SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
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CHECK THE APPROPRIATE BOX:
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/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission Only (as
/X/ Definitive Proxy Statement permitted by Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant toss.240.14a-11(c) orss.240.14a-12
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/ / No fee required
/ / FEE COMPUTED ON TABLE BELOW PER EXCHANGE ACT RULES 14A-6(I)(1) AND 0-11.
(1) TITLE OF EACH CLASS OF SECURITIES TO WHICH TRANSACTION APPLIES:
South Jersey Financial Corporation, Inc. common stock, par
value $0.01 per share
(2) AGGREGATE NUMBER OF SECURITIES TO WHICH TRANSACTION APPLIES:
3,423,571 shares of South Jersey common stock and 379,343
options to purchase shares of South Jersey common stock
(3) PER UNIT PRICE OR OTHER UNDERLYING VALUE OF TRANSACTION
COMPUTED PURSUANT TO EXCHANGE ACT RULE 0-11 (SET FORTH THE
AMOUNT ON WHICH THE FILING FEE IS CALCULATED AND STATE HOW IT
WAS DETERMINED):
The calculation fee of $14,036 is calculated by multiplying
1/50th of 1% by $70,178,464, which is the maximum aggregate
value of the transaction. The maximum aggregate value of the
transaction is based on: (i) the payment of $20.00 in cash for
each of the 3,423,571 shares of South Jersey common stock
outstanding and (ii) the payment of $4.50 in cash for each of
the 379,343 outstanding options to purchase South Jersey
common stock, which amount represents the difference between
the $20.00 per share merger consideration and the $15.50
exercise price of the stock options.
(4) PROPOSED MAXIMUM AGGREGATE VALUE OF TRANSACTION: $ 70,178,464
(calculated as described above)
(5) TOTAL FEE PAID: $14,036
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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SOUTH JERSEY FINANCIAL CORPORATION, INC.
4651 ROUTE 42
TURNERSVILLE, NEW JERSEY 08012
(856) 629-6000
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
Dear Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders
of South Jersey Financial Corporation, Inc., the holding company for South
Jersey Savings and Loan Association, Turnersville, New Jersey, which will be
held on Wednesday, July 26, 2000, at 10:00 a.m., New Jersey time, at the
Renaissance Room, 194 Fries Mill Road, Turnersville, New Jersey.
At the Annual Meeting, we will ask you to consider and vote upon the
approval and adoption of a merger agreement pursuant to which South Jersey will
be acquired by Richmond County Financial Corp. through a merger of a subsidiary
of Richmond County with and into South Jersey. Following the merger, it is
expected that South Jersey will be consolidated into Richmond County. If we
complete the proposed merger, each of your shares of South Jersey common stock
(unless you exercise appraisal rights), will be converted into the right to
receive a cash payment of $20.00, without interest. This amount will be taxable
for U.S. federal income tax purposes for U.S. taxpayers. After the completion of
the merger, you will no longer have an equity interest in South Jersey.
South Jersey common stock is traded on the Nasdaq National Market under
the symbol "SJFC." As of the close of business on March 15, 2000, which is the
day we announced the merger, the price of South Jersey common stock was $16.69
per share. If the merger is completed, South Jersey common stock will no longer
be traded on Nasdaq. Completion of the merger is subject to certain conditions,
including the approval of the merger agreement by South Jersey's shareholders
and the approval of the merger by various regulatory agencies.
At the Annual Meeting, we will also ask you to consider and vote upon
the election of three directors to serve on the South Jersey Board of Directors
for a term of three years or until completion of the merger. YOUR VOTE IS VERY
IMPORTANT. Whether or not you plan to attend the Annual Meeting, please take the
time to vote by completing and mailing the enclosed proxy card to us. If you
date and mail your proxy card without indicating how you want to vote, your
proxy will be counted as a vote FOR approval and adoption of the merger
agreement and FOR each of the three nominees for director. If you do not return
your card, or if you do not instruct your broker how to vote any shares held for
you in "street name," the effect will be a vote against the merger agreement.
This Proxy Statement gives you detailed information about the proposed
merger, and a copy of the merger agreement is attached hereto as Appendix A. We
encourage you to read this entire document, including its Appendices, carefully.
Also enclosed is a copy of South Jersey's Annual Report on Form 10- KSB for the
fiscal year ended December 31, 1999.
THE BOARD OF DIRECTORS OF SOUTH JERSEY HAS DETERMINED THAT THE MERGER
AND THE ELECTION OF THE THREE NOMINEES AS DIRECTORS ARE IN THE BEST INTERESTS OF
SOUTH JERSEY AND ITS SHAREHOLDERS AND HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND FOR EACH NOMINEE FOR DIRECTOR.
Sincerely yours,
Robert J. Colacicco
PRESIDENT AND CHIEF EXECUTIVE OFFICER
This Proxy Statement is dated June 16, 2000 and is
first being mailed to shareholders of South
Jersey on June 16, 2000.
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SOUTH JERSEY FINANCIAL CORPORATION, INC.
4651 ROUTE 42
TURNERSVILLE, NEW JERSEY 08012
(856) 629-6000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON WEDNESDAY, JULY 26, 2000
The Annual Meeting of Shareholders of South Jersey Financial
Corporation, Inc., a Delaware corporation and the holding company for South
Jersey Savings and Loan Association, will be held on Wednesday, July 26, 2000,
at 10:00 a.m., New Jersey time, at the Renaissance Room, 194 Fries Mill Road,
Turnersville, New Jersey. The purpose of the Annual Meeting is to consider and
vote upon the following matters:
1. The approval and adoption of the Agreement and Plan of Merger,
dated as of March 15, 2000, by and among Richmond County
Financial Corp., a Delaware corporation, Richmond County
Acquisition, Inc., a Delaware corporation and wholly owned
subsidiary of Richmond County, and South Jersey, as more fully
described in the accompanying Proxy Statement;
2. The election of three directors for terms of three years each
or until completion of the merger; and
3. Such other matters as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
We have fixed the close of business on June 8, 2000 as the record date
for determining those South Jersey shareholders entitled to vote at the Annual
Meeting. Accordingly, only shareholders of record on that date are entitled to
notice of, and to vote at, the Annual Meeting or any adjournment or postponement
thereof. A list of shareholders entitled to vote at the Annual Meeting will be
available for examination by South Jersey shareholders for any purpose germane
to the meeting, during ordinary business hours, beginning 10 days prior to the
date of the Annual Meeting, at South Jersey's principal executive offices at
4651 Route 42, Turnersville, New Jersey 08012.
If South Jersey shareholders approve and adopt the merger agreement at
the Annual Meeting and the merger occurs, any shareholder of South Jersey
entitled to vote on the merger agreement at the Annual Meeting who does not vote
in favor of the merger has the right to receive payment of the fair value of
such shareholder's shares of South Jersey common stock upon compliance with the
provisions of Section 262 of the Delaware General Corporation Law, a copy of
which is included as Appendix D to the Proxy Statement attached to this Notice
of Annual Meeting.
Whether or not you plan to attend the Annual Meeting in person, please
complete, date, sign and return the enclosed proxy card in the enclosed
envelope. The envelope requires no postage if mailed in the United States. If
you attend the Annual Meeting, you may vote in person if you wish, even if you
have previously returned your proxy card. However, if you are a shareholder
whose shares are not registered in your own name, you will need appropriate
documentation from your recordholder to vote in person at the Annual Meeting.
By Order of the Board of Directors
Joseph M. Sidebotham
CORPORATE SECRETARY
Turnersville, New Jersey
June 16, 2000
SOUTH JERSEY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND FOR EACH NOMINEE FOR
DIRECTOR.
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TABLE OF CONTENTS
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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE ANNUAL MEETING.....................................................1
SUMMARY .........................................................................................................2
THE ANNUAL MEETING................................................................................................7
Date, Time and Place.....................................................................................7
Matters to be Considered.................................................................................7
Proxies ................................................................................................7
Solicitation of Proxies..................................................................................7
Record Date and Voting Rights; Vote Required.............................................................8
How to Vote Shares Held Through Brokers..................................................................8
Dissenting Shareholders..................................................................................9
Recommendation of the South Jersey Board.................................................................9
Stock Ownership of Certain Beneficial Owners.............................................................9
Stock Ownership of South Jersey's Management............................................................10
PROPOSAL 1-- THE MERGER..........................................................................................12
The Parties to the Merger...............................................................................12
Transaction Structure...................................................................................12
Background of the Merger................................................................................12
Recommendation of the South Jersey Board of Directors and Reasons for the Merger........................14
Opinion of South Jersey's Financial Advisor.............................................................15
Conversion of South Jersey Common Stock.................................................................21
Treatment of Options....................................................................................21
Procedures for Exchanging Your Stock Certificates.......................................................22
Effective Time..........................................................................................22
Changing the Structure of the Combination...............................................................23
Conditions to the Completion of the Merger..............................................................23
Representations and Warranties..........................................................................24
Conduct of Business Pending the Merger..................................................................25
No Solicitation by South Jersey.........................................................................28
Regulatory Approvals Required for the Merger............................................................29
Material Federal Income Tax Consequences................................................................31
Termination of the Merger Agreement.....................................................................31
Waiver and Amendment of the Merger Agreement............................................................32
Expenses ...............................................................................................32
Accounting Treatment....................................................................................32
Appraisal Rights........................................................................................32
Interests of Certain Persons in the Merger..............................................................34
Employee Matters........................................................................................36
Agreement to Vote in Favor of the Merger................................................................37
Management and Operations Following the Merger..........................................................37
Stock Option Agreement..................................................................................37
PRICE RANGE OF COMMON STOCK AND DIVIDENDS........................................................................40
PROPOSAL 2-- ELECTION OF DIRECTORS...............................................................................41
General ...............................................................................................41
Information as to Nominees and Continuing Directors.....................................................41
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Nominees for Election as Directors......................................................................42
Continuing Directors....................................................................................42
Board and Committee Meetings............................................................................43
Directors' Compensation.................................................................................43
Executive Officers......................................................................................44
Performance Graph.......................................................................................45
Executive Compensation..................................................................................46
Employment Agreements...................................................................................47
Change in Control Agreements............................................................................48
Employee Severance Compensation Plan....................................................................48
Supplemental Executive Retirement Plan..................................................................49
Stock Option Plan and Restricted Stock Plan.............................................................49
Transactions With Certain Related Persons...............................................................49
Other Transactions With Affiliates......................................................................50
Compliance with Section 16(a) of the Exchange Act.......................................................50
INDEPENDENT PUBLIC ACCOUNTANTS...................................................................................50
SHAREHOLDER PROPOSALS............................................................................................50
OTHER MATTERS....................................................................................................51
WHERE YOU CAN FIND MORE INFORMATION..............................................................................51
FORWARD-LOOKING STATEMENTS.......................................................................................51
Appendix A -- Agreement and Plan of Merger
Appendix B -- Stock Option Agreement
Appendix C -- Opinion of Sandler O'Neill & Partners, L.P.
Appendix D -- Section 262 of the Delaware General Corporation Law
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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE ANNUAL MEETING
Q: WHAT DO I NEED TO DO NOW?
A: After you have carefully read this document, just indicate on your proxy
card how you want to vote. Complete, sign, date and mail the proxy card in
the enclosed postage-paid return envelope as soon as possible so that your
shares will be represented and voted at the Annual Meeting. The South Jersey
Board of Directors unanimously recommends that you vote to approve and adopt
the merger agreement and that you vote for each nominee for director.
Q: WHAT DO I DO IF I WANT TO CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY
CARD?
A: You may change your vote by revoking your proxy in any of the three
following ways:
o by sending a written notice to the Corporate Secretary of South Jersey
prior to the Annual Meeting stating that you would like to revoke your
proxy;
o by completing, signing and dating another proxy card and returning it
by mail prior to the Annual Meeting; or
o by attending the Annual Meeting and voting in person.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES AT THIS TIME?
A: No. After we complete the merger, Richmond County will send you written
instructions for exchanging your stock certificates for the merger
consideration.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: If you do not provide your broker with instructions on how to vote your
shares held in "street name," your broker will not be permitted to vote your
shares on the proposal to approve and adopt the merger agreement. You should
therefore provide your broker with instructions as to how to vote your
shares. Failure to instruct your broker as to how to vote your shares will
be the equivalent of voting against the merger agreement. Your broker may
vote your shares on the proposal regarding the election of directors without
specific instructions from you.
Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A: We presently expect to complete the merger in the third quarter of 2000.
However, we cannot assure you when or if the merger will occur. We must
first obtain the approval of our shareholders at the Annual Meeting and the
necessary regulatory approvals.
Q: WHO CAN I CALL WITH QUESTIONS ABOUT THE ANNUAL MEETING OR THE MERGER?
A: You can call Joseph M. Sidebotham, Corporate Secretary of South Jersey, at
(856) 629-6000.
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SUMMARY
THIS BRIEF SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THE PROXY
STATEMENT. IT DOES NOT CONTAIN ALL OF THE INFORMATION THAT MAY BE IMPORTANT TO
YOU. YOU SHOULD CAREFULLY READ THE ENTIRE PROXY STATEMENT AND THE OTHER
DOCUMENTS TO WHICH THIS DOCUMENT REFERS YOU TO FULLY UNDERSTAND THE MERGER. SEE
"WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 51. EACH ITEM IN THIS SUMMARY
INCLUDES A PAGE REFERENCE DIRECTING YOU TO A MORE COMPLETE DESCRIPTION OF THAT
ITEM.
RICHMOND COUNTY WILL ACQUIRE SOUTH JERSEY
(PAGE 12)
Richmond County will acquire South Jersey through the merger of a
subsidiary of Richmond County with and into South Jersey. After this merger,
South Jersey will be a subsidiary of Richmond County. It is anticipated that,
following the merger, South Jersey will be consolidated into Richmond County. We
expect to complete the merger in the third quarter of 2000.
A copy of the merger agreement is attached to this Proxy Statement as
Appendix A. Please read the merger agreement carefully. It is the legal document
that governs the merger.
EACH SHARE OF SOUTH JERSEY COMMON STOCK WILL BE CONVERTED INTO THE RIGHT TO
RECEIVE A CASH PAYMENT OF $20.00 (PAGE 21)
When we complete the merger, each of your shares of South Jersey common
stock will automatically be converted into the right to receive a cash payment
of $20.00, without interest, from Richmond County (unless you exercise appraisal
rights).
You must surrender your South Jersey common stock certificates to receive
the $20.00 per share merger consideration from Richmond County. This will not be
necessary, however, until you receive written instructions shortly after the
merger is completed. You should not send your South Jersey common stock
certificates to South Jersey, Richmond County or anyone else until you receive
these instructions.
FEDERAL INCOME TAX CONSEQUENCES (PAGE 31)
The merger will be a taxable transaction to you for U.S. federal income tax
purposes. You will recognize gain or loss in the merger in an amount determined
by the difference between the payment received ($20.00 per share) and your tax
basis in the South Jersey common stock you exchange for that payment. However,
your tax consequences will depend on your personal situation. Please consult
with your own tax advisor to determine the particular tax consequences of the
merger to you.
WE HAVE RECEIVED AN OPINION OF OUR FINANCIAL ADVISOR THAT THE MERGER
CONSIDERATION IS FAIR TO YOU FROM A FINANCIAL POINT OF VIEW (PAGE 15)
In deciding to approve the merger, the South Jersey Board of Directors
considered the opinion of its financial advisor, Sandler O'Neill & Partners,
L.P., that, as of March 15, 2000, the merger consideration of $20.00 per share
was fair to the holders of South Jersey common stock from a financial point of
view. That opinion has been updated and confirmed as of the date of this Proxy
Statement. A copy of Sandler O'Neill's updated opinion is attached to this Proxy
Statement as Appendix C. You should read the opinion completely to understand
the assumptions made, matters considered and qualifications and limitations on
the review undertaken by Sandler O'Neill in providing its opinion. South Jersey
has agreed to pay a fee of $400,000 to Sandler O'Neill for its services,
$100,000 of which was paid on March 17, 2000 and $300,000 of which will be paid
upon completion of the merger.
INFORMATION ABOUT THE PARTIES (PAGE 12)
RICHMOND COUNTY FINANCIAL CORP.
1214 Castleton Avenue
Staten Island, New York 10310
(718) 448-2800
Richmond County Financial Corp. is a savings and loan holding company
registered under the Home Owners' Loan Act, as amended, and
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incorporated in Delaware. Richmond County's wholly owned subsidiary, Richmond
County Savings Bank, a New York State chartered, FDIC- insured savings bank,
operates 14 full-service banking offices on Staten Island, one banking office in
Brooklyn and eight banking offices in the counties of Essex, Hudson and Union,
New Jersey. In addition, Richmond County operates a multi- family loan
processing center in Jericho, New York. At March 31, 2000, Richmond County had
total assets of $2.9 billion, deposits of $1.8 billion and shareholders' equity
of $317.0 million.
SOUTH JERSEY FINANCIAL CORPORATION, INC.
4651 Route 42
Turnersville, New Jersey 08012
(856) 629-6000
South Jersey is a savings and loan association holding company registered
under the Home Owners' Loan Act, as amended, and incorporated in Delaware. South
Jersey's wholly owned subsidiary, South Jersey Savings and Loan Association, a
New Jersey State chartered, FDIC- insured savings and loan association, operates
three full-service banking offices in the New Jersey counties of Gloucester and
Camden. At March 31, 2000, South Jersey had total assets of $328.1 million,
deposits of $240.5 million and shareholders' equity of $53.2 million.
MARKET PRICE INFORMATION (PAGE 40)
The common stock of South Jersey is listed and traded on the Nasdaq
National Market under the symbol "SJFC." On March 15, 2000, the last trading day
prior to our announcement of the merger, the closing sale price per share of
South Jersey common stock on Nasdaq was $16.69. On June 8, 2000, the closing
sale price of South Jersey common stock was $19.50.
CONVERSION OF SOUTH JERSEY STOCK OPTIONS
(PAGE 21)
In general, as of the effective time of the merger, each option to buy
South Jersey common stock granted under South Jersey's stock option plan that is
outstanding and not yet exercised will be canceled, and each holder of an
unexercised stock option will be entitled to receive a payment in an amount
equal to the number of shares subject to the stock option multiplied by the
difference between the $20.00 per share merger consideration and the exercise
price of the stock option, less any required withholding taxes.
However, under the merger agreement, five officers of South Jersey are
entitled to convert their stock options to equivalent stock options of Richmond
County.
OUR REASONS FOR THE MERGER (PAGE 14)
The South Jersey Board of Directors determined to recommend approval and
adoption of the merger agreement based on its consideration of a number of
factors, including:
o the strategic alternatives available to the company, as determined by
South Jersey's Board of Directors and management with the assistance of
South Jersey's financial advisor;
o the terms of the merger, including the amount of the consideration to
be received by South Jersey shareholders;
o the substantial premium to market prices represented by the $20.00 per
share merger consideration;
o the fact that the merger consideration to be received by South Jersey
shareholders was fixed at $20.00 per share in cash and would not be
subject to market fluctuation;
o the likelihood of approval of the merger by regulators; and
o the South Jersey Board of Directors' belief that the merger would
enable the combined company to better serve the convenience and needs
of its customers, employees and communities.
THE ANNUAL MEETING (PAGE 7)
The Annual Meeting will be held on Wednesday, July 26, 2000, at 10:00 a.m.,
New Jersey time, at the Renaissance Room, 194 Fries Mill Road, Turnersville, New
Jersey. At the Annual Meeting, you will be asked to consider and vote upon:
1. the approval and adoption of the merger agreement;
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2. the election of three directors; and
3. such other matters that may properly be submitted to a vote at the
Annual Meeting.
RECORD DATE AND VOTE REQUIRED FOR APPROVAL OF THE MERGER (PAGE 8)
You can vote at the Annual Meeting if you owned shares of South Jersey
common stock at the close of business on June 8, 2000. On that date, there were
3,423,571 shares of South Jersey common stock outstanding and entitled to vote.
You can cast one vote for each share of South Jersey common stock that you owned
on that date. In order to approve and adopt the merger agreement, the holders of
a majority of the outstanding shares of South Jersey common stock must vote in
favor of doing so. Thus, a failure to vote or an abstention has the same effect
as voting against the merger agreement. Directors are elected by a plurality of
the votes cast. Accordingly, the three nominees who receive the greatest number
of votes cast at the Annual Meeting will be elected as directors.
At the time the merger agreement was signed, one director of South Jersey,
Lawrence B. Seidman, signed an agreement with Richmond County pursuant to which
he agreed to vote his shares of South Jersey common stock in favor of the merger
agreement. Mr. Seidman beneficially owned approximately 9.6% of the outstanding
shares of South Jersey common stock as of June 8, 2000.
Whether or not you plan to attend the Annual Meeting in person, please
complete, date, sign and return the enclosed proxy card in the enclosed
postage-paid return envelope as soon as possible so that your shares will be
represented and voted at the Annual Meeting. You can revoke your proxy at any
time before we take a vote at the Annual Meeting by sending a written notice
revoking the proxy or a later-dated proxy to the Corporate Secretary of South
Jersey, or by attending the Annual Meeting and voting in person.
WE UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS APPROVE AND ADOPT THE MERGER
AGREEMENT (PAGE 14)
South Jersey's Board of Directors believes that the merger is fair to you
and in your best interests, and unanimously recommends that you vote FOR the
proposal to approve and adopt the merger agreement.
COMPLETION OF THE MERGER IS SUBJECT TO CERTAIN CONDITIONS (PAGE 23)
The completion of the merger is subject to a number of conditions being
met, including approval of the merger agreement by South Jersey's shareholders
and receipt of all required regulatory approvals.
Where the law permits, a party to the merger agreement could elect to waive
a condition to its obligation to complete the merger if that condition has not
been satisfied. We cannot be certain when (or if) the conditions to the merger
will be satisfied or waived or that the merger will be completed.
THE MERGER WILL BE ACCOUNTED FOR USING THE "PURCHASE" METHOD OF ACCOUNTING (PAGE
32)
Richmond County will account for the merger as a purchase for financial
reporting purposes.
WE MAY NOT COMPLETE THE MERGER WITHOUT ALL REQUIRED REGULATORY APPROVALS (PAGE
29)
We cannot complete the merger unless it is approved by the Office of Thrift
Supervision. The merger is also subject to the approval of, or notice to,
certain other regulatory authorities, including the Federal Deposit Insurance
Corporation, the New York State Banking Department and the New Jersey Department
of Banking and Insurance. In addition to obtaining these other approvals, we
have to wait from 15 to 30 days following the FDIC approval before we can
complete the merger.
All of the required applications and notices to the OTS and these other
regulatory authorities have been filed. As of the date of this Proxy Statement,
the required approvals have not been received. While we do not know of any
reason
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why the necessary approvals would not be obtained in a timely manner, we cannot
be certain when or if they will be received.
THE PARTIES MAY TERMINATE THE MERGER AGREEMENT WITHOUT COMPLETING THE MERGER
(PAGE 31)
South Jersey and Richmond County can mutually decide at any time to
terminate the merger agreement without completing the merger. Also, either of
South Jersey and Richmond County can decide, without the other's consent, to
terminate the merger agreement if any of the following occurs:
o the final denial of a required regulatory approval;
o the South Jersey shareholders do not approve and adopt the merger
agreement;
o the other party materially breaches a representation, warranty or
covenant contained in the merger agreement and does not cure the breach
or the breach cannot be cured within 30 days of notice (provided that
the party seeking termination is not in material breach); or
o the merger is not completed by December 31, 2000.
Richmond County may also terminate the merger agreement if:
o South Jersey's Board of Directors modifies its recommendation or
withdraws its approval of the merger agreement; or
o South Jersey determines to commence negotiations with, or provide
confidential information regarding South Jersey to, a third party in
connection with a possible merger or other similar transaction
involving South Jersey and that third party.
Regardless of whether we complete the merger, we will each pay our own fees
and expenses.
WE MAY AMEND THE TERMS OF THE MERGER AND WAIVE RIGHTS UNDER THE MERGER AGREEMENT
(PAGE 32)
We may jointly amend the terms of the merger agreement, and each of us may
waive our right to require the other party to adhere to any of those terms, to
the extent legally permissible. In addition, Richmond County may change the
structure of the transactions called for by the merger agreement. However, after
South Jersey's shareholders approve the merger agreement, they must approve any
amendment, waiver or change that would reduce the amount or change the kind of
consideration that will be received by South Jersey's shareholders.
SOUTH JERSEY HAS GRANTED RICHMOND COUNTY AN OPTION TO PURCHASE SHARES OF SOUTH
JERSEY COMMON STOCK (PAGE 37)
In connection with the merger agreement, South Jersey granted to Richmond
County an option to purchase up to 681,290 shares of South Jersey common stock
(approximately 19.9% of South Jersey's outstanding common stock) at a price of
$15.72 per share. The option is exercisable upon the occurrence of certain
events generally involving the acquisition of South Jersey or a significant
amount of its stock or assets by a third party. As of the date of this Proxy
Statement, we know of no such event that has occurred. The option could have the
effect of discouraging other companies from offering to acquire South Jersey.
The stock option agreement limits the aggregate profit Richmond County is
permitted to receive as a result of the exercise of any rights under the stock
option agreement to $3.5 million. A copy of the stock option agreement is
attached as Appendix B to this Proxy Statement.
SOUTH JERSEY'S SHAREHOLDERS ARE ENTITLED TO APPRAISAL RIGHTS AS A RESULT OF THE
MERGER (PAGE 32)
Pursuant to Section 262 of the Delaware General Corporation Law, the
holders of South Jersey common stock have the right to dissent from the merger
and have the "fair value" of their stock appraised by a court and paid to them
in cash. To do this, the holders of these shares must
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continually hold such shares through the effective time of the merger and must
follow the procedures set forth in Section 262, a copy of which is attached to
this Proxy Statement as Appendix D. Failure to comply strictly with the
provisions of Section 262 may result in a waiver or forfeiture of such appraisal
rights. Voting in favor of the merger agreement or returning a signed proxy card
which does not specify a vote against the approval and adoption of the merger
agreement will constitute a waiver of such appraisal rights and will nullify any
previously filed written demand for appraisal.
If you hold shares of South Jersey common stock and you dissent from the
merger and follow the required procedures, your shares of South Jersey common
stock will not be converted into the right to receive a cash payment of $20.00
per share from Richmond County. Instead, your only right will be to receive the
appraised value of your shares in cash.
Shareholders wishing to exercise their appraisal rights under Section 262
are urged to read carefully the discussion under "PROPOSAL 1 -- THE MERGER --
Appraisal Rights" in this Proxy Statement and Appendix D to this Proxy
Statement.
SOUTH JERSEY OFFICERS AND DIRECTORS HAVE SOME INTERESTS IN THE MERGER THAT ARE
DIFFERENT FROM OR IN ADDITION TO THEIR INTERESTS AS SHAREHOLDERS GENERALLY (PAGE
34)
South Jersey's directors and officers have interests in the merger that are
in addition to their interests as shareholders of South Jersey generally. These
interests exist because of employment agreements or change in control agreements
that some South Jersey officers have entered into with South Jersey and rights
that South Jersey officers and directors have under certain benefit, severance
and compensation plans maintained by South Jersey. These agreements and plans
will provide certain officers with severance benefits if their employment with
the combined company is terminated at or after the completion of the merger and
will provide certain officers with other rights and benefits as a result of the
completion of the merger.
Following the merger, the combined company will indemnify, and provide
directors' and officers' liability insurance for, the officers and directors of
South Jersey for events occurring before the merger, including events that are
related to the merger.
The South Jersey Board of Directors knew about these additional interests,
and considered them, when it approved the merger agreement.
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE (PAGE 51)
This Proxy Statement contains certain forward-looking statements with
respect to the financial condition, results of operations, plans, objectives,
future performance and business of South Jersey, as well as certain information
relating to the merger. Also, statements preceded by, followed by or that
include the words "believes," "expects," "anticipates," "estimates" or similar
expressions are forward-looking statements. These forward-looking statements
involve certain risks and uncertainties. Actual results may differ materially
from those contemplated by the forward-looking statements due to various
factors.
