SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996 OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
------ ------
Commission file number 2-81353
-------
CENTER BANCORP, INC.
-------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 52-1273725
--------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2455 Morris Avenue, Union, New Jersey 07083
-------------------------------------------------------------------------
(Address of principal executives offices) (Zip Code)
(908) 688-9500
-------------------------------------------------------------------------
(Registrant's telephone number, including area code)
-------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes|X| No|_|
Shares outstanding on March 30, 1996
Common stock no par value - 2,220,384 shares
<PAGE>
CENTER BANCORP, INC.
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION PAGE
Item I. Financial Statements
Consolidated Statements of Condition
at March 31, 1996 (Unaudited) and March 31, 1995 2
Consolidated Statements of Income
Three and Nine Months Ended March 31, 1996 and 1995
(Unaudited) 3
Consolidated Statements of Cash Flows
Nine Months Ended March 31, 1996 and 1995
(Unaudited) 4
In the opinion of Management, all adjustments necessary for a fair
presentation of the financial position and results of operations for
the interim periods have been made. Such adjustments are of a normal
recurring nature. All share and per share amounts have been restated to
reflect a 3 for 2 split payable to shareholders of record May 1, 1996,
on May 31, 1996. Results for the period ended March 31, 1996 are not
necessarily indicative of results for any other interim period or for
the entire fiscal year. Reference is made to the Company's Annual
Report on Form 10-K for the year ended March 31, 1995 for information
regarding accounting principles.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 5-11
PART II. OTHER INFORMATION------------------------------------------------12-13
SIGNATURES-----------------------------------------------------------14
<PAGE>
Consolidated Statements of Condition
<TABLE>
<CAPTION>
March 31, December 31,
-------- ------------
1996 1995
- ---------------------------------------------------------------------------------------
Assets:
<S> <C> <C>
Cash and due from banks $ 12,117 $ 14,172
Federal funds sold 0 16,000
Securities purchased under agreement to resell 0 0
- ---------------------------------------------------------------------------------------
Total cash and cash equivalents 12,117 30,172
Investment securities held to maturity (approximate
market value of $200,176 in 1996 and $157,449 in 1995) 201,403 156,030
Investment securities available for sale 53,317 53,662
----------------------
Total investment securities 254,720 209,692
Loans, net of unearned income 98,625 97,570
Less - Allowance for loan losses 1,073 1,073
- ---------------------------------------------------------------------------------------
Net loans 97,552 96,497
Premises and equipment, net 7,515 7,462
Accrued interest receivable 4,368 3,643
Other assets 580 311
- ---------------------------------------------------------------------------------------
Total assets $ 376,852 $ 347,777
- ---------------------------------------------------------------------------------------
Liabilities
Deposits:
Non-interest bearing 59,173 60,635
Interest bearing:
Certificates of deposit $100,000 and over 71,836 39,521
Other 202,863 195,510
- ---------------------------------------------------------------------------------------
Total deposits 333,872 295,666
Federal funds purchased and securities sold under 12,705 22,326
agreements to repurchase
Accounts payable and accrued liabilities 1,903 2,106
- ---------------------------------------------------------------------------------------
Total Liabilities 348,480 320,098
- ---------------------------------------------------------------------------------------
Stockholder's equity
Common stock, no par value:
Authorized 20,000,000 shares; issued 2,256,180
and 2,510,427 shares in 1996 and 1995, respectively 4,261 4,199
Appropriated surplus 3,510 3,510
Retained earnings 22,158 21,368
- --------------------------------------------------------------------------------------
29,929 29,077
Less - Treasury stock at cost (299,052 shares in
1996 and 1995) 1,814 1,814
Net unrealized (loss) on investment securities
available-for-sale, net of taxes 257 416
- --------------------------------------------------------------------------------------
Total stockholders' equity 28,372 27,679
- --------------------------------------------------------------------------------------
Total liabilities and stockholders' equity 376,852 347,777
- --------------------------------------------------------------------------------------
</TABLE>
*All share and per share amounts have been restated to reflect a 3-for-2 stock
split effective May 1, 1996.
Page 2
<PAGE>
Consolidated Statements of Income
(unaudited) Three Months Ended
March 31,
------------------
(in thousands, except per share data) 1996 1995
- --------------------------------------------------------------------------------
Interest income:
Interest and fees on loans $ 1,974 $ 1,780
Interest and dividends on investment securities:
Taxable interest income 3,606 3,043
Nontaxable interest income 284 369
Interest on Federal funds sold 96 14
- ------------------------------------------------------------------- -------
Total interest income 5,960 5,206
- ------------------------------------------------------------------- -------
Interest expense:
Interest on certificates of deposit $100,000 or more 868 523
Interest on other deposits 1,501 1,459
Interest on short-term borrowings 135 88
- ------------------------------------------------------------------- -------
Total interest expense 2,504 2,070
- ------------------------------------------------------------------- -------
Net interest income 3,456 3,136
Provision for loan losses 0 0
- ------------------------------------------------------------------- -------
Net interest income after provision for loan
losses 3,456 3,136
- ------------------------------------------------------------------- -------
Other income:
Service charges, commissions and fees 114 124
Other income 31 35
Gain on securities sold 0 0
- ------------------------------------------------------------------- -------
Total other income 145 159
- ------------------------------------------------------------------- -------
Other expense:
Salaries and employee benefits 1,094 1,007
Occupancy expense, net 235 169
Premises and equipment expense 194 186
Stationery and printing expense 67 63
Correspondent fees expense 0 0
Computer expense 0 0
FDIC Insurance expense 1 162
Other expenses 403 386
- ------------------------------------------------------------------- -------
Total other expense 1,994 1,973
- ------------------------------------------------------------------- -------
Income before income tax expense 1,607 1,322
Income tax expense 372 322
- ------------------------------------------------------------------- -------
Net income 1,235 $ 1,000
- ------------------------------------------------------------------- -------
Earnings per share:
(on 2,225,718 average shares outstanding in 1996, and
2,213,506 in 1995)
Net income per share $ 0.55 $ 0.45
- ------------------------------------------------------------------- -------
*All share and per share amounts have been restated to reflect a 3-for-2 stock
split effective May 1, 1996.
