits increased
$16.2 million, or 68.7%, from $23.6 million for the nine-month period ended
March 31, 1999, to $39.9 million for the nine-month period ended March 31, 2000.
The increase reflects a $621.0 million increase in the average balance of
interest-bearing deposits, primarily attributable to a $269.2 million increase
in the average balance of certificates of deposit and a $288.3 million increase
in the average balance of savings deposit accounts. This increase can be
primarily attributable to the opening of two full-service banking facilities and
one public accommodation office on Staten Island, the opening of an Ironbound
Bank divisional full-service banking facility in Union, New Jersey and deposits
acquired through the recently completed acquisitions. In addition, the Bank's
strategy over the past several years has been to attract more certificates of
deposit through the offering of additional certificate of deposit products and
related marketing of commercial deposit accounts.
Interest expense on borrowed funds for the nine-month period ended March 31,
2000 was $32.8 million, an increase of $15.8 million as compared to the $17.0
million reported in the same period in 1999. The increase in interest expense on
borrowed funds was attributable to the growth in the average balance of borrowed
funds of $391.8 million and a four basis point increase in the average cost on
borrowed funds. The Bank continues to place a greater level of emphasis on the
utilization of borrowed funds to fund asset growth and to leverage the Bank's
capital position to improve returns on equity. As of March 31, 2000, the Bank
had $825.5 million of borrowings outstanding, an increase of $67.7 million, or
8.9%, as compared to the $757.8 million of borrowings outstanding as of June 30,
1999. The Bank may continue to increase such emphasis on borrowed funds, which
may result in an increase in the Bank's overall cost of funds. The Bank's
current strategy is to invest such borrowed funds primarily in mortgage loans
and mortgage-backed and mortgage-related securities with similar estimated
maturities. This strategy is intended to incrementally increase net interest
income, although it may have the effect of incrementally decreasing net interest
rate spread.
Provision for Loan Losses. The Bank's provision for loan losses for the
nine-month periods ended March 31, 2000 and 1999 was $900,000 and $2.0 million,
respectively. The provision for the nine-month period ended March 31, 2000 was
based on management's evaluation of its loan portfolio and real estate market
conditions. In particular, management considered the continued growth in the
portfolio, the introduction of new lending products by the Bank and the
seasoning of such new products, as well as the level of its non-performing
loans. Management believes, based upon information currently available, that its
allowance for loan losses is adequate to cover future loan losses. To the extent
the Bank increases its investment in multifamily loans, commercial real estate,
commercial and other loans, which entail higher risk than one- to four-family
loans, the Bank may decide to increase its allowance for loan losses through
additional loan loss provisions, which may adversely affect net income. In
addition, if general economic conditions and real estate values within the
Bank's primary lending area decline, the level of non-
<PAGE>15
performing loans may increase, resulting in larger provisions for loan losses
which, in turn, would also adversely affect net income.
Non-Interest Income. Exclusive of net gains and losses from the sales of
securities and loans, total non-interest income for the nine-month period ended
March 31, 2000 was $9.8 million, as compared to the $3.5 million reported for
the same period in 1999. The increased level of non-interest income is primarily
due to an overall increase in deposit fee income, fee income generated from the
Bayonne and Ironbound acquisitions, ATM fee income and advisory fee income from
our investment in Peter B. Cannell & Co. Inc. Additionally, the Bank purchased a
Bank Owned Life Insurance Policy ("BOLI"), which accounted for approximately
$2.2 million of other income. Net gains reported for the nine-month periods
ended March 31, 2000 and 1999, were primarily due to net gains of $734,000 and
$2.6 million from the sale of equity and investment securities, respectively.
Non-Interest Expense. Non-interest expense totaled $39.0 million for the
nine-month period ended March 31, 2000, an increase of $14.7 million, or 60.8%,
as compared to the $24.2 million reported for the same period of the prior year.
The increased level of non-interest expense was mainly attributable to increased
compensation and employee benefit expenses, goodwill amortization and other
expenses associated with the Bayonne and Ironbound acquisitions. Additionally,
the Bank recognized increases in non-interest expenses as a result of the Bank's
opening of a public accommodation office and the opening of two new full-service
branches in Staten Island and a full service branch in Union, New Jersey.
Income taxes. The Company's effective consolidated tax rate for the nine-month
period ended March 31, 2000, was 36.3% as compared to 38.0% reported for the
comparable period in 1999. The reduction of the Company's effective tax rate is
primarily due to the Bank's utilization of various tax-planning strategies.
LIQUIDITY AND CAPITAL RESOURCES
The Bank's primary sources of funds are deposits, proceeds from the principal
and interest payments on loans, mortgage-backed and mortgage-related and
investment securities, and to a significantly lesser extent, proceeds from the
sale of fixed-rate mortgage loans to the secondary market. While maturities and
scheduled amortization of loans and securities are predictable sources of funds,
deposit outflows, mortgage prepayments and mortgage loan sales are greatly
influenced by general interest rates, economic conditions and competition.
The primary investing activities of the Bank are the origination of residential
one- to four-family, multifamily and, to a lesser extent, commercial real
estate, construction and development and other loans and the purchase of
mortgage-backed and mortgage-related and investment securities. During the three
and nine-month periods ended March 31, 2000 and 1999, the Bank's loan
originations totaled $130.3 million, $472.6 million, $142.5 million and $428.8
million, respectively. Purchases of mortgage-backed, mortgage-related and
investment securities totaled $2.2 million, $83.6 million, $156.7 million and
$282.7 million for the three and nine-month periods ended March 31, 2000 and
1999, respectively. These activities were funded primarily by deposit growth and
principal repayments and prepayments on loans, mortgage-backed and
mortgage-related securities and investment securities and advances from the
FHLB. As of March 31, 2000, the Bank experienced a net increase in total
deposits of $127.4 million to $1.7 billion, or 7.9%, as compared to the $1.6
billion at June 30, 1999. Deposit flows are affected by the level of interest
rates, the interest rates and products offered by local competitors and other
factors.
<PAGE>16
The Bank closely monitors its liquidity position on a daily basis. Excess
short-term liquidity is invested in overnight federal funds sold. In the event
the Bank should require funds beyond its ability to generate them internally,
additional sources of funds are available through repurchase agreements and
advances from the FHLB. The Bank has recently begun to place a greater level of
emphasis on the utilization of borrowed funds to fund asset growth. In this
regard, at March 31, 2000, the Bank had total borrowings of $825.5 million. The
Bank may continue to increase such emphasis, which may result in an increase in
the Bank's average cost of funds.
Loan commitments totaled $153.5 million at March 31, 2000, were comprised of
$48.5 million in one- to four-family loan commitments, $2.0 million in
commercial real estate loan commitments, $54.2 million in construction loan
commitments, $17.7 million in commercial loan commitments, $23.1 million in home
equity loan commitments, $3.5 million in multifamily loan commitments and $4.5
million in other loan commitments. In addition, management estimates that an
increased level of loan commitments may arise as a result of the Multifamily
Lending Division. Management of the Bank anticipates that it will have
sufficient funds available to meet its current loan commitments. Certificates of
deposit, which are scheduled to mature in less than one year from March 31,
2000, totaled $490.2 million. Based upon past experience and the Bank's current
pricing strategy, management believes that a significant portion of such
deposits will remain with the Bank.
At March 31, 2000, the Bank exceeded all of its regulatory capital requirements
with a leverage capital level of $239.8 million, or 8.3% of adjusted assets,
which is above the required level of $115.2 million, or 4.0% of adjusted assets,
and risk-based capital of $254.4 million, or 15.8% of adjusted assets, which
exceeds the required level of $128.8 million, or 8.0% of adjusted assets.
The Company's most liquid assets are cash, due from banks and federal funds
sold. The levels of these assets are dependent on the Bank's operating,
financing, lending and investing activities during any given period. At March
31, 2000, cash, due from banks and federal funds sold totaled $50.7 million, or
1.7% of total assets.
THE YEAR 2000 ISSUE
To date, the Company has not experienced any data processing or computer
problems related to the Year 2000 issue. The Company has maintained formal
communications with all of its service providers, vendors, major fund providers,
major borrowers and companies with which it has material investments. At this
time, the Company is unaware of any material condition that would impact its
ability to deliver accurate data processing services, although such conditions
may arise during calendar year 2000. The Company's expenses, for the third
quarter were approximately $10,000 and total expenses relative to the Year 2000
issue were approximately $260,000.
FINANCIAL SERVICES LEGISLATION
Recent legislation designed to modernize the regulation of the financial
services industry expands the ability of bank holding companies to affiliate
with other types of financial services companies such as insurance companies and
investment banking companies. However, the legislation provides that companies
that acquire control of a single savings association after May 4, 1999 (or that
filed an application for that purpose after that date) are not entitled to the
unrestricted activities formerly allowed for a unitary savings and loan holding
company. Rather, these companies will have authority to engage in the activities
permitted "a financial holding company" under the new legislation, including
insurance and securities-related activities, and the activities currently
permitted for multiple savings and loan holding companies, but generally not
<PAGE>17
in commercial activities. The authority for unrestricted activities is
grandfathered for unitary savings and loan holding companies, such as the
Company, that existed prior to May 4, 1999. However, the authority for
unrestricted activities would not apply to any company that acquired the
Company.
PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT
In addition to historical information, this Form 10-Q includes certain
forward-looking statements based on current management expectations. The
Company's actual results could differ materially from those management
expectations. Factors that could cause future results to vary from current
management expectations include, but are not limited to, general economic
conditions, legislative and regulatory changes, monetary and fiscal policies of
the federal government, changes in tax policies, rates and regulations of
federal, state and local tax authorities, changes in interest rates, deposit
flows, the cost of funds, demand for loan products, demand for financial
services, competition, changes in the quality or composition of the Company's
loan and investment portfolios, changes in accounting principles, policies or
guidelines, and other economic, competitive, governmental and technological
factors affecting the Company's operations, markets, products, services and
prices.
<PAGE>18
ITEM 3. QUANTITATIVE AND QUALITIVE DISCLOSURES ABOUT MARKET RISK
ASSET AND LIABILITY MANAGEMENT AND THE MANAGEMENT OF INTEREST RATE RISK
Quantitative and qualitative disclosure about market risk is presented at June
30, 1999 in Item 7a. to the Company's Form 10-K, filed with the SEC on September
28, 1999. There have been no material changes in the Company's market risk at
March 31, 2000 as compared to June 30, 1999. The following is an update of the
discussion provided therein.
General. The Company's largest component of market risk continues to be interest
rate risk. Substantially all of this risk continues to reside at the Bank level.
The Bank still is not subject to foreign currency exchange or commodity price
risk. At March 31, 2000, neither the Company nor the Bank owned any trading
assets, nor did they participate in hedging programs, interest rate swaps or
other activities involving the use of off-balance sheet derivative financial
instruments.
Gap Analysis. At March 31, 2000, the Company's estimated one-year "gap"
position, the difference between the amount of interest-earning assets maturing
or repricing within one year and interest-bearing liabilities maturing or
repricing within one year, was a negative $406.1 million, representing a
one-year interest sensitivity gap as a percentage of total assets of (14.0%).
Accordingly, during a period of rising interest rates, the Company, having a
positive gap position, would be in a better position to invest in higher
yielding assets which, consequently, may result in the yield on its assets
increasing at a pace more closely matching the increase in the cost of its
interest-bearing liabilities than if it had a negative gap. During a period of
falling interest rates, an institution with a positive gap would tend to have
its assets repricing at a faster rate than one with a negative gap which,
consequently, may tend to restrain the growth of its net interest income or
result in a decrease in interest income.
Interest Rate Risk Compliance. The Company continues to monitor the impact of
interest rate volatility upon net interest income and net portfolio value in the
same manner as June 30, 1999. There have been no changes in the Board of
Directors approved limits of acceptable variance in net interest income and net
portfolio value at March 31, 2000, compared to June 30, 1999, and the projected
changes continue to fall within the Board of Directors approved limits at all
levels of potential interest rate volatility.
<PAGE>19
PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS
- -------------------------
The Company is not involved in any pending legal proceedings other than the
routine legal proceedings occurring in the ordinary cause of business. Such
routine legal proceeding in the aggregate, are believed by management to be
immaterial to the Company's financial condition or results of operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
- -------------------------------------------------
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- ---------------------------------------
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -----------------------------------------------------------
Not applicable.
ITEM 5. OTHER INFORMATION
- -------------------------
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ----------------------------------------
(a) EXHIBITS
--------
2.1 Agreement and Plan of Merger, dated as of March 15, 2000, by and
among Richmond County Financial Corp., Richmond County
Acquisition, Inc. and South Jersey Financial Corporation, Inc.
3.1 Certificate of Incorporation of Richmond County Financial Corp.*
3.2 Bylaws of Richmond County Financial Corp.*
11.0 Statement re: Computation of Per Share Earnings.
27.0 Financial Data Schedule (EDGAR version only).
* Incorporated by reference from the Form S-1 (Registration No.
333-37009), as amended, filed on October 2, 1997.
(b) REPORTS ON FORM 8-K
-------------------
Not applicable.
<PAGE>20
Exhibit Index
-------------
Exhibit No.
- -----------
2.1 Agreement and Plan of Merger, dated as of March 15, 2000, by and among
Richmond County Financial Corp., Richmond County Acquisition, Inc. and
South Jersey Financial Corporation, Inc.
11.0 Statement re: Computation of Per Share Earnings
27.0 Financial Data Schedule
<PAGE>21
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RICHMOND COUNTY FINANCIAL CORP.
(Registrant)
Date: May 15, 2000 By: /s/ Michael F. Manzulli
-----------------------
Michael F. Manzulli
Chairman of the Board and
Chief Executive Officer
Date: May 15, 2000 By: /s/ Thomas R. Cangemi
-----------------------
Thomas R. Cangemi
Executive Vice President, Chief
Financial Officer and Treasurer
<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF MARCH 15, 2000
BY AND AMONG
RICHMOND COUNTY FINANCIAL CORP.,
RICHMOND COUNTY ACQUISITION, INC.
AND
SOUTH JERSEY FINANCIAL CORPORATION, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
PAGE NO.
Introductory Statement........................................................1
ARTICLE I
THE MERGER..............................................................1
----------
Section 1.1. Structure of the Merger....................................1
-----------------------
Section 1.2. Effect on Shares of South Jersey Common Stock..............2
---------------------------------------------
Section 1.3. Payment Procedures.........................................2
------------------
Section 1.4. Stock Options..............................................4
-------------
Section 1.5. Effect on Shares of Acquisition Sub Stock..................5
-----------------------------------------
Section 1.6. Certificate of Incorporation and Bylaws of the
----------------------------------------------
Surviving Corporation......................................5
---------------------
Section 1.7. Directors and Officers of the Surviving Corporation........5
---------------------------------------------------
Section 1.8. Bank Merger................................................5
-----------
Section 1.9. Alternative Structure......................................6
---------------------
Section 1.10. Dissenters' Rights........................................6
------------------
ARTICLE II
REPRESENTATIONS AND WARRANTIES..........................................7
------------------------------
Section 2.1. Disclosure Letters; Standards..............................7
-----------------------------
Section 2.2. Representations and Warranties of South Jersey.............7
----------------------------------------------
Section 2.3. Representations and Warranties of Richmond County.........24
-------------------------------------------------
ARTICLE III
CONDUCT PENDING THE MERGER.............................................28
--------------------------
Section 3.1. Conduct of South Jersey's Business Prior to the
-----------------------------------------------
Effective Time............................................28
--------------
Section 3.2. Forbearance by South Jersey...............................29
---------------------------
Section 3.3. Conduct of Richmond County's Business Prior to the
--------------------------------------------------
Effective Time............................................32
--------------
ARTICLE IV
COVENANTS..............................................................32
---------
Section 4.1. Acquisition Proposals.....................................32
---------------------
Section 4.2. Certain Policies and Actions of South Jersey..............34
--------------------------------------------
Section 4.3. Access and Information....................................35
----------------------
Section 4.4. Certain Filings, Consents and Arrangements................37
------------------------------------------
Section 4.5. Antitakeover Provisions...................................37
-----------------------
Section 4.6. Additional Agreements.....................................37
---------------------
Section 4.7. Publicity.................................................38
---------
Section 4.8. Stockholder Meeting.......................................38
-------------------
Section 4.9. Proxy Statement...........................................38
---------------
Section 4.10.Notification of Certain Matters...........................39
-------------------------------
Section 4.11.Employees, Directors and Officers.........................39
---------------------------------
Section 4.12.Indemnification...........................................41
---------------
Section 4.13.South Jersey Savings Charitable Foundation................43
------------------------------------------
ii
<PAGE> 3
ARTICLE V
CONDITIONS TO CONSUMMATION.............................................43
--------------------------
Section 5.1. Conditions to Each Party's Obligations....................43
--------------------------------------
Section 5.2. Conditions to the Obligations of Richmond County..........44
------------------------------------------------
Section 5.3. Conditions to the Obligations of South Jersey.............45
---------------------------------------------
ARTICLE VI
TERMINATION............................................................45
-----------
Section 6.1. Termination...............................................45
-----------
Section 6.2. Effect of Termination.....................................46
---------------------
ARTICLE VII
CLOSING, EFFECTIVE DATE AND EFFECTIVE TIME.............................47
------------------------------------------
Section 7.1. Effective Date and Effective Time.........................47
---------------------------------
Section 7.2. Deliveries at the Closing.................................47
-------------------------
ARTICLE VIII
CERTAIN OTHER MATTERS..................................................47
---------------------
Section 8.1. Certain Definitions; Interpretation.......................47
-----------------------------------
Section 8.2. Survival..................................................48
--------
Section 8.3. Waiver; Amendment.........................................48
-----------------
Section 8.4. Counterparts..............................................48
------------
Section 8.5. Governing Law.............................................48
-------------
Section 8.6. Expenses..................................................48
--------
Section 8.7. Notices...................................................48
-------
Section 8.8. Entire Agreement; etc.....................................49
---------------------
Section 8.9. Successors and Assigns; Assignment........................50
----------------------------------
Exhibit A - Stock Option Agreement
Exhibit B - Bank Merger Agreement
Exhibit C - Form of Consulting and Noncompetition Agreement
iii
<PAGE> 4
AGREEMENT AND PLAN OF MERGER
----------------------------
This is an AGREEMENT AND PLAN OF MERGER, dated as of the 15th day of
March,2000 ("AGREEMENT"), by and among Richmond County Financial Corp., a
Delaware corporation ("RICHMOND COUNTY"), Richmond County Acquisition, Inc., a
Delaware corporation ("ACQUISITION SUB"), and South Jersey Financial
Corporation, Inc., a Delaware corporation ("SOUTH JERSEY").