6
<PAGE>
THE ANNUAL MEETING
DATE, TIME AND PLACE
This Proxy Statement is first being mailed by South Jersey to its
shareholders on or about June 16, 2000, and is accompanied by a form of proxy
solicited by the South Jersey Board of Directors for use at the Annual Meeting,
to be held on Wednesday, July 26, 2000, at 10:00 a.m., New Jersey time, at the
Renaissance Room, 194 Fries Mill Road, Turnersville, New Jersey, and at any
adjournment or postponement of the Annual Meeting.
MATTERS TO BE CONSIDERED
At the Annual Meeting, you will be asked to consider and vote upon the
following matters:
1. the approval and adoption of the merger agreement;
2. the election of three directors for terms of three years each
or until completion of the merger; and
3. such other matters as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
You may also be asked to vote upon a proposal to adjourn or postpone
the Annual Meeting. South Jersey could use any adjournment or postponement of
the Annual Meeting for the purpose, among others, of allowing additional time
for soliciting additional votes to approve and adopt the merger agreement.
PROXIES
Whether or not you plan to attend the Annual Meeting in person, please
complete, date, sign and return the enclosed proxy card in the enclosed
postage-paid return envelope as soon as possible so that your shares will be
represented and voted at the Annual Meeting. You may revoke your proxy at any
time before it is exercised by submitting to the Corporate Secretary of South
Jersey a written notice of revocation, by properly executing a proxy having a
later date, or by attending the Annual Meeting and voting in person. Written
notices of revocation and other communications with respect to the revocation of
South Jersey proxies should be addressed to South Jersey Financial Corporation,
Inc., 4651 Route 42, Turnersville, New Jersey 08012, Attention: Joseph M.
Sidebotham, Corporate Secretary. All shares represented by valid proxies
received pursuant to this solicitation, and not revoked before they are
exercised, will be voted in the manner indicated in those proxies. IF YOU DO NOT
INDICATE HOW YOU WANT TO VOTE, YOUR PROXY WILL BE VOTED FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND FOR EACH OF THE NOMINEES FOR ELECTION AS A
DIRECTOR.
South Jersey's Board of Directors is unaware of any other matters to be
presented for action at the Annual Meeting. However, if other matters do
properly come before the Annual Meeting, South Jersey intends that shares
represented by proxies in the accompanying form will be voted, or not voted, at
the discretion of the persons named in the proxies. No proxy that is voted
against approval of the merger agreement will be voted in favor of any
adjournment or postponement of the Annual Meeting for the purpose of soliciting
additional votes to approve and adopt the merger agreement.
SOLICITATION OF PROXIES
South Jersey will bear the entire cost of soliciting proxies from South
Jersey shareholders. In addition to the solicitation of proxies by mail, South
Jersey will request that banks, brokers and other record holders
7
<PAGE>
send proxies and proxy material to the beneficial owners of stock held by them
and obtain voting instructions from such beneficial owners if necessary. South
Jersey will reimburse those record holders for their reasonable expenses in so
doing. South Jersey may engage proxy solicitors to assist it in soliciting
proxies from banks, brokers and nominees, and, if necessary, it may also use
several of its employees, who will not receive additional compensation, to
solicit proxies from South Jersey shareholders, either personally or by
telephone, telegram, facsimile or special delivery letter.
RECORD DATE AND VOTING RIGHTS; VOTE REQUIRED
The South Jersey Board of Directors has fixed June 8, 2000 as the
record date for determining South Jersey shareholders entitled to notice of and
to vote at the Annual Meeting. Accordingly, only South Jersey shareholders of
record at the close of business on the South Jersey record date will be entitled
to notice of and to vote at the Annual Meeting. At the close of business on the
South Jersey record date, there were 3,423,571 shares of South Jersey common
stock outstanding and held by approximately 1,087 holders of record. Each share
of South Jersey common stock outstanding on the South Jersey record date
entitles its holder to one vote on each matter to be voted upon at the Annual
Meeting.
The presence, in person or by proxy, of a majority of the shares of
South Jersey common stock outstanding and entitled to vote on the South Jersey
record date is necessary to constitute a quorum at the Annual Meeting. Shares
held by persons attending the Annual Meeting but not voting, and shares for
which holders have abstained from voting, will be counted as present at the
Annual Meeting for purposes of determining the presence or absence of a quorum.
Brokers who hold shares in nominee or "street name" for customers who are the
beneficial owners of those shares are prohibited from giving a proxy to vote
shares held for those customers on the proposal to approve and adopt the merger
agreement without specific instructions from those customers. If the brokers do
not receive instructions, the shares will not be voted on that proposal. These
"broker non-votes" will also be counted as present for purposes of determining
whether a quorum exists.
UNDER APPLICABLE DELAWARE LAW, APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE
OUTSTANDING SHARES OF SOUTH JERSEY COMMON STOCK ENTITLED TO VOTE AT THE ANNUAL
MEETING. ABSTENTIONS AND BROKER NON-VOTES WILL HAVE THE SAME EFFECT AS VOTES
AGAINST APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. ACCORDINGLY, WE URGE YOU
TO COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY IN
THE ENCLOSED, POSTAGE-PAID ENVELOPE.
Directors are elected by a plurality of the votes cast in person or by
proxy at the Annual Meeting. Accordingly, the three nominees who receive the
greatest number of votes cast at the Annual Meeting will be elected as
directors. Your broker may vote your shares of South Jersey common stock on the
proposal regarding the election of directors without specific instructions from
you.
As of the South Jersey record date, directors and executive officers of
South Jersey beneficially owned approximately 569,119 shares of South Jersey
common stock, entitling them to exercise approximately 16.6% of the voting power
of the South Jersey common stock entitled to vote at the Annual Meeting. On the
basis of the unanimous approval of the merger agreement by the South Jersey
Board of Directors, we currently expect that each director and executive officer
of South Jersey will vote the shares of South Jersey common stock beneficially
owned by him or her for approval and adoption of the merger agreement. As of the
South Jersey record date, neither Richmond County nor any of its directors or
executive officers owned any shares of South Jersey common stock.
HOW TO VOTE SHARES HELD THROUGH BROKERS
If you hold South Jersey common stock in the name of a broker or other
custodian and wish to vote those shares in person at the Annual Meeting, you
must obtain from the nominee holding the South Jersey
8
<PAGE>
common stock a properly executed "legal proxy" identifying you as a South Jersey
shareholder, authorizing you to act on behalf of the nominee at the Annual
Meeting and identifying the number of shares with respect to which the
authorization is granted.
DISSENTING SHAREHOLDERS
Any South Jersey shareholder has the right to dissent from approval and
adoption of the merger agreement and, subject to strict compliance with certain
requirements and procedures set forth in Section 262 of the Delaware General
Corporation Law ("DGCL"), to receive payment of the "fair value," as defined in
the DGCL, of his or her shares of South Jersey common stock. See "PROPOSAL 1 --
THE MERGER -- Appraisal Rights" on page 32.
RECOMMENDATION OF THE SOUTH JERSEY BOARD
The South Jersey Board of Directors has unanimously approved the merger
agreement and the transactions contemplated by the merger agreement. The South
Jersey Board of Directors believes that the terms of the merger agreement are
fair to and in the best interests of South Jersey and its shareholders and
unanimously recommends that the South Jersey shareholders vote FOR approval and
adoption of the merger agreement. See "PROPOSAL 1 -- THE MERGER --
Recommendation of the South Jersey Board of Directors and Reasons for the
Merger" on page 14. The South Jersey Board of Directors also unanimously
recommends that the South Jersey shareholders vote FOR each nominee for election
as a director.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to those persons believed
by South Jersey's management to be beneficial owners of more than 5% of South
Jersey's outstanding shares of common stock as of May 31, 2000. Other than those
persons listed below, South Jersey is not aware of any person that beneficially
owns more than 5% of the outstanding shares of South Jersey common stock as of
May 31, 2000.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
NAME AND ADDRESS OF OF BENEFICIAL COMMON STOCK
BENEFICIAL OWNER OWNERSHIP OUTSTANDING(5)
------------------------------------------------------------------ --------------------------- -----------------------
<S> <C> <C>
Seidman and Associates, L.L.C., Seidman and Associates 328,100(1) 9.6%
II, L.L.C., Seidman Investment Partnership, L.P., Seidman
Investment Partnership II, L.P., Lawrence B. Seidman,
Kerrimatt, L.P., Federal Holdings, L.L.C., Benchmark
Partners, L.P., Richard Whitman, Lorraine DiPaolo
100 Misty Lane
Parsippany, New Jersey 07054
South Jersey Savings and Loan Association Employee 303,474(2) 8.9%
Stock Ownership Plan ("ESOP")
4651 Route 42
Turnersville, New Jersey 08012
The South Jersey Savings Charitable Foundation 280,995(3) 8.2%
("FOUNDATION")
4651 Route 42
Turnersville, New Jersey 08012
Wallace R. Weitz & Company 240,000(4) 7.0%
One Pacific Place, Suite 600
Omaha, Nebraska 68124
</TABLE>
-------------------------------
(FOOTNOTES ON NEXT PAGE)
9
<PAGE>
(1) Based on information disclosed by the group of reporting persons set
forth herein in a Schedule 13D/A filed with the SEC on July 19, 1999.
(2) Shares of South Jersey common stock were acquired by the ESOP in
connection with the mutual to stock conversion of South Jersey Savings
with funds borrowed from South Jersey. The ESOP is administered by a
committee established pursuant to the ESOP. The assets of the ESOP are
held in a trust for which First Bankers Trust Company, N.A. serves as
trustee. The South Jersey common stock acquired by the ESOP is released
from a suspense account and allocated annually to the accounts of
participants based upon the contributions made to the ESOP by South
Jersey. The ESOP trustee, subject to its fiduciary duty, must vote all
allocated shares held in the ESOP trust in accordance with the
instructions of participants. Pursuant to the terms of the ESOP,
unallocated shares are generally voted by the ESOP trustee in a manner
calculated to most accurately reflect the voting instructions received
from participants regarding the allocated shares so long as such vote
is in accordance with the requirements of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). As of May 31, 2000,
20,232 shares have been allocated to ESOP participants, and 283,242
shares remain unallocated.
(3) The Foundation was established and funded by South Jersey in connection
with South Jersey Savings' conversion from mutual to stock form with an
amount of South Jersey's common stock equal to 8.0% of the total amount
of common stock sold in the conversion. The Foundation is a Delaware
non-stock corporation and is dedicated to the promotion of charitable
purposes within the communities in which South Jersey Savings operates.
The Foundation is governed by a Board of Directors with four members,
three of whom are directors or officers of South Jersey or South Jersey
Savings.
Pursuant to the terms of the contribution of South Jersey common stock,
as mandated by the Office of Thrift Supervision, all shares of South
Jersey common stock held by the Foundation must be voted in the same
ratio as all other shares of South Jersey common stock on all proposals
considered by South Jersey's shareholders.
(4) Based on information disclosed by the reporting person set forth herein
in a Schedule 13G filed with the SEC on February 4, 2000.
(5) Percentages have been calculated on the basis of 3,423,571 shares of
South Jersey common stock outstanding and entitled to vote as of May
31, 2000.
STOCK OWNERSHIP OF SOUTH JERSEY'S MANAGEMENT
The following table sets forth information with respect to the shares
of South Jersey common stock beneficially owned by each director of South
Jersey, by each executive officer of South Jersey or South Jersey Savings
identified in the Summary Compensation Table included on page 46 of this Proxy
Statement and by all directors and executive officers of South Jersey or South
Jersey Savings as a group as of May 31, 2000. Except as otherwise indicated,
each person and each group shown in the table has sole voting and investment
power with respect to the shares of South Jersey common stock indicated.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL COMMON STOCK
NAME TITLE OWNERSHIP(1)(2) OUTSTANDING(3)
--------------------------------- ------------------------------------ ----------------------------- --------------
<S> <C> <C> <C>
DIRECTORS
Arthur E. Armitage, Jr.(4) Director 15,443 *
Richard Baer Director 1,000 *
Robert J. Colacicco President, Chief Executive 34,869 1.0%
Officer and Director
Richard W. Culbertson, Jr. Chairman of the Board and 10,943 *
Director
Gregory M. DiPaolo Executive Vice President, 52,254 1.5%
Treasurer, Chief Operating
Officer and Director
John V. Field Director 25,443 *
Richard G. Mohrfeld Director 20,443 *
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL COMMON STOCK
NAME TITLE OWNERSHIP(1)(2) OUTSTANDING(3)
--------------------------------- ------------------------------------ ----------------------------- --------------
<S> <C> <C> <C>
Lawrence B. Seidman (5) Director 328,100 9.6%
Ronald L. Woods Director 34,043 *
NAMED EXECUTIVE OFFICERS
(WHO ARE NOT DIRECTORS)
Jane E. Brode Senior Vice President 20,357 *
Joseph M. Sidebotham Senior Vice President,
Controller and Corporate 14,856 *
Secretary
All directors and executive officers 569,119 16.6%
as a group (12 persons)
------------------------------
</TABLE>
* Less than 1.0% of the outstanding South Jersey common stock.
(1) The figures shown include shares held under the South Jersey 2000
Restricted Stock Plan, over which each individual has sole voting but
no investment power, as follows: Mr. Colacicco, 18,236 shares; Mr.
DiPaolo, 16,021 shares; Ms. Brode, 7,500 shares; Mr. Sidebotham, 7,500
shares; Mr. Armitage, 5,443 shares; Mr. Culbertson, 5,443 shares; Mr.
Field, 5,443 shares; Mr. Mohrfeld, 5,443 shares; Mr. Woods, 5,443
shares; and all directors and executive officers as a group, 81,472
shares. See "PROPOSAL 1 -- THE MERGER -- Interests of Certain Persons
in the Merger -- RESTRICTED STOCK PLAN" on page 35.
(2) The figures shown include shares held in trust pursuant to the ESOP
that have been allocated as of December 31, 1999 to individual accounts
of ESOP participants as follows: Mr. Colacicco, 1,433 shares; Mr.
DiPaolo, 1,433 shares; Ms. Brode, 957 shares; Mr. Sidebotham, 956
shares; and all executive officers as a group, 5,612 shares. Such
persons have voting power (subject to the fiduciary duties of the ESOP
trustee) but no investment power, except in limited circumstances, as
to such shares. The figures shown do not include 283,242 shares held in
trust pursuant to the ESOP that have not been allocated to any
individual's account and as to which the members of the committee that
administers the ESOP and each of the participants identified in the
table may be deemed to share investment power, except in limited
circumstances, thereby causing each such person to be deemed a
beneficial owner of such shares. Each of the members of the ESOP
committee and the participants identified in the table disclaims
beneficial ownership of such shares and, accordingly, such shares are
not attributed to the members of the ESOP committee or the participants
identified in the table individually.
(3) Percentages with respect to each person or group of persons have been
calculated on the basis of 3,423,571 shares of South Jersey common
stock outstanding and entitled to vote as of May 31, 2000.
(4) Mr. Armitage is a director of South Jersey Savings only.
(5) For further information concerning shares beneficially held by Mr.
Seidman, see "-- Stock Ownership of Certain Beneficial Owners" on page
9.
11
<PAGE>
PROPOSAL 1 -- THE MERGER
THE FOLLOWING DESCRIPTION OF THE MATERIAL INFORMATION PERTAINING TO THE
MERGER, INCLUDING THE MATERIAL TERMS AND PROVISIONS OF THE MERGER AGREEMENT AND
THE RELATED STOCK OPTION AGREEMENT, IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE MORE DETAILED APPENDICES TO THIS PROXY STATEMENT, INCLUDING THE MERGER
AGREEMENT IN APPENDIX A AND THE STOCK OPTION AGREEMENT IN APPENDIX B. WE URGE
YOU TO READ THE APPENDICES IN THEIR ENTIRETY.
THE PARTIES TO THE MERGER
SOUTH JERSEY. South Jersey is a savings and loan association holding
company registered under the Home Owners' Loan Act, as amended ("HOLA"), and
incorporated in Delaware. South Jersey's wholly owned subsidiary, South Jersey
Savings and Loan Association, a New Jersey State chartered, FDIC-insured savings
and loan association, operates three full-service banking offices in the New
Jersey counties of Gloucester and Camden. At March 31, 2000, South Jersey had
total assets of $328.1 million, deposits of $240.5 million and shareholders'
equity of $53.2 million.
RICHMOND COUNTY. Richmond County is a savings and loan holding company
registered under HOLA and incorporated in Delaware. Richmond County's wholly
owned subsidiary, Richmond County Savings Bank, a New York State chartered,
FDIC-insured savings bank, operates 14 full-service banking offices on Staten
Island, one banking office in Brooklyn and eight banking offices in the counties
of Essex, Hudson and Union, New Jersey, and operates a multi-family loan
processing center in Jericho, New York. At March 31, 2000, Richmond County had
total assets of $2.9 billion, deposits of $1.8 billion and shareholders' equity
of $317.0 million.
RICHMOND COUNTY ACQUISITION, INC. Richmond County Acquisition, Inc. is
a Delaware corporation formed by Richmond County for the sole purpose of
effecting the merger. Richmond County Acquisition is a wholly owned subsidiary
of Richmond County. Richmond County Acquisition will not engage in any business
activity other than in connection with the transactions contemplated by the
merger agreement.
TRANSACTION STRUCTURE
The merger agreement provides for the acquisition of South Jersey by
Richmond County, pursuant to the merger of Richmond County Acquisition with and
into South Jersey. South Jersey will be the surviving corporation of the merger
and will be a wholly owned subsidiary of Richmond County. It is anticipated
that, following the merger, South Jersey will be consolidated into Richmond
County. At the effective time of the merger, with certain limited exceptions
described below, each share of South Jersey common stock issued and outstanding
at the effective time will be converted into the right to receive a cash payment
of $20.00, without interest.
At the same time as, or shortly following, the completion of the merger
of South Jersey and Richmond County Acquisition, South Jersey's wholly owned
subsidiary, South Jersey Savings, will be merged with and into Richmond County's
wholly owned subsidiary, Richmond County Savings.
BACKGROUND OF THE MERGER
Since the conversion of South Jersey Savings from a mutual to stock
form of organization on February 12, 1999, the Board of Directors and senior
management of South Jersey have regularly reviewed various strategic options
available to South Jersey, including, among others things, continuing as an
independent institution and growing internally, acquiring other financial
institutions, merging with similarly- sized institutions in a merger of equals
and merging South Jersey with and into a larger financial institution. In
12
<PAGE>
October 1999, Sandler O'Neill & Partners, L.P., South Jersey's financial
advisor, reviewed with the South Jersey Board of Directors and senior management
a five-year pro forma analysis which showed the effects of various strategies on
earnings per share and return on equity. Part of the analysis compared such pro
forma results to the performance of comparably-sized financial institutions.
Also included in the presentation was a calculation of South Jersey's capacity
for the possible acquisition of other financial institutions. Sandler O'Neill
compiled a list of possible acquisition candidates based on geographical
location and asset size. Subsequent to the meeting, at the direction of the
South Jersey Board of Directors, senior management informally contacted several
such institutions to determine their interest in a possible business
combination. Robert J. Colacicco, South Jersey's President and Chief Executive
Officer, reported to the South Jersey Board of Directors in December 1999 that
none of the institutions he had contacted had expressed an interest in further
discussions regarding a business combination.
On February 16, 2000, the Forward Planning Committee of South Jersey,
as authorized by the South Jersey Board of Directors, discussed the engagement
of an investment banking firm to analyze and review the strategic options
available to South Jersey. The South Jersey Board of Directors also agreed at
this meeting to directly contact institutions that might have an interest in
acquiring South Jersey, and members of the committee contacted a small group of
these institutions. On February 18, 2000, a representative of Richmond County
contacted Mr. Colacicco and expressed an interest in meeting with South Jersey's
senior management to discuss a possible business combination. On February 23,
2000, Mr. Colacicco and Gregory M. DiPaolo, South Jersey's Executive Vice
President, Treasurer and Chief Operating Officer, met with members of Richmond
County's senior management to discuss a possible transaction. On February 28,
2000, Messrs. Colacicco, DiPaolo and Lawrence B. Seidman, a director of South
Jersey, met with representatives of Sandler O'Neill and with the law firm of
Thacher Proffitt & Wood regarding their possible retention as South Jersey's
financial advisor and special legal counsel, respectively, with respect to a
possible business combination with Richmond County. On February 29, 2000, Mr.
Colacicco received a term sheet from Richmond County outlining Richmond County's
proposed terms to acquire South Jersey. Richmond County and South Jersey then
executed a confidentiality agreement, and both parties, and their respective
financial advisors and legal counsel, commenced a due diligence review in
preparation for a possible business combination.
On March 13, 2000, the South Jersey Board of Directors held a special
meeting at which senior management reviewed their discussions and negotiations
with Richmond County and its advisors regarding the proposed business
combination. Senior management of South Jersey and Sandler O'Neill presented
financial information with respect to Richmond County and the potential
transaction to the South Jersey Board of Directors. Thacher Proffitt then
reviewed and discussed with the South Jersey Board of Directors its fiduciary
responsibility to South Jersey's shareholders with respect to the proposed
merger. The Board of Directors also engaged in a detailed review with Thacher
Proffitt of the material terms and conditions contained in the proposed
definitive merger agreement, bank merger agreement, stock option agreement and
related documents. After such review and discussion, the South Jersey Board of
Directors authorized and directed South Jersey's senior management to continue
to explore the proposed business combination with Richmond County and to
continue to work toward a mutually acceptable definitive merger agreement with
respect to the proposed transaction.
On March 15, 2000, at a regularly scheduled meeting of the South Jersey
Board of Directors, Mr. Colacicco reported that a number of outstanding issues
had been resolved and that the parties had, subject to the Board's review and
approval, reached a definitive agreement with respect to the proposed merger.
Sandler O'Neill reviewed with the Board of Directors at length materials
analyzing the proposed business combination and then delivered to the South
Jersey Board of Directors its written opinion that the consideration to be
received by South Jersey's shareholders in the proposed merger was fair, from a
financial point of view, to such shareholders. Thacher Proffitt then reviewed
with the Board of Directors the changes that had been made to the proposed
merger agreement and related documents as a result of negotiations over the
prior two days. After discussion, the South Jersey Board of Directors then
unanimously approved the merger agreement and related documents.
13
<PAGE>
Following the completion of the March 15, 2000 meetings of the South
Jersey Board of Directors and the Richmond County Board of Directors, South
Jersey and Richmond County entered into the merger agreement and stock option
agreement, and South Jersey Savings and Richmond County Savings entered into the
bank merger agreement. In addition, at the request of Richmond County, Mr.
Seidman signed a letter agreement pursuant to which he agreed not to sell or
otherwise dispose of his shares of South Jersey common stock, representing
approximately 9.6% of South Jersey's outstanding shares, and to vote such shares
in favor of the proposed merger and the merger agreement.
RECOMMENDATION OF THE SOUTH JERSEY BOARD OF DIRECTORS AND REASONS FOR THE MERGER
South Jersey's Board of Directors believes that the merger is in the
best interests of South Jersey and its shareholders. Accordingly, the South
Jersey Board of Directors has approved the merger agreement and recommends that
shareholders vote FOR approval and adoption of the merger agreement and the
transactions contemplated by that agreement, including the merger.
In reaching its decision to approve and adopt the merger agreement and
the transactions contemplated by that agreement, including the merger, the South
Jersey Board of Directors consulted with South Jersey's management, as well as
with its financial and legal advisors, and considered a variety of factors,
including the following:
o the South Jersey Board of Directors' familiarity with and
review of Richmond County's business, operations, financial
condition, earnings and prospects;
o the South Jersey Board of Directors' knowledge and analysis of
the current banking industry environment, characterized by
rapid consolidation, evolving trends in technology and
increasing nationwide and regional competition;
o the current and prospective environment in the banking market
in which South Jersey primarily operates;
o the review conducted by the South Jersey Board of Directors of
the strategic options available to South Jersey and the
assessment of the South Jersey Board of Directors that none of
these options presented superior opportunities, or were likely
to create greater value for South Jersey shareholders, than
the prospects presented by the merger;
o the financial terms of the merger, including the amount of the
merger consideration and the fact that this consideration
represented a substantial premium over recently prevailing
market prices of South Jersey common stock;
o the fact that the merger consideration to be paid by Richmond
County would be paid in cash, which substantially eliminated
the possibility that the economic benefit to be received by
South Jersey shareholders would be subject to market
fluctuation;
o the opinion of Sandler O'Neill to the South Jersey Board of
Directors that the merger consideration of $20.00 per share
was fair, from a financial point of view, to the holders of
the common stock of South Jersey;
o the business, operations, financial condition, earnings and
prospects of each of South Jersey and Richmond County;
o the terms of the merger agreement and the stock option
agreement as negotiated, including the possibility that the
merger agreement and the stock option agreement might
discourage other parties that might have an interest in a
business combination with South Jersey;
o the South Jersey Board of Directors' assessment that South
Jersey would better serve the convenience and needs of its
customers and the communities that it serves through
affiliation with a substantially larger banking company, such
as Richmond County;
14
<PAGE>
o the South Jersey Board of Directors' belief that, while no
assurances could be given, the level of execution risk in
connection with the merger was relatively low and that the
business and financial advantages contemplated in connection
with the merger were likely to be achieved within a reasonable
timeframe;
o the likelihood of the merger being approved by the appropriate
regulatory authorities; and
o the further effect of the merger on South Jersey's
constituencies other than its shareholders, including the
customers and communities served by South Jersey and its
employees, including management.
The foregoing discussion of the information and factors considered by
the South Jersey Board of Directors is not intended to be exhaustive, but
includes all material factors, both positive and negative, considered by the
South Jersey Board of Directors. In reaching its determination to approve and
recommend the merger, the South Jersey Board of Directors did not assign any
relative or specific weights to these factors, and individual directors may have
given differing weights to different factors. However, in the opinion of the
South Jersey Board of Directors, the positive factors outweighed the negative
factors.
OPINION OF SOUTH JERSEY'S FINANCIAL ADVISOR
By letter agreement dated as of February 28, 2000, South Jersey
retained Sandler O'Neill as an independent financial advisor in connection with
South Jersey's consideration of a possible business combination with Richmond
County or other second party. Sandler O'Neill is a nationally recognized
investment banking firm whose principal business specialty is financial
institutions. In the ordinary course of its investment banking business, Sandler
O'Neill is regularly engaged in the valuation of financial institutions and
their securities in connection with mergers and acquisitions and other corporate
transactions.
Sandler O'Neill acted as financial advisor to South Jersey in
connection with the merger and participated in certain of the negotiations
leading to the merger agreement and the stock option agreement. At the request
of the South Jersey Board of Directors, representatives of Sandler O'Neill
attended the meetings of the South Jersey Board on March 13 and 15, 2000 at
which the Board considered and approved the merger agreement, bank merger
agreement and the stock option agreement. At the March 15th meeting, Sandler
O'Neill delivered to the South Jersey Board of Directors its written opinion
that, as of such date, the consideration to be received by South Jersey
shareholders in the merger was fair to South Jersey's shareholders from a
financial point of view. Sandler O'Neill has also delivered to the South Jersey
Board of Directors a written opinion dated the date of this Proxy Statement
which is substantially identical to the March 15, 2000 opinion. THE FULL TEXT OF
SANDLER O'NEILL'S OPINION IS ATTACHED AS APPENDIX C TO THIS PROXY STATEMENT. THE
OPINION OUTLINES THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED
AND QUALIFICATIONS AND LIMITATIONS ON THE REVIEW UNDERTAKEN BY SANDLER O'NEILL
IN RENDERING THE OPINION. THE OPINION IS INCORPORATED BY REFERENCE INTO THIS
DESCRIPTION AND THIS DESCRIPTION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE OPINION. SOUTH JERSEY SHAREHOLDERS ARE URGED TO CAREFULLY READ THE OPINION
IN CONNECTION WITH THEIR CONSIDERATION OF THE PROPOSED MERGER.