Page 3
<PAGE>
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
March 31,
--------------------
(Dollars in thousands) 1996 1995
- -----------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 1,235 $ 1,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 184 174
Provision for loan losses 0 0
(Increase) in accrued interest receivable (725) (34)
(Increase) in other assets (269) (254)
Increase (decrease) in other liabilities (203) 378
Amortization of premium and accretion of
discount on investment securities, net 148 173
- ---------------------------------------------------------------------------- -----------
Net cash provided by operating activities 370 1,437
- ---------------------------------------------------------------------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities available-for-sale 1,005 4,311
Proceeds from maturities of securities held-to-maturity 12,346 6,556
Proceeds from sales of investment securities available-for-sale 30,932 0
Purchase of securities available-for-sale (35,358) (3,661)
Purchase of securities held-to-maturity (54,259) (3,886)
Net (increase) decrease in loans (1,055) (4,448)
Property and equipment expenditures, net (237) (38)
- ---------------------------------------------------------------------------- ------------
Net cash used in investing activities (46,626) (1,166)
- ---------------------------------------------------------------------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 38,206 24,427
Dividends paid (446) (443)
Proceeds from issuance of common stock 62 51
Net increase (decrease) in short term borrowings (9,621) (7,131)
- ---------------------------------------------------------------------------- -----------
Net cash provided by financing activities 28,201 16,904
- ---------------------------------------------------------------------------- -----------
Net increase in cash and cash equivalents (18,055) 17,175
- ---------------------------------------------------------------------------- -----------
Cash and cash equivalents at beginning of period 30,172 18,305
- ---------------------------------------------------------------------------- -----------
Cash and cash equivalents at end of period $ 12,117 $ 35,480
- ---------------------------------------------------------------------------- -----------
Supplemental disclosures of cash flow information:
Interest paid on deposits and short-term borrowings $ 2,512 $ 2,205
Income taxes $ 217 $ 0
Transfers from securities held-to-maturity to
securities available-for-sale $ 0 $ 0
Transfers from securities available-for-sale to
securities held-to-maturity $ 0 $ 0
</TABLE>
Page 4
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Net income for the three months ended March 31, 1996 increased 23.5 percent to
$1,235,000 as compared to $1,000,000 earned for the comparable three month
period of 1995. On a per share basis, earnings increased 20.3 percent to $0.55
as compared to $0.45 earned for the three months ended March 31, 1995. The
annualized return on average assets was 1.30 percent for the three months ended
March 31, 1996 as compared with 1.18 percent for the comparable period ended
March 31, 1995, while the annualized return on average stockholders' equity was
17.5 percent and 15.8 percent, respectively. Earnings performance for the three
months ended March 31, 1996 primarily reflected an increased net interest margin
offset by an increase in income tax expense and, to a lesser extent, other
non-interest expense. All share and per share amounts have been restated to
reflect the 3 for 2 stock split which will take place on May 1, 1996.
Net interest income is the difference between the interest earned on the
portfolio of earnings assets (principally loans and investments) and the
interest paid for deposits and short-term borrowings which support these assets.
Net interest income is presented below first in accordance with the Company's
consolidated financial statements and then on a fully tax-equivalent basis by
adjusting tax-exempt income (primarily interest earned on various obligations of
state and political subdivisions) by the amount of income tax which would have
been paid had the assets been invested in taxable issues.
NET INTEREST INCOME
================================================================================
(dollars in thousands)
Three
months ended Percent
March 31, Change
--------------------- ------------
1996 1995
-------- --------
Interest income:
Investments $3,890 $3,412 14.0%
Loans, including fees 1,974 1,780 10.9%
Federal funds sold 96 14 585.7%
Total interest income 5,960 5,206 14.5%
- ------------------------------------------------- ------ -------
Interest expense:
Certificates $100,000 or more 868 523 66.0%
Deposits 1,501 1,459 2.9%
Short-term borrowings 135 88 53.4%
Total interest expense 2,504 2,070 21.0%
- ------------------------------------------------- ------
NET INTEREST INCOME* 3,456 3,136 10.2%
- ------------------------------------------------- ------ -------
Tax-equivalent adjustment 146 190 -23.2%
Net interest income on a fully
tax-equivalent basis $3,602 $3,326 8.3%
- ------------------------------------------------- ------ -------
* Before the provision for loan losses. NOTE: The tax-equivalent adjustment was
computed based on an assumed statutory Federal income tax rate of 34 percent.
Adjustments were made for interest accrued on securities of state and
political subdivisions.
Net interest income on a fully tax-equivalent basis for the three months ended
March 31, 1996 increased $276,000 or 8.30 percent as compared with the three
months ended March 31, 1995. Although there was a favorable increase in the
overall yield on average interest-earning assets of 9 basis points reflected in
the rise in interest rates, as compared to the comparable period ended March 31,
1995, the primary factor contributing to the change was the $38.8 million
increase in the volume of average interest-earning assets. This was offset in
part by a $26.5 increase in the volume of average interest-bearing liabilities
and by a greater increase in average interest rates on interest-bearing deposit
liabilities, 20 basis points, than the increase in the corresponding average
yield on interest-earning assets, 2 basis points.