INTRODUCTORY STATEMENT
The Board of Directors of each of Richmond County and South Jersey (i) has
determined that this Agreement and the business combination and related
transactions contemplated hereby are in the best interests of Richmond County
and South Jersey, respectively, and in the best interests of their respective
stockholders and (ii) has approved, at meetings of each of such Boards of
Directors, this Agreement.
Concurrently with the execution and delivery of this Agreement and as a
condition to Richmond County's willingness to enter into this Agreement,
Richmond County and South Jersey have entered into a Stock Option Agreement (the
"OPTION AGREEMENT") in the form attached hereto as Exhibit A.
---------
Richmond County and South Jersey desire to make certain representations,
warranties and agreements in connection with the business combination and
related transactions provided for herein and to prescribe various conditions to
such transactions.
Acquisition Sub has been organized as a wholly-owned subsidiary of Richmond
County to facilitate the business combination contemplated by this Agreement.
In consideration of their mutual promises and obligations hereunder, the
parties hereto adopt and make this Agreement and prescribe the terms and
conditions hereof and the manner and basis of carrying it into effect, which
shall be as follows:
ARTICLE I
THE MERGER
----------
Section 1.1. Structure of the Merger. On the Effective Date (as
-----------------------
defined in SECTION 7.1), Acquisition Sub will merge with and into South Jersey
("MERGER"), pursuant to the provisions of, and with the effect provided in, the
Delaware General Corporation Law ("DGCL"). Upon consummation of the Merger, the
separate corporate existence of Acquisition Sub shall cease. South Jersey shall
be the surviving corporation (hereinafter sometimes referred to in such capacity
as the "SURVIVING CORPORATION") in the Merger and shall continue to be governed
by the DGCL, and its separate corporate existence, with all of its rights,
privileges, immunities, powers and franchises, shall continue unaffected by the
Merger. The name of South
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Jersey, as the Surviving Corporation in the Merger, shall be South Jersey
Financial Corporation, Inc. From and after the Effective Time (as defined in
SECTION 7.1), South Jersey shall possess all of the properties and rights and be
subject to all of the liabilities and obligations of Acquisition Sub, all as
more fully described in the DGCL.
Section 1.2. Effect on Shares of South Jersey Common Stock.
---------------------------------------------
(a) By virtue of the Merger, automatically and without any action on
the part of the holder thereof, each share of common stock, par value $.01 per
share, of South Jersey ("SOUTH JERSEY COMMON STOCK") that is issued and
outstanding at the Effective Time, other than Excluded Shares (as defined
below), shall cease to be outstanding and shall be converted into and become the
right to receive (subject to adjustment as described below) $20.00 in cash,
without interest (the "MERGER CONSIDERATION").
"EXCLUDED SHARES" shall consist of (i) Dissenters Shares' (as
defined in SECTION 1.10); (ii) shares held directly or indirectly by Richmond
County (other than shares held in a fiduciary capacity or in satisfaction of a
debt previously contracted) and (iii) shares held by South Jersey as treasury
stock.
(b) As of the Effective Time, each Excluded Share, other than
Dissenters' Shares, shall be canceled and retired and shall cease to exist, and
no exchange or payment shall be made with respect thereto. In addition, no
Dissenters' Shares shall be converted into the Merger Consideration pursuant to
this SECTION 1.2 but instead shall be treated in accordance with the procedures
set forth in SECTION 1.10 of this Agreement.
Section 1.3. Payment Procedures.
------------------
(a) Appropriate transmittal materials ("LETTER OF TRANSMITTAL")
shall be mailed as soon as reasonably practicable after the Effective Time to
each holder of record of South Jersey Common Stock as of the Effective Time. A
Letter of Transmittal shall be deemed properly completed only if accompanied by
certificates representing all shares of South Jersey Common Stock to be
converted thereby.
(b) At and after the Effective Time, each certificate ("SOUTH JERSEY
CERTIFICATE") previously representing shares of South Jersey Common Stock
(except as specifically set forth in SECTION 1.2) shall represent only the right
to receive the Merger Consideration multiplied by the number of shares of South
Jersey Common Stock previously represented by the South Jersey Certificate.
(c) Prior to the Effective Time, Richmond County shall deposit, or
shall cause to be deposited, in a segregated account with a bank or trust
company selected by Richmond County and reasonably acceptable to South Jersey,
which shall act as paying agent ("PAYING AGENT") for the benefit of the holders
of shares of South Jersey Common Stock, for payment in
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accordance with this SECTION 1.3, an amount of cash sufficient to pay the
aggregate Merger Consideration to be paid pursuant to SECTION 1.2.
(d) The Letter of Transmittal shall (i) specify that delivery shall
be effected, and risk of loss and title to the South Jersey Certificates shall
pass, only upon delivery of the South Jersey Certificates to the Paying Agent,
(ii) be in a form and contain any other provisions as Richmond County may
reasonably determine and (iii) include instructions for use in effecting the
surrender of the South Jersey Certificates in exchange for the Merger
Consideration. Upon the proper surrender of the South Jersey Certificates to the
Paying Agent, together with a properly completed and duly executed Letter of
Transmittal, the holder of such South Jersey Certificates shall be entitled to
receive in exchange therefor a check in the amount equal to the cash that such
holder has the right to receive pursuant to SECTION 1.2. South Jersey
Certificates so surrendered shall forthwith be canceled. As soon as practicable
following receipt of the properly completed Letter of Transmittal and any
necessary accompanying documentation, the Paying Agent shall issue a check as
provided herein. If there is a transfer of ownership of any shares of South
Jersey Common Stock not registered in the transfer records of South Jersey, the
Merger Consideration shall be issued to the transferee thereof if the South
Jersey Certificates representing such South Jersey Common Stock are presented to
the Paying Agent, accompanied by all documents required, in the reasonable
judgment of Richmond County and the Paying Agent, (x) to evidence and effect
such transfer and (y) to evidence that any applicable stock transfer taxes have
been paid.
(e) From and after the Effective Time there shall be no transfers on
the stock transfer records of South Jersey of any shares of South Jersey Common
Stock. If, after the Effective Time, South Jersey Certificates are presented to
Richmond County, they shall be canceled and exchanged for the Merger
Consideration deliverable in respect thereof pursuant to this Agreement in
accordance with the procedures set forth in this SECTION 1.3.
(f) Any portion of the aggregate amount of cash to be paid pursuant
to SECTION 1.2 that remains unclaimed by the stockholders of South Jersey for
six months after the Effective Time shall be repaid by the Paying Agent to
Richmond County upon the written request of Richmond County. After such request
is made, any stockholders of South Jersey who have not theretofore complied with
this SECTION 1.3 shall look only to Richmond County for the Merger Consideration
deliverable in respect of each share of South Jersey Common Stock such
stockholder holds, as determined pursuant to SECTION 1.2 of this Agreement,
without any interest thereon. If outstanding South Jersey Certificates are not
surrendered prior to the date on which such payments would otherwise escheat to
or become the property of any governmental unit or agency, the unclaimed items
shall, to the extent permitted by any abandoned property, escheat or other
applicable laws, become the property of Richmond County (and, to the extent not
in its possession, shall be paid over to it), free and clear of all claims or
interest of any person previously entitled to such claims. Notwithstanding the
foregoing, neither the Paying Agent nor any party to this Agreement (or any
affiliate thereof) shall be liable to any former holder of South
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<PAGE> 7
Jersey Common Stock for any amount delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(g) Richmond County and the Paying Agent shall be entitled to rely
upon South Jersey's stock transfer books to establish the identity of those
persons entitled to receive the Merger Consideration, which books shall be
conclusive with respect thereto. In the event of a dispute with respect to
ownership of stock represented by any South Jersey Certificate, Richmond County
and the Paying Agent shall be entitled to deposit any Merger Consideration
represented thereby in escrow with an independent third party and thereafter be
relieved with respect to any claims thereto.
(h) If any South Jersey Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such South Jersey Certificate to be lost, stolen or destroyed and, if required
by the Paying Agent, the posting by such person of a bond in such amount as the
Paying Agent may direct as indemnity against any claim that may be made against
it with respect to such South Jersey Certificate, the Paying Agent will issue in
exchange for such lost, stolen or destroyed South Jersey Certificate the Merger
Consideration deliverable in respect thereof pursuant to SECTION 1.2.
Section 1.4. Stock Options.
-------------
(a) Except as provided in SECTION 1.4(B), at the Effective Time,
each option to acquire shares of South Jersey Common Stock (a "SOUTH JERSEY
OPTION") granted pursuant to the South Jersey Financial Corporation, Inc. 2000
Stock Option Plan (the "SOUTH JERSEY OPTION PLAN") that is then outstanding and
unexercised, whether or not then vested, shall be canceled, and in lieu thereof
the holders of such options shall be paid in cash an amount equal to the product
of (i) the number of shares of South Jersey Common Stock subject to such option
at the Effective Time and (ii) the amount by which the Merger Consideration
exceeds the exercise price per share of such option, net of any cash which must
be withheld under federal and state income and employment tax requirements. In
the event that the exercise price of a South Jersey Option is greater than the
Merger Consideration, then at the Effective Time such South Jersey Option shall
be canceled without any payment made in exchange therefor. At the Effective Time
the South Jersey Option Plan shall be deemed terminated.
(b) Robert J. Colacicco, Gregory M. DiPaolo, Jane E. Brode, Joseph
M. Sidebotham and Paul D. Wampler or any one or more of them may, by written
notice to Richmond County received by Richmond County not less than the day that
is two business days prior to the Closing Date (as defined in SECTION 7.1),
elect to convert all or any portion of the South Jersey Options held by them
into options ("RICHMOND COUNTY OPTIONS") to purchase shares of Richmond County's
common stock, par value $.01 per share ("RICHMOND COUNTY COMMON STOCK"). Any
such election shall identify the South Jersey Options to be converted into
Richmond County Options and shall become irrevocable upon receipt by Richmond
County of the notice of election. Any conversion pursuant to this SECTION 1.4(B)
shall be effected by
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<PAGE> 8
issuing to the electing individual Richmond County Options to purchase the
number of shares of Richmond County Common Stock equal to the product of (i) the
number of shares of South Jersey Common Stock subject to the South Jersey
Options being converted, and (ii) a fraction, the numerator of which is the per
share Merger Consideration and the denominator of which is the average of the
daily closing sales prices of a share of Richmond County Common Stock, as
reported on the National Market System of the Nasdaq Stock Market, for the 15
consecutive trading days ending with the last trading day before the Effective
Date (as defined in SECTION 7.1). The exercise price per share for each share of
Richmond County Common Stock subject to a Richmond County Option issued under
this SECTION 1.4(B) shall be equal to the product of the per share exercise
price of the South Jersey Option being converted into such Richmond County
Options multiplied by the reciprocal of the fraction described in SECTION
1.4(B)(II) above. Each such Richmond County Option (i) shall be exercisable and
shall vest at the same time and on the same terms as the related South Jersey
Options, except that the period during which the individual provides consulting
services shall be deemed to be equivalent to continued employment for purposes
of such Richmond County Options (and upon the completion of such consulting
services, such Richmond County Options shall continue to vest and become
exercisable over the period that they would have vested and become exercisable
if the individual had continued consulting services for a full five years), (ii)
shall not be subject to any condition, except as may be required under
applicable securities laws, including, without limitation, the continued
retention by Richmond County of the holder thereof as a consultant, and (iii)
shall be evidenced by a Richmond County Option Agreement in a form to be
provided by Richmond County that is reasonably acceptable to South Jersey, and
that shall provide for reasonable registration rights. No payment shall be made
pursuant to SECTION 1.4(A) with respect to any portion of a South Jersey Option
that is converted into a Richmond County Option as described in this paragraph.
Section 1.5. Effect on Shares of Acquisition Sub Stock. Each share
-----------------------------------------
of common stock of Acquisition Sub that is issued and outstanding immediately
prior to the Effective Time shall be converted into and exchanged for one share
of the Surviving Corporation.
Section 1.6. Certificate of Incorporation and Bylaws of the
----------------------------------------------
Surviving Corporation. The certificate of incorporation and bylaws of South
- ---------------------
Jersey in effect immediately prior to the Effective Time shall be the
certificate of incorporation and bylaws of the Surviving Corporation from and
after the Effective Time until amended as provided by law.
Section 1.7. Directors and Officers of the Surviving Corporation.
---------------------------------------------------
From and after the Effective Time, the directors and officers of South Jersey
shall consist of the directors and officers of Acquisition Sub serving
immediately prior to the Effective Time, each to hold office in accordance with
the certificate of incorporation and bylaws of the Surviving Corporation until
their respective successors are duly elected or appointed and qualified.
Section 1.8. Bank Merger. Concurrently with or as soon as
-----------
practicable after the execution and delivery of this Agreement, Richmond County
Savings Bank ("RICHMOND
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COUNTY SAVINGS"), a wholly owned subsidiary of Richmond County, and South Jersey
Savings and Loan Association ("SOUTH JERSEY SAVINGS"), a wholly owned subsidiary
of South Jersey, shall enter into the Plan of Bank Merger, in the form attached
hereto as Exhibit B, pursuant to which South Jersey Savings will merge with and
---------
into Richmond County Savings (the "BANK MERGER"). The parties hereto intend that
the Bank Merger shall become effective on the Effective Date.
Section 1.9. Alternative Structure. Notwithstanding anything to the
---------------------
contrary contained in this Agreement, prior to the Effective Time, Richmond
County may specify that the structure of the transactions contemplated by this
Agreement be revised and the parties shall enter into such alternative
transactions as Richmond County may determine to effect the purposes of this
Agreement; PROVIDED, HOWEVER, that such revised structure shall not (i) alter or
change the amount or kind of the Merger Consideration or (ii) materially impede
or delay the receipt of any regulatory approval referred to in, or the
consummation of the transactions contemplated by, this Agreement. This Agreement
and any related documents shall be appropriately amended in order to reflect any
such revised structure.
Section 1.10. Dissenters' Rights. Notwithstanding any other
------------------
provision of this Agreement to the contrary, shares of South Jersey Common Stock
that are outstanding immediately prior to the Effective Time and that are held
by stockholders who shall have not voted in favor of the Merger or consented
thereto in writing and who properly shall have delivered to South Jersey a
written demand for appraisal of the fair value of such shares in accordance with
the DGCL (collectively, the "DISSENTERS' SHARES") shall not be converted into or
represent the right to receive the Merger Consideration. Such stockholders
instead shall be entitled to receive payment of the fair value of such shares
held by them in accordance with the provisions of the DGCL, except that all
Dissenters' Shares held by stockholders who shall have failed to perfect or who
effectively shall have withdrawn or otherwise lost their dissenters' rights
under the DGCL shall thereupon be deemed to have been converted into and to have
become exchangeable, as of the Effective Time, for the right to receive, without
any interest thereon, the Merger Consideration upon surrender in the manner
provided in SECTION 1.3, of the South Jersey Certificate or South Jersey
Certificates that, immediately prior to the Effective Time, evidenced such
shares. South Jersey shall give Richmond County (i) prompt notice of any written
demands for appraisal of the fair value of any shares of South Jersey Common
Stock, attempted withdrawals of such demands and any other instruments served
pursuant to the DGCL and received by South Jersey relating to stockholders'
rights of appraisal, and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under the DGCL. South Jersey
shall not, except with the prior written consent of Richmond County, voluntarily
make any payment with respect to, or settle or offer to settle, any such demand
for appraisal.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 2.1. Disclosure Letters; Standards.
-----------------------------
(a) On or prior to the execution and delivery of this Agreement,
South Jersey and Richmond County each shall have delivered to the other a letter
(each, its "DISCLOSURE LETTER") setting forth, among other things, facts,
circumstances and events the disclosure of which is required or appropriate in
relation to any or all of their respective representations and warranties (and
making specific reference to the Section of this Agreement to which they relate)
; PROVIDED, that (a) no such fact, circumstance or event is required to be set
forth in the Disclosure Letter as an exception to a representation or warranty
if its absence is not reasonably likely to result in the related representation
or warranty being deemed untrue or incorrect under the standards established by
SECTION 2.1(B), and (b) the mere inclusion of a fact, circumstance or event is a
Disclosure Letter shall not be deemed an admission by a party that such item
represents a material exception or that such item is reasonably likely to result
in a Material Adverse Effect (as defined in SECTION 8.1).