SANDLER O'NEILL'S OPINION WAS DIRECTED TO THE SOUTH JERSEY BOARD OF
DIRECTORS AND WAS PROVIDED TO SOUTH JERSEY FOR ITS INFORMATION IN CONSIDERING
THE MERGER. THE OPINION IS DIRECTED ONLY TO THE FAIRNESS OF THE MERGER
CONSIDERATION TO SOUTH JERSEY SHAREHOLDERS FROM A FINANCIAL POINT OF VIEW. IT
DOES NOT ADDRESS THE UNDERLYING BUSINESS DECISION OF SOUTH JERSEY TO ENGAGE IN
THE MERGER OR ANY OTHER ASPECT OF THE MERGER AND IS NOT A RECOMMENDATION TO ANY
SOUTH JERSEY SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE ANNUAL
MEETING WITH RESPECT TO THE MERGER OR ANY OTHER RELATED MATTER.
In rendering its March 15, 2000 opinion, Sandler O'Neill performed a
variety of financial analyses. The following is a summary of the material
analyses performed by Sandler O'Neill, but is not a complete description of all
the analyses underlying Sandler O'Neill's opinion. The preparation of a fairness
opinion is a
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<PAGE>
complex process involving subjective judgments as to the most appropriate and
relevant methods of financial analysis and the application of those methods to
the particular circumstances. The process, therefore, is not necessarily
susceptible to a partial analysis or summary description. Sandler O'Neill
believes that its analyses must be considered as a whole and that selecting only
certain factors and analyses, or attempting to ascribe relative weights to some
or all factors and analyses, could create an incomplete view of the evaluation
process underlying its opinion. Also, no company included in Sandler O'Neill's
comparative analyses described below is identical to South Jersey and no
transaction is identical to the merger. Accordingly, an analysis of comparable
companies or transactions involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
companies and other factors that could affect the public trading value or merger
transaction value of South Jersey and the companies to which it is being
compared.
The earnings projections for South Jersey relied upon by Sandler
O'Neill in its analyses were reviewed with management and were based upon
internal projections of South Jersey for the year ending December 31, 2000. For
periods after 2000, Sandler O'Neill assumed, with South Jersey's consent, an
annual growth rate on earning assets of 5.75%. The earnings projections
furnished to Sandler O'Neill were prepared by the senior management of South
Jersey for internal purposes only and not with a view towards public disclosure.
These projections were based on numerous variables and assumptions that are
inherently uncertain. Accordingly, actual results could vary materially from
those used in such projections.
In performing its analyses, Sandler O'Neill also made numerous
assumptions with respect to industry performance, business and economic
conditions and various other matters, many of which cannot be predicted and are
beyond the control of South Jersey, Richmond County and Sandler O'Neill. The
analyses performed by Sandler O'Neill are not necessarily indicative of actual
values or future results, which may be significantly more or less favorable than
suggested by such analyses. Sandler O'Neill prepared its analyses solely for
purposes of rendering its opinion and provided such analyses to the South Jersey
Board of Directors at the March 13th and 15th meetings. Estimates on the values
of companies do not purport to be appraisals or necessarily reflect the prices
at which companies or their securities may actually be sold. Such estimates are
inherently subject to uncertainty and actual values may be materially different.
Accordingly, Sandler O'Neill's analyses do not necessarily reflect the value of
South Jersey common stock or the prices at which South Jersey common stock may
be sold at any time.
SUMMARY OF PROPOSAL. Sandler O'Neill reviewed the financial terms of
the proposed transaction. Based upon the $20.00 per share merger consideration
and South Jersey's December 31, 1999 financial information, Sandler O'Neill
calculated the following ratios:
Transaction value/tangible book value................................ 1.2x
Transaction value/book value......................................... 1.2x
Transaction value/last quarter annualized fully-diluted EPS.......... 23.8x
Tangible book premium/core deposits (1).............................. 5.4%
Transaction value/total deposits..................................... 29.5%
Transaction value/total assets....................................... 21.0%
------------------------------------
(1) Assumes all deposits are core deposits.
The aggregate transaction value was approximately $70.2 million, based upon 3.5
million fully diluted shares of South Jersey common stock outstanding, which was
determined using the treasury stock method at the per share transaction value.
For purposes of Sandler O'Neill's analyses, earnings per share were based on
fully diluted earnings per share. Sandler O'Neill noted that the transaction
value represented an 18.5% premium over the March 14, 2000 closing price of
South Jersey common stock of $16.88.
STOCK TRADING HISTORY. Sandler O'Neill reviewed the history of the
reported trading prices and volume of South Jersey common stock and the
relationship between the movements in the prices of South
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<PAGE>
Jersey common stock to movements in certain stock indices, including the
Standard & Poor's 500 Index, the Nasdaq Bank Index and the median performance of
a composite group of publicly traded regional savings institutions selected by
Sandler O'Neill. For the period commencing on February 12, 1999 (the date on
which South Jersey completed its initial public offering and commenced trading)
through March 13, 2000, the South Jersey common stock outperformed each of the
indices to which it was compared.
<TABLE>
<CAPTION>
BEGINNING INDEX VALUE ENDING INDEX VALUE
FEBRUARY 12, 1999 MARCH 13, 2000
----------------- --------------
<S> <C> <C>
SOUTH JERSEY.............................................. 100.00% 155.17%
SOUTH JERSEY COMPOSITE GROUP.............................. 100.00% 76.75%
NASDAQ BANK INDEX......................................... 100.00% 80.63%
S&P 500 INDEX............................................. 100.00% 110.49%
</TABLE>
COMPARABLE COMPANY ANALYSIS. SANDLER O'NEILL USED PUBLICLY AVAILABLE
INFORMATION TO COMPARE SELECTED FINANCIAL AND MARKET TRADING INFORMATION FOR
SOUTH JERSEY AND TWO GROUPS OF SAVINGS INSTITUTIONS SELECTED BY SANDLER O'NEILL.
THE "REGIONAL GROUP" consisted of South Jersey and the following 14 publicly
traded regional savings institutions:
Pamrapo Bancorp, Inc. The Washington Savings Bank, FSB
Equitable Bank The Elmira Savings Bank, FSB
Pittsburgh Financial Corp. Independence Federal Savings Bank
Carver Bancorp, Inc. Harbor Federal Bancorp, Inc.
WVS Financial Corp. Laurel Capital Group, Inc.
Crusader Holding Corporation JADE Financial Corp.
Catskill Financial Corporation Prestige Bancorp, Inc.
The "HIGHLY VALUED GROUP" consisted of the following 10 publicly traded
nationwide savings institutions which had a return on average equity (based on
last twelve months' earnings) of greater than 14% and a price-to-tangible book
value of greater than 100%:
Home Federal Bancorp Warren Bancorp, Inc.
American Bank of Connecticut WVS Financial Corp.
Coastal Financial Corporation Home Port Bancorp, Inc.
Highland Bancorp, Inc. Alliance Bancorp of New England, Inc.
Bancorp Connecticut, Inc. Ipswich Bancshares, Inc.
The analysis compared publicly available financial information for
South Jersey and the median data for each of the Regional Group and Highly
Valued Group as of and for each of the years ended December 31, 1994 through
December 31, 1999. The table below sets forth selected comparative data as of
and for the twelve months ended December 31, 1999.
<TABLE>
<CAPTION>
REGIONAL HIGHLY VALUED
SOUTH JERSEY GROUP GROUP
------------ ----- -----
<S> <C> <C> <C>
Total assets....................................... 334,473 334,607 485,523
Tangible equity/total assets....................... 17.12% 7.99% 7.32%
Net loans/total assets............................. 44.15% 62.06% 67.95%
Gross loans/total deposits......................... 62.52% 91.70% 98.83%
Total borrowings/total assets...................... 11.08% 18.07% 21.93%
Non-performing assets/total assets................. 0.04% 0.36% 0.25%
Loan loss reserve/gross loans...................... 0.70% 0.88% 1.47%
Net interest margin................................ 3.23% 3.23% 3.62%
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
REGIONAL HIGHLY VALUED
SOUTH JERSEY GROUP GROUP
------------ ----- -----
<S> <C> <C> <C>
Non-interest income/average assets................. 0.18% 0.36% 0.53%
Non-interest expense/average assets................ 2.02%(1) 2.02% 2.13%
Efficiency ratio................................... 60.70%(1) 60.20% 51.26%
Return on average assets........................... 0.82%(2) 0.67% 1.35%
Return on average equity........................... 4.78%(2) 8.57% 16.38%
Price/tangible book value per share................ 100.00% 84.06% 139.09%
Price/earnings per share........................... 20.54x(2) 10.07x 8.47x
Dividend yield..................................... 2.09%(2) 2.94% 3.90%
Dividend payout ratio.............................. 42.86%(2) 29.63% 28.83%
</TABLE>
------------------------------------
(1) Excludes contribution to the South Jersey Savings Charitable Foundation.
(2) Last quarter annualized.
ANALYSIS OF SELECTED MERGER TRANSACTIONS. Sandler O'Neill reviewed
certain other transactions announced from January 1, 1999 to March 14, 2000
involving publicly traded savings institutions as acquired institutions with
transaction values greater than $15 million. Sandler O'Neill reviewed 51
transactions announced nationwide ("NATIONWIDE TRANSACTIONS") and nine
transactions announced in the mid-Atlantic region, comprised of Washington,
D.C., Delaware, Maryland, New Jersey, New York and Pennsylvania ("MID-ATLANTIC
TRANSACTIONS"). In addition, in view of the fact that South Jersey had recently
completed its conversion to stock form and consequently had a relatively high
tangible equity to total assets ratio of 17.1% at December 31, 1999, Sandler
O'Neill also reviewed 26 transactions announced nationwide involving sellers
which had a tangible equity/total assets ratio of greater than 10% at
announcement ("HIGHLY-CAPITALIZED TRANSACTIONS"). Sandler O'Neill computed high,
low, mean and median multiples and premiums for the respective groups of
transactions as set forth below. These multiples and premiums were applied to
South Jersey's financial information as of and for the last quarter annualized
ended December 31, 1999. As illustrated in the following table, Sandler O'Neill
derived an imputed range of values per share of South Jersey common stock of
$11.09 to $29.95 based upon the median multiples for Nationwide Transactions,
$14.80 to $26.88 based upon the median multiples for Mid-Atlantic Transactions
and $11.59 to $24.91 based upon the median multiples for Highly-Capitalized
Transactions.
<TABLE>
<CAPTION>
NATIONWIDE MID-ATLANTIC HIGHLY-CAPITALIZED
TRANSACTIONS TRANSACTIONS TRANSACTIONS
------------ ------------ ------------
MEDIAN IMPLIED MEDIAN IMPLIED MEDIAN IMPLIED
MULTIPLE VALUE MULTIPLE VALUE MULTIPLE VALUE
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Deal price/LTM EPS....................... 24.01x $19.84 (1) 27.57x $ 22.78 27.69x $ 22.88
Relative price/LTM EPS................... 1.25x $11.09 (1) 1.67x $ 14.80 1.31x $ 11.59
Deal price/book value.................... 1.72x $ 29.66 1.54x $ 26.58 1.33x $ 23.01
Relative price/book value................ 0.81x $ 15.38 1.14x $ 21.87 0.77x $ 14.71
Deal price/tangible book value........... 1.73x $ 29.95 1.56x $ 26.88 1.33x $ 23.01
Tangible book premium/core deposits...... 11.53% $ 25.13 11.45% $ 25.08 11.20% $ 24.91
Deal price/total assets.................. 19.70% $ 19.88 17.85% $ 18.01 24.41% $ 24.63
Deal price/total deposits................ 27.27% $ 19.56 24.12% $ 17.30 32.97% $ 23.65
</TABLE>
------------------------------------
(1) South Jersey's data is last quarter annualized.
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<PAGE>
In considering the results of the above analysis and in discussing the
analysis with South Jersey's Board of Directors, Sandler O'Neill considered the
range of values suggested by its analysis as a whole, but in considering the
price to book value and price to tangible book value ratios, placed more weight
on the multiples for the Highly-Capitalized Transactions. Sandler O'Neill noted
that the per share transaction value of $20.00 was within the range of values
suggested by the analysis.
DISCOUNTED CASH FLOW ANALYSIS. Sandler O'Neill also performed an
analysis which estimated the future stream of after-tax dividend flows of South
Jersey through December 31, 2003 under various circumstances, assuming South
Jersey's current dividend payout ratio and that South Jersey performed in
accordance with the earnings forecasts reviewed with management. To approximate
the terminal value of South Jersey common stock at December 31, 2003, Sandler
O'Neill applied price/earnings multiples ranging from 10x to 25x and applied
multiples of tangible book value ranging from 75% to 200%. The dividend income
streams and terminal values were then discounted to present values using
different discount rates ranging from 9% to 15% chosen to reflect different
assumptions regarding required rates of return of holders or prospective buyers
of South Jersey common stock. As illustrated in the following table, this
analysis indicated an imputed range of values per share of South Jersey common
stock of $7.40 to $20.59 when applying the price/earnings multiples and $9.71 to
$29.52 when applying multiples of tangible book value.
<TABLE>
<CAPTION>
PRICE/EARNINGS MULTIPLES
------------------------
DISCOUNT RATE 10X 16X 19X 25X
------------- --- --- --- ---
<S> <C> <C> <C> <C>
9% $9.05 $13.66 $15.97 $20.59
11 8.45 12.74 14.89 19.18
13 7.90 11.90 13.89 17.89
15 7.40 11.12 12.98 16.71
</TABLE>
<TABLE>
<CAPTION>
TANGIBLE BOOK VALUE MULTIPLES
-----------------------------
DISCOUNT RATE .75X 1.25X 1.5X 2.00X
------------- ---- ----- ---- -----
<S> <C> <C> <C> <C>
9% $11.92 $18.96 $22.48 $29.52
11 11.12 17.67 20.94 27.49
13 10.39 16.48 19.53 25.63
15 9.71 15.40 18.24 23.92
</TABLE>
In connection with its analysis, Sandler O'Neill considered and
discussed with the South Jersey Board of Directors how the present value
analysis would be affected by changes in the underlying assumptions, including
variations with respect to the growth rate of assets, net interest spread,
non-interest income, non-interest expenses, earnings per share and dividend
payout ratio. Sandler O'Neill noted that the discounted dividend stream and
terminal value analysis is a widely used valuation methodology, but the results
of such methodology are highly dependent upon the assumptions that must be made,
and the results thereof are not necessarily indicative of actual values or
future results.
In connection with rendering its March 15, 2000 opinion, Sandler
O'Neill reviewed, among other things: (1) the merger agreement and exhibits
thereto; (2) the stock option agreement; (3) certain publicly available
financial statements and other historical financial information of South Jersey
that they deemed relevant; (4) certain publicly available financial statements
and other historical financial information of Richmond County that they deemed
relevant; (5) certain internal financial analyses and forecasts of South Jersey
prepared by and reviewed with management of South Jersey and the views of senior
management of South Jersey, based on certain limited discussions with certain
members of senior management, regarding South Jersey's past and current
business, financial condition, results of operations and future prospects; (6)
the views of senior management of Richmond County, based on certain limited
discussions with certain members of senior management, regarding Richmond
County's past and current business, financial condition, results of
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<PAGE>
operations and future prospects; (7) the publicly reported historical price and
trading activity for South Jersey's and Richmond County's common stock,
including a comparison of certain financial and stock market information for
South Jersey and Richmond County with similar publicly available information for
certain other companies the securities of which are publicly traded; (8) the
financial terms of recent business combinations in the savings institution
industry, to the extent publicly available; (9) the current market environment
generally and the banking environment in particular; and (10) such other
information, financial studies, analyses and investigations and financial,
economic and market criteria as they considered relevant.
In connection with rendering its opinion attached as Appendix C to this
Proxy Statement, Sandler O'Neill confirmed the appropriateness of its reliance
on the analyses used to render its March 15, 2000 opinion by performing
procedures to update certain of such analyses and by reviewing the assumptions
upon which such analyses were based and the other factors considered in
rendering its opinion.
In performing its reviews and analyses, Sandler O'Neill assumed and
relied upon the accuracy and completeness of all the financial information,
analyses and other information that was publicly available or otherwise
furnished to, reviewed by or discussed with it, and Sandler O'Neill did not
assume any responsibility or liability for independently verifying the accuracy
or completeness of any of such information. Sandler O'Neill did not make an
independent evaluation or appraisal of the assets, the collateral securing
assets or the liabilities, contingent or otherwise, of South Jersey or Richmond
County or any of their respective subsidiaries, or the collectibility of any
such assets, nor was it furnished with any such evaluations or appraisals.
Sandler O'Neill is not an expert in the evaluation of allowances for loan losses
and it has not made an independent evaluation of the adequacy of the allowance
for loan losses of South Jersey or Richmond County, nor has it reviewed any
individual credit files relating to South Jersey or Richmond County. With South
Jersey's consent, Sandler O'Neill has assumed that the respective allowances for
loan losses for both South Jersey and Richmond County are adequate to cover such
losses and will be adequate on a pro forma basis for the combined entity. In
addition, Sandler O'Neill has not conducted any physical inspection of the
properties or facilities of South Jersey or Richmond County. With respect to all
financial projections reviewed with each company's management and used by
Sandler O'Neill in its analyses, Sandler O'Neill assumed that they reflected the
best currently available estimates and judgments of the respective managements
of the respective future financial performances of South Jersey and Richmond
County and that such performances will be achieved. Sandler O'Neill expressed no
opinion as to such financial projections or the assumptions on which they were
based.
Sandler O'Neill's opinion was necessarily based upon market, economic
and other conditions as they existed on, and could be evaluated as of, the date
of its opinion. Sandler O'Neill assumed, in all respects material to its
analysis, that all of the representations and warranties contained in the merger
agreement and all related agreements are true and correct, that each party to
such agreements will perform all of the covenants required to be performed by
such party under such agreements and that the conditions precedent in the merger
agreement are not waived. Sandler O'Neill also assumed, with South Jersey's
consent, that there has been no material change in South Jersey's or Richmond
County's assets, financial condition, results of operations, business or
prospects since the date of the last publicly filed financial statements
available to them, that South Jersey and Richmond County will remain as going
concerns for all periods relevant to its analyses, and that the merger will be
accounted for as a purchase transaction.
South Jersey has agreed to pay Sandler O'Neill a transaction fee of
$400,000 in connection with the merger, $100,000 of which was paid on March 17,
2000. The balance of the fee is contingent, and will be paid, upon the closing
of the merger. The $100,000 paid on March 17, 2000 included Sandler O'Neill's
fee for rendering its fairness opinion. South Jersey has also agreed to
reimburse Sandler O'Neill for its reasonable out-of-pocket expenses incurred in
connection with its engagement and to indemnify Sandler O'Neill and its
affiliates and their respective partners, directors, officers, employees,
agents, and controlling persons against certain expenses and liabilities,
including liabilities under securities laws.
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<PAGE>
Sandler O'Neill has in the past provided certain other investment
banking services to South Jersey and Richmond County and has received
compensation for such services. In addition, Sandler O'Neill has in the past
provided and expects to continue to provide investment banking services to
Richmond County and has received and will receive compensation for such
services. In the ordinary course of its business as a broker-dealer, Sandler
O'Neill may also purchase securities from and sell securities to South Jersey
and Richmond County and may actively trade the equity or debt securities of
South Jersey and Richmond County and their respective affiliates for its own
account and for the accounts of customers and, accordingly, may at any time hold
a long or short position in such securities.
CONVERSION OF SOUTH JERSEY COMMON STOCK
At the effective time of the merger, each share of South Jersey common
stock outstanding, other than shares described in the following sentence, will
be converted into the right to receive $20.00 per share, without interest. The
following shares of South Jersey common stock will not be converted into the
right to receive the merger consideration:
o shares held by Richmond County or South Jersey or any
subsidiary of either company, except in both cases, for shares
held in a fiduciary capacity for the benefit of third parties
or shares held in respect of a debt previously contracted; and
o shares of South Jersey common stock outstanding immediately
prior to the effective time of the merger, the holders of
which delivered to South Jersey a written demand for appraisal
of their shares in the manner provided in Section 262 of the
DGCL.
TREATMENT OF OPTIONS
Except as provided in the next paragraph, each option to purchase South
Jersey common stock outstanding and unexercised at the effective time of the
merger will be canceled and the holder of the outstanding and unexercised stock
option will be entitled to receive, and at the effective time will be paid in
full satisfaction of the stock option, a cash payment equal to the product of
(i) the excess, if any, of the $20.00 per share merger consideration over the
exercise price per share of South Jersey common stock subject to the stock
option multiplied by (ii) the number of shares of South Jersey common stock
subject to the stock option, less any tax withholding required under the
Internal Revenue Code of 1986, as amended ("INTERNAL REVENUE CODE"), or any
provision of state or local tax law. Subject to the foregoing, South Jersey's
stock option plan and all options issued under this plan will terminate at the
effective time of the merger.
As an alternative to the receipt of the cash payments for the stock
options described above, Robert J. Colacicco, Gregory M. DiPaolo, Joseph M.
Sidebotham, Paul D. Wampler and Jane E. Brode may elect, not less that two
business days prior to the closing date of the merger, to convert all or any
portion of their South Jersey stock options into options to purchase shares of
Richmond County common stock. The conversion of such options will be effected by
issuing to the electing person Richmond County stock options equal to the
product of (i) the number of South Jersey stock options being converted and (ii)
a fraction, the numerator of which is the $20.00 per share merger consideration
and the denominator of which is the average of the daily closing sales prices of
Richmond County common stock for the 15 consecutive trading days ending with the
last trading day before the effective time of the merger. The exercise price per
share for such Richmond County stock options shall be the product of the
exercise price of the South Jersey stock options being converted multiplied by
the reciprocal of the fraction described in the prior sentence. Instead of fully
vesting and being cashed out at the closing date of the merger, such Richmond
County stock options shall be exercisable and shall vest on the same terms as
the related South Jersey stock options, except that any period during which the
individual provides consulting services and thereafter shall be deemed to be
equivalent to continued employment, and, upon the completion of such consulting
services, the Richmond County stock options shall continue to vest and become
exercisable over the period that they would have vested and become
21
<PAGE>
exercisable if the individual had continued consulting services for a full five
years. See "-- Interests of Certain Persons in the Merger -- CONSULTING
AGREEMENTS" on page 34.
PROCEDURES FOR EXCHANGING YOUR STOCK CERTIFICATES
At or prior to the effective time of the merger, Richmond County will
deposit, or cause to be deposited, with a subsidiary of Richmond County, or
another bank or trust company reasonably acceptable to each of Richmond County
and South Jersey, that will act as paying agent for the benefit of the holders
of certificates of South Jersey common stock, cash in an amount equal to the
product of the $20.00 per share merger consideration and the number of shares of
South Jersey common stock entitled to receive the merger consideration.
As soon as reasonably practicable after the effective time, a form of
transmittal letter will be mailed by the paying agent to South Jersey
shareholders. The form of transmittal letter will contain instructions with
respect to the surrender of certificates representing South Jersey common stock.
You should not return your South Jersey common stock certificates with
the enclosed proxy and should not forward them to the paying agent until you
receive the letter of transmittal following the effective time. After the
effective time, there will be no transfers on the stock transfer books of South
Jersey of shares of South Jersey common stock issued and outstanding immediately
prior to the effective time. If certificates representing shares of South Jersey
common stock are presented after the effective time, they will be canceled and
exchanged for the merger consideration.
None of Richmond County, South Jersey or any other person will be
liable to any former holder of South Jersey common stock for any amount properly
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
If a certificate for South Jersey common stock has been lost, stolen or
destroyed, the paying agent will issue the consideration properly payable under
the merger agreement on receipt of appropriate evidence as to that loss, theft
or destruction, appropriate evidence as to the ownership of that certificate by
the claimant, and appropriate and customary indemnification.
After six months following the effective time, Richmond County may
elect to cause the paying agent to deliver to Richmond County any funds which
had been made available to the paying agent and not disbursed to holders of
shares of South Jersey common stock. Following that election, the payment
obligation in respect of any certificate representing South Jersey common stock
which has not been satisfied by the paying agent as of the date of the election
will become the responsibility of Richmond County.
EFFECTIVE TIME
The effective time of the merger will be the time and date set forth in
the certificate of merger which will be filed with the Secretary of State of the
State of Delaware by South Jersey and Richmond County on the closing date of the
merger. The closing date will occur on a date to be specified by the parties,
which date will be no later than 14 days following the date on which all
conditions to the completion of the merger are satisfied or waived, or on such
other date as may be agreed to by the parties.
Richmond County and South Jersey each anticipate that the merger will
be consummated during the third quarter of 2000. However, completion of the
merger could be delayed if there is a delay in obtaining the required regulatory
approvals or in satisfying other conditions to the merger. There can be no
assurances as to whether, and on what date, those approvals will be obtained or
that the merger will be consummated. If the merger is not effected on or before
December 31, 2000, either Richmond County or South Jersey may terminate the
agreement, unless the failure to effect the merger by that date is due to the
failure of the party
22
<PAGE>
seeking to terminate the merger agreement to perform or observe the covenants
and agreements of that party set forth in the merger agreement. See " --
Conditions to the Completion of the Merger" below and " -- Regulatory Approvals
Required for the Merger" on page 29.
CHANGING THE STRUCTURE OF THE COMBINATION
Richmond County may, at any time, change the structure of the
transactions contemplated by the merger agreement. However, no change may (i)
alter or change the amount or kind of the merger consideration to be received by
South Jersey's shareholders or (ii) materially impede or delay the receipt of
any required regulatory approval or the completion of the transactions
contemplated by the merger agreement.
CONDITIONS TO THE COMPLETION OF THE MERGER
Completion of the merger is subject to various conditions. While it is
anticipated that all such conditions will be satisfied, there can be no
assurance as to whether or when all of such conditions will be satisfied or,
where permissible, waived.
The respective obligations of Richmond County and South Jersey to
complete the merger are subject to the following conditions:
o approval of the merger agreement by South Jersey's
shareholders;
o receipt of all regulatory approvals, consents or waivers and
the expiration of all related statutory waiting periods;
PROVIDED that none of such approvals, consents or waivers
contains any condition or requirement that would so materially
and adversely impact the economic or business benefits to
Richmond County of the merger that, had such condition or
requirement been known, Richmond County would not, in its
reasonable judgment, have entered into the merger agreement;
o absence of any order, decree or injunction of a court or
agency of competent jurisdiction which prohibits the
completion of the merger or the bank merger;
o absence of any statute, rule or regulation which prohibits,
restricts or makes illegal the completion of the merger or the
bank merger;
o accuracy of the other party's representations and warranties
in all material respects as of the date of the merger
agreement and, except to the extent such representations and
warranties relate to an earlier date, as of the closing date;
o performance by the other party of its obligations contained in
the merger agreement in all material respects; and
o receipt of certificates from the appropriate authorities as to
the corporate existence of the other party and receipt of such
other documents and certificates from the other party as to
the fulfillment of the conditions contained in the merger
agreement.
Richmond County's obligation to effect the merger is also subject to
the following additional conditions:
o receipt by South Jersey of all third party approvals and
consents (other than regulatory approvals) that are necessary
to be obtained in connection with the merger, except for those
the failure of which to obtain would not result in a material
adverse effect on Richmond County or upon the completion of
the transactions contemplated by the merger agreement;
o shares of South Jersey common stock as to which a written
demand for appraisal has been made in accordance with Section
262 of the DGCL shall not constitute more than 15% of South
Jersey's outstanding common stock; and
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o the conversion of South Jersey Savings prior to the effective
time of the merger from a New Jersey chartered savings and
loan association to a New Jersey chartered savings bank.