Page 5
<PAGE>
Interest income on a fully tax-equivalent basis increased by $710,000 or 13.1
percent for the first three months of 1996, as compared with the three months
ended March 31, 1996. The key factor in this change was the increased income
from taxable investment securities and loans reflecting increases in the volume
of average taxable investment securities and loans. This was offset in part by a
decrease in the average volume of tax-exempt investment securities carried in
the investment portfolio as compared with the three month period ended March 31,
1995.
Investment income generated form the investment portfolio for the 3 month period
ended March 31, 1996 improved by $101.00 or 2.97% over the comparable three
month period of 1995. The positive impact of more favorable interest rates and
increased average volume in the portfolio were sufficient to sustain an average
portfolio yield of 6.44% as compared to 6.48% for the period ended March 31,
1995.
The primary component of the improved earnings from the investment portfolio
were the volume related factors.
For the three months ended March 31, 1996 average loan volume increased $8.6
million while the portfolio yield increased by only 1 basis point, compared with
the three months ended March 31, 1995. Average loan volume increased to $99.9
million at an average yield of 7.90 percent during the first three months of
1996, as compared to $91.3 million with a yield of 7.89 percent for the three
month period ended March 31, 1995. The stabilization in yield was a result of a
competitive rate structure to attract loan business in the market to increase
portfolio volume offset in part by some continued refinancing activity in the
mortgage portfolio.
Interest expense increased during the first three months of 1996, primarily as a
result of rising funding costs as market rates climbed and banks became more
competitive as a result of these deposit pricing pressures. For the three months
ended March 31, 1996, interest expense increased by $434,000 or 21 percent as
compared with the three months ended March 31, 1995. The average cost of funds
increased by 39 basis points reflecting an increasing rate environment and
changes in the liability mix, (i.e., increased volumes of more costly
interest-bearing liabilities). The growth in interest-bearing liabilities has
been primarily in jumbo certificates of deposit and interest rate sensitive
public fund deposits.
For the three months ended March 31, 1996, the Corporation's net interest spread
on a tax-equivalent basis (i.e. the average yield on average interest-earning
assets, calculated on a tax-equivalent basis, minus the average rate paid on
interest-bearing liabilities) declined to 3.42 percent annualized as compared to
3.46 percent annualized for the three months ended March 31, 1995. The decline
was primarily due to a narrowing of spreads between yields earned on loans and
investments and rates paid for supporting funds. As previously noted, there was
a favorable change in the mix of interest-earning assets, primarily the
increased loan volumes; however, this was impacted by the change in the mix of
interest-bearing liabilities to more costly funding.
The contribution of non-interest-bearing sources (i.e. the differential between
the average rate paid on all sources of funds and the average rate paid on
interest-bearing sources) increased favorably to 61 basis points during the
first three months of 1996 from 42 basis points during the first three months of
1995. This change has helped to absorb the pressure on margins.
Short-term borrowings can be used to satisfy daily funding needs. Balances in
these accounts fluctuate significantly on a day-to-day basis. The Corporation's
principal short-term funding sources are securities sold under agreement to
repurchase. Average short-term borrowings during the first three months of 1996
were $11.2 million, an increase from $5.8 million in average short-term
borrowings during the comparable three months ended March 31, 1995. This change
was due to insufficient funding liquidity from deposit activity.
Investments
Page 6
<PAGE>
The average volume of investment securities increased by $45 million for the
three month period ended March 31, 1996 as compared to the comparable period
ended March 31, 1995. The tax-equivalent yield on investments decreased to 6.44
percent or by 4 basis points from a yield of 6.48 percent during the three month
period ended March 31, 1995. The yield on the investment portfolio was sustained
due to higher market rates on the increased volume of purchases and existing
cashflows available for reinvestment made to replace investments which had
matured.
The impact of repricing activity on yields was lessened by a change made in the
mix of investment maturities sought and the current disparity in the yield
curve, resulting in narrowed spreads, due to the change in investment strategies
brought about by the current uncertainty of rates. Securities available for sale
are a part of the Corporation's interest rate risk management strategy and may
be sold in response to changes in interest rates, changes in prepayment risk,
liquidity management and other factors.
At March 31, 1996, the net unrealized gain carried as a component of
shareholders' equity amounted to $257,000, as compared with $416,000 at December
31, 1995.
At March 31, 1996, the total investment portfolio excluding overnight
investments, was $250.0 million, or 70.1 percent of earning assets, as compared
to $205.4 million or 64.7 percent at March 31, 1995. The principal components of
the investment portfolio continue to be U.S. Government Treasury and Federal
Agency and Agency-backed securities.
OTHER NON-INTEREST INCOME
The following table presents the principal categories of non-interest income for
the three month periods ended March 31, 1996 and 1995.
================================================================================
(dollars in thousands) Three months ended
March 31,
-----------------------
1996 1995 % change
--------- --------
Other income:
Service charges, commissions and fees $114 $124 (8.06%)
Other income. 31 35 (11.4%)
Gain on securities sold 0 0 0%
---- ----
Total other income $145 $159 (8.80%)
- --------------------------------------------------------------------------------
For the three months ended March 31, 1996 total other (non-interest) income,
decreased $14,000 or 8.8 percent as compared to the three months ended March 31,
1995. The decline in service charges, commissions and fees is primarily a result
of a decline in business activity.