(b) No representation or warranty of South Jersey or Richmond County
contained in SECTION 2.2 or 2.3, respectively, shall be deemed untrue or
incorrect, and no party hereto shall be deemed to have breached a representation
or warranty, on account of the existence of any fact, circumstance or event,
unless, as a direct or indirect consequence of such fact, circumstance or event,
individually or taken together with all other facts, circumstances or events
inconsistent with any paragraph of SECTIONS 2.2 or 2.3, as applicable, there is
reasonably likely to exist a Material Adverse Effect. South Jersey's
representations, warranties and covenants contained in this Agreement shall not
be deemed to be untrue or breached as a result of effects arising solely from
actions taken in compliance with a written request of Richmond County.
Section 2.2. Representations and Warranties of South Jersey. South
----------------------------------------------
Jersey represents and warrants to Richmond County that:
(a) Organization.
------------
(i) South Jersey is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and is
registered as a savings and loan holding company under the Home Owners' Loan
Act, as amended ("HOLA").
(ii) South Jersey Savings is a savings and loan association
duly organized and validly existing under the laws of the State of New Jersey.
The deposits of South Jersey Savings are insured by the Savings Association
Insurance Fund of the Federal Deposit Insurance Corporation ("FDIC") to the
extent provided in the Federal Deposit Insurance Act, as amended ("FDIA"). South
Jersey Savings is a member of the Federal Home Loan Bank of New York ("FHLBNY").
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(iii) South Jersey and South Jersey Savings each has all
requisite corporate power and authority to own, lease and operate its properties
and to conduct the business currently being conducted by it. South Jersey and
South Jersey Savings are each duly qualified or licensed as a foreign
corporation to transact business and are in good standing in each jurisdiction
in which the character of the properties owned or leased by it or the nature of
the business conducted by it makes such qualification or licensing necessary,
each of which jurisdictions is listed in South Jersey's Disclosure Letter,
except where the failure to be so qualified or licensed and in good standing
would not have a Material Adverse Effect on South Jersey.
(b) Subsidiaries.
------------
(i) South Jersey does not, directly or indirectly, own an
equity interest representing 5% or more of any class of the capital stock or
other equity interests in any corporation, partnership, joint venture or other
entity other than South Jersey Savings.
(ii) South Jersey owns of record and beneficially all the
capital stock of South Jersey Savings free and clear of any claims, liens,
encumbrances or restrictions and there are no agreements or understandings with
respect to the voting or disposition of any such shares. The outstanding shares
of capital stock of South Jersey Savings have been validly authorized and are
validly issued, fully paid and nonassessable.
(iii) South Jersey Savings does not hold any shares of its
capital stock in its treasury, and there are not, and on the Closing Date there
will not be, outstanding (A) any options, warrants or other rights with respect
to the capital stock of South Jersey Savings, (B) any securities convertible
into or exchangeable for shares of such capital stock or any other debt or
equity security of South Jersey Savings or (C) any other commitments of any kind
for the issuance of additional shares of capital stock or other debt or equity
security of South Jersey Savings or options, warrants or other rights with
respect to such securities.
(c) Capital Structure.
-----------------
(i) The authorized capital stock of South Jersey consists of
14,000,000 shares of South Jersey Common Stock, and 1,000,000 shares of
preferred stock, par value $0.01 per share ("SOUTH JERSEY PREFERRED STOCK").
(ii) As of the date of this Agreement:
(A) 3,423,571 shares of South Jersey Common Stock are
issued and outstanding, all of which are validly
issued, fully paid and nonassessable;
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(B) 379,343 shares of South Jersey Common Stock are
reserved for issuance pursuant to outstanding
South Jersey Options under the South Jersey Option
Plan;
(C) 369,859 shares of South Jersey Common Stock are
held by South Jersey in its treasury; and
(D) no shares of South Jersey Preferred Stock are
outstanding or reserved for issuance.
(iii) Set forth in South Jersey's Disclosure Letter is a
complete and accurate list of all outstanding South Jersey Options that have
been granted by South Jersey, including the names of the optionees, dates of
grant, exercise prices, dates of vesting, dates of termination and shares
subject to each grant. Following the Effective Time, no holder of South Jersey
Options will have any right to receive shares of common stock of Richmond County
upon the exercise of South Jersey Options except as provided in SECTION 1.4.
(iv) No bonds, debentures, notes or other indebtedness having
the right to vote on any matters on which stockholders of South Jersey may vote
are issued or outstanding.
(v) Except as set forth in this SECTION 2.2(C), as of the date
of this Agreement, (A) no shares of capital stock or other voting securities of
South Jersey are issued, reserved for issuance or outstanding and (B) neither
South Jersey nor South Jersey Savings has or is bound by any outstanding
subscriptions, options, warrants, calls, rights, convertible securities,
commitments or agreements of any character obligating South Jersey or South
Jersey Savings to issue, deliver or sell, or cause to be issued, delivered or
sold, any additional shares of capital stock of South Jersey or obligating South
Jersey or South Jersey Savings to grant, extend or enter into any such option,
warrant, call, right, convertible security, commitment or agreement. As of the
date hereof, there are no outstanding contractual obligations of South Jersey or
South Jersey Savings to repurchase, redeem or otherwise acquire any shares of
capital stock of South Jersey or South Jersey Savings.
(d) Authority.
---------
(i) South Jersey has all requisite corporate power and
authority to enter into this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
by this Agreement have been duly authorized by all necessary corporate actions
on the part of the Board of Directors of South Jersey, and no other corporate
proceedings on the part of South Jersey are necessary to authorize this
Agreement or to consummate the transactions contemplated by this Agreement other
than the approval and adoption of this Agreement by the affirmative vote of the
holders of a majority of the outstanding shares of South Jersey Common Stock at
South Jersey's Stockholder Meeting (as
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defined in SECTION 4.8). This Agreement has been duly and validly executed and
delivered by South Jersey and constitutes a valid and binding obligation of
South Jersey, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights and remedies
generally and subject, as to enforceability, to general principles of equity,
whether applied in a court of law or a court of equity.
(ii) South Jersey Savings has all requisite corporate power
and authority to enter into the Plan of Bank Merger and to consummate the
transactions contemplated thereby. The execution and delivery of the Plan of
Bank Merger and the consummation of the transactions contemplated thereby have
been duly authorized by the Board of Directors of South Jersey Savings and
approved by South Jersey as the sole stockholder of South Jersey Savings. The
Plan of Bank Merger, upon execution and delivery by South Jersey Savings, will
be duly and validly executed and delivered by South Jersey Savings and will
constitute a valid and binding obligation of South Jersey Savings, enforceable
in accordance with its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights and remedies generally and subject, as
to enforceability, to general principles of equity, whether applied in a court
of law or a court of equity.
(e) Fairness Opinion. South Jersey has received the written
----------------
opinion of Sandler O'Neill & Partners, L.P., to the effect that, as of the date
hereof, the Merger Consideration to be received by South Jersey's stockholders
is fair, from a financial point of view, to such stockholders.
(f) No Violations; Consents.
-----------------------
(i) The execution, delivery and performance of this Agreement
by South Jersey do not, and the consummation of the transactions contemplated by
this Agreement will not, (A) assuming the consents and approvals referred to in
SECTION 2.2(F)(II) are obtained, violate any law, rule or regulation or any
judgment, decree, order, governmental permit or license to which South Jersey or
South Jersey Savings (or any of their respective properties) is subject, (B)
violate the certificate of incorporation or bylaws of South Jersey or the
similar organizational documents of South Jersey Savings or (C) constitute a
breach or violation of, or a default under (or an event which, with due notice
or lapse of time or both, would constitute a default under), or result in the
termination of, accelerate the performance required by, or result in the
creation of any lien, pledge, security interest, charge or other encumbrance
upon any of the properties or assets of South Jersey or South Jersey Savings
under, any of the terms, conditions or provisions of any note, bond, indenture,
deed of trust, loan agreement or other agreement, instrument or obligation to
which South Jersey or South Jersey Savings is a party, or to which any of their
respective properties or assets may be subject, except, in the case of (C), for
any such breaches, violations or defaults that would not, individually or in the
aggregate, have a Material Adverse Effect on South Jersey.
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(ii) Except for (A) the filing of an application with the
Office of Thrift Supervision (the "OTS") under HOLA and approval of such
application, (B) the filing of the Proxy Statement (as defined in SECTION 4.9)
with the Securities and Exchange Commission ("SEC"), (C) the filing of a
certificate of merger with the Delaware Secretary of State pursuant to the DGCL,
(D) the filing of any necessary notice or approval of the New Jersey Department
of Banking and Insurance (the "NJBD"), and (E) the approval of the FDIC under
the FDIA, no con sents or approvals of or filings or registrations with any
court, administrative agency or commission or other governmental authority or
instrumentality (each a "GOVERNMENTAL ENTITY") or with any third party are
necessary in connection with the execution and delivery by South Jersey of this
Agreement or the consummation by South Jersey and South Jersey Savings of the
Merger, the Bank Merger and the other transactions contemplated by this
Agreement, including the Bank Merger. As of the date hereof, South Jersey knows
of no reason pertaining to South Jersey why any of the approvals referred to in
this SECTION 2.2(F) should not be obtained without the imposition of any
material condition or restriction described in SECTION 5.1(B).
(g) Reports and Financial Statements.
--------------------------------
(i) South Jersey and South Jersey Savings have each timely
filed all material reports, forms, registration statements and proxy or
information statements, together with any amendments required to be made with
respect thereto, that they were required to file since December 31, 1997 with
(A) the FDIC, (B) the OTS, (C) the NJBD, (D) the National Association of
Securities Dealers, Inc., and (E) the SEC (collectively, "SOUTH JERSEY'S
REPORTS") and have paid all fees and assessments due and payable in connection
therewith. As of their respective dates, none of South Jersey's Reports
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. All of South Jersey's Reports filed with the SEC complied in all
material respects with the applicable requirements of the Securities Exchange
Act of 1934, as amended ("EXCHANGE ACT"), and the rules and regulations of the
SEC promulgated thereunder.
(ii) Each of the financial statements of South Jersey included
in South Jersey's Reports filed with the SEC complied as to form, as of their
respective dates of filing with the SEC, in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto. The financial statements included in South
Jersey's Reports were prepared from the books and records of South Jersey and
South Jersey Savings, fairly present the consolidated financial position of
South Jersey and South Jersey Savings in each case at and as of the dates
indicated and the consolidated results of operations, retained earnings and cash
flows of South Jersey and South Jersey Savings for the periods indicated, and,
except as otherwise set forth in the notes thereto, were prepared in accordance
with generally accepted accounting principles ("GAAP") consistently applied
throughout the periods covered thereby; PROVIDED, HOWEVER, that the unaudited
financial statements for interim periods are subject to normal year-end
adjustments (which will not be material individually or in the aggregate) and
lack a statement of cash flows and footnotes.
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(h) Absence of Certain Changes or Events. Except as disclosed in
------------------------------------
South Jersey's Reports filed with the SEC prior to the date of this Agreement,
since December 31, 1998, (i) South Jersey and South Jersey Savings have not
incurred any liability, except in the ordinary course of their business
consistent with past practice, (ii) South Jersey and South Jersey Savings have
conducted their respective businesses only in the ordinary and usual course of
such businesses consistent with their past practices, (iii) there has not been
any event or occurrence that has had a Material Adverse Effect on South Jersey,
(iv) there has been no increase in the salary, compensation, pension or other
benefits payable or to become payable by South Jersey or South Jersey Savings to
any of their respective directors, officers or employees, other than in
conformity with the policies and practices of such entity in the usual and
ordinary course of its business and other than the award of stock options and/or
restricted stock, (v) neither South Jersey nor South Jersey Savings has paid or
made any accrual or arrangement for payment of bonuses or special compensation
of any kind or any severance or termination pay to any of their directors,
officers or employees, and (vi) there has been no change in any accounting
principles, practices or methods of South Jersey or South Jersey Savings other
than as required by GAAP.
(i) Absence of Claims. No litigation, controversy, claim, action,
-----------------
suit or other legal, administrative or arbitration proceeding before any court,
governmental agency or arbitrator, other than in connection with routine
foreclosure and collection claims against borrowers, is pending against South
Jersey or South Jersey Savings and, to the knowledge of South Jersey, no such
litigation, controversy, claim, action, suit or proceeding has been threatened.
To the knowledge of South Jersey, there are no investigations, reviews or
inquiries by any court or governmental agency pending or threatened against
South Jersey or South Jersey Savings. There are no judgments, decrees,
injunctions, orders or rules of any Governmental Entity or arbitrator
outstanding against South Jersey or South Jersey Savings.
(j) Absence of Regulatory Actions. Since December 31, 1996, neither
-----------------------------
South Jersey nor South Jersey Savings has been a party to any cease and desist
order, written agreement or memorandum of understanding with, or any commitment
letter or similar undertaking to, or has been subject to any action, proceeding,
order or directive by, or has been a recipient of any extraordinary supervisory
letter from any federal or state governmental authority charged with the
supervision or regulation of depository institutions or depository institution
holding companies or engaged in the insurance of bank deposits ("GOVERNMENT
REGULATORS"), or has adopted any board resolutions at the request of any
Government Regulator, or has been advised by any Government Regulator that it is
contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such action, proceeding, order, directive, written
agreement, memorandum of understanding, extraordinary supervisory letter,
commitment letter, board resolutions or similar undertaking.
(k) Taxes. All federal, state, local and foreign tax returns
-----
required to be filed by or on behalf of South Jersey or South Jersey Savings
have been timely filed or requests for extensions have been timely filed and any
such extension shall have been granted and not have expired, and all such filed
returns are complete and accurate in all material respects. All taxes
12
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shown on such returns, all taxes required to be shown on returns for which
extensions have been granted and all other taxes required to be paid by South
Jersey or South Jersey Savings have been paid in full or adequate provision has
been made for any such taxes on South Jersey's balance sheet (in accordance with
GAAP). For purposes of this SECTION 2.2(K), the term "TAXES" shall include all
income, franchise, gross receipts, real and personal property, real property
transfer and gains, wage and employment taxes. As of the date of this Agreement,
there is no audit examination, deficiency assessment, tax investigation or
refund litigation with respect to any taxes of South Jersey or South Jersey
Savings, and no claim has been made by any authority in a jurisdiction where
South Jersey or South Jersey Savings do not file tax returns that South Jersey
or South Jersey Savings is subject to taxation in that jurisdiction. All taxes,
interest, additions and penalties due with respect to completed and settled
examinations or concluded litigation relating to South Jersey or South Jersey
Savings have been paid in full or adequate provision has been made for any such
taxes on South Jersey's balance sheet (in accordance with GAAP). Neither South
Jersey nor South Jersey Savings has executed an extension or waiver of any
statute of limitations on the assessment or collection of any material tax due
that is currently in effect. South Jersey and South Jersey Savings have withheld
and paid all taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party, and South Jersey and South Jersey Savings have
timely complied with all applicable information reporting requirements under
Part III, Subchapter A of Chapter 61 of the Internal Revenue Code of 1986, as
amended ("IRC"), and similar applicable state and local information reporting
requirements. Neither South Jersey nor South Jersey Savings (i) has made an
election under Section 341(f) of the IRC, or (ii) has issued or assumed any
obligation under Section 279 of the IRC, any high yield discount obligation as
described in Section 163(i) of the IRC or any registration-required obligation
within the meaning of Section 163(f)(2) of the IRC that is not in registered
form.
(l) Agreements.
----------
(i) Except for this Agreement and the Option Agreement, South
Jersey and South Jersey Savings are not bound by any material contract (as
defined in Item 601(b)(10) of Regulation S-K promulgated by the SEC), to be
performed after the date hereof that has not been filed with or incorporated by
reference in South Jersey's Reports.
(ii) South Jersey's Disclosure Letter lists any contract,
arrangement, commitment or understanding (whether written or oral) to which
South Jersey or South Jersey Savings is a party or is bound:
(A) with any executive officer or other key employee
of South Jersey or South Jersey Savings the benefits of which are contingent, or
the terms of which are materially altered, upon the occurrence of a transaction
involving South Jersey or South Jersey Savings of the nature contemplated by
this Agreement;
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(B) with respect to the employment of any directors,
officers employees or consultants;
(C) (including any stock option plan, phantom stock or
stock appreciation rights plan, restricted stock plan or stock purchase plan)
any of the benefits of which will be increased, or the vesting or payment of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement;
(D) containing covenants that limit the ability of South
Jersey or South Jersey Savings to compete in any line of business or with any
person, or that involve any restriction on the geographic area in which, or
method by which, South Jersey (including any successor thereof) or South Jersey
Savings may carry on its business (other than as may be required by law or any
regulatory agency);
(E) pursuant to which South Jersey or South Jersey
Savings may become obligated to invest in or contribute capital to any entity;
(F) not fully disclosed in the South Jersey's Reports
that relates to borrowings of money (or guarantees thereof) by South Jersey or
South Jersey Savings, other than in the ordinary course of business; or
(G) which is a lease or license with respect to any
property, real or personal, whether as landlord, tenant, licensor or licensee,
involving a liability or obligation as obligor in excess of $25,000 on an annual
basis.
To the knowledge of South Jersey, each of the agreements and other
documents referenced in South Jersey's Disclosure Letter is a valid, binding and
enforceable obligation of the parties sought to be bound thereby, subject to
applicable bankruptcy, insolvency and similar laws affecting creditors' rights
and remedies generally and subject, as to enforceability, to general principles
of equity, whether applied in a court of law or a court of equity. South Jersey
has previously made available to Richmond County true and complete copies of
each agreement and other documents referenced in South Jersey's Disclosure
Letter.