South Jersey's obligation to effect the merger is also subject to the
condition that Richmond County deposit with the paying agent sufficient funds to
pay the aggregate merger consideration.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains reciprocal representations and warranties
of Richmond County and South Jersey regarding, among other things:
o corporate existence, good standing and qualification to
conduct business;
o due authorization, execution, delivery and enforceability of
the merger agreement;
o governmental and third party consents necessary to complete
the merger;
o the compliance of the merger agreement with its certificate of
incorporation and bylaws, applicable law, and certain material
agreements;
o absence of legal proceedings and regulatory actions;
o financial statements;
o Community Reinvestment Act compliance;
o the accuracy of information provided for inclusion in this
Proxy Statement; and
o absence of undisclosed liabilities.
South Jersey has also made certain other additional representations and
warranties, including those relating to:
o capital structure and subsidiaries;
o receipt of a written fairness opinion with respect to the
merger consideration;
o SEC and regulatory filings;
o absence of certain events or changes since December 31, 1998;
o tax matters;
o material agreements;
o labor and employee benefit matters;
o title to assets;
o compliance with applicable laws;
o fees payable to its financial advisor in connection with the
merger;
o environmental matters;
o loan portfolio and allowance for possible loan losses;
o asset quality;
o insurance;
o investment securities;
o anti-takeover provisions;
o books and records; and
o Year 2000 matters.
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Richmond County has also made a representation and warranty as to its
ability to finance the merger. The representations and warranties of the parties
will be deemed to be true and correct unless the existence of any fact,
circumstance or event, individually or taken together with all other facts,
circumstances or events inconsistent with any such representation or warranty,
has had or would be reasonably likely to have a material adverse effect on the
business, financial condition or results of operations of the party making such
representation or warranty and its subsidiaries taken as a whole. Any effects
resulting from any (i) changes in laws, rules or regulations or generally
accepted accounting principles ("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, will not be
considered in determining if a material adverse effect has occurred.
CONDUCT OF BUSINESS PENDING THE MERGER
Each of Richmond County and South Jersey has agreed that, during the
period from the date of the merger agreement to the completion of the merger
(except as expressly provided in the merger agreement), it will use its best
efforts to:
o take no action that 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
the merger agreement; and
o take no action that 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 by the merger agreement or which
would reasonably be expected to result in any such approvals,
consents or waivers containing any material condition or
restriction.
Richmond County also agreed that, during the period from the date of
the merger agreement to the completion of the merger (except as expressly
provided in the merger agreement), it will use its best efforts to take no
action that is intended or expected to result in any of its representations and
warranties set forth in the merger agreement being or becoming untrue in any
material respect at any time prior to the effective time of the merger, or in
any of the conditions to the merger not being satisfied or in violation of the
merger agreement.
In addition, South Jersey agreed that, during the period from the date
of the merger agreement to the completion of the merger (except as expressly
provided in the merger agreement), it will, and it will cause South Jersey
Savings to, use its best efforts to:
o conduct its business in the regular, ordinary and usual course
consistent with past practice;
o maintain and preserve intact its business organization,
properties, leases, employees and advantageous business
relationships and retain the services of its officers and key
employees;
o take no action that results in or is reasonably likely to have
a material adverse effect on South Jersey or South Jersey
Savings;
o maintain insurance in such amounts and against such risks and
losses as are customary for companies engaged in a similar
business;
o 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;
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o promptly notify Richmond County of any material change in its
business, properties, assets, condition (financial or
otherwise) or results of operations; and
o 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 the merger agreement
and the transactions contemplated thereby.
In addition, during the period from the date of the merger agreement to
the completion of the merger (except as specifically provided in the merger
agreement or any other related agreement or as required by law or regulation or
by any regulatory authority), South Jersey has agreed that it will not, and will
not permit South Jersey Savings to, take any of the following actions, among
others, without the prior consent of Richmond County, which consent will 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 Federal Home
Loan Bank of New York, 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, except that:
(A) 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;
(B) in the event the effective date of the
merger 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
(C) in the event the effective date of the
merger does not occur on or before October
31, 2000, South Jersey may also pay to its
shareholders a cash 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 of the merger agreement or
(B) the stock 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 the merger agreement;
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(d) except pursuant to contracts or agreements in force at the
date of the merger agreement or as permitted by the merger
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 Federal Home
Loan Bank of New York;
(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 paragraph
(f) below;
(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 of the merger agreement;
(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 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 the merger
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 the
merger 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;
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(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 the merger
agreement being or becoming untrue in any material respect at
any time prior to the effective time of the merger, or in any
of the conditions to the merger not being satisfied or in
violation of any provision of the merger 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 the merger agreement.
NO SOLICITATION BY SOUTH JERSEY
South Jersey has agreed that, except as provided in the following
paragraph, from the date of the merger agreement until the termination of the
merger agreement, neither it 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 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.
Nothing contained in the merger agreement will prevent South Jersey or
its Board of Directors from:
(a) 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:
(i) the South Jersey Board of Directors, after
consultation with its independent financial advisor,
determines that such proposal may be superior to the
merger with Richmond County from a financial point of
view to South Jersey's shareholders;
(ii) the South Jersey Board of Directors, after
consultation with and based upon the advice of
independent legal counsel, determines in good faith
that such action is necessary for it to comply with
its fiduciary duties to shareholders under applicable
law (such proposal that satisfies (i) and (ii) being
referred to herein as a "SUPERIOR PROPOSAL"); and
(iii) prior to furnishing such information to, or entering
into discussions or negotiations with, such person or
entity, South Jersey:
(A) 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
(B) receives from such person or entity an
executed confidentiality agreement in
reasonably customary form;
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(b) complying with Rule 14e-2 promulgated under the Securities
Exchange Act of 1934, as amended, with regard to a tender or
exchange offer; or
(c) failing to make or withdrawing or modifying its recommendation
and entering into a superior proposal if there exists a
superior proposal and South Jersey's Board of Directors, after
consultation with independent legal counsel, determines in
good faith that such action is necessary for it to comply with
its fiduciary duties to shareholders 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.
An "ACQUISITION PROPOSAL" includes any of the following (other than the
transactions contemplated in the merger agreement) involving South Jersey or
South Jersey Savings:
o any merger, consolidation, share exchange, business
combination, or other similar transaction;
o 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;
o 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
o 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.
Although permitted in the limited circumstances described above, the
taking of these actions by South Jersey may entitle Richmond County to terminate
the merger agreement and/or exercise certain of its rights under the stock
option agreement. See "-- Termination of the Merger Agreement" and " -- Stock
Option Agreement" on pages 31 and 37, respectively.
REGULATORY APPROVALS REQUIRED FOR THE MERGER
Completion of the merger and the bank merger is subject to a number of
regulatory approvals and consents. The merger is subject to the prior approval
of the Office of Thrift Supervision under HOLA and the regulations of the OTS.
The bank merger is subject to the prior approval of the Federal Deposit
Insurance Corporation under the Bank Merger Act. In reviewing applications under
the Bank Merger Act, the FDIC must consider, among other factors, the financial
and managerial resources and future prospects of the existing and proposed
institutions, and the convenience and needs of the communities to be served. In
addition, the FDIC may not approve a transaction:
o that will result in a monopoly or be in furtherance of any
combination or conspiracy to monopolize or to attempt to
monopolize the business of banking in any part of the United
States;
o if its effect in any section of the country may be
substantially to lessen competition or to tend to create a
monopoly; or
o if it would in any other manner be a restraint of trade,
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unless the FDIC finds that the anti-competitive effects of the transaction are
clearly outweighed by the public interests and the probable effect of the
transaction on meeting the convenience and needs of the communities to be
served. Any transaction approved by the FDIC may not be completed until 30 days
after such approval, during which time the Department of Justice may challenge
such transaction on antitrust grounds and seek the divestiture of certain assets
and liabilities. With the approval of the FDIC and the Department of Justice,
the waiting period may be reduced to no less than 15 days.
In addition, the bank merger is subject to the prior approval of the
Superintendent of Banks of the State of New York ("SUPERINTENDENT") under
certain provisions of the New York Banking Law. In determining whether to
approve merger applications under the Banking Law, the Superintendent considers,
among other factors:
o whether the merger would be consistent with adequate or sound
banking and would not result in concentration of assets beyond
limits consistent with effective competition; and
o whether the merger would result in such a lessening of
competition as to be injurious to the interest of the public
or tend toward monopoly.
The Superintendent also considers the public interest and the needs and
convenience thereof. Further, it is the policy of the State of New York to:
o ensure the safe and sound conduct of banking organizations;
o conserve assets of banking organizations;
o prevent hoarding of money;
o eliminate unsound and destructive competition among banking
organizations; and
o maintain public confidence in the business of banking and
protect the public interest and the interests of depositors,
creditors, and shareholders.
Under the Community Reinvestment Act of 1977, as amended, and the
comparable provisions of the New York Banking Law, the FDIC and the
Superintendent must also take into account the record of performance of each
institution in meeting the credit needs of the entire community, including low-
and moderate-income neighborhoods served by each institution. As part of the
review process, the banking agencies frequently receive comments and protests
from community groups and others.
The bank merger, including the conversion of South Jersey Savings from
a New Jersey State chartered savings and loan association to a New Jersey State
chartered savings bank prior to the effective time of the merger, is also
subject to the prior approval of the Commissioner of the New Jersey Department
of Banking and Insurance ("COMMISSIONER") under certain provisions of the New
Jersey Statutes. In determining whether to approve merger applications, the
Commissioner considers, among other factors:
o whether the merger would be detrimental to the safety and
soundness of South Jersey and South Jersey Savings;
o whether the merger would result in undue concentration of
resources or a substantial reduction in competition in New
Jersey; or
o whether the merger would have a significantly adverse effect
on the convenience and needs of the communities served by
South Jersey Savings.
Richmond County and South Jersey filed the required regulatory
applications and notices on May 3, 2000. As of the date of this document, we
have not received all required approvals. We are not aware of any regulatory
approvals that would be required for completion of the merger or the bank
merger, other than those described above. If any other approvals are required,
it is likely that we would seek to obtain them. There can be no assurance,
however, that any other approvals, if required, will be obtained.
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We cannot complete the merger in the absence of the receipt of all
requisite regulatory approvals and the expiration of all related waiting
periods. See "-- Conditions to the Completion of the Merger" on page 23 and "--
Termination of the Merger Agreement" below. There can be no assurance that the
Department of Justice or the New York State Attorney General or the New Jersey
Attorney General will not challenge the merger or the bank merger or, if such a
challenge is made, as to the result thereof.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences of the merger to South Jersey shareholders. The receipt of cash in
exchange for South Jersey common stock in the merger will be a taxable
transaction for federal income tax purposes and may also be a taxable
transaction under applicable state, local and foreign tax laws. A South Jersey
shareholder will generally recognize gain or loss for federal income tax
purposes in an amount equal to the difference between that South Jersey
shareholder's adjusted tax basis in the South Jersey common stock and the amount
of cash received in exchange for their shares in the merger. Any gain or loss
will be a capital gain or loss if those shares of South Jersey common stock are
held as a capital asset, and will be a long-term capital gain or loss if, at the
effective time of the merger, that South Jersey common stock was held for more
than one year.
This discussion may not apply to South Jersey shareholders who acquired
their South Jersey common stock pursuant to compensation arrangements with South
Jersey or who are not citizens or residents of the United States or who are
otherwise subject to special tax treatment. Each South Jersey shareholder is
urged to consult his, her or its tax advisor with respect to the tax
consequences of the merger, including the effects of applicable state, local,
foreign or other tax laws.
TERMINATION OF THE MERGER AGREEMENT
The merger may be terminated at any time prior to completion of the
merger, whether before or after approval by South Jersey shareholders, in any of
the following ways:
o by mutual consent of Richmond County and South Jersey;
o by either Richmond County or South Jersey if South Jersey's
shareholders do not approve the merger agreement, provided
that, in the case of termination by South Jersey, South Jersey
has complied in all material respects with its obligations
under the merger agreement with respect to its shareholder
meeting and the proxy statement for such meeting;
o by either Richmond County or South Jersey if any approval,
consent or waiver of a governmental agency required to permit
completion of the merger has been denied;
o by either Richmond County or South Jersey if any governmental
authority issues a final, unappealable order enjoining or
otherwise prohibiting the completion of the merger or the
related transactions;
o by either Richmond County or South Jersey if the merger has
not been completed by December 31, 2000, unless the failure to
complete the merger by that date is due to a breach of the
merger agreement by the party seeking to terminate;
o by either Richmond County or South Jersey if there has been a
material failure by the other party to perform or comply with
any of its covenants or agreements contained in the merger
agreement or there has been a material breach by the other
party of any of its representations or warranties contained in
the merger agreement, 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 the
other party; or
o by Richmond County if South Jersey's Board of Directors does
not publicly recommend in the Proxy Statement that South
Jersey's shareholders approve and adopt the merger
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agreement and the merger or if, after recommending in the
Proxy Statement, South Jersey's Board of Directors withdraws,
qualifies or revises such recommendation in any respect
materially adverse to Richmond County.
WAIVER AND AMENDMENT OF THE MERGER AGREEMENT
At any time prior to the effective time of the merger, any provision of
the merger 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, except that,
after the vote of South Jersey's shareholders, no amendment or modification may
be made that would reduce the amount or alter or change the kind of
consideration to be received by South Jersey's shareholders or contravene any
provision of the DGCL or the New Jersey, New York and federal banking laws,
rules and regulations.
EXPENSES
The merger agreement provides that each of Richmond County and South
Jersey will pay its own expenses in connection with the merger and the
transactions contemplated by the merger agreement.
ACCOUNTING TREATMENT
Richmond County will account for the merger using the purchase method
of accounting. Under the purchase method of accounting, assets acquired and
liabilities assumed are recorded at their fair values.
APPRAISAL RIGHTS
Any South Jersey shareholder who follows the procedures specified in
Section 262 of the DGCL is entitled to have such shareholder's shares of South
Jersey common stock appraised by the Delaware Court of Chancery ("COURT") and to
receive the "fair value" of such shares as of the effective time of the merger,
as determined by the Court, in lieu of the merger consideration. The following
is a summary of Section 262 of the DGCL and is qualified in its entirety by
reference to Section 262 of the DGCL, a copy of which is attached hereto as
Appendix D. Shareholders should carefully review Section 262 of the DGCL as well
as information discussed below to determine their rights to appraisal.
If a South Jersey shareholder elects to exercise the right to an
appraisal under Section 262 of the DGCL, such shareholder must do ALL of the
following:
o the shareholder must file with South Jersey at its
main office in Turnersville, New Jersey, a written
demand for appraisal of the South Jersey common stock
held (which demand must identify the shareholder and
expressly request an appraisal) before the vote is
taken on the merger agreement at the Annual Meeting
(this written demand for appraisal must be in
addition to and separate from any proxy or vote
against the merger agreement; neither voting against,
abstaining from voting nor failing to vote on the
merger agreement will constitute a demand for
appraisal within the meaning of Section 262 of the
DGCL);
o the shareholder must not vote in favor of the merger
agreement (a failure to vote or abstaining from
voting will satisfy this requirement, but a vote in
favor of the merger agreement, by proxy or in person,
or the return of a signed proxy that does not specify
a vote against approval and adoption of the merger
agreement, will constitute a waiver of such
shareholder's right of appraisal and will nullify any
previously filed written demand for appraisal); and
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o the shareholder must continuously hold such shares of
South Jersey common stock through the effective time
of the merger.
All written demands for appraisal should be addressed to: Joseph M.
Sidebotham, Corporate Secretary, South Jersey Financial Corporation, Inc., 4651
Route 42, Turnersville, New Jersey 08012, before the vote is taken on the merger
agreement at the Annual Meeting, and should be executed by, or on behalf of, the
holder of record. Such demand must reasonably inform South Jersey of the
identity of the shareholder and that such shareholder is thereby demanding
appraisal within the meaning of Section 262 of the DGCL.
Within 10 days after the effective time of the merger, Richmond County
will give written notice of the effective time to each shareholder of South
Jersey who has satisfied the requirements of Section 262 of the DGCL and has not
voted for, or consented to, the proposal to approve and adopt the merger
agreement (such a shareholder being referred to herein as a "DISSENTING
SHAREHOLDER"). Within 120 days after the effective time, Richmond County or any
dissenting shareholder may file a petition in the Court demanding a
determination of the fair value of the shares of South Jersey common stock of
all dissenting shareholders. Any dissenting shareholder desiring the filing of
such petition is advised to file such petition on a timely basis unless such
dissenting shareholder receives notice that such a petition has been filed by
Richmond County or another dissenting shareholder.
If a petition for appraisal is timely filed, the Court will determine
which shareholders are entitled to appraisal rights and thereafter will
determine the fair value of the South Jersey common stock held by dissenting
shareholders, exclusive of any element of value arising from the accomplishment
or expectations of the merger, but together with a fair rate of interest, if
any, to be paid on the amount determined to be fair value.
In determining such fair value, the Court shall take into account all relevant
factors. Such fair value may be determined by the Court to be more than, less
than or equal to the merger consideration that such dissenting shareholder would
otherwise be entitled to receive pursuant to the merger agreement (a cash
payment in the amount of $20.00 per share, without interest).
If a petition for appraisal is not timely filed, then the right to an
appraisal will cease. The costs of the appraisal proceeding will be determined
by the Court and taxed against the parties as the Court determines to be
equitable under the circumstances. Upon the application of any shareholder, the
Court may determine the amount of interest, if any, to be paid upon the value of
the stock of shareholders entitled thereto. Upon application of a shareholder,
the Court may order all or a portion of the expenses incurred by any shareholder
in connection with the appraisal proceeding, including, without limitation,
reasonable attorneys' fees and the fees and expenses of experts, to be charged
pro rata against the value of all shares entitled to appraisal.
From and after the effective time of the merger, no dissenting
shareholder shall have any rights of a South Jersey shareholder with respect to
such holder's South Jersey common stock for any purpose, except to receive
payment of its fair value and to receive payment of dividends or other
distributions on such holder's South Jersey common stock, if any, payable to
South Jersey shareholders of record as of a date prior to the effective time. If
a dissenting shareholder delivers to Richmond County a written withdrawal of the
demand for an appraisal within 60 days after the effective time or thereafter
with the written approval of Richmond County, or if no petition for appraisal is
filed within 120 days after the effective time, then the right of such
dissenting shareholder to an appraisal will cease and such dissenting
shareholder will be entitled to receive only the merger consideration.
A SHAREHOLDER OF SOUTH JERSEY WHO FAILS TO COMPLY WITH SECTION 262 OF
THE DGCL IS BOUND BY THE TERMS OF THE MERGER AGREEMENT.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
Directors and executive officers of South Jersey have certain interests
in the merger that are different from and in addition to their interests as
South Jersey shareholders generally. The South Jersey Board of Directors was
aware of these interests and considered them, among other matters, in approving
the merger agreement and the merger.
EMPLOYMENT AGREEMENTS. Effective as of February 12, 1999, South Jersey
Savings entered into Employment Agreements with Messrs. Colacicco, DiPaolo,
Sidebotham and Wampler and Ms. Brode, and South Jersey entered into Employment
Agreements with Messrs. Colacicco, DiPaolo and Sidebotham. See "PROPOSAL 2 --
ELECTION OF DIRECTORS -- Employment Agreements" on page 47. The merger will be
considered a change in control of South Jersey and South Jersey Savings for
purposes of the Employment Agreements. The total payments and benefits that
would be due under the Employment Agreements with the five officers covered by
the Employment Agreements, if the employment of all five of such officers were
terminated, would be approximately $2.7 million, based upon the assumption that
the payments and benefits to Messrs. Colacicco, DiPaolo and Sidebotham are not
reduced to avoid any excise tax under sections 280G and 4999 of the Internal
Revenue Code. However, it is not expected that payments and benefits will be
provided under the Employment Agreements, but rather under the Consulting
Agreements described below.
CONSULTING AGREEMENTS. The merger agreement provides that, at the
effective time of the merger, Messrs. Colacicco, DiPaolo, Sidebotham and Wampler
and Ms. Brode will each enter into a Consulting Agreement with Richmond County
Savings, which in the case of Messrs. Colacicco and DiPaolo will also include a
noncompetition agreement. Each Consulting Agreement will have a term of two
years and will require the consultant to perform reasonable consulting services
as may be assigned by Richmond County Savings, but not in excess of 150 hours
during the first year following completion of the merger and not in excess of 75
hours during the second year following completion of the merger. Such services
may include providing advice and information on the operations of South Jersey
Savings, providing background and historical information with respect to the
records and operations of South Jersey Savings and attending meetings or
participating in conferences with clients, customers or employees of Richmond
County Savings and the former South Jersey Savings. As compensation for these
consulting services, Messrs. Colacicco, DiPaolo, Sidebotham and Wampler and Ms.
Brode will be paid monthly fees of $16,700, $20,500, $10,200, $9,300 and $8,700,
respectively, during the first year following the merger and one half of such
monthly amounts during the second year following the merger.
For a period of three years following the merger in the case of Messrs.
Colacicco and DiPaolo and for two years following the merger in the case of
Messrs. Sidebotham and Wampler and Ms. Brode, each consultant will be covered at
Richmond County Savings' expense under Richmond County Savings' medical, life,
dental and disability programs, or, if such coverage cannot be provided by
reason of the consultant's status as an independent contractor, the consultant
will receive an additional payment equal to what Richmond County Savings would
have paid under such programs in lieu of such benefits. In consideration for
consenting to the termination of each consultant's Employment Agreement, Messrs.
Colacicco, DiPaolo, Sidebotham and Wampler and Ms. Brode will each be paid a
one-time payment on the effective date of the merger of $400,000, $200,000,
$150,000, $175,000 and $190,000, respectively.
Each Consulting Agreement requires the consultant to maintain the
confidentiality of financial data, customer lists and data, licensing
arrangements, business strategies, pricing information, product development
materials and other confidential information. Each Consulting Agreement also
precludes the consultant from soliciting or hiring any employee of Richmond
County Savings, and from using confidential information relating to Richmond
County Savings, for a period of three years following the merger in the case of
Messrs. Colacicco and DiPaolo and for two years following the merger in the case
of Messrs. Sidebotham and Wampler and Ms. Brode.
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In addition, the Consulting Agreements for Messrs. Colacicco and
DiPaolo include a noncompetition agreement with Richmond County Savings to the
effect that they will not, for a period of three years following the merger,
compete with Richmond County Savings, be employed by or participate in the
ownership of any competing financial institution, solicit or divert any business
from Richmond County Savings or cause any person, firm or corporation to refrain
from doing business with Richmond County Savings. In consideration for agreeing
to such additional restrictions, Messrs. Colacicco and DiPaolo will each be paid
12 quarterly payments of $30,000 and $26,500, respectively, during the three
years following the merger.
CHANGE IN CONTROL AGREEMENTS. Effective as of February 12, 1999, South
Jersey Savings entered into two-year Change in Control Agreements with six
employees of South Jersey Savings and one-year Change in Control Agreements with
four employees of South Jersey Savings (collectively, the "CIC AGREEMENTS"). See
"PROPOSAL 2 -- ELECTION OF DIRECTORS -- Change in Control Agreements" on page
48. ThE merger will be considered a change in control of South Jersey Savings
for purposes of the CIC Agreements. The total payments that would be due under
the CIC Agreements with the 10 employees covered by the CIC Agreements, if the
employment of all 10 of such employees were terminated, would be approximately
$905,000.
STOCK OPTION PLAN. At a special meeting held on February 16, 2000,
South Jersey's shareholders approved the South Jersey 2000 Stock Option Plan
("OPTION PLAN"). On that date, each non-employee director of South Jersey and
South Jersey Savings was granted a non-qualified stock option to purchase 18,967
shares of South Jersey common stock, and Messrs. Colacicco, DiPaolo, Sidebotham
and Wampler and Ms. Brode were granted stock options to purchase 63,540, 55,950,
25,000, 16,500 and 25,000 shares of South Jersey common stock, respectively,
under the Option Plan.
These options are scheduled to vest, that is, become exercisable, at a
rate of 20% per year over a five- year period beginning on February 16, 2001 and
will become immediately exercisable upon the grantee's death, disability or
retirement or upon a change in control of South Jersey, as such terms are
defined in the Option Plan. The merger will, upon the effective date of the
merger, be considered a change in control for purposes of the Option Plan.
Pursuant to the terms of the merger agreement, each option to purchase
shares of South Jersey common stock granted pursuant to the Option Plan that is
then outstanding and unexercised, whether or not then vested, will be canceled,
and the holders of such options will receive a cash payment in lieu thereof.
Notwithstanding the previous sentence, Messrs. Colacicco, DiPaolo, Sidebotham
and Wampler and Ms. Brode may elect to convert all or any portion of their South
Jersey stock options into options to purchase shares of Richmond County common
stock. See " -- Treatment of Options" on page 21.
RESTRICTED STOCK PLAN. On February 16, 2000, South Jersey's
shareholders also approved the South Jersey 2000 Restricted Stock Plan
("RESTRICTED STOCK PLAN"). On that date, Messrs. Armitage, Culbertson, Field,
Mohrfeld and Woods were each awarded 5,443 shares of South Jersey common stock,
and Messrs. Colacicco, DiPaolo, Sidebotham and Wampler and Ms. Brode were
awarded 18,236, 16,021, 7,500, 5,000 and 7,500 shares of South Jersey common
stock, respectively, under the Restricted Stock Plan.
These awards are also scheduled to vest at a rate of 20% per year over
a five-year period beginning on February 16, 2001 and will also become 100%
vested upon the grantee's death, disability or retirement or upon a change in
control of South Jersey, as such terms are defined in the Restricted Stock Plan.
The merger will, upon the effective date of the merger, be considered a change
in control for purposes of the Restricted Stock Plan.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. Under the terms of the South
Jersey Savings and Loan Association Supplemental Executive Retirement Plan
("SERP"), supplemental benefits are provided to participants in the SERP as a
result of termination of employment in connection with a change in control, or
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<PAGE>
whose participation in the ESOP ends due to termination of the ESOP in
connection with a change in control (regardless of whether the individual
terminates employment) prior to the complete repayment of the ESOP loan.
Generally, upon such an event, the SERP will provide the individual with a
supplemental ESOP benefit computed by (i) determining the number of shares
acquired by ESOP acquisition loans that would have been allocated for the
benefit of the participant under the ESOP and SERP had the participant continued
in the employ of South Jersey Savings through the last scheduled payment of the
ESOP loan, (ii) subtracting from such number of shares the number of shares
actually allocated for the benefit of the participant, and (iii) multiplying the
result by the higher of the closing price of the shares as of (x) the first ESOP
valuation date following the participant's retirement or (y) the last day of the
participant's employment with South Jersey Savings.
An individual's benefits under the SERP will become payable upon the
participant's retirement as described in the plan, upon the change in control of
South Jersey Savings or South Jersey, or as determined under the ESOP and the
South Jersey Savings and Loan Association Money Purchase Pension Plan ("PENSION
PLAN"). The merger will, upon the effective date of the merger, be considered a
change in control for purposes of the ESOP and the SERP. Messrs. Colacicco and
DiPaolo are entitled to benefits under the supplemental ESOP portion of the SERP
as a result of the change in control. See "PROPOSAL 2 -- ELECTION OF DIRECTORS
-- Supplemental Executive Retirement Plan" on page 49.
INDEMNIFICATION AND INSURANCE. Richmond County has agreed in the merger
agreement that, from and after the effective date of the merger through the
sixth anniversary of such date, Richmond County will 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 against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages or liabilities incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of matters existing or occurring at or prior to the
effective time of the merger (including the transactions contemplated by the
merger agreement, including entering into the stock option agreement), whether
asserted or claimed prior to, at or after the effective time. Richmond County
has also agreed 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 indemnified as a director, officer or employee of South
Jersey and South Jersey Savings and as then permitted under applicable law.
Richmond County has also agreed in the merger agreement that, for a
period of three years after the effective date of the merger, it will cause the
former directors and officers of South Jersey to be covered by the policy of
directors' and officers' liability insurance currently maintained by South
Jersey or by a policy of at least the same coverage and containing terms no less
advantageous to its beneficiaries than South Jersey's policies, subject to
certain maximum cost limits.