Page 7
<PAGE>
Other Non-Interest Expense
The following table presents the principal categories of non-interest expense
for the three month periods ended March 31, of 1996 and 1995.
================================================================================
(dollars in thousands) Three months ended
March 31,
----------------------
Other expense: 1996 1995 % change
------- -------- ----------
Salaries and employee benefits $1,094 $1007 8.6%
Occupancy expense, net 235 169 39.1%
Premise & equipment expense 194 186 4.3%
Stationery and printing expense 67 63 6.3%
FDIC Insurance expense 1 162 99.4%
Other expenses 403 386 4.4%
------- ------ -----
Total other expense $1,994 $1,973 1.1%
- ----------------------------------------------------------------------------
For the three month period ended March 31, 1996 total other (non-interest)
expenses increased only $21,000 or 1.1 percent over the comparable three months
ended March 31, 1995. Salaries and employee benefits cost coupled with occupancy
comprised the primary components of the total increase for the period. The
primary offsetting factor contributing to the stabilization of expense was the
reduction in FDIC insurance assessments and general control of operating
overhead.
Salaries and employees benefits increased $87,000 or 8.6 percent in 1996 over
the comparable three month period ended March 31, 1995. This increase is
primarily attributed to increases arising from merit and promotional raises and
higher benefit costs. Staffing levels overall amounted to 136 at March 31, 1996
as compared to 135 full time equivalent employees at March 31, 1995.
Occupancy expense for the three month period ended March 31, 1996 increased
sharply $66,000 or 39 percent as compared with the three months ended March 31,
1995. This change reflects the severe weather conditions experienced in 1996 as
compared to 1995. The small increase in bank premise and equipment expenses were
also a result of weather related occurrences.
The decrease of $161,000 in FDIC insurance expense reflects revisions in FDIC
deposit assessment rates.
PROVISION FOR INCOME TAXES
The effective tax rate for the three month period ended March 31, 1996 remained
relatively stable at 23.1 percent as compared to 24.4 percent for the three
months ended March 31, 1995. The effective tax rate continues to be
substantially less than the statutory Federal tax rate of 34 percent. The
difference between the statutory and the effective tax rates primarily reflects
the tax-exempt status of interest income on obligations of states and political
subdivisions.
RISK ELEMENTS
The purpose of the allowance for loan losses is to absorb the impact of losses
inherent in the loan portfolio. Additions to the allowance are made through
provisions charged against current operations and through recoveries made on
loans previously charged-off. The level of the allowance is determined at an
amount that the Corporation believes is adequate to cover losses in the loan
portfolio. In establishing an appropriate allowance, an assessment of the
individual borrower, a determination of the value of the underlying collateral,
a review of historical loss experience and an analysis of the levels and trends
of loan categories, delinquencies, and questionable loans are considered. Such
factors as the level and trend of interest rates and current economic conditions
are also reviewed. Additionally, various regulatory agencies, as an
Page 8
<PAGE>
integral part of their examination process, periodically review the
Corporation's allowance for such loan losses. Such agencies may require the
Corporation to increase the allowance based on their judgments of information
available to them at the time of their examination. Historically, the
Corporation's allowance for loan losses has been more than adequate to meet the
volume of charge-offs and problem credits. At March 31, 1996, the allowance for
loan losses amounted to $1,073,000 or 1.08 percent of total loans. In
management's view, the level of the allowance was more than adequate to cover
any loss experience and therefore has not warranted any additions to the
allowance during 1996.
Changes in the allowance for possible loans losses for the period ended March
31, 1996 and 1995, respectively, are set forth below.
ALLOWANCE FOR LOAN LOSSES
(in thousands)
================================================================================
Three months ending March 31,
-----------------------------
1996 1995
-------- --------
Average loans outstanding $ 99,916 $ 91,638
- -------------------------------------------------------------------------------
Total loans at end of period 98,625 93,249
- -------------------------------------------------------------------------------
Analysis of the allowance for loan losses
Balance at the beginning of year 1,073 1,073
Charge-offs:
Commercial 0 0
Real estate-mortgage 0 0
Installment loans 0 5
- -------------------------------------------------------------------------------
Total charge-offs 0 5
Recoveries:
Commercial 0 0
Real estate-mortgage 0 0
Installment loans 0 1
- -------------------------------------------------------------------------------
Total recoveries 0 1
Net Charge-offs: 0 4
Additions charged to Operations 0 0
- -------------------------------------------------------------------------------
Balance at end of period $ 1,073 $ 1,069
- -------------------------------------------------------------------------------
Ratio of net charge-offs during the period to
average loans outstanding during the period 0.00% 0.00%
- -------------------------------------------------------------------------------
Allowance for loan losses as a percentage of
total loans $ 1.09 1.15%
- -------------------------------------------------------------------------------
ASSET QUALITY
The Corporation manages asset quality and credit risk by maintaining
diversification in its loan portfolio and through review processes that include
analyses of credit requests and ongoing examination of outstandings and
delinquencies, with particular attention to portfolio dynamics. The Corporation
strives to identify loans experiencing difficulty early enough to correct the
problems, to record charge-offs promptly based on realistic assessments of
current collateral values, and to maintain an adequate allowance for loan losses
at all times.
These practices have protected the Corporation during economic downturns; the
Corporation was not significantly impacted by the recent extended recession.
It is generally the Corporation's policy to discontinue interest accruals once a
loan is past due as to interest/or principal payments for a period of 90 days.