(iii) Neither South Jersey nor South Jersey Savings is in
default under (and no event has occurred which, with due notice or lapse of time
or both, would constitute a default under) or is in violation of any provision
of any note, bond, indenture, mortgage, deed of trust, loan agreement, lease or
other agreement to which it is a party or by which it is bound or to which any
of its respective properties or assets is subject and, to the knowledge of South
Jersey, no other party to any such agreement (excluding any loan or extension of
credit made by South Jersey or South Jersey Savings) is in default in any
respect thereunder.
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<PAGE> 18
(iv) Each of South Jersey and South Jersey Savings owns or
possesses valid and binding licenses and other rights to use without payment all
patents, copyrights, trade secrets, trade names, service marks and trademarks
used in its businesses, and neither South Jersey nor South Jersey Savings has
received any notice of conflict with respect thereto that asserts the right of
others. Each of South Jersey and South Jersey Savings has performed all the
obligations required to be performed by it and are not in default under any
contract, agreement, arrangement or commitment relating to any of the foregoing.
(m) Labor Matters. South Jersey and South Jersey Savings are in
-------------
material compliance with all applicable laws respecting employment, retention of
independent contractors and employment practices, terms and conditions of
employment and wages and hours, and are not engaged in any unfair labor
practice. Neither South Jersey nor South Jersey Savings is or has ever been a
party to, or is or has ever been bound by, any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor
organization with respect to its employees, nor is South Jersey or South Jersey
Savings the subject of any proceeding asserting that it has committed an unfair
labor practice or seeking to compel it to bargain with any labor organization as
to wages and conditions of employment nor, to the knowledge of South Jersey, has
any such proceeding been threatened, nor is there any strike, other labor
dispute or organizational effort involving South Jersey or South Jersey Savings
pending or threatened.
(n) Employee Benefit Plans.
----------------------
(i) South Jersey's Disclosure Letter contains a complete and
accurate list of all pension, retirement, stock option, stock purchase, stock
ownership, savings, stock appreciation right, profit sharing, deferred
compensation, consulting, bonus, group insurance, severance and other benefit
plans, contracts, agreements and arrangements, including, but not limited to,
"employee benefit plans," as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), incentive and welfare
policies, contracts, plans and arrangements and all trust agreements related
thereto with respect to any present or former directors, officers or other
employees of South Jersey or South Jersey Savings (hereinafter referred to
collectively as the "SOUTH JERSEY EMPLOYEE PLANS"). There has been no
announcement or commitment by South Jersey or South Jersey Savings to create an
additional South Jersey Employee Plan, or to amend any South Jersey Employee
Plan, except for amendments required by applicable law which do not materially
increase the cost of such South Jersey Employee Plan. With respect to each South
Jersey Employee Plan, South Jersey has previously made available to Richmond
County a true and correct copy of (A) the annual report on the applicable form
of the Form 5500 series filed with the Internal Revenue Service ("IRS") for the
most recent three plan years, if required to be filed, (B) such South Jersey
Employee Plan, including amendments thereto, (C) each trust agreement, insurance
contract or other funding arrangement relating to such South Jersey Employee
Plan, including amendments thereto, (D) the most recent summary plan description
and summary of material modifications thereto for such South Jersey Employee
Plan, to the extent available, if the South Jersey Employee Plan is subject
15
<PAGE> 19
to Title I of ERISA, (E) the most recent actuarial report or valuation if such
South Jersey Employee Plan is a South Jersey Pension Plan (as defined below) and
any subsequent changes to the actuarial assumptions contained therein and (F)
the most recent determination letter issued by the IRS if such South Jersey
Employee Plan is a South Jersey Qualified Plan (as defined below).
(ii) There is no pending or threatened litigation,
administrative action or proceeding relating to any South Jersey Employee Plan.
All of the South Jersey Employee Plans comply in all material respects with all
applicable requirements of ERISA, the IRC and other applicable laws. There has
occurred no "prohibited transaction" (as defined in Section 406 of ERISA or
Section 4975 of the IRC) with respect to the South Jersey Employee Plans which
is likely to result in the imposition of any penalties or taxes upon South
Jersey or South Jersey Savings under Section 502(i) of ERISA or Section 4975 of
the IRC.
(iii) No liability to the Pension Benefit Guaranty Corporation
has been or is expected by South Jersey or South Jersey Savings to be incurred
with respect to any South Jersey Employee Plan which is subject to Title IV of
ERISA ("SOUTH JERSEY PENSION PLAN"), or with respect to any "single-employer
plan" (as defined in Section 4001(a) of ERISA) currently or formerly maintained
by South Jersey or any entity which is considered one employer with South Jersey
under Section 4001(b)(1) of ERISA or Section 414 of the IRC (an "ERISA
AFFILIATE"). No South Jersey Pension Plan had an "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not waived, as of
the last day of the end of the most recent plan year ending prior to the date
hereof; the fair market value of the assets of each South Jersey Pension Plan
exceeds the present value of the "benefit liabilities" (as defined in Section
4001(a)(16) of ERISA) under such South Jersey Pension Plan as of the end of the
most recent plan year with respect to the respective South Jersey Pension Plan
ending prior to the date hereof, calculated on the basis of the actuarial
assumptions used in the most recent actuarial valuation for such South Jersey
Pension Plan as of the date hereof; and no notice of a "reportable event" (as
defined in Section 4043 of ERISA) for which the 30-day reporting requirement has
not been waived has been required to be filed for any South Jersey Pension Plan
within the 12-month period ending on the date hereof. Neither South Jersey nor
South Jersey Savings has provided, or is required to provide, security to any
South Jersey Pension Plan or to any single-employer plan of an ERISA Affiliate
pursuant to Section 401(a)(29) of the IRC. Neither South Jersey, South Jersey
Savings, nor any ERISA Affiliate has contributed to any "multiemployer plan," as
defined in Section 3(37) of ERISA, on or after September 26, 1980.
(iv) Each South Jersey Employee Plan that is an "employee
pension benefit plan" (as defined in Section 3(2) of ERISA) and which is
intended to be qualified under Section 401(a) of the IRC (a "SOUTH JERSEY
QUALIFIED PLAN") has received a favorable determination letter from the IRS, and
South Jersey and South Jersey Savings are not aware of any circumstances likely
to result in revocation of any such favorable determination letter. Each South
Jersey Qualified Plan that is an "employee stock ownership plan" (as defined in
Section 4975(e)(7) of the IRC) has satisfied all of the applicable requirements
of Sections 409 and 4975(e)(7) of the IRC and the regulations thereunder in all
respects and any assets of any such
16
<PAGE> 20
South Jersey Qualified Plan that are not allocated to participants' individual
accounts are pledged as security for, and may be applied to satisfy, any
securities acquisition indebtedness.
(v) Neither South Jersey nor South Jersey Savings has any
obligations for post-retirement or post-employment benefits under any South
Jersey Employee Plan that cannot be amended or terminated upon 60 days' notice
or less without incurring any liability thereunder, except for coverage required
by Part 6 of Title I of ERISA or Section 4980B of the IRC, or similar state
laws, the cost of which is borne by the insured individuals. With respect to
South Jersey or South Jersey Savings, for the South Jersey Employee Plans listed
in South Jersey's Disclosure Letter, the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not
result in any payment or series of payments by South Jersey or South Jersey
Savings to any person which is an "excess parachute payment" (as defined in
Section 280G of the IRC), increase or secure (by way of a trust or other
vehicle) any benefits payable under any South Jersey Employee Plan or accelerate
the time of payment or vesting of any such benefit.
(o) Title to Assets. South Jersey's Disclosure Letter contains a
---------------
complete and accurate list of all real property owned or leased by South Jersey
or South Jersey Savings, including all properties of South Jersey or South
Jersey Savings classified as "Real Estate Owned" or words of similar import (the
"REAL PROPERTY"). Each of South Jersey and South Jersey Savings has good and
marketable title to its properties and assets (including any intellectual
property asset such as any trademark, service mark, trade name or copyright) and
property acquired in a judicial foreclosure proceeding or by way of a deed in
lieu of foreclosure or similar transfer whether real or personal, tangible or
intangible, in each case free and clear of any liens, security interests,
encumbrances, mortgages, pledges, restrictions, charges or rights or interests
of others, except pledges to secure deposits and other liens incurred in the
ordinary course of business. Each lease pursuant to which South Jersey or South
Jersey Savings is lessee or lessor is valid and in full force and effect and
neither South Jersey nor South Jersey Savings, nor, to the knowledge of South
Jersey, any other party to any such lease is in default or in violation of any
provisions of any such lease. All material tangible properties of South Jersey
and South Jersey Savings are in a good state of maintenance and repair, conform
with all applicable ordinances, regulations and zoning laws and are considered
by South Jersey to be adequate for the current business of South Jersey and
South Jersey Savings. To the knowledge of South Jersey, none of the buildings,
structures or other improvements located on the Real Property encroaches upon or
over any adjoining parcel or real estate or any easement or right-of-way.
(p) Compliance with Laws. Each of South Jersey and South Jersey
--------------------
Savings has all permits, licenses, certificates of authority, orders and
approvals of, and has made all filings, applications and registrations with, all
Governmental Entities that are required in order to permit it to carry on its
business as it is presently conducted; all such permits, licenses, certificates
of authority, orders and approvals are in full force and effect, and no
suspension or cancellation of any of them is threatened. Since the date of its
incorporation, the corporate affairs
17
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of South Jersey have not been conducted in violation of any law, ordinance,
regulation, order, writ, rule, decree or approval of any Governmental Entity.
Neither South Jersey nor South Jersey Savings is in violation of, is, to the
knowledge of South Jersey, under investigation with respect to any violation of,
or has been given notice or been charged with any violation of, any law,
ordinance, regulation, order, writ, rule, decree or condition to approval of any
Governmental Entity which, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on South Jersey.
(q) Fees. Other than financial advisory services performed for South
----
Jersey by Sandler O'Neill & Partners, L.P. pursuant to an agreement dated
February 28, 2000, a true and complete copy of which has been previously
delivered to Richmond County, neither South Jersey nor South Jersey Savings, nor
any of their respective officers, directors, employees or agents, has employed
any broker or finder or incurred any liability for any financial advisory fees,
brokerage fees, commissions or finder's fees, and no broker or finder has acted
directly or indirectly for South Jersey or South Jersey Savings in connection
with this Agreement or the transactions contemplated hereby.
(r) Environmental Matters.
---------------------
(i) With respect to South Jersey and South Jersey Savings:
(A) Each of South Jersey and South Jersey Savings, the
Participation Facilities (as defined below), and, to the knowledge of South
Jersey, the Loan Properties (as defined below) are, and have been, in
substantial compliance with, and are not liable under, all Environmental Laws
(as defined below);
(B) There is no suit, claim, action, demand, executive
or administrative order, directive, investigation or proceeding pending or, to
the knowledge of South Jersey, threatened, before any court, governmental agency
or board or other forum against South Jersey or South Jersey Savings or any
Participation Facility (1) for alleged noncompliance (including by any
predecessor) with, or liability under, any Environmental Law or (2) relating to
the presence of or release into the environment of any Hazardous Material (as
defined below), whether or not occurring at or on a site owned, leased or
operated by South Jersey or South Jersey Savings or any Participation Facility;
(C) To the knowledge of South Jersey, there is no suit,
claim, action, demand, executive or administrative order, directive,
investigation or proceeding pending or threatened before any court, governmental
agency or board or other forum relating to or against any Loan Property (or
South Jersey or South Jersey Savings in respect of such Loan Property) (1)
relating to alleged noncompliance (including by any predecessor) with, or
liability under, any Environmental Law or (2) relating to the presence of or
release into the environment of any Hazardous Material, whether or not occurring
at a Loan Property;
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(D) To the knowledge of South Jersey, the properties
currently owned or operated by South Jersey or South Jersey Savings (including,
without limitation, soil, groundwater or surface water on or under the
properties, and buildings thereon) are not contaminated with and do not
otherwise contain any Hazardous Material other than as permitted under
applicable Environmental Law;
(E) Neither South Jersey nor South Jersey Savings has
received any notice, demand letter, executive or administrative order, directive
or request for information from any Governmental Entity or any third party
indicating that it may be in violation of, or liable under, any Environmental
Law;
(F) To the knowledge of South Jersey, there are no
underground storage tanks on, in or under any properties owned or operated by
South Jersey or South Jersey Savings or any Participation Facility and no
underground storage tanks have been closed or removed from any properties owned
or operated by South Jersey or South Jersey Savings or any Participation
Facility; and
(G) To the knowledge of South Jersey, during the period
of (1) South Jersey's or South Jersey Savings' ownership or operation of any of
their respective current properties or (2) South Jersey's or South Jersey
Savings' participation in the management of any Participation Facility, there
has been no contamination by or release of Hazardous Materials in, on, under or
affecting such properties. To the knowledge of South Jersey, prior to the period
of (1) South Jersey's or South Jersey Savings' ownership or operation of any of
their respective current properties or (2) South Jersey's or South Jersey
Savings' participation in the management of any Participation Facility, there
was no contamination by or release of Hazardous Material in, on, under or
affecting such properties.
(ii) The following definitions apply for purposes of this
SECTION 2.2(R):
"LOAN PROPERTY" means any property in which the applicable
party (or a subsidiary of it) holds a security interest and, where required by
the context, includes the owner or operator of such property, but only with
respect to such property.
"PARTICIPATION FACILITY" means any facility in which the
applicable party (or a subsidiary of it) participates in the management
(including all property held as trustee or in any other fiduciary capacity) and,
where required by the context, includes the owner or operator of such property,
but only with respect to such property.
"ENVIRONMENTAL LAW" means (i) any federal, state or local law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, legal doctrine, order, directive, executive or administrative
order, judgment, decree, injunction, legal requirement or agreement with any
Governmental Entity relating to (A) the protection, preservation or restoration
of the environment (which includes, without limitation, air, water
19
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vapor, surface water, groundwater, drinking water supply, structures, soil,
surface land, subsurface land, plant and animal life or any other natural
resource), or to human health or safety as it relates to Hazardous Materials, or
(B) the exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or disposal
of, Hazardous Materials, in each case as amended and as now in effect. The term
Environmental Law includes all federal, state and local laws, rules, regulations
or requirements relating to the protection of the environment or health and
safety, including, without limitation, (i) the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Superfund
Amendments and Reauthorization Act of 1986, the Federal Water Pollution Control
Act of 1972, the Federal Clean Air Act, the Federal Clean Water Act, the Federal
Resource Conservation and Recovery Act of 1976 (including, but not limited to,
the Hazardous and Solid Waste Amendments thereto and Subtitle I relating to
underground storage tanks), the Federal Solid Waste Disposal and the Federal
Toxic Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide
Act, the Federal Occupational Safety and Health Act of 1970 as it relates to
Hazardous Materials, the Federal Hazardous Substances Transportation Act, the
Emergency Planning and Community Right-To-Know Act, the Safe Drinking Water Act,
the Endangered Species Act, the National Environmental Policy Act, the Rivers
and Harbors Appropriation Act or any so-called "Superfund" or "Superlien" law,
each as amended and as now in effect, and (ii) any common law or equitable
doctrine (including, without limitation, injunctive relief and tort doctrines
such as negligence, nuisance, trespass and strict liability) that may impose
liability or obligations for injuries or damages due to, or threatened as a
result of, the presence of or exposure to any Hazardous Material.
"HAZARDOUS MATERIAL" means any substance (whether solid,
liquid or gas) which is or could be detrimental to human health or safety or to
the environment, currently or hereafter listed, defined, designated or
classified as hazardous, toxic, radioactive or dangerous, or otherwise
regulated, under any Environmental Law, whether by type or by quantity,
including any substance containing any such substance as a component. Hazardous
Material includes, without limitation, any toxic waste, pollutant, contaminant,
hazardous substance, toxic substance, hazardous waste, special waste, industrial
substance, oil or petroleum, or any derivative or by-product thereof, radon,
radioactive material, asbestos, asbestos-containing material, urea formaldehyde
foam insulation, lead and polychlorinated biphenyl.
(s) Loan Portfolio; Allowance; Asset Quality.
----------------------------------------
(i) With respect to each loan, lease, advance, credit
enhancement, guarantee, other extension of credit, commitment and
interest-bearing asset of South Jersey and South Jersey Savings (collectively,
"LOANS") owned by South Jersey or South Jersey Savings in whole or in part:
(A) to the knowledge of South Jersey, the note and the
related security documents are each legal, valid and binding obligations of the
maker or obligor thereof, enforceable against such maker or obligor in
accordance with their terms;
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<PAGE> 24
(B) neither South Jersey nor South Jersey Savings, nor,
to the knowledge of South Jersey, any prior holder of a Loan, has modified the
note or any of the related security documents in any material respect or
satisfied, canceled or subordinated the note or any of the related security
documents except as otherwise disclosed by documents in the applicable loan
file;
(C) South Jersey or South Jersey Savings is the sole
holder of legal and beneficial title to each Loan (or South Jersey's or South
Jersey Savings' applicable participation interest, as applicable), except as
otherwise referenced on the books and records of South Jersey or South Jersey
Savings;
(D) the note and the related security documents, copies
of which are included in the Loan files, are true and correct copies of the
documents they purport to be and have not been suspended, amended, modified,
canceled or otherwise changed except as otherwise disclosed by documents in the
applicable Loan file;
(E) to the knowledge of South Jersey, there is no
litigation or proceeding pending or threatened relating to the property that
serves as security for a Loan that would have a Material Adverse Effect upon the
related Loan; and
(F) with respect to a Loan held in the form of a
participation, the participation documentation is legal, valid, binding and
enforceable in accordance with its terms.