EMPLOYEE MATTERS
The merger agreement provides that, at the effective time, each South
Jersey Savings employee whose employment is not terminated when the merger
closes will become an employee of Richmond County Savings.
These continuing employees will be eligible to participate in the employee
benefit plans maintained by Richmond County or Richmond County Savings on the
same basis as any newly-hired employee of Richmond County or Richmond County
Savings, except that they will 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. In addition,
Richmond County will make available employer-provided health and other employee
welfare benefit plans to such employees on the same basis as it provides such
coverage to current 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
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<PAGE>
apply to the continuing employees or their covered dependents who were covered
under a similar South Jersey plan on the effective date of the merger.
The ESOP will be terminated as of, or prior to, the effective time of
the merger. Pursuant to the terms of the ESOP, any unvested portion of benefits
will vest immediately upon termination or a change in control. The merger will,
upon the effective date of the merger, be considered a change in control for
purposes of the ESOP. As of the effective time of the merger, all shares held by
the ESOP will be converted into the right to receive the merger consideration.
As soon as practicable following such time, a sufficient portion of the
unallocated shares held in the ESOP will be sold, and the proceeds will be used
to repay the outstanding loan to the ESOP in full. The remaining unallocated
shares will be allocated and distributed to the ESOP participants as provided in
the ESOP, subject to receipt of a favorable determination letter from the
Internal Revenue Service and unless otherwise required by applicable law. The
Pension Plan will also be terminated as of, or prior to, the effective time of
the merger. Subject to receipt of a favorable determination letter from the IRS,
distributions will be made to participants as provided in the Pension Plan.
Notwithstanding the prior two sentences, distributions to employees of South
Jersey Savings whose employment terminates may be made as soon as practicable
after the determination of final allocations and prior to the receipt of a
determination letter from the IRS.
AGREEMENT TO VOTE IN FAVOR OF THE MERGER
At the time the merger agreement was signed, Lawrence B. Seidman, a
member of the South Jersey Board of Directors and the beneficial holder of 9.6%
of South Jersey's common stock, entered into a letter agreement with Richmond
County in which Mr. Seidman agreed that he would not, directly or indirectly,
(i) sell or otherwise dispose of or encumber any or all of his shares of South
Jersey common stock or (ii) deposit any shares of South Jersey common stock into
a voting trust or enter into a voting agreement or arrangement with respect to
any shares of South Jersey common stock or grant any proxy with respect thereto,
other than to other members of the South Jersey Board of Directors for the
purpose of voting to approve the merger agreement. Mr. Seidman also agreed to
vote or cause to be voted all of the shares of South Jersey common stock that he
is entitled to so vote, whether such shares were beneficially owned at the time
such letter agreement was signed or were subsequently acquired, whether pursuant
to the exercise of stock options or otherwise, at the Annual Meeting for
approval and adoption of the merger agreement.
MANAGEMENT AND OPERATIONS FOLLOWING THE MERGER
At the effective time of the merger, the directors and officers of the
surviving corporation will be the directors and officers of Richmond County
Acquisition immediately prior to the effective time. The directors and officers
of Richmond County Savings following the bank merger will consist of the
directors and officers of Richmond County Savings immediately prior to the
effective time.
STOCK OPTION AGREEMENT
GENERAL. As a condition to entering into the merger agreement, Richmond
County required that South Jersey enter into the stock option agreement, which
allows Richmond County, under certain circumstances, to purchase up to 681,290
shares of South Jersey common stock (representing approximately 19.9% of South
Jersey's issued and outstanding common stock), subject to adjustment so that in
no event may Richmond County acquire shares of South Jersey common stock
representing more than 19.9% of the issued and outstanding shares of such stock,
at an exercise price of $15.72 per share (subject to adjustment). The option may
only be exercised upon the occurrence of certain events which are described
below.
EFFECT OF STOCK OPTION AGREEMENT. Richmond County and South Jersey
entered into the stock option agreement to increase the likelihood that the
merger will be completed in accordance with the terms of the merger agreement.
The stock option agreement may have the effect of discouraging persons who might
be
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<PAGE>
interested in acquiring all of or a significant interest in South Jersey, even
if such persons were prepared to pay a higher price per share of South Jersey
common stock than the value per share contemplated by the merger agreement. The
acquisition by a third party of South Jersey or a significant interest in South
Jersey or a significant portion of its consolidated assets, or an agreement to
do so, could cause the option to become exercisable and significantly increase
the cost of the acquisition to a potential acquirer. Such increased costs might
discourage a potential acquirer from considering or proposing an acquisition or
might result in a potential acquirer proposing to pay a lower per share price to
acquire South Jersey than it might otherwise have proposed to pay. Moreover, the
management of South Jersey believes that the exercise of the option is likely to
prohibit any acquirer of South Jersey from accounting for any acquisition of
South Jersey using the pooling-of-interests accounting method. This could
discourage or preclude an acquisition by certain other banking organizations.
TERMS OF THE STOCK OPTION AGREEMENT. The following is a brief summary
of certain provisions of the stock option agreement, which is attached hereto as
Appendix B. The summary is not intended to be complete and is qualified by
reference to the complete text of the agreement.
If Richmond County is not in material breach of the stock option
agreement or the merger agreement and if no injunction or other court order
against delivery of the shares covered by the option is in effect, Richmond
County may exercise the option, in whole or in part, at any time and from time
to time, upon the occurrence of a "purchase event," as defined below. A
"PURCHASE EVENT" means any of the following events:
o without Richmond County's prior written consent, South Jersey
takes certain actions, including authorizing, recommending or
proposing, or entering into an agreement with any third party
to effect (i) a merger, consolidation or similar transaction
involving South Jersey or any of its significant subsidiaries,
(ii) the disposition, by sale, lease, exchange or otherwise,
of assets or deposits of South Jersey or any of its
significant subsidiaries representing in either case 10% or
more of the consolidated assets or deposits of South Jersey
and South Jersey Savings or (iii) the issuance, sale or other
disposition by South Jersey of (including by way of merger,
consolidation, share exchange or any similar transaction)
securities representing 10% or more of the voting power of
South Jersey or any of its significant subsidiaries (each an
"ACQUISITION TRANSACTION"); or
o any third party acquires or obtains the right to acquire 10%
or more of the voting power of South Jersey or any of its
significant subsidiaries.
The option will terminate upon the earliest to occur of:
o the completion of the merger;
o termination of the merger agreement in accordance with its
terms prior to the occurrence of a purchase event or a
"preliminary purchase event" (as defined below) other than a
termination by Richmond County as a result of a material
breach of the merger agreement by South Jersey (such
termination is referred to as a "DEFAULT TERMINATION");
o 18 months after a default termination; or
o 18 months after termination of the merger agreement (other
than a default termination) following the occurrence of a
purchase event or a preliminary purchase event.
The term "PRELIMINARY PURCHASE EVENT" means any of the following
events:
o commencement by any third party of a tender offer or exchange
offer to purchase 10% or more of the then outstanding shares
of South Jersey common stock (such an offer being referred to
herein as a "TENDER OFFER" or an "EXCHANGE OFFER,"
respectively);
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o failure of the South Jersey shareholders to approve the merger
agreement, failure of South Jersey to hold the Annual Meeting,
or withdrawal or modification by the South Jersey Board of
Directors, in a manner adverse to Richmond County, of its
recommendation that South Jersey shareholders approve the
merger agreement, in each case after public announcement that
a third party (i) proposed to engage in an acquisition
transaction with South Jersey, (ii) commenced a tender offer
or filed a registration statement under the Securities Act of
1933, as amended, with respect to an exchange offer or (iii)
filed an application with any financial institution regulatory
authority to engage in an acquisition transaction;
o a proposal is made by a third party to South Jersey or its
shareholders, publicly or in any writing that becomes
disclosed publicly, to engage in an acquisition transaction;
or
o after a proposal is made by a third party to South Jersey or
its shareholders to engage in an acquisition transaction,
South Jersey breaches any representation, warranty, covenant
or agreement in the merger agreement and such breach would
entitle Richmond County to terminate the merger agreement.
In the event that South Jersey enters into an agreement:
(i) to consolidate with or merge into any person, other than
Richmond County or one of its subsidiaries, and South Jersey
will not be the continuing or surviving corporation of such
consolidation or merger;
(ii) to permit any person, other than Richmond County or one of its
subsidiaries, to merge into South Jersey and South Jersey
shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding shares of
South Jersey common stock shall be changed into or exchanged
for stock or other securities of South Jersey or any other
person or cash or any other property, or the outstanding
shares of South Jersey common stock immediately prior to such
merger shall after such merger represent less than 50% of the
outstanding shares and share equivalents of the merged
company; or
(iii) to sell or otherwise transfer all or substantially all of its
assets or deposits to any person, other than Richmond County
or one of its subsidiaries,
then, and in each such case, the agreement governing such transaction must
provide that the option will, upon the completion of any such transaction, be
converted into or exchanged for a substitute option, at the election of Richmond
County, to purchase shares of either (a) the corporation acquiring South Jersey,
(b) any person that controls the corporation acquiring South Jersey or (c) in
the case of a merger described in clause (ii), South Jersey.
REPURCHASE OF THE OPTION. The stock option agreement permits Richmond
County to require that South Jersey repurchase the option (or the substitute
option) and any shares issued under the option, for an aggregate price computed
in accordance with a formula set forth in the stock option agreement, if:
o any person or group shall have acquired beneficial ownership
of more than 25% of the outstanding shares of South Jersey
common stock;
o South Jersey completes a merger, consolidation or similar
transaction or any sale of substantially all of its assets; or
o any third party acquires beneficial ownership of 50% or more
of the outstanding South Jersey common stock.
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<PAGE>
PROFIT LIMITATION. The stock option agreement contains a provision that
limits the aggregate realizable profit to Richmond County from the option to
$3.5 million, plus Richmond County's reasonable out-of-pocket expenses incurred
in connection with the merger.
ADJUSTMENT. The stock option agreement provides for adjustment to the
number of shares and the exercise price of the option upon the occurrence of
certain changes to the capital structure of South Jersey or certain other events
or transactions.
REGULATORY MATTERS. Some rights and obligations of South Jersey and
Richmond County under the stock option agreement are subject to receipt of
required regulatory approvals. Richmond County must obtain the approval of the
OTS to acquire more than 5% of the outstanding shares of South Jersey common
stock.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
South Jersey common stock is quoted on the Nasdaq National Market under
the symbol "SJFC." The following table sets forth the high and low sales prices
for South Jersey common stock for the periods indicated, as quoted on the Nasdaq
National Market, and the quarterly cash dividends per share declared, for the
periods indicated. On March 15, 2000, the last trading day prior to our
announcement of the merger, the closing sale price per share of South Jersey
common stock on Nasdaq was $16.69.
<TABLE>
<CAPTION>
Price Range of Common Stock
---------------------------
High Low Dividends Declared
---- --- ------------------
<S> <C> <C> <C>
1999
First Quarter....................................... $11.56 $10.63 N/A
Second Quarter...................................... 14.13 11.06 N/A
Third Quarter....................................... 15.13 13.50 N/A
Fourth Quarter...................................... 15.63 13.13 $ 0.09
2000
First Quarter....................................... 19.50 15.25 0.09
Second Quarter (as of June 8, 2000)................. 19.75 18.88 0.09
</TABLE>
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PROPOSAL 2 -- ELECTION OF DIRECTORS
GENERAL
The Board of Directors of South Jersey currently consists of eight
directors and is divided into three classes, each of which contains
approximately one-third of the Board. The directors of each class serve for a
term of three years, with one class elected each year. In all cases, directors
serve until their successors are elected and qualified.
The terms of three directors expire at the Annual Meeting. Each of the
three incumbent directors, Robert J. Colacicco, Richard G. Mohrfeld and John V.
Field, has been nominated by the Board of Directors to be re-elected at the
Annual Meeting, each to serve for a term of three years, or until completion of
the merger. Each nominee has consented to being named in this Proxy Statement
and to serve if elected.
In the event that any nominee is unable to serve or declines to serve
for any reason, it is intended that proxies will be voted for the election of
the balance of those nominees named and for such other persons as may be
designated by the present Board of Directors. The Board of Directors has no
reason to believe that any of the persons named will be unable or unwilling to
serve. Unless authority to vote for the directors is withheld, it is intended
that the shares represented by the enclosed proxy card will be voted FOR the
election of all nominees proposed by the Board of Directors.
INFORMATION AS TO NOMINEES AND CONTINUING DIRECTORS
The following table sets forth certain information with respect to each
nominee for election as a director and each continuing director whose term does
not expire at the Annual Meeting. There are no arrangements or understandings
between South Jersey and any director or nominee pursuant to which such person
was elected or nominated to be a director of South Jersey. For information with
respect to security ownership of directors, see "THE ANNUAL MEETING -- Stock
Ownership of South Jersey's Management" on page 10.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE(1) END OF TERM POSITION HELD WITH SOUTH JERSEY SINCE(2)
---- ------ ----------- ------------------------------- --------
<S> <C> <C> <C> <C>
NOMINEES FOR A THREE-YEAR
TERM EXPIRING IN 2003
ROBERT J. COLACICCO 65 2000 PRESIDENT, CHIEF EXECUTIVE 1976
OFFICER AND DIRECTOR
RICHARD G. MOHRFELD 54 2000 DIRECTOR 1983
JOHN V. FIELD 56 2000 DIRECTOR 1998
CONTINUING DIRECTORS
RICHARD BAER 52 2002 DIRECTOR 1999
RICHARD W. CULBERTSON, 55 2001 DIRECTOR AND CHAIRMAN OF THE 1992
JR. BOARD
</TABLE>
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<TABLE>
<CAPTION>
DIRECTOR
NAME AGE(1) END OF TERM POSITION HELD WITH SOUTH JERSEY SINCE(2)
---- ------ ----------- ------------------------------- --------
<S> <C> <C> <C> <C>
GREGORY M. DIPAOLO 51 2002 EXECUTIVE VICE PRESIDENT, 1982
TREASURER, CHIEF OPERATING
OFFICER AND DIRECTOR
LAWRENCE B. SEIDMAN 52 2002 DIRECTOR 1999
RONALD L. WOODS 41 2001 DIRECTOR 1998
</TABLE>
---------------------------
(1) AT MAY 31, 2000.
(2) INCLUDES SERVICE AS A DIRECTOR OF SOUTH JERSEY SAVINGS PRIOR TO THE
INCORPORATION OF SOUTH JERSEY ON SEPTEMBER 28, 1998.
THE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE OF EACH NOMINEE FOR ELECTION AS
DIRECTOR AND EACH CONTINUING DIRECTOR ARE SET FORTH BELOW. UNLESS OTHERWISE
STATED, EACH INDIVIDUAL HAS HELD HIS CURRENT OCCUPATION FOR THE PAST FIVE YEARS.
NOMINEES FOR ELECTION AS DIRECTORS
ROBERT J. COLACICCO has been employed by South Jersey Savings since
1967 and has served as President and Chief Executive Officer of South Jersey
Savings since 1971 and as President and Chief Executive Officer of South Jersey
since 1998.
RICHARD G. MOHRFELD is currently an employee of Mohrfeld-Petro, Inc.
and was the former President of Mohrfeld, Inc., heating oil distributors,
located in Collingswood, New Jersey.
JOHN V. FIELD has been a practicing attorney for the past 29 years. He
is sole shareholder in the firm of John V. Field, PA. In 1977, Mr. Field became
General Counsel of South Jersey Savings.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE FOR THE NOMINEES FOR ELECTION
AS DIRECTORS.
CONTINUING DIRECTORS
RICHARD BAER is President of Casper Partition Systems, Inc., a company
that refurbishes office partitions for retail sale, located in Newark, New
Jersey.
RICHARD W. CULBERTSON, JR. is a certified public accountant and a
partner in the firm of Bowman & Company LLP, located in Voorhees, New Jersey.
Mr. Culbertson has served as Chairman of the Board since 1998.
GREGORY M. DIPAOLO is the Executive Vice President, Treasurer and Chief
Operating Officer of South Jersey Savings and has been Executive Vice President
and Chief Operating Officer of South Jersey since 1998.
Mr. DiPaolo has been employed by South Jersey Savings since 1973.
LAWRENCE B. SEIDMAN is an attorney and the manager of Seidman &
Associates, L.L.C. and Seidman & Associates II, L.L.C.; the President of Veteri
Place Corp., the sole General Partner of Seidman Investment
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Partnership, LP and Seidman Investment Partnership II, LP; manager of Federal
Holdings, L.L.C.; and a business consultant to certain corporations and
individuals, including, but not limited to, Kerrimatt, LP and Crown Associates,
L.L.C. These entities are generally engaged in investing in publicly-traded
securities. Mr. Seidman is also a director of CNY Financial Corporation and its
wholly owned subsidiary, Cortland Savings Bank, and a director of Ambanc Holding
Co., Inc. Mr. Seidman is a former director of Crestmont Financial Corporation,
The Savings Bank of Rockland County and Atlantic Gulf Corporation.
RONALD L. WOODS is a representative of Lenny, Vermaat and Leonard, a
real estate brokerage firm, located in Haddonfield, New Jersey.
BOARD AND COMMITTEE MEETINGS
The Board of Directors of South Jersey conducts business through
meetings of the Board of Directors and through activities of its committees. The
Board of Directors generally meets on a monthly basis and may have additional
meetings as needed. During the fiscal year ended December 31, 1999, the Board of
Directors met 11 times. No current director attended fewer than 75% of the
aggregate of (i) the total number of Board meetings held during the period that
he served as a director and (ii) the total number of meetings held by all
committees of the Board on which he served during the period that he served.
The nature and composition of the committees maintained by the Board of
Directors of South Jersey are described below:
AUDIT COMMITTEE. The Audit Committee currently consists of Messrs.
Baer, Culbertson, Field, Mohrfeld, Seidman and Woods. This committee generally
meets on an annual basis and is responsible for the review of audit reports and
management's actions regarding the implementation of audit findings and to
review compliance with all relevant laws and regulations. The Audit Committee
met one time during the fiscal year ended December 31, 1999 at the South Jersey
Savings level.
NOMINATING COMMITTEE. The Nominating Committee currently consists of
the full Board of Directors. The Nominating Committee considers and recommends
the nominees for election to the Board of Directors. The Nominating Committee
met one time during the fiscal year ended December 31, 1999.
COMPENSATION COMMITTEE. The Compensation Committee currently consists
of the full Board of Directors, however, no officer participates in the review
of his or her own compensation. The Compensation Committee is responsible for
all matters regarding compensation and fringe benefits for officers and
employees and meets on an as needed basis. The Compensation Committee met during
the fiscal year ended December 31, 1999 as part of the regular meetings of the
Board of Directors of South Jersey.
DIRECTORS' COMPENSATION
DIRECTORS' FEES. For the fiscal year ended December 31, 1999, all
non-employee directors of South Jersey Savings received an annual retainer of
$7,000, except that the Chairman of the Board received an annual retainer of
$8,000. All non-employee directors of South Jersey Savings also received $450
for each Board of Directors meeting attended and $200 for each Committee meeting
attended. For the fiscal year ended December 31, 1999, all non-employee
directors of South Jersey received an annual retainer of $3,500 and did not
receive additional fees for attending meetings of the Board of Directors of
South Jersey. As of February, 2000, all non-employee directors of South Jersey
Savings receive an annual retainer of $9,500 per year, except that the Chairman
of the Board receives an annual retainer of $10,500, and all non-employee
directors of South Jersey Savings also receive $500 for each Board of Directors
meeting attended and $250 for each committee meeting attended. The annual
retainer paid to the non-employee directors of South Jersey did not change for
2000.
43
<PAGE>
CONSULTING AGREEMENT. On August 12, 1999, South Jersey entered into a
consulting agreement with Mr. Seidman. The agreement, which is for a one-year
term, commenced on August 12, 1999 and provided for the payment of $45,000 to
Mr. Seidman for consulting services to South Jersey.
STOCK OPTION PLAN AND RESTRICTED STOCK PLAN. On February 16, 2000, each
non-employee director of South Jersey and South Jersey Savings was granted a
non-qualified stock option to purchase 18,967 shares of South Jersey common
stock and the Director Emeritus, Martin Rosner, was granted a non-qualified
stock option to purchase 9,484 shares of South Jersey common stock, under the
Option Plan. See "PROPOSAL 1 -- THE MERGER -- Interests of Certain Persons in
the Merger -- STOCK OPTION PLAN" on page 35.
On February 16, 2000, Messrs. Armitage, Culbertson, Field, Mohrfeld and
Woods were each awarded 5,443 shares of South Jersey common stock, and Mr.
Rosner was awarded 2,722 shares of South Jersey common stock, under the
Restricted Stock Plan. See "PROPOSAL 1 -- THE MERGER -- Interests of Certain
Persons in the Merger -- RESTRICTED STOCK PLAN" on page 35.
EXECUTIVE OFFICERS
The following individuals are the executive officers of South Jersey or
South Jersey Savings and hold the offices set forth below opposite their names.
<TABLE>
<CAPTION>
NAME POSITIONS HELD WITH SOUTH JERSEY OR SOUTH JERSEY SAVINGS
---- --------------------------------------------------------
<S> <C>
Robert J. Colacicco President and Chief Executive Officer
Gregory M. DiPaolo Executive Vice President, Treasurer and Chief Operating Officer
Jane E. Brode Senior Vice President
Joseph M. Sidebotham Senior Vice President, Controller and Corporate Secretary
Paul D. Wampler Senior Vice President and Chief Lending Officer
</TABLE>
The executive officers of South Jersey are elected annually and hold
office until their respective successors have been elected and qualified or
until death, resignation or removal by the Board of Directors. South Jersey has
entered into employment agreements with Messrs. Colacicco, DiPaolo and
Sidebotham, and South Jersey Savings has entered into employment agreements with
Messrs. Colacicco, DiPaolo, Sidebotham and Wampler and Ms. Brode, which set
forth the terms of their employment. See "-- Executive Compensation" and " --
Employment Agreements" on pages 46 and 47, respectively.
Biographical information of the executive officers of South Jersey or
South Jersey Savings who are not directors is set forth below.
JANE E. BRODE, age 51, joined South Jersey Savings in 1972 and has
served in various positions since that time. In 1992, Ms. Brode became Senior
Vice President. Ms. Brode is responsible for South Jersey Savings' retail
savings department.
JOSEPH M. SIDEBOTHAM, age 45, joined South Jersey Savings in 1979 and
has been Controller since 1980. In 1992, Mr. Sidebotham was promoted to Senior
Vice President. Mr. Sidebotham is responsible for regulatory reporting,
monitoring investments, management information systems (MIS) and the accounting
and internal auditing functions of South Jersey Savings. Mr. Sidebotham has also
been Corporate Secretary of South Jersey since 1998.
PAUL D. WAMPLER, age 40, joined South Jersey Savings in 1997 and is
Senior Vice President. Mr. Wampler is South Jersey Savings' Chief Lending
Officer and oversees all mortgage and consumer lending activities.
44
<PAGE>
PERFORMANCE GRAPH
Pursuant to the rules and regulations of the SEC, the graph below,
prepared by SNL Securities, L.C., compares the performance of South Jersey's
common stock with that of the Nasdaq Composite Index (U.S. Companies) and the
Nasdaq Thrift Composite Index (thrifts and savings and loan holding companies,
over 99% of which are based in the United States) from February 12, 1999, the
date of South Jersey's initial public offering, through April 30, 2000. The
graph is based on an investment of $100 in South Jersey's common stock at its
closing price of $10.63 on February 12, 1999 and assumes the reinvestment of all
dividends in additional shares of the same class of equity securities as those
below.
SOUTH JERSEY FINANCIAL CORPORATION, INC.
TOTAL RETURN PERFORMANCE
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
PERIOD ENDING
----------------------------------------------------------------------------------
INDEX 02/12/99 03/31/99 06/30/99 09/30/99 12/31/99 04/30/00
------------------------------- ------------- ------------- ------------- -------------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
South Jersey 100.00 105.17 128.74 132.76 144.59 177.99
Nasdaq - Total US* 100.00 105.86 115.83 118.64 174.79 166.27
SNL Thrift Index 100.00 101.96 100.75 88.71 82.71 80.55
</TABLE>
*SOURCE: CRSP, CENTER FOR RESEARCH IN SECURITY PRICES, GRADUATE SCHOOL OF
BUSINESS, THE UNIVERSITY OF CHICAGO 1999. USED WITH PERMISSION. ALL RIGHTS
RESERVED. CRSP.COM
45
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid to the Chief
Executive Officer and all executive officers of South Jersey or South Jersey
Savings who received aggregate salary and bonus in excess of $100,000 in 1999
for services rendered in all capacities to South Jersey and South Jersey Savings
during the fiscal years ending December 31, 1999, 1998 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM(2)
ANNUAL COMPENSATION (1) COMPENSATION AWARDS
----------------------- -------------------
OTHER ALL
ANNUAL RESTRICTED OTHER
COMPEN STOCK LTIP COMPEN
NAME AND YEAR SALARY BONUS SATION AWARDS OPTIONS PAY- SATION
PRINCIPAL POSITION * ($) ($) ($)(2) ($) (#) OUTS ($)(3)
------------------------------ ---- ----------- ---------- -------------- -------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert J. Colacicco 1999 170,435 37,496 -- -- -- -- 73,620
President and 1998 153,331 32,599 -- -- -- -- 44,884
Chief Executive Officer 1997 141,107 31,044 -- -- -- -- 39,821
Gregory M. DiPaolo 1999 142,730 32,064 -- -- -- -- 54,109
Executive Vice President, 1998 128,410 25,201 -- -- -- -- 27,851
Treasurer and Chief 1997 118,102 25,982 -- -- -- -- 25,231
Operating Officer
Jane E. Brode 1999 94,328 14,147 -- -- -- -- 31,951
Senior Vice President
Joseph M. Sidebotham 1999 87,422 23,111 -- -- -- -- 31,871
Senior Vice President,
Controller and Corporate
Secretary
</TABLE>
------------------------------
(1) Under Annual Compensation, the column titled "Bonus" consists of a
discretionary bonus approved by the South Jersey Board of Directors for
service during the year ended December 31, 1999, which was paid during
2000. The amounts shown for Messrs. DiPaolo and Sidebotham also include
discretionary bonuses of $2,000 and $10,000, respectively, which were
approved by the South Jersey Board of Directors and paid in 1999 for
their efforts in connection with the mutual to stock conversion of
South Jersey Savings.
(2) The aggregate amount of perquisites and other personal benefits was the
lesser of $50,000 or 10% of the total salary and bonus reported. For
1999, 1998 and 1997, South Jersey had no stock-related plans in
existence.
(3) For 1999, other compensation includes employer contributions of
$22,186, $22,186, $16,728 and $16,391 to the South Jersey Savings
Pension Plan on behalf of Messrs. Colacicco, DiPaolo and Sidebotham and
Ms. Brode, respectively.
For 1999, other compensation also includes the value of life insurance
premiums of $3,033, $1,005, $204 and $596 paid by South Jersey Savings
on behalf of Messrs. Colacicco, DiPaolo and Sidebotham and Ms. Brode,
respectively.
For 1999, other compensation also includes employer contributions of
$26,009 and $8,526 credited under the South Jersey Savings SERP for
Messrs. Colacicco and DiPaolo, respectively. For 1999, other
compensation also includes the value of allocations under the ESOP,
which totaled $22,392, $22,392, $14,939 and $14,964 for Messrs.
Colacicco,
DiPaolo and Sidebotham and Ms. Brode, respectively. The dollar amounts
with respect to allocations under the ESOP and contributions under the
SERP with respect to supplemental ESOP benefits are based on $15.63 per
share, the closing price of South Jersey's common stock as reported on
the Nasdaq National Market on December 31, 1999.
46
<PAGE>
EMPLOYMENT AGREEMENTS
Effective as of February 12, 1999, South Jersey Savings entered into
Employment Agreements with Messrs. Colacicco, DiPaolo, Sidebotham and Wampler
and Ms. Brode, and South Jersey entered into Employment Agreements with Messrs.