Page 9
<PAGE>
At March 31, 1996, the Corporation had no non-accrual or restructured loans.
Loans past due 90 days or more amounted to $40,000 and are comprised entirely of
guaranteed student loans. Additionally, the Corporation did not have any other
real estate owned (OREO) at March 31, 1996.
Liquidity
The liquidity position of the Corporation is dependent on successful management
of its assets and liabilities so as to meet the needs of both deposit and credit
customers. Liquidity needs arise principally to accomodate possible deposit
outflows and to meet customers' requests for loans. Such needs can be satisfied
by scheduled principal loan prepayments, maturing investments and short-term
liquid assets. Anticipated cash flows at March 31, 1996 which provide the Bank
with liquidity remain strong with approximately $79.8 million in repayments and
maturities over the next 12 months.
The Corporation derives a significant proportion of its liquidity from its
stable core deposit base. For the three month period ended March 31, 1996
average core deposits (comprised of total demand and savings accounts plus money
market and time deposit accounts under $100,000) represented 66.0 percent of
total deposits. More volatile rate sensitive deposits, concentrated in
Certificates of deposit $100,000 and greater, comprised on average during the
first three months of 1996 16.6 percent of total deposits, as compared with 8.7
percent during the first three months of 1995. This change has been brought
about due to the sharp rise in short-term rates during the first three months of
1996.
The increase in average funding sources during the three months ended March 31,
1996 resulted primarily from an increase in business and public fund deposits
offset by a decrease of $9.6 million in Federal funds purchased and securities
sold under agreement to repurchase. Non-interest bearing funding sources as a
percentage of the funding mix decreased to 17.9 percent as compared to 18.7
percent for the three month period ended March 31, 1995. Demand deposits as a
percentage of the funding mix continue to be replaced by more expensive
interest-bearing core deposits.
The consolidated statements of cash flows present the changes in cash and cash
equivalents from operating, investing and financing activites. During the three
months ended March 31, 1996, cash and cash equivalents (which decreased overall
by $18.1) were provided (on a net basis) by operating and financing activities.
The cash flow provided by the $38.2 million net increase in deposits supported a
$45.3 million net increase in the investment portfolio at period end, and a $1.1
million net increase in the loan portfolio. Cash flow from operating activities
resulted primarily from net income.
Shareholders' Equity and Dividends
Shareholders' Equity
Shareholders' equity averaged $28.3 million for the three month period ended
March 31, 1996, an increase of $25.7 million, or 10.1 percent, as compared to
1995. The Corporation's dividend reinvestment and optional stock purchase plan
has raised $62,000 in new capital for the three months ended March 31, 1996.
That plan together with internal capital generation, may enhance the
Corporation's equity position during 1996. Book value per common share restated
to reflect the 3-for-2 stock split effective May 1, 1996 payable May 31, 1996
was $12.78 at March 31, 1996 as compared to $12.50 at March 31, 1995.
Capital
The maintenance of a solid capital foundation continues to be a primary goal for
the Corporation. Accordingly, capital plans and dividend policies are monitored
on an ongoing basis. The most important objective of the capital planning
process is to balance effectively the retention of capital to support future
growth and the goal of providing shareholders with an attractive long term
return on their investment.
Page 10
<PAGE>
The Federal Reserve Board has established a minimum leverage test which requires
banking institutions to maintain a 3.00 percent minimum of Tier I (defined as
tangible Stockholders' Equity for common stock and perpetual preferred stock)
capital to total assets. The 3.00 percent minimum applies only to the most
highly rated banks. All other institutions are expected to maintain an
additional percentage of at least 100 to 200 basis points above the minimum.
At March 31, 1996, Stockholders' Equity amounted to $26.4 million. Total Tier I
capital as a percentage of average total assets for the three months ended March
31, 1996 was 7.53 percent, as compared with 7.33 percent for the comparable
three month period in 1995. At March 31, 1996, total capital (defined as Tier I
capital and Tier II capital, which includes a portion of the Allowance for Loan
Losses, certain qualifying long term debt and preferred stock which does not
qualify as Tier I capital) as a percentage of total assets amounted to
approximately 7.81 percent.
United States bank regulators have additionally issued guidelines establishing
minimum capital standards related to the level of assets and off balance-sheet
exposures adjusted for credit risk. Specifically, these guidelines categorize
assets and off-balance sheet items into four risk-weightings and require banking
institutions to maintain a minimum ratio of capital to risk weighted assets. At
March 31, 1996, the Company's estimated Tier I to risk-adjusted assets and total
risk-based capital ratios were 21.1 percent and 22.0 percent, respectively.
These ratios are well above the minimum guidelines (in effect as of June 30,
1994) of 4 percent for Tier I capital and the 8 percent minimum for the
aggregate of Tier I and Tier II capital to risk adjusted assets.
Page 11
<PAGE>
II. OTHER INFORMATION
Item 1 Legal Proceedings
Item 2 Changes in Securities
None
Item 3 Defaults Upon Senior Securities
None
Item 4 Submission of Matters to Vote of Security Holders
a) The Annual Meeting of shareholders was held on Tuesday,
April 16, 1996.
b) The following class 1 Director was elected for two years
based on the following share votes.