(ii) The allowance for possible loan losses reflected in South
Jersey's audited balance sheet at December 31, 1998 was, and the allowance for
possible losses shown on the balance sheets in South Jersey's Reports for
periods ending after December 31, 1998, in the opinion of management, was or
will be adequate, as of the dates thereof, under GAAP.
(iii) South Jersey's Disclosure Letter sets forth a true and
complete listing, as of December 31, 1999, of:
(A) all Loans that have been classified (whether
regulatory or internal) as "Special Mention," "Substandard," "Doubtful," "Loss"
or words of similar import listed by category, including the amounts thereof;
(B) Loans (1) that are contractually past due 90 days or
more in the payment of principal and/or interest, (2) that are on a non-accrual
status, (3) where the interest rate terms have been reduced and/or the maturity
dates have been extended subsequent to the agreement under which the Loan was
originally created due to concerns regarding the borrower's ability to pay in
accordance with such initial terms, or (4) where a specific reserve allocation
exists in connection therewith, listed by category, including the amounts
thereof; and
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(C) Loans with any director, executive officer or five
percent or greater stockholder of South Jersey or South Jersey Savings or any
person, corporation or enterprise controlling, controlled by or under common
control with any of the foregoing, including the amounts thereof.
(iv) To the knowledge of South Jersey, neither South Jersey
nor South Jersey Savings is a party to any Loan that is in violation of any law,
regulation or rule of any Governmental Entity. Any asset of South Jersey or
South Jersey Savings that is classified as "Real Estate Owned" or words of
similar import that is included in any non-performing assets of South Jersey or
South Jersey Savings is listed in South Jersey's Disclosure Letter and is
carried net of reserves at the lower of cost or fair value, less estimated
selling costs, based on current independent appraisals or evaluations or current
management appraisals or evaluations; PROVIDED, HOWEVER, that "current" shall
mean within the past 12 months.
(t) Deposits. None of the deposits of South Jersey or South
--------
Jersey Savings is a "brokered" deposit.
(u) Anti-takeover Provisions Inapplicable. South Jersey and South
-------------------------------------
Jersey Savings have taken all actions required to exempt Richmond County,
Acquisition Sub, the Agreement, the Merger, the Plan of Bank Merger, the Bank
Merger and the Option Agreement from any provisions of an antitakeover nature
contained in their organizational documents, and the provisions of any federal
or state "anti-takeover," "fair price," "moratorium," "control share
acquisition" or similar laws or regulations.
(v) Material Interests of Certain Persons. No officer or director of
-------------------------------------
South Jersey, or any "associate" (as such term is defined in Rule 12b-2 under
the Exchange Act) of any such officer or director, has any material interest in
any material contract or property (real or personal), tangible or intangible,
used in or pertaining to the business of South Jersey or South Jersey Savings.
(w) Insurance. In the opinion of management, South Jersey and South
---------
Jersey Savings are presently insured for amounts deemed reasonable by management
against such risks as companies engaged in a similar business would, in
accordance with good business practice, customarily be insured. All of the
insurance policies and bonds maintained by South Jersey and South Jersey Savings
are in full force and effect, South Jersey and South Jersey Savings are not in
default thereunder and all material claims thereunder have been filed in due and
timely fashion.
(x) Investment Securities; Derivatives.
----------------------------------
(i) South Jersey's Disclosure Letter sets forth the book and
market value as of December 31, 1999 of the investment securities, mortgage
backed securities and securities held for sale of South Jersey and South Jersey
Savings. South Jersey's Disclosure
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<PAGE> 26
Letter sets forth, with respect to such securities, descriptions thereof, CUSIP
numbers, pool face values and coupon rates.
(ii) Except for Federal Home Loan Bank stock, pledges to
secure Federal Home Loan Bank borrowings and restrictions that exist for
securities to be classified as "held to maturity," none of the investment
securities held by South Jersey or South Jersey Savings is subject to any
restriction (contractual or statutory) that would materially impair the ability
of the entity holding such investment freely to dispose of such investment at
any time.
(iii) Neither South Jersey nor South Jersey Savings is a party
to or has agreed to enter into an exchange-traded or over-the-counter equity,
interest rate, foreign exchange or other swap, forward, future, option, cap,
floor or collar or any other contract that is a derivative contract (including
various combinations thereof) or owns securities that (A) are referred to
generically as "structured notes," "high risk mortgage derivatives," "capped
floating rate notes" or "capped floating rate mortgage derivatives" or (B) are
likely to have changes in value as a result of interest or exchange rate changes
that significantly exceed normal changes in value attributable to interest or
exchange rate changes.
(y) Indemnification. Except as provided in the certificate of
---------------
incorporation or bylaws of South Jersey and the similar governing documents of
South Jersey Savings, neither South Jersey nor South Jersey Savings is a party
to any agreement that provides for the indemnification of any of its present or
former directors, officers, or employees or other persons who serve or served as
a director, officer or employee of another corporation, partnership or other
enterprise at the request of South Jersey and, to the knowledge of South Jersey,
there are no claims for which any such person would be entitled to
indemnification under the certificate of incorporation or bylaws of South Jersey
or the similar governing documents of South Jersey Savings, under any applicable
law or regulation or under any indemnification agreement.
(z) Books and Records. The books and records of South Jersey and
-----------------
South Jersey Savings on a consolidated basis have been, and are being,
maintained in accordance with applicable legal and accounting requirements and
reflect in all material respects the substance of events and transactions that
should be included therein.
(aa) Corporate Documents. South Jersey has previously furnished or
-------------------
made available to Richmond County a complete and correct copy of the certificate
of incorporation, bylaws and similar governing documents of South Jersey and
South Jersey Savings, as in effect as of the date of this Agreement. Neither
South Jersey nor South Jersey Savings is in violation of its certificate of
incorporation, bylaws or similar governing documents. The minute books of South
Jersey and South Jersey Savings constitute a complete and correct record of all
actions taken by their respective boards of directors (and each committee
thereof) and their stockholders.
(bb) Proxy Statement. The information regarding South Jersey and
---------------
South Jersey Savings to be included in the Proxy Statement filed by South Jersey
with the SEC under
23
<PAGE> 27
the Exchange Act will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading.
(cc) Community Reinvestment Act Compliance. South Jersey Savings
-------------------------------------
is in material compliance with the applicable provisions of the Community
Reinvestment Act ("CRA") and the regulations promulgated thereunder, and South
Jersey Savings currently has a CRA rating of satisfactory or better. To the
knowledge of South Jersey, there is no fact or circumstance or set of facts or
circumstances that would cause South Jersey Savings to fail to comply with such
provisions or cause the CRA rating of South Jersey Savings to fall below
satisfactory.
(dd) Undisclosed Liabilities. As of the date hereof, neither South
-----------------------
Jersey nor South Jersey Savings has incurred any debt, liability or obligation
of any nature whatsoever (whether accrued, contingent, absolute or otherwise and
whether due or to become due) except for (i) liabilities reflected on or
reserved against in the consolidated financial statements of South Jersey as of
December 31, 1998, (ii) liabilities incurred since December 31, 1998 in the
ordinary course of business consistent with past practice that, either alone or
when combined with all similar liabilities, have not had, and would not
reasonably be expected to have, a Material Adverse Effect on South Jersey and
(iii) liabilities incurred for legal, accounting, financial advising fees and
out-of-pocket expenses in connection with a proposed sale or merger of South
Jersey.
(ee) Year 2000 Matters. South Jersey and South Jersey Savings have
-----------------
not experienced any data processing or other computer malfunctions related to
processing date information on and after January 1, 2000 and none of the third
party service providers or customers of South Jersey or South Jersey Savings
have reported year 2000 data processing problems to South Jersey that,
individually or in the aggregate, would have a Material Adverse Effect on South
Jersey.
(ff) Liquidation Account. Neither the Merger nor the Bank Merger
-------------------
will result in any payment or distribution payable out of the liquidation
account of South Jersey Savings established in connection with South Jersey
Savings' conversion from mutual to stock form.
Section 2.3. Representations and Warranties of Richmond County.
-------------------------------------------------
Richmond County represents and warrants to South Jersey that:
(a) Organization.
------------
(i) Richmond County is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and is
registered as a savings and loan holding company under HOLA.
24
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(ii) Richmond County Savings is a savings bank duly organized
and validly existing under the laws of the State of New York. The deposits of
Richmond County Savings are insured by the Bank Insurance Fund of the FDIC and
the Savings Association Fund of the FDIC to the extent provided in the FDIA.
Richmond County Savings is a member of the FHLBNY.
(iii) Each of Richmond County and Richmond County Savings has
all requisite corporate power and authority to own, lease and operate its
properties and to conduct the business currently being conducted by it. Each of
Richmond County and Richmond County Savings is duly qualified or licensed as a
foreign corporation to transact business and is in good standing in each
jurisdiction in which the character of the properties owned or leased by it or
the nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so qualified or licensed and in good
standing would not have a Material Adverse Effect on Richmond County.
(iv) Acquisition Sub is a corporation, duly organized, validly
existing and in good standing under the laws of Delaware, all of the outstanding
capital stock of which is, or prior to the Effective Time will be, owned
directly or indirectly by Richmond County free and clear of any lien, charge or
other encumbrance. From and after its incorporation, Acquisition Sub has not and
will not engage in any activities other than in connection with or as
contemplated by this Agreement.
(b) Authority.
---------
(i) Each of Richmond County and Acquisition Sub has all
requisite corporate power and authority to enter into this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated by
this Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate actions of the Boards of Directors of
Richmond County and Acquisition Sub and no other corporate proceedings on the
part of Richmond County or Acquisition Sub are necessary to authorize this
Agreement or to consummate the transactions contemplated by this Agreement
except for the approval of this Agreement and the Merger by Richmond County as
the sole stockholder of Acquisition Sub. This Agreement has been duly and
validly executed and delivered by each of Richmond County and Acquisition Sub
and constitutes a valid and binding obligation of each of Richmond County and
Acquisition Sub, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights and remedies
generally and subject, as to enforceability, to general principles of equity,
whether applied in a court of law or a court of equity.
(ii) Richmond County Savings has all requisite corporate power
and authority to enter into the Plan of Bank Merger and to consummate the
transactions contemplated thereby. The execution and delivery of the Plan of
Bank Merger and the consummation of the
25
<PAGE> 29
transactions contemplated thereby have been duly authorized by the Board of
Directors of Richmond County Savings and approved by Richmond County as the sole
stockholder of Richmond County Savings. The Plan of Bank Merger, upon execution
and delivery by Richmond County Savings, will be duly and validly executed and
delivered by Richmond County Savings and will constitute a valid and binding
obligation of Richmond County Savings, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally and subject, as to enforceability, to
general principles of equity, whether applied in a court of law or a court of
equity.
(c) No Violations; Consents.
-----------------------
(i) The execution, delivery and performance of this Agreement
by Richmond County do not, and the consummation of the transactions contemplated
hereby will not, constitute (A) assuming the consents and approvals referred to
in SECTION 2.3(C)(II) are obtained, a violation of any law, rule or regulation
or any judgment, decree, order, governmental permit or license to which Richmond
County or any of its subsidiaries (or any of their properties) is subject; (B) a
violation of the certificate of incorporation or bylaws of Richmond County or
any of its subsidiaries; or (C) a breach or violation of, or a default under (or
an event which, with due notice or lapse of time or both, would constitute a
default under), or result in the termination of, accelerate the performance
required by, or result in the creation of any lien, pledge, security interest,
charge or other encumbrance upon any of the properties or assets of Richmond
County under, any of the terms, conditions or provisions of any note, bond,
indenture, deed of trust, loan agreement or other agreement, instrument or
obligation to which Richmond County is a party, or to which any of its
properties or assets may be subject, except, in the case of (C), for any such
breaches, violations or defaults that wold not, individually or in the
aggregate, have a Material Adverse Effect on Richmond County.
(ii) Except for (A) the filing of an application with the OTS,
under HOLA, and approval of such application, (B) the approval of the Banking
Board of the State of New York ("BANKING BOARD") under Section 143-b of the
Banking Law of the State of New York ("BANKING LAW"), the approval of the
Superintendent of Banks of the State of New York (the "SUPERINTENDENT") under
Section 601 of the Banking Law, and any other requirement of the Banking Board
or the Superintendent, (C) the filing of any necessary notice or approval of the
NJBD, (D) the approval of the FDIC under the FDIA, and (E) the filing of a
certificate of merger with the Delaware Secretary of State pursuant to the DGCL,
no consents or approvals of or filings or registrations with any Governmental
Entity or with any third party are necessary in connection with the execution
and delivery by Richmond County and Acquisition Sub of this Agreement or the
consummation by Richmond County, Richmond County Savings and Acquisition Sub of
the Merger and the other transactions contemplated by this Agreement, including
the Bank Merger. As of the date hereof, the executive officers of Richmond
County know of no reason pertaining to Richmond County why any of the approvals
referred to in this SECTION 2.3(C) should not be obtained without the imposition
of any material condition or restriction described in SECTION 5.1(B).
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(d) Absence of Claims. No litigation, proceeding, controversy,
-----------------
claim, action or suit or other legal, administrative or arbitration proceeding
before any court, governmental agency or arbitrator is pending or has been
threatened against Richmond County or its subsidiaries that would reasonably be
expected to prevent, delay or adversely affect Richmond County's or Richmond
County Savings' ability to consummate, or which seeks to prohibit the
consummation of, the transactions contemplated by this Agreement.
(e) Absence of Regulatory Actions. Since December 31, 1996, neither
-----------------------------
Richmond County nor any of its subsidiaries has been a party to any cease and
desist order, written agreement or memorandum of understanding with, or any
commitment letter or similar undertaking to, or has been subject to any action,
proceeding, order or directive by, or has been a recipient of any extraordinary
supervisory letter from any Government Regulator, or has adopted any board
resolutions at the request of any Government Regulator, or has been advised by
any Government Regulator that it is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such action,
proceeding, order, directive, written agreement, memorandum of understanding,
extraordinary supervisory letter, commitment letter, board resolutions or
similar undertaking.
(f) Proxy Statement. The information regarding Richmond County to be
---------------
supplied by Richmond County for inclusion in the Proxy Statement will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
(g) Community Reinvestment Act Compliance. Richmond County Savings
-------------------------------------
is in material compliance with the applicable provisions of the CRA and the
regulations promulgated thereunder, and Richmond County Savings currently has a
CRA rating of satisfactory or better. To the knowledge of Richmond County
Savings, there is no fact or circumstance or set of facts or circumstances that
would cause Richmond County Savings to fail to comply with such provisions or
cause the CRA rating of Richmond County Savings to fall below satisfactory.
(h) Financing. Richmond County will have available to it, at the
---------
Effective Time, immediately available funds necessary to pay the aggregate
Merger Consideration and will use such funds for such purpose subject to the
conditions of this Agreement.
(i) Reports and Financial Statements.
--------------------------------
(i) Richmond County has timely filed all material reports,
together with any amendments required to be made with respect thereto, that they
were required to file since June 30, 1999 with the SEC (collectively, "RICHMOND
COUNTY'S REPORTS"). As of their respective dates, none of Richmond County's
Reports contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make
27
<PAGE> 31
the statements made therein, in light of the circumstances under which they were
made, not misleading. All of Richmond County's Reports complied in all material
respects with the applicable requirements of the Exchange Act and the rules and
regulations of the SEC promulgated thereunder.
(ii) Each of the financial statements of Richmond County
included in Richmond County's Reports filed with the SEC complied as to form, as
of their respective dates of filing with the SEC, in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto. The financial statements included in Richmond
County's Reports were prepared from the books and records of Richmond County and
its subsidiaries, fairly present the consolidated financial position of Richmond
County and its subsidiaries in each case at and as of the dates indicated and
the consolidated results of operations, retained earnings and cash flows of
Richmond County and its subsidiaries for the periods indicated, and, except as
otherwise set forth in the notes thereto, were prepared in accordance with GAAP
consistently applied throughout the periods covered thereby; PROVIDED, HOWEVER,
that the unaudited financial statements for interim periods are subject to
normal year-end adjustments (which will not be material individually or in the
aggregate) and lack a statement of cash flows and footnotes.
(j) Undisclosed Liabilities. As of the date hereof, neither Richmond
-----------------------
County nor any of its subsidiaries has incurred any debt, liability or
obligation of any nature whatsoever (whether accrued, contingent, absolute or
otherwise and whether due or to become due) that is not reflected in Richmond
County's Reports and that, either alone or when combined with all similar
liabilities, would reasonably be expected to prevent Richmond County from
consummating the transactions contemplated by this Agreement.