Colacicco, DiPaolo and Sidebotham. The Employment Agreements are intended to
ensure that the management base of South Jersey Savings and South Jersey remains
stable.
The South Jersey Savings Employment Agreements provide for a three-year
term for Messrs. Colacicco and DiPaolo and a two-year term for Messrs.
Sidebotham and Wampler and Ms. Brode. Each South Jersey Savings Employment
Agreement provides that, commencing on the first anniversary date of the
agreement and continuing each anniversary date thereafter, the Board of
Directors may, after conducting a performance evaluation of the executive,
extend the agreement for an additional year so that the remaining term shall be
three years, in the case of Messrs. Colacicco and DiPaolo, and two years, in the
case of Messrs. Sidebotham and Wampler and Ms. Brode, unless the executive
elects not to extend the term by giving written notice. Each South Jersey
Employment Agreement provides for a three-year term for Messrs. Colacicco and
DiPaolo and a two-year term for Mr. Sidebotham. The term of each South Jersey
Employment Agreement automatically extends on a daily basis, unless written
notice of non-renewal is given by the Board of Directors of South Jersey or the
executive. The South Jersey Savings Employment Agreements and the South Jersey
Employment Agreements provide that the executive's base salary will be reviewed
annually. The initial base salaries for such Employment Agreements for Messrs.
Colacicco, DiPaolo, Sidebotham and Wampler and Ms. Brode were $170,435,
$142,730, $87,422, $86,258 and $94,328, respectively. In addition to the base
salary, the Employment Agreements provide for, among other things, participation
in various employee benefit plans and stock-based compensation programs, as well
as the provision of fringe benefits available to similarly-situated executive
personnel.
The Employment Agreements provide for termination of employment of the
executive by South Jersey Savings or South Jersey for cause (as described in the
agreements) at any time. In the event South Jersey Savings or South Jersey
chooses to terminate the executive's employment for reasons other than for cause
or in the event of the executive's resignation from South Jersey Savings or
South Jersey upon: (i) the failure to re-elect or re-appoint the executive to
his or her current office, unless consented to by the executive; (ii) a material
change in the executive's functions, duties or responsibilities causing the
executive's position to become one of lesser responsibility, importance or
scope, unless consented to by the executive; (iii) a relocation of the
executive's principal place of employment by more than 25 miles, unless
consented to by the executive; (iv) a material reduction in the benefits and
perquisites to the executive, unless consented to by the executive; (v) the
liquidation or dissolution of South Jersey Savings or South Jersey; or (vi) a
breach of the Employment Agreement by South Jersey Savings or South Jersey
(collectively referred to as an "EVENT OF TERMINATION"), the executive or, in
the event of the executive's death, the executive's beneficiary, would be
entitled to receive an amount generally equal to the sum of (x) the remaining
base salary and bonus payments that would have been paid to the executive during
the remaining term of the Employment Agreements had the event of termination not
occurred and (y) a payment attributable to the contributions that would have
been made on the executive's behalf to any employee benefit plans of South
Jersey Savings or South Jersey during the remaining term of the Employment
Agreements, together with the value of stock-based incentives previously awarded
to the executive. South Jersey Savings and South Jersey would also continue and
pay for the executive's life, health and disability coverage for the remaining
term of the Employment Agreement. Under the South Jersey Savings Employment
Agreements, such sum and such benefits cannot exceed, in the aggregate, three
times the executive's average annual compensation for the five most recent
taxable years that the executive has been employed by South Jersey Savings (or
such lesser number of years if the executive has been employed for a lesser
period). Upon the occurrence of an event of termination, the executive is
subject to a covenant not to compete with South Jersey or South Jersey Savings
for one year.
Under the Employment Agreements, if involuntary termination or
voluntary termination of the executive's employment follows a change in control
of South Jersey Savings or South Jersey, the executive or,
47
<PAGE>
in the event of the executive's death, the executive's beneficiary, would
receive a severance payment generally equal to the greater of: (i) the base
salary and bonus payments due for the remaining term of the agreement, including
the value of stock-based incentives previously awarded to the executive; or (ii)
three times the executive's average annual compensation for the five most recent
taxable years that the executive has been employed by South Jersey Savings (or
such lesser number of years if the executive has been employed for a lesser
period). South Jersey Savings and South Jersey would also continue the
executive's life, health, and disability coverage for thirty-six months, in the
case of Messrs. Colacicco and DiPaolo, and twenty-four months in the case of
Messrs. Sidebotham and Wampler and Ms. Brode. Notwithstanding that both the
South Jersey Savings Employment Agreements and the South Jersey Employment
Agreements may provide for a severance payment in the event of a change in
control, to the extent payments or benefits are provided under one agreement,
such amount is subtracted from any amount due under the other agreement.
Payments and benefits to the executives under the South Jersey Savings
Employment Agreements are guaranteed by South Jersey in the event that payments
or benefits are not paid by South Jersey Savings. Payments under the South
Jersey Employment Agreements would be made by South Jersey. All reasonable costs
and legal fees paid or incurred by the executive pursuant to any dispute or
question of interpretation relating to the Employment Agreements will be paid by
South Jersey or South Jersey Savings, if the executive is successful on the
merits pursuant to a legal judgment, arbitration or settlement. The Employment
Agreements also provide that South Jersey Savings and South Jersey shall
indemnify the executive to the fullest extent allowable under federal, New
Jersey and Delaware law, respectively.
CHANGE IN CONTROL AGREEMENTS
Effective as of February 12, 1999, South Jersey Savings entered into
two-year CIC Agreements with six employees of South Jersey Savings and one-year
CIC Agreements with four employees of South Jersey Savings, none of whom are
covered by an Employment Agreement. Commencing on the first anniversary date of
the agreements and continuing on each anniversary thereafter, the CIC Agreements
may be renewed by the Board of Directors of South Jersey Savings for an
additional year. The CIC Agreements provide that in the event involuntary
termination of employment or, under certain circumstances, voluntary termination
of employment follows a change in control of South Jersey Savings or South
Jersey, the covered employee would be entitled to receive a severance payment
equal to the covered employee's average annual compensation for the five most
recent taxable years preceding termination times two in the case of the two-year
CIC Agreements and times one in the case of the one-year CIC Agreements. South
Jersey Savings would also continue and pay for the covered employee's life,
health and disability coverage for 24 months under the two-year CIC Agreements
and 12 months under the one-year CIC Agreements following termination of
employment. Payments to the covered employee under the CIC Agreements are
guaranteed by South Jersey in the event that payments or benefits are not paid
by South Jersey Savings. The payments and benefits under the CIC Agreements are
limited so that in no event will the aggregate payments and benefits result in
an excise tax under sections 280G and 4999 of the Internal Revenue Code.
EMPLOYEE SEVERANCE COMPENSATION PLAN
In connection with the mutual to stock conversion of South Jersey
Savings, the Board of Directors of South Jersey Savings established the South
Jersey Savings and Loan Association Employee Severance Compensation Plan
("SEVERANCE PLAN") to provide eligible employees with severance pay benefits in
the event of a change in control of South Jersey Savings or South Jersey.
Management personnel with Employment Agreements or CIC Agreements do not
participate in the Severance Plan. Generally, all employees are eligible to
participate in the Severance Plan if they have completed at least one year of
service with South Jersey Savings or any subsidiary or parent of South Jersey
Savings. Under the Severance Plan, in the event of a change in control of South
Jersey Savings or South Jersey, eligible employees who terminate employment
within one year of the change in control (for reasons specified under the
Severance Plan), will receive a severance payment equal to one-twelfth of their
current annual compensation for each year of service
48
<PAGE>
completed with South Jersey Savings, up to a maximum of 199% of their current
annual compensation. The merger will, upon the effective date of the merger, be
considered a change in control for purposes of the Severance Plan. The payments
under the Severance Plan are limited so that in no event will the aggregate
payments result in an excise tax under sections 280G and 4999 of the Internal
Revenue Code.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Internal Revenue Code limits the amount of compensation South
Jersey Savings may consider in providing benefits under its tax-qualified
retirement plans, such as the Pension Plan and the ESOP. The Internal Revenue
Code further limits the amount of annual contributions and benefit accruals
under such plans on behalf of any employee. South Jersey Savings sponsors the
SERP, a non-qualified plan intended to provide benefits to make up for the
reduction in benefits flowing from these limits in connection with the Pension
Plan and the ESOP. In addition to providing for benefits lost under
tax-qualified plans as a result of limitations imposed by the Internal Revenue
Code, the SERP will also make up lost ESOP benefits to designated individuals
who retire, who terminate employment in connection with a change in control, or
whose participation in the ESOP ends due to termination of the ESOP in
connection with a change in control (regardless of whether the individual
terminates employment) prior to the complete scheduled repayment of the ESOP
loan. Generally, upon such an event, the SERP will provide the individual with a
benefit equal to what the individual would have received under the ESOP had he
remained employed or continued to participate in the ESOP throughout the
scheduled term of the ESOP loan. An individual's benefits under the SERP will
become payable upon the participant's retirement as described in the plan, upon
the change in control of South Jersey Savings or South Jersey, or as determined
under the ESOP and Pension Plan. The merger will, upon the effective date of the
merger, be considered a change in control for purposes of the SERP.
STOCK OPTION PLAN AND RESTRICTED STOCK PLAN
On February 16, 2000, Messrs. Colacicco, DiPaolo, Sidebotham and
Wampler and Ms. Brode were granted stock options to purchase 63,540, 55,950,
25,000, 16,500 and 25,000 shares, respectively, of South Jersey common stock.
See "PROPOSAL 1 -- THE MERGER -- Interests of Certain Persons in the Merger --
STOCK OPTION PLAN" on page 35.
On February 16, 2000, Messrs. Colacicco, DiPaolo, Sidebotham and
Wampler and Ms. Brode were awarded 18,236, 16,021, 7,500, 5,000 and 7,500
shares, respectively, of South Jersey common stock under the Restricted Stock
Plan. See "PROPOSAL 1 -- THE MERGER -- Interests of Certain Persons in the
Merger -- RESTRICTED STOCK PLAN" on page 35.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
Federal regulations require that all loans or extensions of credit to
executive officers and directors must be made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with the general public and must not involve more than
the normal risk of repayment or present other unfavorable features. In addition,
loans made to a director or executive officer in excess of the greater of
$25,000 or 5% of South Jersey Savings' capital and surplus (up to a maximum of
$500,000) must be approved in advance by a majority of the disinterested members
of the Board of Directors.
South Jersey Savings currently makes loans to its executive officers
and directors on the same terms and conditions offered to the general public.
South Jersey Savings' policy provides that all loans made by South Jersey
Savings to its executive officers and directors be made in the ordinary course
of business, on substantially the same terms, including collateral, as those
prevailing at the time for comparable transactions with other persons and may
not involve more than the normal risk of collectibility or present other
unfavorable features. As of December 31, 1999, one of South Jersey's directors,
Mr. Mohrfeld, had a residential first mortgage loan with South Jersey Savings.
This loan had an outstanding balance of approximately $208,000 at
49
<PAGE>
December 31, 1999. In addition, as of December 31, 1999, another director of
South Jersey, Mr. Woods, was the executor of an estate that had a residential
first mortgage loan with South Jersey Savings. This loan had an outstanding
balance of approximately $69,000 at December 31, 1999. These loans were made by
South Jersey Savings in the ordinary course of business, with no favorable terms
and such loans do not involve more than the normal risk of collectibility or
present unfavorable features.
South Jersey intends that all transactions in the future between South
Jersey and its executive officers, directors, holders of 10% or more of the
shares of any class of its common stock and affiliates thereof, will contain
terms no less favorable to South Jersey than could have been obtained by it in
arm's length negotiations with unaffiliated persons and will be approved by a
majority of independent outside directors of South Jersey not having any
interest in the transaction.
OTHER TRANSACTIONS WITH AFFILIATES
South Jersey and South Jersey Savings utilize the services of the law
offices of John V. Field, PA, of which Mr. Field, a director of South Jersey and
South Jersey Savings, is the sole shareholder, for a variety of legal work,
relating to the ordinary course of South Jersey's and South Jersey Savings'
businesses. During 1999, South Jersey and South Jersey Savings made payments to
Mr. Field's firm for legal services totaling approximately $34,000.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires South Jersey's executive
officers and directors, and persons who own more than 10% of any registered
class of South Jersey's equity securities, to file reports of ownership and
changes in ownership with the SEC. Executive officers, directors and greater
than 10% shareholders are required by regulation to furnish South Jersey with
copies of all Section 16(a) reports they file.
Based solely on its review of the copies of the reports it has received
and written representations provided to South Jersey from the individuals
required to file the reports, South Jersey believes that each of its executive
officers and directors has complied with applicable reporting requirements for
transactions in South Jersey's common stock during the year ended December 31,
1999.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated financial statements of South Jersey and South Jersey
Savings incorporated in this Proxy Statement by reference to the South Jersey
Annual Report on Form 10-KSB for the year ended December 31, 1999, have been so
incorporated by reference in this document in reliance on the report with
respect to those financial statements of Deloitte & Touche LLP, independent
public accountants, given upon the authority of that firm as experts in
accounting and auditing. Representatives of Deloitte & Touche will be present at
the Annual Meeting and will have the opportunity to make a statement if they
desire to do so and are expected to be available to respond to appropriate
questions.
SHAREHOLDER PROPOSALS
South Jersey will hold a 2001 Annual Meeting of Shareholders only if
the merger is not consummated before the time of the meeting. In the event that
such a meeting is held, any proposals of shareholders intended to be presented
at the 2001 Annual Meeting must be received by the Corporate Secretary of South
Jersey no later than February 17, 2001 in order to be considered for inclusion
in the South Jersey proxy materials relating to that meeting.
50
<PAGE>
OTHER MATTERS
As of the date of this Proxy Statement, the South Jersey Board of
Directors knows of no matters that will be presented for consideration at the
Annual Meeting, other than as described in this Proxy Statement. If any other
matters do properly come before the Annual Meeting or any adjournment or
postponement thereof and shall be voted upon, including proposals omitted in
accordance with Rule 14a-8 of the Exchange Act, the enclosed proxies will be
deemed to confer discretionary authority on the individuals named as proxies to
vote the shares represented by those proxies as to any such matters. The
individuals named as proxies intend to vote or not to vote in accordance with
the recommendation of the management of South Jersey.
WHERE YOU CAN FIND MORE INFORMATION
South Jersey files reports, proxy statements and other information with
the SEC under the Exchange Act. You may read and copy this information at the
following locations of the SEC:
<TABLE>
<CAPTION>
Public Reference Room Northwest Regional Office Midwest Regional Office
--------------------- ------------------------- -----------------------
<S> <C> <C>
450 Fifth Street, N.W. 7 World Trade Center 500 West Madison Street
Room 1024 Suite 1300 Suite 1400
Washington, D.C. New York, New York Chicago, Illinois
20549 10048 60661-2511
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. The SEC also maintains an Internet world-wide
web site that contains reports, proxy statements and other information about
issuers, like South Jersey, who file electronically with the SEC. The address of
that site is http://www.sec.gov.
You can also inspect reports, proxy statements and other information
about South Jersey at the offices of the NASD, 1735 K Street, N.W., Washington,
D.C. 20006.
Richmond County has supplied all information contained or incorporated
by reference in this Proxy Statement relating to Richmond County and South
Jersey has supplied all relevant information relating to South Jersey.
We have not authorized anyone to give any information or make any
representation about the merger, South Jersey or Richmond County that is
different from, or in addition to, that contained in this Proxy Statement or in
any of the materials that we have incorporated into this document. Therefore, if
anyone does give you information of this sort, you should not rely on it. The
information contained in this document speaks only as of the date of this
document unless the information specifically indicates that another date
applies.
FORWARD-LOOKING STATEMENTS
This Proxy Statement contains certain forward-looking statements with
respect to the financial condition, results of operations, plans, objectives,
future performance and business of South Jersey, as well as certain information
relating to the merger. These forward-looking statements involve certain risks
and uncertainties. Actual results may differ materially from those contemplated
by the forward-looking statements due to, among others, the following factors:
o competitive pressures among financial services companies may
increase significantly,
51
<PAGE>
o changes in the interest rate environment may reduce interest
margins,
o general economic conditions, either internationally or
nationally or in the states in which Richmond County or South
Jersey are doing business, may be less favorable than
expected,
o legislative or regulatory changes may adversely affect the
business in which Richmond County or South Jersey is engaged,
and
o technological changes may be more difficult or expensive than
anticipated.
See "WHERE YOU CAN FIND MORE INFORMATION" on page 51.
Whether or not you plan to attend the Annual Meeting in person, please
complete, date, sign and return the enclosed proxy card in the enclosed
postage-paid envelope. If you attend the Annual Meeting, you may vote in person
if you wish, even if you have previously returned your proxy card. However, if
you are a shareholder whose shares are not registered in your own name, you will
need appropriate documentation from your recordholder to vote in person at the
Annual Meeting.
By Order of the Board of Directors
Joseph M. Sidebotham
CORPORATE SECRETARY
Turnersville, New Jersey
June 16, 2000
52
<PAGE>
APPENDIX A
================================================================================
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>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
Introductory Statement..........................................................................................A-1
ARTICLE I
THE MERGER
Section 1.1. Structure of the Merger.......................................................................A-1
Section 1.2. Effect on Shares of South Jersey Common Stock.................................................A-1
Section 1.3. Payment Procedures............................................................................A-2
Section 1.4. Stock Options.................................................................................A-3
Section 1.5. Effect on Shares of Acquisition Sub Stock.....................................................A-4
Section 1.6. Certificate of Incorporation and Bylaws of the Surviving Corporation..........................A-4
Section 1.7. Directors and Officers of the Surviving Corporation...........................................A-4
Section 1.8. Bank Merger...................................................................................A-4
Section 1.9. Alternative Structure.........................................................................A-4
Section 1.10. Dissenters' Rights............................................................................A-4
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. Disclosure Letters; Standards.................................................................A-5
Section 2.2. Representations and Warranties of South Jersey................................................A-5
Section 2.3. Representations and Warranties of Richmond County............................................A-18
ARTICLE III
CONDUCT PENDING THE MERGER
Section 3.1. Conduct of South Jersey's Business Prior to the Effective Time...............................A-21
Section 3.2. Forbearance by South Jersey..................................................................A-21
Section 3.3. Conduct of Richmond County's Business Prior to the Effective Time............................A-23
ARTICLE IV
COVENANTS
Section 4.1. Acquisition Proposals........................................................................A-24
Section 4.2. Certain Policies and Actions of South Jersey.................................................A-25
Section 4.3. Access and Information.......................................................................A-25
Section 4.4. Certain Filings, Consents and Arrangements...................................................A-27
Section 4.5. Antitakeover Provisions......................................................................A-27
Section 4.6. Additional Agreements........................................................................A-27
Section 4.7. Publicity....................................................................................A-27
Section 4.8. Stockholder Meeting..........................................................................A-28
Section 4.9. Proxy Statement..............................................................................A-28
Section 4.10. Notification of Certain Matters..............................................................A-28
Section 4.11. Employees, Directors and Officers............................................................A-29
Section 4.12. Indemnification..............................................................................A-30
Section 4.13. South Jersey Savings Charitable Foundation...................................................A-31
<PAGE>
ARTICLE V
CONDITIONS TO CONSUMMATION
Section 5.1. Conditions to Each Party's Obligations.......................................................A-31
Section 5.2. Conditions to the Obligations of Richmond County.............................................A-32
Section 5.3. Conditions to the Obligations of South Jersey................................................A-32
ARTICLE VI
TERMINATION
Section 6.1. Termination..................................................................................A-33
Section 6.2. Effect of Termination........................................................................A-34
ARTICLE VII
CLOSING, EFFECTIVE DATE AND EFFECTIVE TIME
Section 7.1. Effective Date and Effective Time............................................................A-34
Section 7.2. Deliveries at the Closing....................................................................A-34
ARTICLE VIII
CERTAIN OTHER MATTERS
Section 8.1. Certain Definitions; Interpretation..........................................................A-34
Section 8.2. Survival.....................................................................................A-35
Section 8.3. Waiver; Amendment............................................................................A-35
Section 8.4. Counterparts.................................................................................A-35
Section 8.5. Governing Law................................................................................A-35
Section 8.6. Expenses.....................................................................................A-35
Section 8.7. Notices......................................................................................A-35
Section 8.8. Entire Agreement; etc........................................................................A-36
Section 8.9. Successors and Assigns; Assignment...........................................................A-36
</TABLE>
<PAGE>
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 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").
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"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 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
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<PAGE>
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 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 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
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<PAGE>
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 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
A-4
<PAGE>
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.
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
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<PAGE>
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").
(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;
(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.
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<PAGE>
(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 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.
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(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.
(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 consents or approvals of or filings or registrations with any
court, administrative agency or commission or other governmental authority or
instrumentality (each a "GOV ERNMENTAL 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
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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.
(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 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
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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;
(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.
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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.
(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 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
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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 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
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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 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
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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;
(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 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
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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;
(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
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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
(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
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South Jersey and South Jersey Savings. South Jersey's Disclosure 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 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,
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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.
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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.
(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
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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 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
consum mation 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).
(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.
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(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 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.
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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 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
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cash 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 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
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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 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.
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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 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
(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
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<PAGE>
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 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.
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<PAGE>
(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 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;
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<PAGE>
(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 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 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.
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<PAGE>
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 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
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<PAGE>
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 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.
(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.
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<PAGE>
(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
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
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<PAGE>
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 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.
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(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 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,
------------------
converted from a New Jersey chartered savings and loan association to a New
Jersey chartered savings bank.
(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:
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(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, 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
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(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.
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.
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"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) 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
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With copies to:
Douglas J. McClintock, Esq.
Thacher Proffitt & Wood
Two World 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 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.
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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 Executive Officer
SOUTH JERSEY FINANCIAL CORPORATION, INC.
By: /s/ Robert J. Colacicco
-------------------------------------
Robert J. Colacicco
President and Chief Executive Officer
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APPENDIX B
SOUTH JERSEY FINANCIAL CORPORATION, INC.
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of March 15, 2000 ("Agreement"), by
and between South Jersey Financial Corporation, Inc., a Delaware
corporation ("Issuer"), and Richmond County Financial Corp. a Delaware
corporation ("Grantee").
RECITALS
A. THE AGREEMENT AND PLAN OF MERGER. Grantee and Issuer have entered
into an Agreement and Plan of Merger, dated as of March 15, 2000 ("Merger
Agreement"), providing for, among other things, the merger of a wholly owned
subsidiary of Grantee with and into Issuer, with Issuer being the surviving
corporation and becoming a wholly owned subsidiary of Grantee.
B. CONDITION TO AGREEMENT AND PLAN OF MERGER. As a condition and
an inducement to Grantee's execution and delivery of the Merger Agreement,
Grantee has required that Issuer agree, and Issuer has agreed, to grant
Grantee the Option (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Merger Agreement, and intending to be legally bound hereby, Issuer and
Grantee agree as follows:
1. DEFINED TERMS. Capitalized terms that are used but not defined
in this Agreement shall have the meanings ascribed to such terms in the
Merger Agreement.
2. GRANT OF OPTION. Subject to the terms and conditions set forth in
this Agreement, Issuer hereby grants to Grantee an irrevocable option ("Option")
to purchase up to 681,290 shares of common stock, par value $.01 per share
("Issuer Common Stock"), of Issuer (as adjusted as set forth herein, the "Option
Shares," which shall include the Option Shares before and after any transfer of
such Option Shares, but in no event shall the number of Option Shares for which
this Option is exercisable exceed 19.9% of the issued and outstanding shares of
Issuer Common Stock), at a purchase price per Option Share (as adjusted as set
forth herein, the "Purchase Price") equal to $15.72.
3. EXERCISE OF OPTION.
(a) Provided that (i) Grantee or Holder (as hereinafter
defined), as applicable, shall not be in material breach of the agreements or
covenants contained in this Agreement or the Merger Agreement, and (ii) no
preliminary or permanent injunction or other order against the delivery of
shares covered by the Option issued by any court of competent jurisdiction in
the United States shall be in effect, the Holder may exercise the Option, in
whole or in part, at any time and from time to time, following the occurrence of
a Purchase Event (as hereinafter defined); provided, that, the Option shall
terminate and be of no further force or effect upon the earliest to occur of (A)
the Effective Time, (B) termination of the Merger Agreement in accordance with
the terms thereof prior to the occurrence of a Purchase Event or a Preliminary
Purchase Event other than a termination thereof by Grantee pursuant to Section
6.1(e) of the Merger Agreement (a termination of the Merger Agreement by Grantee
pursuant to Section 6.1(e) of the Merger Agreement, being referred to herein as
a "Default Termination"), (C) 18 months after a Default Termination or (D) 18
months after termination of the Merger Agreement (other than a Default
Termination) following the occurrence of a Purchase Event or a Preliminary
Purchase Event; provided, however, that any purchase of shares upon exercise of
the Option shall be subject to compliance with applicable law; provided further,
however, that if the Option
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cannot be exercised on any day an injunction, order or similar restraint issued
by a court of competent jurisdiction, the period during which the Option may be
exercised shall be extended so that the Option shall expire no earlier than the
tenth business day after such injunction, order or restraint shall have been
dissolved or when such injunction, order or restraint shall have become
permanent and no longer subject to appeal, as the case may be. The term "Holder"
shall mean the holder or holders of the Option from time to time, and which
initially is Grantee. The rights set forth in Sections 8 and 9 of this Agreement
shall terminate when the right to exercise the Option and Substitute Option
terminate (other than as a result of a complete exercise of the Option) as set
forth herein.
(b) As used herein, a "Purchase Event" means any of the
following events:
(i) Without Grantee's prior written consent,
Issuer shall have authorized, recommended, publicly proposed or publicly
announced an intention to authorize, recommend or propose, or Issuer shall
have entered into an agreement with any person (other than Grantee or any
subsidiary of Grantee) to effect (A) a merger, consolidation or similar
transaction involving Issuer or any of its significant subsidiaries, (B)
the disposition, by sale, lease, exchange or otherwise, of assets or
deposits of Issuer or any of its significant subsidiaries representing in
either case 10% or more of the consolidated assets or deposits of Issuer
and its subsidiaries, other than in the ordinary course of business, or (C)
the issuance, sale or other disposition by Issuer of (including by way of
merger, consolidation, share exchange or any similar transaction)
securities representing 10% or more of the voting power of Issuer or any of
its significant subsidiaries (each of (A), (B) or (C), an "Acquisition
Transaction"); or
(ii) Any person (other than Grantee or any
subsidiary of Grantee) shall have acquired beneficial ownership (as such
term is defined in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended ("Exchange Act")) of, or the right to acquire beneficial ownership
of, or any "group" (as such term is defined in Section 13(d)(3) of the
Exchange Act), other than a group of which Grantee or any subsidiary of
Grantee is a member, shall have been formed which beneficially owns, or has
the right to acquire beneficial ownership of, 10% or more of the voting
power of Issuer or any of its significant subsidiaries.