For Withheld
Brenda Curtis 1,156,674 13,796
The Following Class 3 Directors' were re-elected for three years based
on the following share votes
For Withheld
Robert L. Bischoff 1,156,674 13,796
Paul Lomakin, Jr. 1,156,674 13,796
Herbert Schiller 1,156,674 13,796
The Following Class 2 Directors' terms continue until the
Annual meeting 1997
Hugo Barth, III
Stanley R. Sommer
Alexander A. Bol
William A. Thompson
The following Class 1 Directors' terms continue until the 1998
Annual meeting
John J. Davis
Donald G. Kein
Charles P. Woodward
Item 5 Other Information
None
Page 12
<PAGE>
Item 6 Exhibits and Reports on Form 8-K
a) Exhibits
10.1 Agreement and plan of merger by and between Center
Bancorp Inc. and Lehigh Savings & Loan dated as of February
14, 1996 as amended on March 19, 1996 and April 30, 1996
10.2 Inducement Agreement dated February 14, 1996
b) Reports on Form 8-K
A current report on Form 8K dated 2/20/96 was filed by the
Corporation discussing (under item 5). The execution of an
agreement relating to the acquisition of Lehigh Savings &
Loan.
Page 13
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf, by the
undersigned, thereunto duly authorized.
CENTER BANCORP, INC.
DATE: /s/ Anthony C. Weagley
- ---- ----------------------
Anthony C. Weagley, Treasurer
(Chief Financial Officer)
Page 14
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
CENTER BANCORP, INC.
AND
LEHIGH SAVINGS BANK, S.L.A.
DATED AS OF FEBRUARY 14, 1996
<PAGE>
INDEX TO DEFINITIONS
Act................................................................Section 1.1
Affected Loans.....................................................Section 5.7
Agreement.........................................................Introduction
Association.......................................................Introduction
Association Disclosure Schedule....................................Article III
Association Financial Statements.................................Section 3.4.1
Association Statement of Condition Date..........................Section 3.4.3
Bank...............................................................Section 4.7
Acquisition Transactions...........................................Section 5.1
Agreement.........................................................Introduction
Branch Property...................................................Section 3.24
CERCLA............................................................Section 3.24
Certificate........................................................Section 1.5
Closing............................................................Section 1.4
Code.............................................................Section 3.8.2
Collateral Shares................................................Section 2.1.1
Commissioner.......................................................Section 1.2
Common Stock.....................................................Section 2.1.1
Company...........................................................Introduction
Company Disclosure Schedule.........................................Article IV
Confidentiality Agreement..........................................Section 5.4
Consents.........................................................Section 6.1.2
Constituent Banks..................................................Section 5.6
Constituent Entities...............................................Section 1.2
Department.......................................................Section 3.3.2
DEPE.............................................................Section 3.3.2
Effective Date.....................................................Section 1.2
Environmental Law.................................................Section 3.20
Escrow Account.....................................................Section 2.3
Escrow Agent.......................................................Section 2.3
Excess TILA Costs..................................................Section 2.3
FDIC.............................................................Section 3.1.1
GAAP.............................................................Section 3.4.1
Hazardous Substance...............................................Section 3.20
Inducement Agreement..............................................Introduction
IRS..............................................................Section 3.8.1
ISRA..............................................................Section 3.20
Legal Proceedings..................................................Section 3.7
Material Adverse Effect..........................................Section 3.3.2
Merger............................................................Introduction
Merger Sub........................................................Introduction
OCC..............................................................Section 4.2.2
OTS...............................................................Introduction
-2-
<PAGE>
PCBs..............................................................Section 3.20
Post-Closing Merger................................................Section 5.6
Qualifying TILA Costs..............................................Section 2.3
RCRA..............................................................Section 3.20
Real Property.....................................................Section 3.20
Returns..........................................................Section 3.8.1
SAIF.............................................................Section 3.1.1
Settlement Agreement..............................................Section 3.14
Side Letter.......................................................Section 5.17
Stockholder.......................................................Introduction
Surviving Bank.....................................................Section 5.6
Surviving Entity...................................................Section 1.3
TILA..............................................................Section 5.16
TILA Costs......................................................Section 6.3.10
TILA Violation....................................................Section 5.16
Trust Account Shares.............................................Section 2.1.1
Trust Agreement...................................................Introduction
Trustee...........................................................Introduction
-3-
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of February 14,
1996, is made by and between Center Bancorp, Inc., a New Jersey corporation (the
"Company"), and Lehigh Savings Bank, S.L.A., a New Jersey chartered capital
stock savings and loan association (the "Association").
WHEREAS, the respective Boards of Directors of the Company and the
Association, by the requisite vote required under applicable law, have each
determined that it is in the best interests of the Company and the Association
and their respective stockholders for the Company to acquire the Association by
(i) organizing an interim New Jersey-chartered capital stock savings and loan
association (the "Merger Sub") and (ii) merging Merger Sub with and into the
Association upon the terms and subject to the conditions set forth herein (the
"Merger");
WHEREAS, the respective Boards of Directors of the Company and the
Association, by the requisite vote required under applicable law, have each
approved the Merger upon the terms and subject to the conditions set forth
herein; and
WHEREAS, the trustee (the "Trustee") under the Trust Agreement, dated as of
November 9, 1992 (the "Trust Agreement"), by and among David Margolis (the
"Stockholder"), Mildred Margolis, the Trustee and the Office of Thrift
Supervision (the "OTS") has entered into an Inducement Agreement, dated of even
date herewith (the "Inducement Agreement"), pursuant to which, among other
things, the Trustee has agreed to vote the shares of the Association's common
stock held by him in favor of the Merger, subject to receipt of notice of
non-disapproval from the OTS;
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained herein, the parties hereto
hereby agree as follows:
ARTICLE I-THE MERGER
1.1. MERGER. Subject to the terms and conditions of this Agreement, on the
Effective Date (as defined in Section 1.2), the Merger Sub shall be merged with
and into the Association and the separate legal existence of Merger Sub shall
thereupon cease in accordance with the applicable provisions of the New Jersey
Savings and Loan Act (the "Act"). The Merger shall be treated as a taxable
purchase of the Common Stock of the Association by the Company for federal and
state income tax purposes.