ARTICLE III
CONDUCT PENDING THE MERGER
--------------------------
Section 3.1. Conduct of South Jersey's Business Prior to the
-----------------------------------------------
Effective Time. Except as expressly provided in this Agreement, during the
- --------------
period from the date of this Agreement to the Effective Time, South Jersey
shall, and shall cause South Jersey Savings to, use its best efforts to (i)
conduct its business in the regular, ordinary and usual course consistent with
past practice, (ii) maintain and preserve intact its business organization,
properties, leases, employees and advantageous business relationships and retain
the services of its officers and key employees, (iii) take no action which would
adversely affect or delay the ability of South Jersey or Richmond County to
perform their respective covenants and agreements on a timely basis under this
Agreement, (iv) take no action which would adversely affect or delay the ability
of South Jersey, South Jersey Savings, Richmond County or Richmond County
Savings to obtain any necessary approvals, consents or waivers of any
Governmental Entity required for the transactions contemplated hereby or which
would reasonably be expected to result in any such approvals, consents or
waivers containing any material condition or restriction, (v) take no action
that results in or is reasonably likely to have a Material Adverse Effect on
South Jersey or South
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<PAGE> 32
Jersey Savings, (vi) maintain insurance in such amounts and against such risks
and losses as are customary for companies engaged in a similar business, (vii)
confer on a regular and frequent basis with one or more representatives of
Richmond County to discuss, subject to applicable law, material operational
matters and the general status of the ongoing operations of South Jersey and
South Jersey Savings, (viii) promptly notify Richmond County of any material
change in its business, properties, assets, condition (financial or otherwise)
or results of operations, and (ix) promptly provide Richmond County with copies
of all filings made by South Jersey or South Jersey Savings with any state or
federal court, administrative agency, commission or other Governmental Entity in
connection with this Agreement and the transactions contemplated hereby.
Section 3.2. Forbearance by South Jersey. Without limiting the
---------------------------
covenants set forth in SECTION 3.1 hereof, except as otherwise provided in this
Agreement or the Option Agreement and except to the extent required by law or
regulation or any Governmental Entity, during the period from the date of this
Agreement to the Effective Time, South Jersey shall not, and shall not permit
South Jersey Savings to, without the prior consent of Richmond County which
consent shall not be unreasonably withheld:
(a) other than in the ordinary course of business consistent with
past practice, incur any indebtedness for borrowed money, assume, guarantee,
endorse or otherwise as an accommodation become responsible for the obligations
of any other individual, corporation or other entity, or make any loan or
advance (it being understood and agreed that incurrence of indebtedness in the
ordinary course of business shall include, without limitation, the creation of
deposit liabilities, purchases of Federal funds, advances from the FHLBNY, sales
of certificates of deposit and entering into repurchase agreements);
(b) (i) adjust, split, combine or reclassify any capital stock;
(ii) make, declare or pay any dividend, or make any other
distribution on, or directly or indirectly redeem,
purchase or otherwise acquire, any shares of its capital
stock or any securities or obligations convertible
(whether currently convertible or convertible only after
the passage of time or the occurrence of certain events)
into or exchangeable for any shares of its capital
stock. Notwithstanding the foregoing, South Jersey may
pay to its shareholders a cash dividend during the
second calendar quarter of 2000 at a rate not in excess
of $0.09 per share of South Jersey Common Stock. In the
event the Effective Date does not occur on or before
August 15, 2000, South Jersey may also pay to its
shareholders a cash dividend during the third calendar
quarter of 2000 at a rate not in excess of $0.09 per
share of South Jersey Common Stock and, in the event the
Effective Date does not occur on or before October 31,
2000, South Jersey may also pay to its shareholders a
cash
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dividend during the fourth calendar quarter of 2000 at a
rate not in excess of $0.09 per share of South Jersey
Common Stock;
(iii) grant any stock options or stock appreciation rights or
grant any individual, corporation or other entity any
right to acquire any shares of its capital stock; or
(iv) issue any additional shares of capital stock or any
securities or obligations convertible or excisable for
any shares of its capital stock except pursuant to (A)
the exercise of South Jersey Options outstanding as of
the date hereof or (B) the Option Agreement;
(c) sell, transfer, mortgage, encumber or otherwise dispose of any
of its material properties or assets to any individual, corporation or other
entity other than South Jersey Savings, or cancel, release or assign any
indebtedness to any such person or any claims held by any such person, except in
the ordinary course of business or pursuant to contracts or agreements in force
at the date of this Agreement;
(d) except pursuant to contracts or agreements in force at the date
hereof or as permitted by this Agreement, make any equity investment, either by
purchase of stock or securities, contributions to capital, property transfers,
or purchase of any property or assets of any other individual, corporation or
entity other than the FHLBNY;
(e) enter into, renew, amend or terminate any contract or agreement,
or make any change in any of its leases or contracts, other than with respect to
those involving aggregate payments of less than, or the provision of goods or
services with a market value of less than, $20,000 per annum and other than
contracts or agreements covered by SECTION 3.2(F);
(f) make, renegotiate, renew, increase, extend, modify or purchase
any loan, lease (credit equivalent), advance, credit enhancement or other
extension of credit, or make any commitment in respect of any of the foregoing,
except (i) in conformity with existing lending practices in amounts not to
exceed an aggregate of $300,000 with respect to any individual borrower or (ii)
loans or advances as to which South Jersey has a binding obligation to make such
loan or advances as of the date hereof;
(g) except for loans or extensions of credit made on terms generally
available to the public, make or increase any loan or other extension of credit,
or commit to make or increase any such loan or extension of credit, to any
director or executive officer of South Jersey or South Jersey Savings, or any
entity controlled, directly or indirectly, by any of the foregoing, other than
renewals of existing loans or commitments to loan;
(h) (i) increase in any manner the compensation or fringe
benefits of any of its employees or directors other than
in the ordinary course of
30
<PAGE> 34
business consistent with past practice and pursuant to
policies currently in effect or pay any pension,
retirement allowance or contribution not required by any
existing plan or agreement to any such employees or
directors;
(ii) become a party to, amend or commit itself to any
pension, retirement, profit-sharing or welfare benefit
plan or agreement or employment agreement with or for
the benefit of any employee or director;
(iii) voluntarily accelerate the vesting of, or the lapsing of
restrictions with respect to, any stock options or other
stock-based compensation; or
(iv) elect to any senior executive office any person who is
not a member of the senior executive officer team of
South Jersey as of the date of this Agreement or elect
to the Board of Directors of South Jersey any person who
is not a member of the Board of Directors of South
Jersey as of the date of this Agreement, or hire any
employee with annual compensation in excess of $50,000;
(i) settle any claim, action or proceeding involving money damages
in excess of $50,000 or the imposition of any material restriction on the
operations of South Jersey or South Jersey Savings;
(j) amend its certificate of incorporation or its bylaws;
(k) restructure or materially change its investment securities
portfolio or its gap position, through purchases, sales or otherwise, or the
manner in which the portfolio is classified or reported;
(l) make any investment in any debt security, including mortgage-
backed and mortgage-related securities, other than U.S. government and U.S.
government agency securities with final maturities not greater than five years;
(m) make any capital expenditures other than expenditures necessary
to maintain existing assets in good repair or to make payment of necessary
taxes;
(n) establish or commit to the establishment of any new branch or
other office facilities or file any application to relocate or terminate the
operation of any banking office;
(o) take any action that is intended or expected to result in any of
its representations and warranties set forth in this Agreement being or becoming
untrue in any
31
<PAGE> 35
material respect at any time prior to the Effective Time, or in any of the
conditions to the Merger set forth in Article V not being satisfied or in a
violation of any provision of this Agreement;
(p) engage in any transaction that is not in the usual and ordinary
course of business and consistent with past practices;
(q) implement or adopt any change in its accounting principles,
practices or methods, other than as may be required by GAAP or regulatory
guidelines; or
(r) agree to take, make any commitment to take, or adopt any
resolutions of its board of directors in support of, any of the actions
prohibited by this SECTION 3.2.
Any request by South Jersey or response thereto by Richmond County shall
be made in accordance with the notice provisions of SECTION 8.7 and shall note
that it is a request pursuant to this SECTION 3.2.
Section 3.3. Conduct of Richmond County's Business Prior to the
--------------------------------------------------
Effective Time. Except as expressly provided in this Agreement, during the
- --------------
period from the date of this Agreement to the Effective Time, Richmond County
shall use its best efforts to (i) take no action which would materially
adversely affect or delay the ability of South Jersey or Richmond County to
perform their respective covenants and agreements on a timely basis under this
Agreement, (ii) take no action which would adversely affect or delay the ability
of South Jersey, South Jersey Savings, Richmond County or Richmond County
Savings to obtain any necessary approvals, consents or waivers of any
Governmental Entity required for the transactions contemplated hereby or which
would reasonably be expected to result in any such approvals, consents or
waivers containing any material condition or restriction and (iii) take no
action that is intended or expected to result in any of its representations and
warranties set forth in this Agreement being or becoming untrue in any material
respect at any time prior to the Effective Time, or in any of the conditions to
the Merger set forth in Article V not being satisfied or in violation of this
Agreement.
ARTICLE IV
COVENANTS
---------
Section 4.1. Acquisition Proposals.
---------------------
(a) From and after the date hereof until the termination of this
Agreement, neither South Jersey nor any of its officers, directors, employees,
representatives, agents or affiliates (including, without limitation, any
investment banker, attorney or accountant retained by South Jersey or South
Jersey Savings), will, directly or indirectly, initiate, solicit or knowingly
encourage (including by way of furnishing non-public information or assistance),
or facilitate knowingly, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal
(as defined below), or enter into or
32
<PAGE> 36
maintain or continue discussions or negotiate with any person or entity in
furtherance of such inquiries or to obtain an Acquisition Proposal or agree to
or endorse any Acquisition Proposal, or authorize or permit any of its officers,
directors or employees or South Jersey Savings or any investment banker,
financial advisor, attorney, accountant or other representative retained by
South Jersey Savings to take any such action; PROVIDED, HOWEVER, that nothing
contained in this SECTION 4.1 shall prohibit South Jersey or the Board of
Directors of South Jersey from:
(i) furnishing information to, or entering into discussions
or negotiations with, any person or entity that makes an
unsolicited written, bona fide proposal to acquire South
Jersey pursuant to a merger, consolidation, share
exchange, business combination, tender or exchange offer
or other similar transaction, if, and only to the extent
that;
(A) the Board of Directors of South Jersey, after
consultation with its independent financial
advisor, determines that such proposal may be
superior to the Merger from a financial
point-of-view to South Jersey's stockholders;
(B) the Board of Directors of South Jersey, after
consultation with and based upon the advice of
independent legal counsel, determines in good
faith that such action is necessary for the Board
of Directors of South Jersey to comply with its
fiduciary duties to stockholders under applicable
law (such proposal that satisfies (A) and (B)
being referred to herein as a "SUPERIOR
PROPOSAL"); and
(C) prior to furnishing such information to, or
entering into discussions or negotiations with,
such person or entity, South Jersey:
(1) provides prompt notice to Richmond County to
the effect that it is furnishing information
to, or entering into discussions or
negotiations with, such person or entity;
and
(2) receives from such person or entity an
executed confidentiality agreement in
reasonably customary form;
(ii) complying with Rule 14e-2 promulgated under the Exchange
Act with regard to a tender or exchange offer; or
33
<PAGE> 37
(iii) failing to make or withdrawing or modifying its
recommendation and entering into a Superior Proposal if
there exists a Superior Proposal and the Board of
Directors of South Jersey, after consultation with
independent legal counsel, determines in good faith that
such action is necessary for the Board of Directors of
South Jersey to comply with its fiduciary duties to
stockholders under applicable law.
South Jersey shall notify Richmond County orally and in writing of any
Acquisition Proposal (including, without limitation, the terms and conditions of
any such Acquisition Proposal and the identity of the person making such
Acquisition Proposal) as promptly as practicable (but, in any event, no later
than 24 hours) after the receipt thereof and shall keep Richmond County informed
of the status and details of any such Acquisition Proposal.
(b) For purposes of this Agreement, "ACQUISITION PROPOSAL" shall
mean any of the following (other than the transactions contemplated hereunder)
involving South Jersey or South Jersey Savings:
(i) any merger, consolidation, share exchange, business
combination, or other similar transaction;
(ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition of 25% or more of the assets of South
Jersey or South Jersey Savings, taken as a whole, in a
single transaction or series of transactions;
(iii) any tender offer or exchange offer for 25% or more of
the outstanding shares of capital stock of South Jersey
or the filing of a registration statement under the
Securities Act of 1933, as amended, in connection
therewith; or
(iv) any public announcement of a proposal, plan or intention
to do any of the foregoing or any agreement to engage in
any of the foregoing.
Section 4.2. Certain Policies and Actions of South Jersey. At the
--------------------------------------------
request of Richmond County, South Jersey shall cause South Jersey Savings to
modify and change its loan, litigation and real estate valuation policies and
practices (including loan classifications and levels of reserves) and investment
and asset/liability management policies and practices after the date on which
all regulatory and stockholder approvals required to consummate the transactions
contemplated hereby are received, and after receipt of written confirmation from
Richmond County that it is not aware of any fact or circumstance that would
prevent completion of the Merger, and prior to the Effective Time; PROVIDED,
HOWEVER, that South Jersey shall not be
34
<PAGE> 38
required to take such action more than 10 days prior to the Effective Date; and
PROVIDED, FURTHER, that such policies and procedures are not prohibited by GAAP
or any applicable laws and regulations. South Jersey's representations,
warranties and covenants contained in this Agreement shall not be deemed to be
untrue or breached in any respect for any purpose as a consequence of any
modifications or changes undertaken solely on account of SECTION 4.2.
Section 4.3. Access and Information.
----------------------
(a) Upon reasonable notice, South Jersey shall (and shall cause
South Jersey Savings to) afford Richmond County and its representatives
(including, without limitation, directors, officers and employees of Richmond
County and its affiliates and counsel, accountants and other professionals
retained by Richmond County) such reasonable access during normal business hours
throughout the period prior to the Effective Time to the books, records
(including, without limitation, tax returns and work papers of independent
auditors), contracts, properties, personnel and to such other information
relating to South Jersey and South Jersey Savings as Richmond County may
reasonably request; PROVIDED, HOWEVER, that no investigation pursuant to this
SECTION 4.3 shall affect or be deemed to modify any representation or warranty
made by South Jersey in this Agreement. In furtherance, and not in limitation of
the foregoing, South Jersey shall make available to Richmond County all
information necessary and appropriate for the preparation and filing of all real
property and real estate transfer tax returns and reports required by reason of
the Merger or the Bank Merger.
(b) South Jersey shall provide Richmond County with true, correct
and complete copies of all financial and other information relating to the
business or operations of South Jersey or South Jersey Savings that is provided
to directors of South Jersey and South Jersey Savings in connection with
meetings of their Boards of Directors or committees thereof; PROVIDED, HOWEVER,
that not withstanding the foregoing, South Jersey shall not be required to
provide Richmond County with any information regarding an Acquisition Proposal
except as required by SECTION 4.1.
(c) As soon as reasonably available, but in no event more than 45
days after the end of each fiscal quarter (and 90 days in the case of the fourth
fiscal quarter), South Jersey shall deliver to Richmond County its Quarterly and
Annual Reports, as filed with the SEC under the Exchange Act. South Jersey shall
deliver to Richmond County any Current Reports on Form 8-K promptly after filing
such reports with the SEC and shall provide Richmond County with a copy of any
press release promptly after such release is made available to the public.
(d) Richmond County will not, and will cause its representatives not
to, use any information obtained pursuant to this SECTION 4.3 for any purpose
unrelated to the consummation of the transactions contemplated by this
Agreement. Subject to the requirements of applicable law, Richmond County will
keep confidential, and will cause its representatives to keep confidential, all
information and documents obtained pursuant to this SECTION 4.3 unless such
information (i) was already known to Richmond County or an affiliate of Richmond
35
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County, other than pursuant to a confidentiality agreement or other confidential
relationship, (ii) becomes available to Richmond County or an affiliate of
Richmond County from other sources not known by such party to be bound by a
confidentiality agreement or other obligation of secrecy, (iii) is disclosed
with the prior written approval of South Jersey or (iv) is or becomes readily
ascertainable from published information or trade sources.
(e) During the period of time beginning on the day application
materials to obtain the requisite regulatory approvals for the Merger are
initially filed and continuing to the Effective Time, including weekends and
holidays, South Jersey shall cause South Jersey Savings to provide Richmond
County and Richmond County Savings and their authorized agents and
representatives full access to South Jersey Savings offices after normal
business hours for the purpose of installing necessary wiring and equipment to
be utilized by Richmond County Savings after the Effective Time; PROVIDED, that:
(i) reasonable advance notice of each entry shall be given
to South Jersey Savings and South Jersey Savings
approves of each entry, which approval shall not be
unreasonably withheld;
(ii) South Jersey Savings shall have the right to have its
employees or contractors present to inspect the work
being done;
(iii) to the extent practicable, such work shall be done in a
matter that will not interfere with South Jersey
Savings' business conducted at any affected branch
offices;
(iv) all such work shall be done in compliance with all
applicable laws and government regulations, and Richmond
County Savings shall be responsible for the procurement,
at Richmond County Savings' expense, of all required
governmental or administrative permits and approvals;
(v) Richmond County Savings shall maintain appropriate
insurance satisfactory to South Jersey Savings in
connection with any work done by Richmond County
Savings' agents and representatives pursuant to this
SECTION 4.3;
(vi) Richmond County Savings shall reimburse South Jersey
Savings for any material out-of-pocket costs or expenses
reasonably incurred by South Jersey Savings in
connection with this undertaking; and
(vii) in the event this Agreement is terminated in accordance
with Article VI hereof, Richmond County Savings, within
a reasonable
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time period and at its sole cost and expense, will
restore such offices to their condition prior to the
commencement of any such installation.
Section 4.4. Certain Filings, Consents and Arrangements.