(c) As used herein, a "Preliminary Purchase Event" means
any of the following events:
(i) Any person (other than Grantee or any
subsidiary of Grantee) shall have commenced (as such term is defined in
Rule 14d-2 under the Exchange Act) or shall have filed a registration
statement under the Securities Act of 1933, as amended, ("Securities Act"),
with respect to, a tender offer or exchange offer to purchase any shares of
Issuer Common Stock such that, upon consummation of such offer, such person
would own or control 10% or more of the then outstanding shares of Issuer
Common Stock (such an offer being referred to herein as a "Tender Offer" or
an "Exchange Offer," respectively); or
(ii) The stockholders of Issuer shall not have
approved the Merger Agreement by the requisite vote at the meeting of the
stockholders of the Issuer required to be called to approve the Merger
Agreement ("Issuer Meeting"), the Issuer Meeting shall not have been held
or shall have been canceled prior to termination of the Merger Agreement or
Issuer's Board of Directors shall have withdrawn or modified in a manner
adverse to Grantee the recommendation of Issuer's Board of Directors with
respect to the Merger Agreement, in each case after it shall have been
publicly announced that any person (other than Grantee or any subsidiary of
Grantee) shall have (A) made, or disclosed an intention to make, a bona
fide proposal to engage in an Acquisition Transaction, (B) commenced a
Tender Offer or filed a registration statement under the Securities Act
with respect to an Exchange Offer or (C) filed an application (or given a
notice), whether in draft or final form, under the Bank Holding Company Act
of 1956, as amended ("BHC Act"), the Home Owners' Loan Act, as amended
("HOLA"), the Bank Merger Act, as amended ("BMA") or the Change in Bank
Control Act of 1978, as amended ("CBCA"), for approval to engage in an
Acquisition Transaction; or
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(iii) Any person (other than Grantee or any
subsidiary of Grantee) shall have made a bona fide proposal to Issuer or
its stockholders by public announcement, or written communication that is
or becomes the subject of public disclosure, to engage in an Acquisition
Transaction; or
(iv) After a proposal is made by a third party to
Issuer or its stockholders to engage in an Acquisition Transaction, or such
third party states its intention to the Issuer to make such a proposal if
the Merger Agreement terminates, and thereafter Issuer shall have breached
any representation, warranty, covenant or agreement contained in the Merger
Agreement and such breach would entitle Grantee to terminate the Merger
Agreement under Section 6.1(e) thereof (without regard to the cure period
provided for therein unless such cure is promptly effected without
jeopardizing consummation of the Merger pursuant to the terms of the Merger
Agreement).
As used in this Agreement, the term "person" shall have the meaning
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Preliminary Purchase Event or Purchase Event of which it has
knowledge, it being understood that the giving of such notice by Issuer shall
not be a condition to the right of Holder to exercise the Option.
(e) In the event Holder wishes to exercise the Option, it
shall send to Issuer a written notice (the "Option Notice," the date of which
being herein referred to as the "Notice Date") specifying (i) the total number
of Option Shares it intends to purchase pursuant to such exercise and (ii) a
place and date not earlier than three business days nor later than 15 business
days from the Notice Date for the closing ("Closing") of such purchase ("Closing
Date"); provided, that the first Option Notice shall be sent to Issuer within
180 days after the first Purchase Event of which Grantee has been notified. If
prior notification to or approval of any Governmental Entity is required in
connection with any such purchase, Issuer shall cooperate with the Holder in the
filing of the required notice of application for approval and the obtaining of
such approval, and the Closing shall occur promptly following such regulatory
approvals and any mandatory waiting periods. Any exercise of the Option shall be
deemed to occur on the Notice Date relating thereto.
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in
immediately available funds by wire transfer to a bank account designated by
Issuer, an amount equal to the Purchase Price multiplied by the number of Option
Shares to be purchased on such Closing Date and (ii) present and surrender this
Agreement to the Issuer at the address of the Issuer specified in Section 13(f)
of this Agreement; provided that failure or refusal of Issuer to designate a
bank account shall not preclude Holder from exercising the Option.
(b) At each Closing, simultaneously with the delivery of
immediately available funds and surrender of this Agreement as provided in
Section 4(a) of this Agreement, (i) Issuer shall deliver to Holder (A) a
certificate or certificates representing the Option Shares to be purchased at
such Closing, which Option Shares shall be free and clear of all liens (as
defined in the Merger Agreement) and subject to no preemptive rights, and (B) if
the Option is exercised in part only, an executed new agreement with the same
terms as this Agreement evidencing the right to purchase the balance of the
shares of Issuer Common Stock purchasable hereunder, and (ii) Holder shall
deliver to Issuer a letter agreeing that Holder shall not offer to sell or
otherwise dispose of such Option Shares in violation of applicable federal and
state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by
applicable law, certificates for the Option Shares delivered at each Closing
shall be endorsed with a restrictive legend which shall read substantially as
follows:
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THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND PURSUANT
TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF MARCH 15, 2000. A COPY OF
SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT
BY THE ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the portion of the above legend relating to the
Securities Act shall be removed by delivery of substitute certificate(s) without
such legend if Holder shall have delivered to Issuer a copy of a letter from the
staff of the Securities and Exchange Commission ("SEC"), or an opinion of
counsel in form and substance reasonably satisfactory to Issuer and its counsel,
to the effect that such legend is not required for purposes of the Securities
Act.
(d) Upon the giving by Holder to Issuer of an Option Notice,
the tender of the applicable purchase price in immediately available funds and
the tender of this Agreement to Issuer, Holder shall be deemed to be the holder
of record of the shares of Issuer Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of Issuer shall then be closed or
that certificates representing such shares of Issuer Common Stock shall not then
be actually delivered to Holder. Issuer shall pay all expenses, and any and all
United States federal, state and local taxes and other charges that may be
payable in connection with the preparation, issuance and delivery of stock
certificates under this Section 4 in the name of Holder or its assignee,
transferee or designee.
(e) Issuer agrees (i) that it shall at all times maintain,
free from preemptive rights, sufficient authorized but unissued or treasury
shares of Issuer Common Stock so that the Option may be exercised without
additional authorization of Issuer Common Stock after giving effect to all other
options, warrants, convertible securities and other rights to purchase Issuer
Common Stock, (ii) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or performance of any
of the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer, (iii) promptly to take all action as may from time to time
be required (including (A) complying with all premerger notification, reporting
and waiting period requirements and (B) in the event prior approval of or notice
to any Governmental Entity is necessary before the Option may be exercised,
cooperating fully with Holder in preparing such applications or notices and
providing such information to such Governmental Entity as it may require) in
order to permit Holder to exercise the Option and Issuer duly and effectively to
issue shares of Issuer Common Stock pursuant hereto and (iv) promptly to take
all action provided herein to protect the rights of Holder against dilution.
5. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby
represents and warrants to Grantee (and Holder, if different than Grantee)
as follows:
(a) CORPORATE AUTHORITY. Issuer has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby; the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Issuer, and no other corporate
proceedings on the part of Issuer are necessary to authorize this Agreement or
to consummate the transactions contemplated by this Agreement. This Agreement
has been duly and validly executed and delivered by Issuer.
(b) BENEFICIAL OWNERSHIP. To the best knowledge of
Issuer, as of the date of this Agreement, no person or group has beneficial
ownership of more than 10% of the issued and outstanding shares of Issuer
Common Stock.
(c) SHARES RESERVED FOR ISSUANCE. Capital Stock. Issuer
has taken all necessary corporate action to authorize and reserve and
permit it to issue, and at all times from the date hereof through the
termination of this Agreement in accordance with its terms, will have
reserved for issuance upon the exercise
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of the Option, that number of shares of Issuer Common Stock equal to the maximum
number of shares of Issuer Common Stock at any time and from time to time
purchasable upon exercise of the Option, and all such shares, upon issuance
pursuant to the Option, will be duly authorized, validly issued, fully paid and
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrances and security interests (other than those created by this Agreement)
and not subject to any preemptive rights.
(d) NO VIOLATIONS. The execution, delivery and performance of
this Agreement does not and will not, and the consummation by Issuer of any of
the transactions contemplated hereby will not, constitute or result in (i) a
breach or violation of, or a default under, its Certificate of Incorporation or
By- Laws, or the comparable governing instruments of any of its subsidiaries, or
(ii) a breach or violation of, or a default under, any agreement, lease,
contract, note, mortgage, indenture, arrangement or other obligation of it or
any of its subsidiaries (with or without the giving of notice, the lapse of time
or both) or under any law, rule, ordinance or regulation or judgment, decree,
order, award or governmental or non-governmental permit or license to which it
or any of its subsidiaries is subject, that would, in any case, give any other
person the ability to prevent or enjoin Issuer's performance under this
Agreement in any material respect.
6. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee hereby represents
and warrants to Issuer that Grantee has full corporate power and authority to
enter into this Agreement and, subject to obtaining the approvals referred to in
this Agreement, to consummate the transactions contemplated by this Agreement;
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Grantee; and this Agreement has been duly
executed and delivered by Grantee.
7. ADJUSTMENT UPON CHANGES IN ISSUER CAPITALIZATION, ETC.
(a) In the event of any change in Issuer Common Stock by
reason of a stock dividend, stock split, split-up, recapitalization,
combination, exchange of shares or similar transaction, the type and number of
shares or securities subject to the Option, and the Purchase Price therefor,
shall be adjusted appropriately, and proper provision shall be made in the
agreements governing any such transaction so that Holder shall receive, upon
exercise of the Option, the number and class of shares or other securities or
property that Holder would have received in respect of Issuer Common Stock if
the Option had been exercised immediately prior to such event, or the record
date therefor, as applicable. If any additional shares of Issuer Common Stock
are issued after the date of this Agreement (other than pursuant to an event
described in the first sentence of this Section 7(a), upon exercise of any
option to purchase Issuer Common Stock outstanding on the date hereof or upon
conversion into Issuer Common Stock of any convertible security of Issuer
outstanding on the date hereof), the number of shares of Issuer Common Stock
subject to the Option shall be adjusted so that, after such issuance, the
Option, together with any shares of Issuer Common Stock previously issued
pursuant hereto, equals 19.9% of the number of shares of Issuer Common Stock
then issued and outstanding, without giving effect to any shares subject to or
issued pursuant to the Option. No provision of this Section 7 shall be deemed to
affect or change, or constitute authorization for any violation of, any of the
covenants or representations in the Merger Agreement.
(b) In the event that Issuer shall enter into an agreement (i)
to consolidate with or merge into any person, other than Grantee or one of its
subsidiaries, and Issuer shall not be the continuing or surviving corporation of
such consolidation or merger, (ii) to permit any person, other than Grantee or
one of its subsidiaries, to merge into Issuer and Issuer shall be the continuing
or surviving corporation, but, in connection with such merger, the then
outstanding shares of Issuer Common Stock shall be changed into or exchanged for
stock or other securities of Issuer or any other person or cash or any other
property, or the outstanding shares of Issuer Common Stock immediately prior to
such merger shall, after such merger, represent less than 50% of the outstanding
shares and share equivalents of the merged company or (iii) to sell or otherwise
transfer all or substantially all of its assets or deposits to any person, other
than Grantee or one of its subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper
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provisions so that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth herein, be converted
into, or exchanged for, an option ("Substitute Option"), at the election of
Holder, to purchase shares of either (A) the Acquiring Corporation (as
hereinafter defined), (B) any person that controls the Acquiring Corporation or
(C) in the case of a merger described in clause (ii), Issuer (such person being
referred to as "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as the
Option, provided, that, if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as possible
and in no event less advantageous to Holder. The Substitute Option Issuer shall
also enter into an agreement with Holder in substantially the same form as this
Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number
of shares of Substitute Common Stock (as hereinafter defined) as is equal to the
Assigned Value (as hereinafter defined) multiplied by the number of shares of
Issuer Common Stock for which the Option was theretofore exercisable, divided by
the Average Price (as hereinafter defined). The exercise price of the Substitute
Option per share of Substitute Common Stock ("Substitute Option Price") shall
then be equal to the Purchase Price multiplied by a fraction in which the
numerator is the number of shares of Issuer Common Stock for which the Option
was theretofore exercisable and the denominator is the number of shares of the
Substitute Common Stock for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (A) the
continuing or surviving corporation of a consolidation or merger with
Issuer (if other than Issuer), (B) Issuer in a merger in which Issuer is
the continuing or surviving person, or (C) the transferee of all or
substantially all of Issuer's assets (or a substantial part of the assets
of its subsidiaries taken as a whole).
(ii) "Substitute Common Stock" shall mean the
shares of capital stock (or similar equity interest) with the greatest
voting power in respect of the election of directors (or persons similarly
responsible for the direction of the business and affairs) of the
Substitute Option Issuer.
(iii) "Assigned Value" shall mean the highest of
(A) the price per share of Issuer Common Stock at which a Tender Offer or
an Exchange Offer therefor has been made, (B) the price per share of Issuer
Common Stock to be paid by any third party pursuant to an agreement with
Issuer, (C) the highest closing price for shares of Issuer Common Stock
within the 60-day period immediately preceding the consolidation, merger or
sale in question and (D) in the event of a sale of all or substantially all
of Issuer's assets or deposits, an amount equal to (x) the sum of the price
paid in such sale for such assets (and/or deposits) and the current market
value of the remaining assets of Issuer, as determined by a nationally
recognized investment banking firm selected by Holder, divided by (y) the
number of shares of Issuer Common Stock outstanding at such time. In the
event that a Tender Offer or an Exchange Offer is made for Issuer Common
Stock or an agreement is entered into for a merger or consolidation
involving consideration other than cash, the value of the securities or
other property issuable or deliverable in exchange for Issuer Common Stock
shall be determined by a nationally recognized investment banking firm
selected by Holder.
(iv) "Average Price" shall mean the average
closing price of a share of Substitute Common Stock for the one year
immediately preceding the consolidation, merger or sale in question, but in
no event higher than the closing price of the shares of Substitute Common
Stock on the day preceding such consolidation, merger or sale; provided,
that, if Issuer is the issuer of the Substitute Option, the Average Price
shall be computed with respect to a share of common stock issued by Issuer,
the person merging into Issuer or by any company which controls such
person, as Holder may elect.
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(f) In no event, pursuant to any of the foregoing paragraphs,
shall the Substitute Option be exercisable for more than 19.9% of the aggregate
of the shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.9% of the aggregate of the shares of Substitute Common Stock
outstanding but for the limitation in the first sentence of this Section 7(f),
Substitute Option Issuer shall make a cash payment to Holder equal to the excess
of (i) the value of the Substitute Option without giving effect to the
limitation in the first sentence of this Section 7(f) over (ii) the value of the
Substitute Option after giving effect to the limitation in the first sentence of
this Section 7(f). This difference in value shall be determined by a nationally
recognized investment banking firm selected by Holder.
(g) Issuer shall not enter into any transaction described in
Section 7(b) of this Agreement unless the Acquiring Corporation and any person
that controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder and take all other actions that may be necessary so that the
provisions of this Section 7 are given full force and effect (including, without
limitation, any action that may be necessary so that the holders of the other
shares of common stock issued by Substitute Option Issuer are not entitled to
exercise any rights by reason of the issuance or exercise of the Substitute
Option and the shares of Substitute Common Stock are otherwise in no way
distinguishable from or have lesser economic value (other than any diminution in
value resulting from the fact that the shares Substitute Common Stock are
restricted securities, as defined in Rule 144, promulgated under the Securities
Act ("Rule 144"), or any successor provision) than other shares of common stock
issued by Substitute Option Issuer).
8. REPURCHASE AT THE OPTION OF HOLDER.
(a) Subject to the last sentence of Section 3(a) of this
Agreement, at the request of Holder at any time commencing upon the first
occurrence of a Repurchase Event (as defined in Section 8(d) hereof) and ending
12 months immediately thereafter, Issuer shall repurchase from Holder (i) the
Option and (ii) all shares of Issuer Common Stock purchased by Holder pursuant
hereto with respect to which Holder then has beneficial ownership. The date on
which Holder exercises its rights under this Section 8 is referred to as the
"Request Date." Such repurchase shall be at an aggregate price ("Section 8
Repurchase Consideration") equal to the sum of:
(i) The aggregate Purchase Price paid by Holder
for any shares of Issuer Common Stock acquired pursuant to the Option with
respect to which Holder then has beneficial ownership;
(ii) The excess, if any, of (A) the Applicable
Price (as defined below) for each share of Issuer Common Stock over (B) the
Purchase Price (subject to adjustment pursuant to Section 7 of this
Agreement), multiplied by the number of shares of Issuer Common Stock with
respect to which the Option has not been exercised; and
(iii) The excess, if any, of the Applicable Price
over the Purchase Price (subject to adjustment pursuant to Section 7 of
this Agreement) paid (or, in the case of Option Shares with respect to
which the Option has been exercised but the Closing Date has not occurred,
payable) by Holder for each share of Issuer Common Stock with respect to
which the Option has been exercised and with respect to which Holder then
has beneficial ownership, multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 8,
Issuer shall, within 10 business days after the Request Date, pay the Section 8
Repurchase Consideration to Holder in immediately available funds, and
contemporaneously with such payment, Holder shall surrender to Issuer the Option
and the certificates evidencing the shares of Issuer Common Stock purchased
thereunder with respect to which Holder then has beneficial ownership, and
Holder shall warrant that it has sole record and beneficial ownership of such
shares and that the same are then free and clear of all Liens. Notwithstanding
the foregoing, to the extent that prior notification to or approval of any
Governmental Entity is required in connection with the payment of
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all or any portion of the Section 8 Repurchase Consideration, Holder shall have
the ongoing option to revoke its request for repurchase pursuant to this Section
8, in whole or in part, or to require that Issuer deliver from time to time that
portion of the Section 8 Repurchase Consideration that it is not then so
prohibited from paying and promptly file the required notice or application for
approval and expeditiously process the same (and each party shall cooperate with
the other in the filing of any such notice or application and the obtaining of
any such approval). If any Governmental Entity disapproves of any part of
Issuer's proposed repurchase pursuant to this Section 8, Issuer shall promptly
give notice of such fact to Holder and Holder shall have the right (i) to revoke
the repurchase request or (ii) to the extent permitted by such Governmental
Entity, determine whether the repurchase should apply to the Option and/or
Option Shares and to what extent to each, and Holder shall thereupon have the
right to exercise the Option as to the number of Option Shares for which the
Option was exercisable at the Request Date less the number of shares covered by
the Option in respect of which payment has been made pursuant to Section
8(a)(ii) of this Agreement. Holder shall notify Issuer of its determination
under the preceding sentence within five business days of receipt of notice of
disapproval of the repurchase. Notwithstanding anything herein to the contrary,
in the event that Issuer delivers to the Holder written notice accompanied by a
certification of Issuer's independent auditor each stating that a requested
repurchase of Issuer Common Stock would result in the recapture of Issuer's bad
debt reserves under the Internal Revenue Code of 1986, as amended ("Code"),
Holder's repurchase request shall be deemed to be automatically revoked.
Notwithstanding anything herein to the contrary, all of Holder's rights under
this Section 8 shall terminate on the date of termination of this Option
pursuant to Section 3(a) of this Agreement.
(c) For purposes of this Agreement, the "Applicable Price"
means the highest of (i) the highest price per share of Issuer Common Stock paid
for any such share by the person or groups described in Section 8(d)(i) hereof,
(ii) the price per share of Issuer Common Stock received by holders of Issuer
Common Stock in connection with any merger, sale or other business combination
transaction described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) of this
Agreement, or (iii) the highest closing sales price per share of Issuer Common
Stock as quoted on the New York Stock Exchange ("NYSE"), the American Stock
Exchange ("AMEX") or the National Market System of The Nasdaq Stock Market
("Nasdaq") (or if Issuer Common Stock is not quoted on the NYSE, AMEX or Nasdaq,
the highest bid price per share as quoted on the principal trading market or
securities exchange on which such shares are traded as reported by a recognized
source chosen by Holder) during the 40 business days preceding the Request Date;
provided, however, that in the event of a sale of less than all of Issuer's
assets, the Applicable Price shall be the sum of the price paid in such sale for
such assets and the current market value of the remaining assets of Issuer as
determined by a nationally recognized investment banking firm selected by
Holder, divided by the number of shares of Issuer Common Stock outstanding at
the time of such sale. If the consideration to be offered, paid or received
pursuant to either of the foregoing clauses (i) or (ii) shall be other than in
cash, the value of such consideration shall be determined in good faith by an
independent nationally recognized investment banking firm selected by Holder and
reasonably acceptable to Issuer, which determination shall be conclusive for all
purposes of this Agreement.
(d) As used herein, "Repurchase Event" shall occur if (i) any
person (other than Grantee or any subsidiary of Grantee) shall have acquired
beneficial ownership of (as such term is defined in Rule 13d- 3, promulgated
under the Exchange Act), or the right to acquire beneficial ownership of, or any
"group" (as such term is defined under the Exchange Act) shall have been formed
which beneficially owns or has the right to acquire beneficial ownership of,
more than 25% of the then outstanding shares of Issuer Common Stock, or (ii) any
of the transactions described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) of this
Agreement shall be consummated.
9. REPURCHASE OF SUBSTITUTE OPTION.
(a) Subject to the last sentence of Section 3(a) of this
Agreement, at the request of Holder at any time commencing upon the first
occurrence of a Repurchase Event (as defined in Section 8(d) hereof) and ending
12 months immediately thereafter, Substitute Option Issuer (or any successor
entity
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thereof) shall repurchase from Holder (i) the Substitute Option and (ii) all
shares of Substitute Common Stock purchased by Holder pursuant hereto with
respect to which Holder then has beneficial ownership. The date on which Holder
exercises its rights under this Section 9 is referred to as the "Section 9
Request Date." Such repurchase shall be at an aggregate price ("Section 9
Repurchase Consideration") equal to the sum of:
(i) The aggregate Purchase Price paid by Holder
for any shares of Substitute Common Stock acquired pursuant to the
Substitute Option with respect to which Holder then has beneficial
ownership;
(ii) The excess, if any, of (A) the Highest
Closing Price (as defined below) for each share of Substitute Common Stock
over (B) the Purchase Price (subject to adjustment pursuant to Section 7 of
this Agreement), multiplied by the number of shares of Substitute Common
Stock with respect to which the Substitute Option has not been exercised;
and
(iii) The excess, if any, of the Highest Closing
Price over the Purchase Price (subject to adjustment pursuant to Section 7
of this Agreement) paid (or, in the case of Substitute Option Shares with
respect to which the Substitute Option has been exercised but the Closing
Date has not occurred, payable) by Holder for each share of Substitute
Common Stock with respect to which the Substitute Option has been exercised
and with respect to which Holder then has beneficial ownership, multiplied
by the number of such shares.
(b) If Holder exercises its rights under this Section 9,
Substitute Option Issuer shall, within 10 business days after the Section 9
Request Date, pay the Section 9 Repurchase Consideration to Holder in
immediately available funds, and contemporaneously with such payment, Holder
shall surrender to Substitute Option Issuer the Substitute Option and the
certificates evidencing the shares of Substitute Common Stock purchased
thereunder with respect to which Holder then has beneficial ownership, and
Holder shall warrant that it has sole record and beneficial ownership of such
shares and that the same are then free and clear of all Liens. Notwithstanding
the foregoing, to the extent that prior notification to or approval of any
Governmental Entity is required in connection with the payment of all or any
portion of the Section 9 Repurchase Consideration, Holder shall have the ongoing
option to revoke its request for repurchase pursuant to this Section 9, in whole
or in part, or to require that Substitute Option Issuer deliver from time to
time that portion of the Section 9 Repurchase Consideration that it is not then
so prohibited from paying and promptly file the required notice or application
for approval and expeditiously process the same (and each party shall cooperate
with the other in the filing of any such notice or application and the obtaining
of any such approval).
If any Governmental Entity disapproves of any part of Substitute Option Issuer's
proposed repurchase pursuant to this Section 9, Substitute Option Issuer shall
promptly give notice of such fact to Holder and Holder shall have the right (i)
to revoke the repurchase request or (ii) to the extent permitted by such
Governmental Entity, determine whether the repurchase should apply to the
Substitute Option and/or Substitute Option Shares and to what extent to each,
and Holder shall thereupon have the right to exercise the Substitute Option as
to the number of Substitute Option Shares for which the Substitute Option was
exercisable at the Section 9 Request Date less the number of shares covered by
the Substitute Option in respect of which payment has been made pursuant to
Section 9(a)(ii) of this Agreement. Holder shall notify Substitute Option Issuer
of its determination under the preceding sentence within five business days of
receipt of notice of disapproval of the repurchase. Notwithstanding anything
herein to the contrary, in the event that Substitute Option Issuer delivers to
the Holder written notice accompanied by a certification of Substitute Option
Issuer's independent auditor each stating that a requested repurchase of
Substitute Common Stock would result in the recapture of Substitute Option
Issuer's bad debt reserves under the Code, Holder's repurchase request shall be
deemed to be automatically revoked. Notwithstanding anything herein to the
contrary, all of Holder's rights under this Section 9 shall terminate on the
date of termination of this Substitute Option pursuant to Section 3(a) of this
Agreement.
(c) For purposes of this Agreement, the "Highest Closing
Price" means the highest of the closing sales price per share of Substitute
Common Stock, as quoted on the NYSE, AMEX or Nasdaq (or if
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the Substitute Common Stock is not quoted on the NYSE, AMEX or Nasdaq, the
highest bid price per share as quoted on the principal trading market or
securities exchange on which such shares are traded as reported by a recognized
source) during the six-month period preceding the Section 9 Request Date.
10. REGISTRATION RIGHTS.
(a) DEMAND REGISTRATION RIGHTS. Issuer shall, subject to the
conditions of Section 10(c) of this Agreement, if requested by any Holder,
including Grantee and any permitted transferee ("Selling Shareholder"), as
expeditiously as possible, prepare and file and keep current a registration
statement under the Securities Act if such registration is necessary in order to
permit the sale or other disposition of any or all shares of Issuer Common Stock
or other securities that have been acquired by or are issuable to the Selling
Shareholder upon exercise of the Option in accordance with the intended method
of sale or other disposition stated by the Selling Shareholder in such request,
including without limitation a "shelf" registration statement under Rule 415,
promulgated under the Securities Act, or any successor provision, and Issuer
shall use its best efforts to qualify such shares or other securities for sale
under any applicable state securities laws.
(b) ADDITIONAL REGISTRATION RIGHTS. If Issuer at any time
after the exercise of the Option proposes to register any shares of Issuer
Common Stock under the Securities Act in connection with an underwritten public
offering of such Issuer Common Stock, Issuer will promptly give written notice
to the Selling Shareholders of its intention to do so and, upon the written
request of any Selling Shareholder given within 30 days after receipt of any
such notice (which request shall specify the number of shares of Issuer Common
Stock intended to be included in such underwritten public offering by the
Selling Shareholder), Issuer will cause all such shares for which a Selling
Shareholder requests participation in such registration, to be so registered and
included in such underwritten public offering; provided, however, that Issuer
may elect to not cause some or all of such shares to be so registered (i) if the
underwriters in the Public Offering in good faith object for valid business
reasons, or (ii) in the case of a registration solely to implement an employee
benefit agreement or a registration filed on Form S-4 of the Securities Act or
any equivalent or successor Form. If some, but not all the shares of Issuer
Common Stock, with respect to which Issuer shall have received requests for
registration pursuant to this Section 10(b), shall be excluded from such
registration, Issuer shall make appropriate allocation of shares to be
registered among the Selling Shareholders desiring to register their shares pro
rata in the proportion that the number of shares requested to be registered by
each such Selling Shareholder bears to the total number of shares requested to
be registered by all such Selling Shareholders then desiring to have Issuer
Common Stock registered for sale.
(c) CONDITIONS TO REQUIRED REGISTRATION. Issuer shall use all
reasonable efforts to cause each registration statement referred to in Section
10(a) of this Agreement to become effective and to obtain all consents or
waivers of other parties which are required therefor and to keep such
registration statement effective, provided, however, that Issuer may delay any
registration of Option Shares required pursuant to Section 10(a) of this
Agreement for a period not exceeding 180 days provided Issuer shall in good
faith determine that any such registration would adversely affect an offering or
contemplated offering of other securities by Issuer, and Issuer shall not be
required to register Option Shares under the Securities Act pursuant to Section
10(a) hereof: (i) Prior to the earliest of (A) termination of the Merger
Agreement pursuant to Article VI thereof, (B) failure to obtain the requisite
stockholder approval pursuant to Section 6.1(b) of the Merger Agreement, and (C)
a Purchase Event or a Preliminary Purchase Event; (ii) On more than one occasion
during any calendar year; (iii) Within 90 days after the effective date of a
registration referred to in Section 10(b) of this Agreement pursuant to which
the Selling Shareholder or Selling Shareholders concerned were afforded the
opportunity to register such shares under the Securities Act and such shares
were registered as requested; and (iv) Unless a request therefor is made to
Issuer by Selling Shareholders that hold at least 25% or more of the aggregate
number of Option Shares (including shares of Issuer Common Stock issuable upon
exercise of the Option) then outstanding. In addition to the foregoing, Issuer
shall not be required to maintain the effectiveness of any registration
statement after the expiration of nine months from the effective date of such
registration statement. Issuer shall use all reasonable efforts to make any
filings, and take all steps, under all applicable state or local securities laws
to the extent necessary to permit the sale or other disposition of the Option
Shares
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so registered in accordance with the intended method of distribution for such
shares; provided, however, that Issuer shall not be required to consent to
general jurisdiction or qualify to do business in any state or locality where it
is not otherwise required to so consent to such jurisdiction or to so qualify to
do business.