1.2. EFFECTIVE DATE. As soon as practicable following fulfillment or waiver
of the conditions specified in Article VI, and provided that this Agreement has
not been terminated or abandoned pursuant to Section 7.1, Merger Sub and the
Association (the "Constituent Entities") shall jointly certify to the New Jersey
Commissioner of Banking (the "Commissioner") that they
-4-
<PAGE>
have complied with all of the requirements of the Act. The Merger shall become
effective on the date such certification is approved by the Commissioner (the
"Effective Date").
1.3. EFFECT OF MERGER. The Merger shall have the effects specified in the
Act. Without limiting the generality of the foregoing, the corporate existence
of each of Merger Sub and the Association shall be merged into each other and
all of their respective rights, privileges and franchises, and their respective
right, title and interest in and to all property of whatever kind, whether real,
personal or mixed, and things in action and every right, privilege, interest or
asset of value or benefit then existing shall be vested in the Association as
the surviving entity of the Merger (sometimes hereinafter referred to as the
"Surviving Entity").
1.4. CONSUMMATION OF MERGER. The closing of the Merger (the "Closing")
shall take place (a) at the offices of Lowenstein, Sandler, Kohl, Fisher &
Boylan, 65 Livingston Avenue, Roseland, New Jersey 07068 five business days
after notification that all of the conditions set forth in Article VI have been
satisfied or duly waived or (b) at such other time and place and on such other
date as the Company and the Association may agree.
1.5. CERTIFICATE OF INCORPORATION AND BY-LAWS. The Certificate of
Incorporation and By-Laws of Merger Sub in effect immediately prior to the
Effective Date shall be the Certificate of Incorporation and By-Laws of the
Surviving Entity, until duly amended in accordance with their terms and the Act.
1.6 DIRECTORS AND OFFICERS. The directors and officers of Merger Sub
immediately prior to the Effective Date shall be the directors and officers,
respectively, of the Surviving Entity, from and after the Effective Date, until
their successors have been duly elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with the terms of the
Surviving Entity's Certificate of Incorporation and By-Laws and the Act.
ARTICLE II-CONVERSION OF SHARES
2.1. CONVERSION OF SHARES. By virtue of the Merger, automatically and
without any action on the part of the holder thereof, upon the effectiveness of
the Merger, the following shall occur:
2.1.1. Each then-outstanding share of common stock, par value
$10 per share, of the Association ("Common Stock"), other than (a)
shares owned by the Company, Merger Sub or any direct or indirect
wholly-owned subsidiary of the Company or Merger Sub (except for any
shares of Common Stock held in trust accounts, managed accounts or in
any similar manner as trustee or in a fiduciary capacity ("Trust
Account Shares") and shares held as collateral or in lieu of a debt
previously contracted ("Collateral Shares")), (b) shares held in the
treasury of the Association and (c) shares of Common Stock the holders
of which perfect any dissenters' rights they may have under applicable
law, shall be converted into the right to receive $15.2867 per share
(as such amount may be reduced pursuant to Section 2.3, the "Per Share
Consideration"), without interest;
-5-
<PAGE>
2.1.2. Each then-outstanding share owned by the Company,
Merger Sub or any direct or indirect wholly-owned subsidiary of the
Company or Merger Sub (except for any Shares that are Trust Account
Shares or Collateral Shares) shall be canceled and retired;
2.1.3. Each share issued and held in the Association's
treasury shall be canceled and retired;
2.14. Each issued and outstanding share of common stock of
Merger Sub shall be converted into one fully paid and nonassessable
share of the common stock of the Surviving Entity; and
2.1.5. Until surrendered and exchanged in accordance with this
Agreement, each certificate representing outstanding shares of Common
Stock entitled to the Per Share Consideration (each such certificate, a
"Certificate") shall, after the Effective Date, represent solely the
right to receive, without interest, the Per Share Consideration
multiplied by the number of shares of Common Stock evidenced by such
Certificate and shall have no other rights. Neither the Association,
the Company or Merger Sub shall be liable to any holder of shares of
Common Stock for any Per Share Consideration (or interest with respect
thereto) delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
2.2. DISSENTERS' RIGHTS. Notwithstanding any provision of this
Agreement to the contrary, any shares of Common Stock outstanding immediately
prior to the Effective Date held by a holder who has demanded and perfected the
right, if any, to dissent from this Agreement in accordance with applicable law
and as of the Effective Date has not withdrawn or lost such right to dissent
shall not be converted into or represent a right to receive the Per Share
Consideration, but the holder of such shares shall only be entitled to such
rights as are granted by applicable law. If a holder of shares of Common Stock
who dissents shall effectively withdraw or lose (through failure to perfect or
otherwise) the right to dissent, then, as of the Effective Date or the
occurrence of such event, whichever last occurs, those shares shall be converted
into and represent only the right to receive the Per Share Consideration as
provided in Section 2.1.1, without interest, upon the surrender of the
Certificate representing those shares. The Association shall give the Company
copies of any notice of dissent of any shares of Common Stock received by the
Association, notice of any attempted withdrawals of any such notices of dissent
and any other instruments served pursuant to applicable law received by the
Association relating to stockholders' rights, if any, to dissent. The
Association shall not, except with the prior written consent of the Company,
voluntarily make any payment with respect to any dissenting shares of the
Association, offer to settle or settle any demands for payment with respect
thereto or approve any withdrawal of any such demands.