------------------------------------------
(a) As soon as practicable after the date hereof, Richmond County
shall use its reasonable best efforts to prepare and file all necessary
applications, notices and filings to obtain all permits, consents, approvals and
authorizations of all Governmental Entities that are necessary or advisable to
consummate the transactions contemplated by this Agreement, including the Bank
Merger. South Jersey shall, upon request, furnish Richmond County with all
information concerning South Jersey, South Jersey Savings, and South Jersey's
directors, officers and stockholders and such other matters as may be reasonably
necessary or advisable in connection with any application, notice or filing made
by or on behalf of Richmond County to any Governmental Entity in connection with
the transactions contemplated by this Agreement and the Plan of Bank Merger.
(b) As soon as practicable after the date hereof, South Jersey shall
file an application with the NJBD, and shall take all other necessary and
appropriate actions, to convert South Jersey Savings from a New Jersey chartered
savings and loan association to a New Jersey chartered savings bank prior to the
Effective Time; PROVIDED, HOWEVER, that South Jersey Savings shall not be
required to complete such charter conversion until after receipt of the
stockholder approval pursuant to SECTION 5.1(A) and all regulatory approvals
pursuant to SECTION 5.1(B).
(c) As soon as practicable after the date hereof, each of the
parties hereto shall, and they shall cause their respective subsidiaries to, use
its best efforts to obtain any consent, authorization or approval of any third
party that is required to be obtained in connection with the Merger and the Bank
Merger.
Section 4.5. Antitakeover Provisions. South Jersey and South Jersey
-----------------------
Savings shall take all steps required by any relevant federal or state law or
regulation or under any relevant agreement or other document to exempt or
continue to exempt Richmond County, Richmond County Savings, Acquisition Sub,
the Agreement, the Plan of Bank Merger, the Merger and the Bank Merger from any
provisions of an antitakeover nature contained in South Jersey's or South Jersey
Savings' certificates of incorporation and bylaws, or similar governing
documents, and the provisions of any federal or state antitakeover laws.
Section 4.6. Additional Agreements. Subject to the terms and
---------------------
conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take promptly, or cause to be taken promptly, all actions
and to do promptly, or cause to be done promptly, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including the Merger
(and if the Plan of Bank Merger is executed, the Bank Merger), as expeditiously
as possible, including using
37
<PAGE> 41
efforts to obtain all necessary actions or non-actions, extensions, waivers,
consents and approvals from all applicable Governmental Entities, effecting all
necessary registrations, applications and filings (including, without
limitation, filings under any applicable state securities laws) and obtaining
any required contractual consents and regulatory approvals.
Section 4.7. Publicity. The initial press release announcing this
---------
Agreement shall be a joint press release and thereafter South Jersey and
Richmond County shall consult with each other in issuing any press releases or
otherwise making public statements with respect to the Merger and any other
transaction contemplated hereby and in making any filings with any governmental
entity or with any national securities exchange with respect thereto.
Section 4.8. Stockholder Meeting. South Jersey shall take all action
-------------------
necessary, in accordance with applicable law and its certificate of
incorporation and bylaws, to convene a meeting of its stockholders ("STOCKHOLDER
MEETING") as promptly as practicable for the purpose of considering and voting
on approval and adoption of this Agreement, the Merger and the other
transactions provided for in this Agreement. Except to the extent legally
required for the discharge by the Board of Directors of its fiduciary duties as
advised by such Board's counsel, the Board of Directors of South Jersey shall
(i) recommend at the Stockholder Meeting that the stockholders vote in favor of
and approve the transactions provided for in this Agreement and (ii) use its
reasonable best efforts to solicit such approvals.
Section 4.9. Proxy Statement.
---------------
(a) For the purposes of holding the Stockholder Meeting, South
Jersey shall prepare and file with the SEC as soon as practicable after the date
hereof, a proxy statement satisfying all applicable requirements of the Exchange
Act and the rules and regulations thereunder (such proxy statement in the form
mailed by South Jersey to the South Jersey stockholders, the "PROXY STATEMENT").
Richmond County shall, upon request, furnish South Jersey with all information
concerning Richmond County and its subsidiaries, directors, officers and
stockholders as South Jersey may reasonably require in connection with the
preparation of the Proxy Statement. South Jersey shall give Richmond County and
its counsel the opportunity to review and comment on the Proxy Statement prior
to its being filed with the SEC. South Jersey shall notify Richmond County
promptly of the receipt of any comments of the SEC with respect to the Proxy
Statement and of any requests by the SEC for any amendment or supplement thereto
or for additional information and shall provide promptly to Richmond County
copies of all correspondence between South Jersey or any representative of South
Jersey and the SEC. South Jersey shall give Richmond County and its counsel the
opportunity to review and comment on all amendments and supplements to the Proxy
Statement and all responses to requests for additional information and replies
to comments prior to their being filed with, or sent to, the SEC. South Jersey
agrees to use all reasonable efforts to respond promptly to all such comments of
and requests by the SEC, to have the Proxy Statement cleared by the staff of the
SEC as promptly as practicable and to cause the Proxy Statement and all required
amendments and
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<PAGE> 42
supplements thereto to be mailed to the holders of South Jersey Common Stock
entitled to vote at the Stockholder Meeting at the earliest practicable time.
(b) South Jersey and Richmond County shall promptly notify the other
party if at any time it becomes aware that the Proxy Statement contains any
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements contained therein, in
light of the circumstances under which they were made, not misleading. In such
event, South Jersey and Richmond County shall cooperate with each other in the
preparation of a supplement or amendment to such Proxy Statement which corrects
such misstatement or omission and South Jersey shall mail an amended Proxy
Statement to South Jersey's stockholders.
Section 4.10. Notification of Certain Matters. South Jersey shall
-------------------------------
give prompt notice to Richmond County of: (i) any event or notice of, or other
communication relating to, a default or event that, with notice or lapse of time
or both, would become a default, received by South Jersey or South Jersey
Savings subsequent to the date of this Agreement and prior to the Effective
Time, under any contract material to the financial condition, properties,
businesses or results of operations of South Jersey and South Jersey Savings
taken as a whole to which South Jersey or South Jersey Savings is a party or is
subject; and (ii) any event, condition, change or occurrence which individually
or in the aggregate has, or which, so far as reasonably can be foreseen at the
time of its occurrence, is reasonably likely to result in a Material Adverse
Effect with respect to South Jersey or which would have been required to be
disclosed by South Jersey on a schedule to this Agreement had such event,
condition, change or occurrence been known at the time such party delivered its
disclosure schedules; PROVIDED, HOWEVER, that no notice provided pursuant to
this SECTION 4.10 shall affect or be deemed to modify any representation or
warranty made herein. Each of South Jersey and Richmond County shall give prompt
notice to the other party of any (i) notice or other communication from any
third party alleging that the consent of such third party is or may be required
in connection with any of the transactions contemplated by this Agreement and
(ii) the occurrence or non-occurrence of any fact or event which would be
reasonably likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate in any respect at any time from the date
hereof to the Effective Time or to cause any covenant, condition or agreement
under this Agreement not to be complied with or satisfied in all material
respects.
Section 4.11. Employees, Directors and Officers.
---------------------------------
(a) All persons who are employees of South Jersey Savings
immediately prior to the Effective Time and whose employment is not specifically
terminated at or prior to the Effective Time (a "CONTINUING EMPLOYEE") shall, at
the Effective Time, become employees of Richmond County Savings; PROVIDED,
HOWEVER, that in no event shall any of South Jersey's employees be officers of
Richmond County Savings, or have or exercise any power or duty conferred upon
such an officer, unless and until duly elected or appointed to such position in
accordance with the bylaws of Richmond County Savings. All of the Continuing
Employees
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<PAGE> 43
shall be employed at the will of Richmond County Savings and no contractual
right to employment shall inure to such employees because of this Agreement.
(b) For purposes of participation and vesting in the Richmond County
Savings Bank Employee Stock Ownership Plan, each Continuing Employee shall be
treated as a new employee of Richmond County. As soon as administratively
practicable following the Effective Time, each Continuing Employee shall be
eligible to participate in the Richmond County Savings Bank 401(k) Plan with
full credit for prior service with South Jersey and South Jersey Savings for
purposes of eligibility and vesting. As of the Effective Time, Richmond County
shall make available employer-provided health and other employee welfare benefit
plans to each Continuing Employee on the same basis as it provides such coverage
to Richmond County employees except that any pre-existing condition, eligibility
waiting period or other limitations or exclusions otherwise applicable under
such plans to new employees shall not apply to a Continuing Employee or their
covered dependents who were covered under a similar South Jersey plan on the
Effective Date of the Merger.
(c) Except as otherwise provided in this Agreement, Richmond County
agrees to honor in accordance with their terms all plans, contracts,
arrangements, commitments or understandings disclosed in South Jersey's
Disclosure Letter, including with respect to benefits which vest or are
otherwise accrued or payable as a result of the consummation of the transactions
contemplated by this Agreement. Set forth in South Jersey's Disclosure Letter in
reasonable detail are estimates of the payments and benefits due under South
Jersey's employment agreements, change in control agreements and severance plan.
It is intended by Richmond County and South Jersey that the procedures and
methodologies used in preparing such estimates shall be followed in determining
the actual payments or benefits due under such agreements.
(d) The South Jersey Savings and Loan Association Employee Stock
Ownership Plan ("SOUTH JERSEY ESOP") shall be terminated as of, or prior to, the
Effective Time. As of the Effective Time, all shares held by the South Jersey
ESOP shall be converted in to the right to receive the Merger Consideration. As
soon as administratively practicable following the Effective Time, all
outstanding indebtedness of the South Jersey ESOP shall be repaid in full and
the balance remaining with respect to unallocated shares previously held by the
South Jersey ESOP shall be allocated and distributed to South Jersey ESOP
participants as provided in the South Jersey ESOP, subject to receipt of a
favorable determination letter from the IRS and unless otherwise required by
applicable law. The South Jersey Savings and Loan Association Money Purchase
Pension Plan ("SOUTH JERSEY PENSION PLAN") shall be terminated as of, or prior
to, the Effective Time and, subject to receipt of a favorable determination
letter from the IRS, distributions shall be made to participants as provided in
the plan. Notwithstanding anything in this SECTION 4.11(D) to the contrary,
distributions may be made to terminated employees of South Jersey or South
Jersey Savings as soon as administratively practicable after the determination
of final allocations and prior to the receipt of a determination letter from the
IRS.
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(e) South Jersey shall use its best efforts to obtain from each
holder of a South Jersey Option and to deliver to Richmond County at or before
the Closing (as defined in SECTION 7.1) an agreement to the cancellation of such
holder's South Jersey Options in exchange for a cash payment as described in
SECTION 1.4.
(f) At the Effective Time, Messrs. Colacicco, DiPaolo, Sidebotham
and Wampler and Ms. Brode shall each execute a consulting and/or noncompetition
agreement in the form attached hereto as Exhibit C containing such terms for
---------
each individual as are set forth in South Jersey's Disclosure Letter.
(g) The employees of South Jersey Savings shall be paid bonuses for
2000 pursuant to South Jersey's existing bonus program equal to the amounts
payable to each such employee as a bonus for 1999 multiplied by a fraction, the
numerator of which is the number of days in 2000 through and including the
Closing Date and the denominator of which is 366, and such bonuses shall be paid
at least five business days prior to the Closing Date. Set forth in South
Jersey's Disclosure Letter is a list of bonuses paid by South Jersey Savings for
1999.
(h) Employees of South Jersey Savings shall be entitled to receive
payment for accrued but unused vacation days in accordance with South Jersey
Savings' past practices, and any accrued but unused vacation days of employees
of South Jersey Savings as of the Closing Date shall, at the employee's option,
either be paid immediately prior to the Closing Date or taken as vacation time
as soon as practicable following the Closing Date. Richmond County acknowledges
and agrees that such vacation days shall include days that would otherwise have
been accrued by South Jersey or South Jersey Savings on December 31, 2000
prorated for the portion of the calendar year 2000 through the Effective Date.
South Jersey's Disclosure Letter sets forth, as of January 1, 2000, the number
of earned but unused vacation days for each employee, the dollar amount that
would be paid therefor, and the number of vacation days that each such employee
is expected to accrue during 2000.
(i) Richmond County agrees that South Jersey Savings may make
contributions to the South Jersey ESOP and the South Jersey Savings Pension Plan
prorated for the portion of the year 2000 through the Closing Date.
Section 4.12. Indemnification.
---------------
(a) From and after the Effective Time through the sixth anniversary
of the Effective Date, Richmond County (and any successor) agrees to indemnify
and hold harmless each present and former director and officer of South Jersey
and South Jersey Savings and each officer or employee of South Jersey and South
Jersey Savings that is serving or has served as a director or trustee of another
entity expressly at South Jersey's request or direction (each, an "INDEMNIFIED
PARTY"), against any costs or expenses (including reasonable attorneys' fees),
judgments, fines, amounts paid in settlement, losses, claims, damages or
liabilities (collectively, "COSTS") incurred in connection with any claim,
action, suit, proceeding or investigation, whether
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<PAGE> 45
civil, criminal, administrative or investigative, arising out of matters
existing or occurring at or prior to the Effective Time (including the
transactions contemplated by this Agreement), whether asserted or claimed prior
to, at or after the Effective Time, and to advance any such Costs to each
Indemnified Party as they are from time to time incurred, in each case to the
fullest extent such Indemnified Party would have been permitted to be
indemnified as a director, officer or employee of South Jersey and South Jersey
Savings and under the DGCL (as in effect on the Effective Date).
(b) Any Indemnified Party wishing to claim indemnification under
SECTION 4.12(A), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify Richmond County thereof, but the failure to
so notify shall not relieve Richmond County of any liability it may have
hereunder to such Indemnified Party if such failure does not materially and
substantially prejudice Richmond County. In the event of any such claim, action,
suit, proceeding or investigation: (i) Richmond County shall have the right to
assume the defense thereof with counsel reasonably acceptable to the Indemnified
Party and Richmond County shall not be liable to such Indemnified Party for any
legal expenses of other counsel subsequently incurred by such Indemnified Party
in connection with the defense thereof, except that if Richmond County does not
elect to assume such defense within a reasonable time or counsel for the
Indemnified Party at any time advises that there are issues which raise
conflicts of interest between Richmond County and the Indemnified Party (and
counsel for Richmond County does not disagree), the Indemnified Party may retain
counsel satisfactory to such Indemnified Party, and Richmond County shall remain
responsible for the reasonable fees and expenses of such counsel as set forth
above, to be paid promptly as statements therefor are received; PROVIDED,
HOWEVER, that Richmond County shall be obligated pursuant to this paragraph (b)
to pay for only one firm of counsel for all Indemnified Parties in any one
jurisdiction with respect to any given claim, action, suit, proceeding or
investigation unless the use of one counsel for such Indemnified Parties would
present such counsel with a conflict of interest; (ii) the Indemnified Party
will reasonably cooperate in the defense of any such matter; and (iii) Richmond
County shall not be liable for any settlement effected by an Indemnified Party
without its prior written consent, which consent may not be withheld unless such
settlement is unreasonable in light of such claims, actions, suits, proceedings
or investigations against, or defenses available to, such Indemnified Party.
(c) Richmond County shall pay all reasonable Costs, including
attorneys' fees, that may be incurred by any Indemnified Party in successfully
enforcing the indemnity and other obligations provided for in this SECTION 4.12
to the fullest extent permitted by law. The rights of each Indemnified Party
hereunder shall be in addition to any other rights such Indemnified Party may
have under applicable law.
(d) Richmond County shall maintain South Jersey's existing directors
and officers' insurance policy (or provide a policy providing comparable
coverage and amounts on terms no less favorable to the persons currently covered
by South Jersey's existing policy, including Richmond County's existing policy
if its meets the foregoing standard) covering
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<PAGE> 46
persons who are currently covered by such insurance for a period of three years
after the Effective Date; PROVIDED, HOWEVER, that Richmond County shall not be
required to expend annually for such insurance amounts in excess of 150% of the
per annum premiums paid by South Jersey for the policy year that includes the
date of this Agreement, and PROVIDED FURTHER, that if the annual premiums for
such insurance exceed such 150% amount, then Richmond County shall be obligated
to obtain the most advantageous coverage of directors' and officers' insurance
obtainable for a cost not exceeding such 150% amount, and provided that the
officers and directors of South Jersey may be required to make applications and
provide customary representations and warranties to Richmond County's insurance
carrier for the purpose of obtaining such insurance.
(e) In the event Richmond County or any of its successors or assigns
(i) consolidates with or merges into any other person or entity and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers or conveys all or substantially all of its properties
and assets to any person or entity, then, and in each such case, to the extent
necessary, proper provision shall be made so that the successors and assigns of
Richmond County assume the obligations set forth in this SECTION 4.12.
(f) The provisions of this SECTION 4.12 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
representatives.
Section 4.13. South Jersey Savings Charitable Foundation. South
------------------------------------------
Jersey shall request the Board of Directors of the South Jersey Savings
Charitable Foundation (the "FOUNDATION") to amend the Bylaws of the Foundation
to increase the Board of Directors of the Foundation by two members and to
appoint, as of the Effective Time, two members of the Board of Directors of
Richmond County to fill the newly created vacancies.
ARTICLE V
CONDITIONS TO CONSUMMATION
--------------------------
Section 5.1. Conditions to Each Party's Obligations. The respective
--------------------------------------
obligations of each party to effect the Merger, the Bank Merger and any other
transactions contemplated by this Agreement shall be subject to the satisfaction
of the following conditions:
(a) Stockholder Approval. This Agreement shall have been approved
--------------------
by the requisite vote of South Jersey's stockholders in accordance with
applicable laws and regulations.