(d) EXPENSES. Except where applicable state law prohibits such
payments, Issuer will pay all expenses (including without limitation
registration fees, qualification fees, blue sky fees and expenses (including the
fees and expenses of counsel), legal expenses, including the reasonable fees and
expenses of one counsel to the holders whose Option Shares are being registered,
printing expenses and the costs of special audits or "cold comfort" letters,
expenses of underwriters, excluding discounts and commissions but including
liability insurance if Issuer so desires or the underwriters so require, and the
reasonable fees and expenses of any necessary special experts) in connection
with each registration pursuant to Section 10(a) or 10(b) of this Agreement
(including the related offerings and sales by holders of Option Shares) and all
other qualifications, notifications or exemptions pursuant to Section 10(a) or
10(b) of this Agreement.
(e) INDEMNIFICATION.
(i) In connection with any registration under
Section 10(a) or 10(b) of this Agreement, Issuer hereby indemnifies the
Selling Shareholders, and each underwriter thereof, including each person,
if any, who controls such holder or underwriter within the meaning of
Section 15 of the Securities Act, against all expenses, losses, claims,
damages and liabilities caused by any untrue, or alleged untrue, statement
of a material fact contained in any registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto) or any preliminary prospectus, or caused by any omission, or
alleged omission, to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such expenses, losses, claims, damages or liabilities of such
indemnified party are caused by any untrue statement or alleged untrue
statement that was included by Issuer in any such registration statement or
prospectus or notification or offering circular (including any amendments
or supplements thereto) in reliance upon and in conformity with,
information furnished in writing to Issuer by such indemnified party
expressly for use therein, and Issuer and each officer, director and
controlling person of Issuer shall be indemnified by such Selling
Shareholders, or by such underwriter, as the case may be, for all such
expenses, losses, claims, damages and liabilities caused by any untrue, or
alleged untrue, statement, that was included by Issuer in any such
registration statement or prospectus or notification or offering circular
(including any amendments or supplements thereto) in reliance upon, and in
conformity with, information furnished in writing to Issuer by such holder
or such underwriter, as the case may be, expressly for such use.
(ii) Promptly upon receipt by a party indemnified
under this Section 10(e) of notice of the commencement of any action
against such indemnified party in respect of which indemnity or
reimbursement may be sought against any indemnifying party under this
Section 10(e), such indemnified party shall notify the indemnifying party
in writing of the commencement of such action, but the failure so to notify
the indemnifying party shall not relieve it of any liability which it may
otherwise have to any indemnified party under this Section 10(e). In case
notice of commencement of any such action shall be given to the
indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and satisfactory to
such indemnified party. The indemnified party shall have the right to
employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel (other than reasonable
costs of investigation) shall be paid by the indemnified party unless (x)
the indemnifying party either agrees to pay the same, (y) the indemnifying
party fails to assume the defense of such action with counsel satisfactory
to the indemnified party, or (z) the indemnified party has been advised by
counsel that one or more legal defenses may be available to the
indemnifying party that may be contrary to the interest of the indemnified
party, in which case the indemnifying party shall be entitled to assume the
defense of such action notwithstanding its obligation to bear fees and
expenses of such counsel. No indemnifying party shall be liable for any
settlement entered into without its consent, which consent may not be
unreasonably withheld.
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(iii) If the indemnification provided for in this
Section 10(e) is unavailable to a party otherwise entitled to be
indemnified in respect of any expenses, losses, claims, damages or
liabilities referred to herein, then the indemnifying party, in lieu of
indemnifying such party otherwise entitled to be indemnified, shall
contribute to the amount paid or payable by such party to be indemnified as
a result of such expenses, losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative benefits received by
Issuer, the Selling Shareholders and the underwriters from the offering of
the securities and also the relative fault of Issuer, the Selling
Shareholders and the underwriters in connection with the statements or
omissions which resulted in such expenses, losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
amount paid or payable by a party as a result of the expenses, losses,
claims, damages and liabilities referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred by such
party in connection with investigating or defending any action or claim;
provided, however, that in no case shall any Selling Shareholder be
responsible, in the aggregate, for any amount in excess of the net offering
proceeds attributable to its Option Shares included in the offering. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. Any
obligation by any holder to indemnify shall be several and not joint with
other holders.
(iv) In connection with any registration pursuant
to Section 10(a) or 10(b) of this Agreement, Issuer and each Selling
Shareholder (other than Grantee) shall enter into an agreement containing
the indemnification provisions of Section 10(e) of this Agreement.
(f) MISCELLANEOUS REPORTING. Issuer shall comply with all
reporting requirements and will do all such other things as may be necessary to
permit the expeditious sale at any time of any Option Shares by the Selling
Shareholders thereof in accordance with and to the extent permitted by any rule
or regulation promulgated by the SEC from time to time, including, without
limitation, Rule 144. Issuer shall at its expense provide the Selling
Shareholders with any information necessary in connection with the completion
and filing of any reports or forms required to be filed by them under the
Securities Act or the Exchange Act, or required pursuant to any state securities
laws or the rules of any stock exchange.
(g) ISSUE TAXES. Issuer will pay all stamp taxes in connection
with the issuance and the sale of the Option Shares and in connection with the
exercise of the Option, and will save the Selling Shareholders harmless, without
limitation as to time, against any and all liabilities, with respect to all such
taxes.
11. QUOTATION; LISTING. If Issuer Common Stock or any other securities
to be acquired in connection with the exercise of the Option are then authorized
for quotation or trading or listing on the NYSE, AMEX, Nasdaq or any other
securities exchange, Issuer, upon the request of Holder, will promptly file an
application, if required, to authorize for quotation or trading or listing the
shares of Issuer Common Stock or other securities to be acquired upon exercise
of the Option on the NYSE, AMEX, Nasdaq or such other securities exchange and
will use its best efforts to obtain approval, if required, of such quotation or
listing as soon as practicable.
12. DIVISION OF OPTION. This Agreement (and the Option granted hereby)
are exchangeable, without expense, at the option of Holder, upon presentation
and surrender of this Agreement at the principal office of Issuer for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any other Agreements and related Options for which this Agreement (and
the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on
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the part of Issuer, whether or not the Agreement so lost, stolen, destroyed or
mutilated shall at any time be enforceable by anyone.
13. PROFIT LIMITATION.
(a) Notwithstanding any other provision of this agreement, in
no event shall Grantee's Total Profit (as hereinafter defined) exceed
$3,500,000, plus Grantee's documented, reasonable out-of-pocket expenses
(including fees and expenses of legal, financial and accounting advisors)
incurred in connection with the transactions contemplated by the Merger
Agreement, and, if it otherwise would exceed such amount, Grantee, at its sole
election, shall either (i) deliver to Issuer for cancellation Shares previously
purchased by Grantee, (ii) pay cash or other consideration to Issuer or (iii)
undertake any combination thereof, so that Grantee's Total Profit shall not
exceed $30 million, plus Grantee's documented, reasonable out-of-pocket expenses
(including fees and expenses of legal, financial and accounting advisors)
incurred in connection with the transactions contemplated by the Merger
Agreement, after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement,
this Option may not be exercised for a number of Shares as would, as of the
Notice Date, result in a Notional Total Profit (as defined below) of more than
$3,500,000, plus Grantee's documented, reasonable out-of-pocket expenses
(including fees and expenses of legal, financial and accounting advisors)
incurred in connection with the transactions contemplated by the Merger
Agreement, and, if exercise of the Option otherwise would exceed such amount,
Grantee, at its discretion, may increase the Purchase Price for that number of
Shares set forth in the Option Notice so that the Notional Total Profit shall
not exceed $3,500,000, plus Grantee's documented, reasonable out-of-pocket
expenses (including fees and expenses of legal, financial and accounting
advisors) incurred in connection with the transactions contemplated by the
Merger Agreement; provided, that nothing in this sentence shall restrict any
exercise of the Option permitted hereby on any subsequent date at the Purchase
Price set forth in Section 2 hereof.
(c) As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) the amount of cash
received by Grantee pursuant to Section (a)(ii) hereof, (ii) (x) the amount
received by Grantee pursuant to the repurchase of Option Shares pursuant to
Section 8 or Section 9 hereof, less Grantee's purchase price for such Option
Shares, and (iii) the net cash amounts received by Grantee pursuant to the sale
of Option Shares (or any other securities into which such Option Shares are
converted or exchanged) to any unaffiliated party, less Grantee's purchase price
for such Option Shares.
(d) As used herein, the term "Notional Total Profit" with
respect to any number of Option Shares as to which Grantee may propose to
exercise this Option shall be the Total Profit determined as of the date of the
Option Notice assuming that this Option were exercised on such date for such
number of Shares and assuming that such Option Shares, together with all other
Option Shares held by Grantee and its affiliates as of such date, were sold for
cash at the closing market price for the Common Stock as of the close of
business on the preceding trading day (less customary brokerage commissions).
14. MISCELLANEOUS.
(a) EXPENSES. Except to the extent expressly provided for
herein, each of the parties hereto shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the transactions contemplated
hereunder, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
(b) WAIVER AND AMENDMENT. Any provision of this Agreement may
be waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
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(c) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES;
SEVERABILITY. This Agreement, together with the Merger Agreement and the other
documents and instruments referred to herein and therein, between Grantee and
Issuer (i) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof and (ii) is not intended to confer upon any person
other than the parties hereto (other than the indemnified parties under Section
10(e) of this Agreement and any transferees of the Option Shares or any
permitted transferee of this Agreement pursuant to Section 14(h) of this
Agreement) any rights or remedies hereunder. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
Governmental Entity to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
If for any reason such court or Governmental Entity determines that the Option
does not permit Holder to acquire, or does not require Issuer to repurchase, the
full number of shares of Issuer Common Stock as provided in Section 3 of this
Agreement (as may be adjusted herein), it is the express intention of Issuer to
allow Holder to acquire or to require Issuer to repurchase such lesser number of
shares as may be permissible without any amendment or modification hereof.
(d) GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware without
regard to any applicable conflicts of law rules.
(e) DESCRIPTIVE HEADINGS. The descriptive headings
contained herein are for convenience of reference only and shall not affect
in any way the meaning or interpretation of this Agreement.
(f) NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (with confirmation) or mailed by registered or certified mail (return
receipt requested) to the parties at the addresses set forth in the Merger
Agreement (or at such other address for a party as shall be specified by like
notice).
(g) COUNTERPARTS. This Agreement and any amendments hereto may
be executed in two counterparts, each of which shall be considered one and the
same agreement and shall become effective when both counterparts have been
signed, it being understood that both parties need not sign the same
counterpart.
(h) ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party, except that Holder may assign this
Agreement to a wholly-owned subsidiary of Holder and Holder may assign its
rights hereunder in whole or in part after the occurrence of a Purchase Event.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
(i) FURTHER ASSURANCES. In the event of any exercise of the
Option by the Holder, Issuer, and the Holder shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such exercise.
(j) SPECIFIC PERFORMANCE. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
(k) LIMITATION ON RESALE OF ISSUER COMMON STOCK. Grantee
agrees that no shares of Issuer Common Stock acquired by it upon exercise of the
Option, if any, shall be sold, transferred or otherwise disposed by it prior to
the termination of the Merger Agreement in accordance with the terms thereof,
except as follows. If the Grantee shall determine to accept a bona fide offer to
purchase the Issuer Common Stock then held by it or to sell any such Stock on
the open market, the Grantee shall give notice thereof to the Issuer
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specifying (i) the Issuer Common Stock to be sold and (ii) the purchase price to
be offered therefor (or in the case of open market sales, that the sales are to
be at prices prevailing on the market) and any other significant terms of the
proposed transaction. Upon receipt of such notice, the Issuer shall, for a
period of three business days immediately following such receipt, have the right
of first refusal to purchase the Issuer Common Stock then held by Grantee that
is proposed to be sold at the purchase price set forth in such notice or, if
such shares are to be sold in open market transaction, at a purchase price equal
to the average of the closing prices therefor (and if there is no such closing
price on any of such days, then the mean of the closing bid and the closing
asked prices on that day) on the principal market on which Issuer Common Stock
is traded for the five trading days immediately prior to the Issuer's receipt of
such notice. Payment for such shares shall be made to the Grantee in immediately
available funds within three business days immediately following receipt of the
notice of the proposed sale.
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
SOUTH JERSEY FINANCIAL CORPORATION, INC.
By: /s/ Robert J. Colacicco
-------------------------------------
Robert J. Colacicco
President and Chief Executive Officer
RICHMOND COUNTY FINANCIAL CORP.
By: /s/ Michael F. Manzulli
-------------------------------------
Michael F. Manzulli
Chief Executive Officer
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SANDLER O'NEILL & PARTNERS, L.P. Telephone: 212-466-7700 APPENDIX C
Investment Banking Group 800-635-6855
Two World Trade Center, 104th Floor Facsimile: 212-466-7711
New York, New York 10048
Sandler O'Neill
June 16, 2000
Board of Directors
South Jersey Financial Corporation, Inc.
4651 Route 42
Turnersville, NJ 08012
Gentlemen:
South Jersey Financial Corporation, Inc. ("South Jersey"), Richmond
County Financial Corp. ("Richmond County") and Richmond County Acquisition, Inc.
("Acquisition Sub") have entered into an Agreement and Plan of Merger, dated as
of March 15, 2000 (the "Agreement"), pursuant to which Acquisition Sub will be
merged with and into South Jersey ("the Merger"). Upon consummation of the
Merger, each share of South Jersey common stock, par value $.01 per share,
issued and outstanding immediately prior to the Merger (the "South Jersey
Shares"), other than certain shares specified in the Agreement, will be
converted into the right to receive $20.00 in cash, without interest (the
"Merger Consideration"). The terms and conditions of the Merger are more fully
set forth in the Agreement. You have requested our opinion as to the fairness,
from a financial point of view, of the Merger Consideration to be received by
the holders of South Jersey Shares.
Sandler O'Neill & Partners, L.P., as a part of its investment banking
business, is regularly engaged in the valuation of financial institutions and
their securities in connection with mergers and acquisitions and other corporate
transactions. In connection with this opinion, we have reviewed, among other
things: (i) the Agreement and exhibits thereto; (ii) the Stock Option Agreement,
dated as of March 15, 2000, by and between South Jersey and Richmond County;
(iii) certain publicly available financial statements and other historical
financial information of South Jersey that we deemed relevant; (iv) certain
publically available financial statements and other historical financial
information of Richmond County that we deemed relevant; (v) certain internal
financial analyses and forecasts of South Jersey prepared by and reviewed with
management of South Jersey and the views of senior management of South Jersey,
based on certain limited discussions with certain members of senior management,
regarding South Jersey's past and current business, financial condition, results
of operations and future prospects; (vi) the views of senior management of
Richmond County, based on certain limited discussions with certain members of
Richmond County regarding Richmond County's past and current business, financial
condition, results of operations and future prospects; (vii) the publicly
reported historical price and trading activity for South Jersey's and Richmond
County's common stock, including a comparison of certain financial and stock
market information for South Jersey and Richmond County with similar publicly
available information for certain other companies the securities of which are
publicly traded; (viii) the financial terms of recent business
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Board of Directors
South Jersey Financial Corporation
June 16, 2000 Sandler O'Neill
Page 2
combinations in the savings institution industry, to the extent publicly
available; (ix) the current market environment generally and the banking
environment in particular; and (x) such other information, financial studies,
analyses and investigations and financial, economic and market criteria as we
considered relevant. In connection with our engagement, we were not asked to,
and did not, solicit indications of interest in a potential transaction from
other third parties.
In performing our review, we have assumed and relied upon the accuracy
and completeness of all the financial information, analyses and other
information that was publicly available or otherwise furnished to, reviewed by
or discussed with us, and we do not assume any responsibility or liability for
independently verifying the accuracy or completeness thereof. We did not make an
independent evaluation or appraisal of the specific assets, the collateral
securing assets or the liabilities (contingent or otherwise) of South Jersey or
Richmond County or any of their subsidiaries, or the collectibility of any such
assets, nor have we been furnished with any such evaluations or appraisals. We
did not make an independent evaluation of the adequacy of the allowance for loan
losses of South Jersey or Richmond County nor have we reviewed any individual
credit files relating to South Jersey or Richmond County and, with your
permission, we have assumed that the respective allowances for loan losses for
both South Jersey and Richmond County are adequate to cover such losses and will
be adequate on a pro forma basis for the combined entity. With respect to the
financial projections prepared by South Jersey's management, we have assumed
that they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of such management of the future financial
performance of South Jersey and that such performance will be achieved, and we
express no opinion as to such financial projections or the assumptions on which
they are based. We have also assumed that there has been no material change in
South Jersey's or Richmond County's assets, financial condition, results of
operations, business or prospects since the date of the most recent financial
statements made available to us. We have assumed in all respects material to our
analysis that South Jersey and Richmond County will remain as going concerns for
all periods relevant to our analyses, that all of the representations and
warranties contained in the Agreement and all related agreements are true and
correct, that each party to such agreements will perform all of the convenants
required to be performed by such party under such agreements and that the
conditions precedent in the Agreement are not waived.
Our opinion is necessarily based on financial, economic, market and
other conditions as in effect on, and the information made available to us as
of, the date hereof. Events occurring after the date hereof could materially
affect this opinion. We have not undertaken to update, revise or reaffirm this
opinion or otherwise comment upon events occurring after the date hereof. We are
expressing no opinion herein as to the prices at which South Jersey's common
stock will trade at any time.
We have acted as South Jersey's financial advisor in connection with
the Merger and will receive a fee for our services, a significant portion of
which is contingent upon consummation of the Merger. We have also received a fee
for rendering this opinion. In the past, we have also provided certain other
investment banking services for South Jersey and have received compensation for
such services. As we have previously advised you, in the past we have also
provided, and expect to
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Board of Directors
South Jersey Financial Corporation
June 16, 2000 Sandler O'Neill
Page 3
continue to provide, including during the period that consummation of the Merger
is pending, certain investment banking services for Richmond County and have
received, and will receive, compensation for such services.
In the ordinary course of our business as broker-dealer, we may also
purchase securities from and sell securities to South Jersey and Richmond
County. We may also actively trade the debt and equity securities of South
Jersey and Richmond County for our own account and for the accounts of our
customers and, accordingly, may at any time hold a long or short position in
such securities.
Our opinion is directed to the Board of Directors of South Jersey in
connection with its consideration of the Merger and does not constitute a
recommendation to any shareholder of South Jersey as to how such shareholder
should vote at any meeting of shareholders called to consider and vote upon the
Merger. Our opinion is not to be quoted or referred to, in whole or in part, in
a registration statement, prospectus, proxy statement or in any other document,
nor shall this opinion be used for any other purposes, without Sandler O'Neill's
prior written consent; PROVIDED, HOWEVER, that we hereby consent to the
inclusion of this opinion as an appendix to South Jersey's Proxy Statement dated
the date hereof and to the references to this opinion therein.
Based upon and subject to the foregoing, it is our opinion that, as of
the date hereof, the Merger Consideration to be received by the holders of South
Jersey Shares is fair to such shareholders from a financial point of view.
Very truly yours,
/s/ Sandler O'Neill & Partners, L.P.
<PAGE>
APPENDIX D
DELAWARE GENERAL CORPORATION LAW
SECTION 262 APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds
shares of stock on the date of the making of a demand pursuant to subsection (d)
of this section with respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has neither voted in favor
of the merger or consolidation nor consented thereto in writing pursuant to
ss.228 of this title shall be entitled to an appraisal by the Court of Chancery
of the fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any
class or series of stock of a constituent corporation in a merger or
consolidation to be effected pursuant to ss.251 (other than a merger effected
pursuant to ss.251(g) of this title), ss.252, ss.254, ss.257, ss.258, ss.263 or
ss.264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series of
stock, which stock, or depository receipts in respect thereof, at the
record date fixed to determine the stockholders entitled to receive
notice of and to vote at the meeting of stockholders to act upon the
agreement of merger or consolidation, were either (i) listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000
holders; and further provided that no appraisal rights shall be
available for any shares of stock of the constituent corporation
surviving a merger if the merger did not require for its approval the
vote of the stockholders of the surviving corporation as provided in
subsection (f) of ss.251 of this title.
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the shares
of any class or series of stock of a constituent corporation if the
holders thereof are required by the terms of an agreement of merger or
consolidation pursuant to ss.ss.251, 252, 254, 257, 258, 263 and 264 of
this title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository receipts in
respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
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d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under ss.253 of this title is
not owned by the parent corporation immediately prior to the merger,
appraisal rights shall be available for the shares of the subsidiary
Delaware corporation.
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be available for
the shares of any class or series of its stock as a result of an amendment to
its certificate of incorporation, any merger or consolidation in which the
corporation is a constituent corporation or the sale of all or substantially all
of the assets of the corporation. If the certificate of incorporation contains
such a provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for approval
at a meeting of stockholders, the corporation, not less than 20 days
prior to the meeting, shall notify each of its stockholders who was
such on the record date for such meeting with respect to shares for
which appraisal rights are available pursuant to subsection (b) or (c)
hereof that appraisal rights are available for any or all of the shares
of the constituent corporations, and shall include in such notice a
copy of this section. Each stockholder electing to demand the appraisal
of such stockholder's shares shall deliver to the corporation, before
the taking of the vote on the merger or consolidation, a written demand
for appraisal of such stockholder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of
the stockholder and that the stockholder intends thereby to demand the
appraisal of such stockholder's shares. A proxy or vote against the
merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate
written demand as herein provided. Within 10 days after the effective
date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that
the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to
ss.228 or ss.253 of this title, each constituent corporation, either
before the effective date of the merger or consolidation or within ten
days thereafter, shall notify each of the holders of any class or
series of stock of such constituent corporation who are entitled to
appraisal rights of the approval of the merger or consolidation and
that appraisal rights are available for any or all shares of such class
or series of stock of such constituent corporation, and shall include
in such notice a copy of this section; provided that, if the notice is
given on or after the effective date of the merger or consolidation,
such notice shall be given by the surviving or resulting corporation to
all such holders of any class or series of stock of a constituent
corporation that are entitled to appraisal rights. Such notice may,
and, if given on or after the effective date of the merger or
consolidation, shall, also notify such stockholders of the effective
date of the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of such
notice, demand in writing from the surviving or resulting corporation
the appraisal of such holder's shares. Such demand will be sufficient
if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation,
either (i) each such constituent corporation shall send a second notice
before the effective date of the merger or consolidation notifying each
of the holders of any class or series of stock of such constituent
corporation that are entitled to appraisal rights of the effective date
of the
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merger or consolidation or (ii) the surviving or resulting corporation
shall send such a second notice to all such holders on or within 10
days after such effective date; provided, however, that if such second
notice is sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder who is
entitled to appraisal rights and who has demanded appraisal of such
holder's shares in accordance with this subsection. An affidavit of the
secretary or assistant secretary or of the transfer agent of the
corporation that is required to give either notice that such notice has
been given shall, in the absence of fraud, be prima facie evidence of
the facts stated therein. For purposes of determining the stockholders
entitled to receive either notice, each constituent corporation may
fix, in advance, a record date that shall be not more than 10 days
prior to the date the notice is given, provided, that if the notice is
given on or after the effective date of the merger or consolidation,
the record date shall be such effective date. If no record date is
fixed and the notice is given prior to the effective date, the record
date shall be the close of business on the day next preceding the day
on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or
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expectation of the merger or consolidation, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value. In
determining such fair value, the Court shall take into account all relevant
factors. In determining the fair rate of interest, the Court may consider all
relevant factors, including the rate of interest which the surviving or
resulting corporation would have had to pay to borrow money during the pendency
of the proceeding. Upon application by the surviving or resulting corporation or
by any stockholder entitled to participate in the appraisal proceeding, the
Court may, in its discretion, permit discovery or other pretrial proceedings and
may proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on the
list filed by the surviving or resulting corporation pursuant to subsection (f)
of this section and who has submitted such stockholder's certificates of stock
to the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that such stockholder is not entitled
to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of such
stockholder's demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding
in the Court of Chancery shall be dismissed as to any stockholder without the
approval of the Court, and such approval may be conditioned upon such terms as
the Court deems just.
(1) The shares of the surviving or resulting corporation to which
the shares of such objecting stockholders would have been converted had
they assented to the merger or consolidation shall have the status of
authorized and unissued shares of the surviving or resulting corporation.
(Last amended by Ch. 339, L. '98, eff. 7-1-98.)
D-4
<PAGE>
REVOCABLE PROXY
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
SOUTH JERSEY FINANCIAL CORPORATION, INC.
ANNUAL MEETING OF SHAREHOLDERS
July 26, 2000-- 10:00 a.m. New Jersey Time
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder hereby appoints the official proxy
committee of South Jersey Financial Corporation, Inc. ("Company"), consisting of
the entire Board of Directors of the Company, each with full power of
substitution, to act as proxy for the undersigned, and to vote all shares of
common stock of the Company which the undersigned is entitled to vote only at
the Annual Meeting of Shareholders, to be held on July 26, 2000, at 10:00 a.m.,
New Jersey Time, at the Renaissance Room, 194 Fries Mill Road, Turnersville, New
Jersey, and at any adjournment or postponement thereof, with all of the powers
the undersigned would possess if personally present at such meeting, as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. Approval and adoption of the Agreement and Plan of FOR AGAINST ABSTAIN
Merger, dated as of March 15, 2000, by and between / / / / / /
Richmond County Financial Corp., Richmond County
Acquisition, Inc. and South Jersey Financial
Corporation, Inc.
WITH- FOR ALL
FOR HOLD EXCEPT
2. Election of Directors for a term of three years each / / / / / /
or until completion of the merger (except as marked
to the contrary below):
</TABLE>
ROBERT J. COLACICCO, RICHARD G. MOHRFELD AND JOHN V. FIELD
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
MARK "FOR ALL EXCEPT" AND WRITE THAT NOMINEE'S NAME IN THE SPACE
PROVIDED BELOW.
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
PROPOSAL 1 AND "FOR" EACH OF THE NOMINEES FOR DIRECTOR.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
THIS PROXY IS REVOCABLE AND WILL BE VOTED AS DIRECTED, BUT IF NO
INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" PROPOSAL 1 AND "FOR"
EACH OF THE NOMINEES FOR DIRECTOR. IF ANY OTHER BUSINESS IS PRESENTED AT THE
ANNUAL MEETING, INCLUDING WHETHER OR NOT TO ADJOURN OR POSTPONE THE MEETING,
THIS PROXY WILL BE VOTED BY THE PROXIES IN THEIR BEST JUDGMENT. AT THE PRESENT
TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE
ANNUAL MEETING.
<TABLE>
<CAPTION>
<S> <C>
Please be sure to sign and date this Proxy in the box below Date
-----------------------------------------
Stockholder sign above Co-holder (if any) sign above
-------------------------------------------------------------------------- -----------------------------------------
</TABLE>
The above-signed shareholder acknowledges receipt from the Company
prior to the execution of this proxy of a Notice of Annual Meeting of
Shareholders and of a Proxy Statement, dated June 16, 2000 for the Annual
Meeting to be held on July 26, 2000.
Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder may sign but only one signature
is required.
PLEASE COMPLETE, DATE, SIGN AND PROMPTLY MAIL
THIS PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