(b) Regulatory Approvals. All approvals, consents or waivers of any
--------------------
Governmental Entity required to permit consummation of the transactions
contemplated by this Agreement shall have been obtained and shall remain in full
force and effect, and all statutory waiting periods shall have expired;
PROVIDED, HOWEVER, that none of such approvals, consents or waivers shall
contain any condition or requirement that would so materially and adversely
impact the economic or business benefits to Richmond County of the transactions
contemplated hereby
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<PAGE> 47
that, had such condition or requirement been known, Richmond County would not,
in its reasonable judgment, have entered into this Agreement.
(c) No Injunctions or Restraints; Illegality. No party hereto shall
----------------------------------------
be subject to any order, decree or injunction of a court or agency of competent
jurisdiction that enjoins or prohibits the consummation of the Merger or the
Bank Merger and no Governmental Entity shall have instituted any proceeding for
the purpose of enjoining or prohibiting the consummation of the Merger, the Bank
Merger, or any transactions contemplated by this Agreement. No statute, rule or
regulation shall have been enacted, entered, promulgated or enforced by any
Governmental Entity which prohibits, restricts or makes illegal consummation of
the Merger or the Bank Merger.
Section 5.2. Conditions to the Obligations of Richmond County. The
------------------------------------------------
obligations of Richmond County to effect the Merger, the Bank Merger and any
other transactions contemplated by this Agreement shall be further subject to
the satisfaction of the following additional conditions:
(a) Representations and Warranties; Performance of Obligations. Each
----------------------------------------------------------
of the obligations of South Jersey required to be performed by it at or prior to
the Closing pursuant to the terms of this Agreement shall have been duly
performed and complied with in all material respects and the representations and
warranties of South Jersey contained in this Agreement shall be true and
correct, subject to SECTION 2.1, as of the date of this Agreement and as of the
Effective Time as though made at and as of the Effective Time (except as to any
representation or warranty which specifically relates to an earlier date), and
Richmond County shall have received a certificate to the foregoing effect signed
by the chief executive officer and the chief financial or principal accounting
officer of South Jersey.
(b) Third Party Consents. South Jersey shall have obtained the
--------------------
consent or approval of each person (other than the governmental approvals or
consents referred to in SECTION 5.1(B)) whose consent or approval shall be
required in order to permit the succession by Richmond County to any obligation,
right or interest of South Jersey under any loan or credit agreement, note,
mortgage, indenture, lease, license or other agreement or instrument to which
South Jersey or South Jersey Savings is a party or is otherwise bound, except
those for which failure to obtain such consents and approvals would not,
individually or in the aggregate, have a Material Adverse Effect on Richmond
County or upon the consummation of the transactions contemplated hereby.
(c) Dissenters's Shares. On the Closing Date, Dissenters' Shares
-------------------
shall not constitute more than 15% of the outstanding shares of South Jersey
Common Stock.
(d) Charter Conversion. Prior to the Effective Time, South Jersey
------------------
Savings shall have converted from a New Jersey chartered savings and loan
association to a New Jersey chartered savings bank.
44
<PAGE> 48
(e) Good Standing and Other Certificates. Richmond County shall have
------------------------------------
received certificates (such certificates to be dated as of a day as close as
practicable to the Closing Date) from appropriate authorities as to the
corporate existence of South Jersey and South Jersey Savings and such other
documents and certificates to evidence fulfillment of the conditions set forth
in SECTIONS 5.1 and 5.2 as Richmond County may reasonably require.
Section 5.3. Conditions to the Obligations of South Jersey. The
---------------------------------------------
obligations of South Jersey to effect the Merger, the Bank Merger and any other
transactions contemplated by this Agreement shall be further subject to the
satisfaction of the following additional conditions:
(a) Representations and Warranties; Performance of Obligations. Each
----------------------------------------------------------
of the obligations of Richmond County required to be performed by it at or prior
to the Closing pursuant to the terms of this Agreement shall have been duly
performed and complied with in all material respects and the representations and
warranties of Richmond County contained in this Agreement shall be true and
correct, subject to SECTION 2.1, as of the date of this Agreement and as of the
Effective Time as though made at and as of the Effective Time (except as to any
representation or warranty which specifically relates to an earlier date), and
South Jersey shall have received a certificate to the foregoing effect signed by
the chief executive officer and the chief financial or principal accounting
officer of Richmond County.
(b) Deposit of Merger Consideration. Richmond County shall have
-------------------------------
deposited with the Paying Agent sufficient cash to pay the aggregate Merger
Consideration and South Jersey shall have received a certificate from the Paying
Agent to such effect.
(c) Good Standing and Other Certificates. South Jersey shall have
------------------------------------
received certificates (such certificates to be dated as of a day as close as
practicable to the Closing Date) from appropriate authorities as to the
corporate existence of Richmond County and such other documents and certificates
to evidence fulfillment of the conditions set forth in SECTIONS 5.1 and 5.3 as
South Jersey may reasonably require.
ARTICLE VI
TERMINATION
-----------
Section 6.1. Termination. This Agreement may be terminated, and the
-----------
Merger abandoned, at or prior to the Effective Date, either before or after any
requisite stockholder approval:
(a) by the mutual consent of Richmond County and South Jersey in a
written instrument, if the Board of Directors of each so determines by vote of a
majority of the members of its entire Board; or
(b) by either Richmond County or South Jersey, in the event of the
failure of the stockholders of South Jersey to approve the Agreement at the
Stockholder Meeting; PROVIDED,
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<PAGE> 49
HOWEVER, that South Jersey shall only be entitled to terminate the Agreement
pursuant to this clause if it has complied in all material respects with its
obligations under SECTION 4.8 and SECTION 4.9; or
(c) by either Richmond County or South Jersey, if either (i) any
approval, consent or waiver of a governmental agency required to permit
consummation of the transactions contemplated hereby shall have been denied or
(ii) any governmental authority of competent jurisdiction shall have issued a
final, unappealable order enjoining or otherwise prohibiting consummation of the
transactions contemplated by this Agreement; or
(d) by either Richmond County or South Jersey, in the event that the
Merger is not consummated by December 31, 2000, unless the failure to so
consummate by such time is due to the breach of any representation, warranty or
covenant contained in this Agreement by the party seeking to terminate; or
(e) by either Richmond County or South Jersey (provided that the
party seeking termination is not then in material breach of any representation,
warranty, covenant or other agreement contained herein), in the event of (i) a
failure to perform or comply by the other party with any covenant or agreement
of such other party contained in this Agreement, which failure or non-compliance
is material in the context of the transactions contemplated by this Agreement,
or (ii) any inaccuracies, omissions or breach in the representations,
warranties, covenants or agreements of the other party contained in this
Agreement the circumstances as to which either individually or in the aggregate
have, or reasonably could be expected to have, a Material Adverse Effect on such
other party; in either case which has not been or cannot be cured within 30
calendar days after written notice thereof is given by the party seeking to
terminate to such other party; or
(f) by Richmond County, if the Board of Directors of South Jersey
does not publicly recommend in the Proxy Statement that stockholders approve and
adopt this Agreement and the Merger or if, after recommending in the Proxy
Statement that stockholders approve and adopt this Agreement and the Merger, the
Board of Directors of South Jersey shall have withdrawn, qualified or revised
such recommendation in any respect materially adverse to Richmond County.
Section 6.2. Effect of Termination. In the event of termination of
---------------------
this Agreement by either Richmond County or South Jersey prior to the
consummation of the Merger as provided in SECTION 6.1, this Agreement shall
forthwith become void and have no effect except (i) the obligations of the
parties under SECTIONS 4.3 (with respect to confidentiality), and 8.6 shall
survive any termination of this Agreement and (ii) that notwithstanding anything
to the contrary contained in this Agreement, no party shall be relieved or
released from any liabilities or damages arising out of its willful breach of
any provision of this Agreement.
46
<PAGE> 50
ARTICLE VII
CLOSING, EFFECTIVE DATE AND EFFECTIVE TIME
------------------------------------------
Section 7.1. Effective Date and Effective Time. The closing of the
---------------------------------
transactions contemplated hereby ("CLOSING") shall take place at the offices of
Muldoon, Murphy & Faucette LLP, 5101 Wisconsin Avenue, N.W., Washington, DC
20016, unless another place is agreed to by Richmond County and South Jersey, on
a date designated by Richmond County ("CLOSING DATE") that is no later than 14
days following the date on which the expiration of the last applicable waiting
period in connection with notices to and approvals of governmental authorities
shall occur and all conditions to the consummation of this Agreement are
satisfied or waived (excluding conditions that, by their nature, cannot be
satisfied until the Closing Date), or on such other date as may be agreed to by
the parties. Prior to the Closing Date, Acquisition Sub and South Jersey shall
execute a certificate of merger in accordance with all appropriate legal
requirements, which shall be filed as required by law on the Closing Date, and
the Merger provided for therein shall become effective upon such filing or on
such date as may be specified in such certificate of merger. The date of such
filing or such later effective date as specified in the certificate of merger is
herein referred to as the "EFFECTIVE DATE." The "EFFECTIVE TIME" of the Merger
shall be as set forth in the certificate of merger.
Section 7.2. Deliveries at the Closing. Subject to the provisions of
-------------------------
Articles V and VI, on the Closing Date there shall be delivered to Richmond
County and South Jersey the documents and instruments required to be delivered
under Article V.
ARTICLE VIII
CERTAIN OTHER MATTERS
---------------------
Section 8.1. Certain Definitions; Interpretation. As used in this
-----------------------------------
Agreement, the following terms shall have the meanings indicated:
"MATERIAL" means material to Richmond County or South Jersey (as the
case may be) and its respective subsidiaries, taken as a whole.
"MATERIAL ADVERSE EFFECT" means an effect which is material and
adverse to the business, financial condition or results of operations of
South Jersey and South Jersey Savings taken as a whole or Richmond County
and its subsidiaries taken as a whole, as the case may be; PROVIDED,
HOWEVER, that any such effect resulting from any (i) changes in laws,
rules or regulations or GAAP or regulatory accounting requirements or
interpretations thereof that apply to South Jersey and South Jersey
Savings or Richmond County and Richmond County Savings, as the case may
be, or to similarly situated financial and/or depository institutions or
(ii) changes in economic conditions affecting financial institutions
generally, including but not limited to, changes in the general level of
market interest rates shall not be considered in determining if a Material
Adverse Effect has occurred.
47
<PAGE> 51
"KNOWLEDGE" shall mean, with respect to a party hereto, actual
knowledge of any of the members of the Board of Directors of that party or
any officer of that party with the title ranking not less than senior vice
president.
"PERSON" includes an individual, corporation, limited liability
company, partnership, association, trust or unincorporated organization.
When a reference is made in this Agreement to Sections or Exhibits,
such reference shall be to a Section of, or Exhibit to, this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for ease of reference only and shall not affect the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed followed by the
words "without limitation." Any singular term in this Agreement shall be deemed
to include the plural, and any plural term the singular. Any reference to gender
in this Agreement shall be deemed to include any other gender.
Section 8.2. Survival. Only those agreements and covenants of the
--------
parties that are by their terms applicable in whole or in part after the
Effective Time, including SECTIONS 4.3, 4.11 and 4.12 of this Agreement, shall
survive the Effective Time. All other representations, warranties, agreements
and covenants shall be deemed to be conditions of the Agreement and shall not
survive the Effective Time.
Section 8.3. Waiver; Amendment. Prior to the Effective Time, any
-----------------
provision of this Agreement may be (i) waived in writing by the party benefitted
by the provision or (ii) amended or modified at any time (including the
structure of the transaction) by an agreement in writing between the parties
hereto except that, after the vote by the stockholders of South Jersey, no
amendment or modification may be made that would reduce the amount or alter or
change the kind of consideration to be received by holders of South Jersey
Common Stock or contravene any provision of the DGCL or the New Jersey, New York
and federal banking laws, rules and regulations.
Section 8.4. Counterparts. This Agreement may be executed in
------------
counterparts each of which shall be deemed to constitute an original, but all of
which together shall constitute one and the same instrument.
Section 8.5. Governing Law. This Agreement shall be governed by, and
-------------
interpreted in accordance with, the laws of the State of Delaware, without
regard to conflicts of laws principles.
Section 8.6. Expenses. Each party hereto will bear all expenses
--------
incurred by it in connection with this Agreement and the transactions
contemplated hereby.
Section 8.7. Notices. All notices, requests, acknowledgments and
-------
other communications hereunder to a party shall be in writing and shall be
deemed to have been duly given when delivered by hand, overnight courier or
facsimile transmission (confirmed in writing)
48
<PAGE> 52
to such party at its address or facsimile number set forth below or such other
address or facsimile transmission as such party may specify by notice (in
accordance with this provision) to the other party hereto.
If to South Jersey, to:
South Jersey Financial Corporation, Inc.
4651 Route 42
Turnersville, New Jersey 08012
Attn: Robert J. Colacicco
Facsimile: (856) 629-3095
With copies to:
Douglas J. McClintock, Esq.
Thacher Proffitt & Wood
Two Wold Trade Center
39th Floor
New York, New York 10048
Facsimile: (212) 432-2898
If to Richmond County, to:
Richmond County Financial Corp.
1214 Castleton Avenue
Staten Island, New York 10310
Attn: Michael F. Manzulli
Facsimile: (718) 390-0224
With copies to:
Douglas P. Faucette, Esq.
Eric S. Kracov, Esq.
Muldoon, Murphy & Faucette LLP
5101 Wisconsin Avenue, N.W.
Washington, D.C. 20016
Facsimile: (202) 966-9409
Section 8.8. Entire Agreement; etc. This Agreement, together with
----------------------
the Plan of Bank Merger, the Exhibits and Disclosure Letters, represents the
entire understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
heretofore made. All terms and provisions of this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns. Except for SECTIONS 4.11 and 4.12, which confer rights
on the parties described
49
<PAGE> 53
therein, nothing in this Agreement is intended to confer upon any other person
any rights or remedies of any nature whatsoever under or by reason of this
Agreement.
Section 8.9. Successors and Assigns; Assignment. This Agreement
----------------------------------
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; PROVIDED, HOWEVER, that this Agreement may
not be assigned by either party hereto without the written consent of the other
party.
50
<PAGE> 54
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the date first above
written.
RICHMOND COUNTY FINANCIAL CORP.
By: /s/ Michael F. Manzulli
--------------------------------------
Michael F. Manzulli
Chairman and Chief Executive Officer
RICHMOND COUNTY ACQUISITION, INC.
By: /s/ Anthony E. Burke
--------------------------------------
Anthony E. Burke
President and Chief Operating Officer
SOUTH JERSEY FINANCIAL CORPORATION, INC.
By: /s/ Robert J. Colacicco
--------------------------------------
Robert J. Colacicco
President and Chief Executive Officer
51
EXHIBIT 11
RICHMOND COUNTY FINANCIAL CORP.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS NINE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
---------------------- ----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Income $ 8,809 $ 5,380 $ 26,946 $ 16,754
========== ========== ========== ==========
Weighted average common shares outstanding 25,923,987 22,515,575 27,181,803 23,431,027
Common stock equivalents due to dilutive effect of
stock options - - - -
---------- ---------- ---------- ----------
Total weighted average common shares and
equivalents 25,923,987 22,515,575 27,181,803 23,431,027
========== ========== ========== ==========
Basic earnings per common and common share
equivalents $ 0.34 $ 0.24 $ 0.99 $ 0.73
========== ========== ========== ==========
Total weighted average common shares and
equivalents outstanding 25,923,987 22,515,575 27,181,803 23,431,027
Additional dilutive shares using ending period
market value versus average market value
for the period when utilizing the treasury
stock method regarding stock options 89,528 (157,942) 226,705 (192,243)
---------- ---------- ---------- ----------
Total shares for dilutive earnings per share 26,013,515 22,357,633 27,408,508 23,238,784
========== ========== ========== ==========
Diluted earnings per common share equivalents $ 0.34 $ 0.24 $ 0.98 $ 0.73
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 46,152
<INT-BEARING-DEPOSITS> 4,577
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,032,493
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 1,603,288
<ALLOWANCE> 14,556
<TOTAL-ASSETS> 2,902,522
<DEPOSITS> 1,746,904
<SHORT-TERM> 250,100
<LIABILITIES-OTHER> 13,152
<LONG-TERM> 575,432
0
0
<COMMON> 327
<OTHER-SE> 316,607
<TOTAL-LIABILITIES-AND-EQUITY> 2,902,522
<INTEREST-LOAN> 83,563
<INTEREST-INVEST> 60,460
<INTEREST-OTHER> 305
<INTEREST-TOTAL> 144,328
<INTEREST-DEPOSIT> 39,873
<INTEREST-EXPENSE> 72,678
<INTEREST-INCOME-NET> 71,650
<LOAN-LOSSES> 900
<SECURITIES-GAINS> 734
<EXPENSE-OTHER> 38,980
<INCOME-PRETAX> 42,305
<INCOME-PRE-EXTRAORDINARY> 42,305
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,946
<EPS-BASIC> .99
<EPS-DILUTED> .98
<YIELD-ACTUAL> 7.18
<LOANS-NON> 5,033
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 13,885
<CHARGE-OFFS> 317
<RECOVERIES> 88
<ALLOWANCE-CLOSE> 14,556
<ALLOWANCE-DOMESTIC> 8,700
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 5,856
</TABLE>