2.3. ADJUSTMENT TO PER SHARE CONSIDERATION; ESCROW ACCOUNT. (a) In the
event that the aggregate TILA Costs (as defined herein) exceed $30,000, the Per
Share Consideration shall be reduced by an amount (determined on a per share
basis) equal to the excess, in any, of the Qualifying TILA Costs (as defined
herein) actually incurred and paid by the Association on or prior to Closing
over $30,000. As used herein, the term "Qualifying TILA Costs" means only
-6-
<PAGE>
those TILA Costs which are (i) for a sum certain, (ii) liquidated, and (iii)
indefeasibly paid in full by the Association in cash on or prior to Closing;
such term specifically excludes any TILA Costs which are contingent,
unliquidated or unpaid. In the event that the Per Share Consideration is reduced
as provided in this Section 2.3(a), at the Closing the Company will cause the
Surviving Bank to assign to the Stockholder, as the representative of all of the
former stockholders of the Association, any claims which the Association may
have against any third party as a result of the TILA Violations (as defined in
Section 5.16) giving rise to the adjustment in the Per Share Consideration;
PROVIDED, HOWEVER, that the Surviving Bank shall be entitled to receive the
first $30,000 of any recoveries based upon, resulting from or arising out of the
claims so assigned, together with the reimbursement in full of any out-of-pocket
expenses incurred by the Surviving Bank in connection therewith (including, but
not limited to, the fees and disbursements of counsel) before any amounts are
paid to the former stockholders of the Association in respect thereof. No later
than the business day immediately prior to the Closing, the Association shall
certify to the Company the amount of the Qualifying TILA Costs and shall provide
the Company with a reasonably detailed analysis of such Qualifying TILA Costs.
(b) If the aggregate amount of TILA Costs (net of Qualifying TILA Costs
for which a reduction in the Per Share Consideration has been made in accordance
with paragraph (a)) exceeds $30,000, then the Company shall have the right
exercisable at any time prior to the Closing, at its sole election, to either
terminate this Agreement as provided in Section 7.1 as a result of the failure
by the Association to satisfy the conditions of Section 6.3.10 or to further
reduce the Per Share Consideration otherwise payable pursuant to Section 2.1.1
by paying into an escrow account (the "Escrow Account") with an unrelated third
party financial institution selected by the Company and reasonably satisfactory
to the Association (the "Escrow Agent") an amount equal to the sum of (i) such
excess and (ii) the aggregate amount of the litigation expenses expected to be
incurred or paid after the Closing (the "Excess TILA Costs"); PROVIDED, HOWEVER,
that the Company shall not have the right to terminate the Agreement as provided
above if the aggregate amount of the Excess TILA Costs is less than $100,000.
Amounts deposited into the Escrow Account shall be paid either to the Company
(or its designee) to the extent that any TILA Costs are actually incurred by the
Company or its subsidiaries or to the former shareholders of the Association in
accordance with the terms of a mutually satisfactory escrow agreement to be
entered into by the Company, the Stockholder, as the representative of the
former shareholders of the Association, and the Escrow Agent at the time the
Escrow Account is established. For purposes of this Agreement, TILA Costs shall
include the maximum amount of all disputed claims, unless otherwise mutually
agreed by the Association and the Company.
ARTICLE III-REPRESENTATIONS AND WARRANTIES OF THE ASSOCIATION
References herein to "Association Disclosure Schedules" shall mean all
of the disclosure schedules required by this Article III, dated as of the date
hereof and referenced to the specific sections and subsections of Article III of
this Agreement, which have been delivered on the date hereof by the Association
to the Company. The Association hereby represents and warrants to the Company as
follows:
-7-
<PAGE>
3.1. ORGANIZATION.
3.1.1. ASSOCIATION. The Association is a capital stock savings
and loan association duly organized, validly existing and in good
standing under the laws of the State of New Jersey. The Association has
full power and authority, corporate and otherwise, to own or lease all
of its properties and assets and to carry on its business as it is now
being conducted. All eligible accounts of depositors issued by the
Association are insured by the Savings Association Insurance Fund
("SAIF") of the Federal Deposit Insurance Corporation ("FDIC") to the
fullest extent permitted by law. The Association Disclosure Schedule
sets forth true and complete copies of the Association's Certificate of
Incorporation and By-Laws, as in effect on the date hereof.
3.1.2. SUBSIDIARIES. The Association has not previously and
does not now own or control, directly or indirectly, any controlling
equity interest in any corporation, company, association, partnership,
joint venture or other entity or otherwise control, directly or
indirectly, the management and policies of any such entity.
3.2. CAPITALIZATION. The authorized capital stock of the Association
consists of 1,395,500 shares of Common Stock. As of the date hereof, there are
392,500 shares of Common Stock issued and outstanding. The Association
Disclosure Schedules accurately set forth the names and addresses of each of the
shareholders of the Association and the number of shares of Common Stock owned
by each such shareholder. There are no shares of Common Stock issuable upon
exercise of outstanding options. The Association has not adopted any plan
pursuant to which capital stock may be issued. All issued and outstanding shares
of Common Stock have been duly authorized and validly issued, have been issued
without violating the pre-emptive or other rights of third-parties or the
provisions of any applicable federal or state securities laws, are fully paid,
and are nonassessable. The Association has not granted and is not bound by any
outstanding subscriptions, options, warrants, calls, commitments or agreements
of any character calling for the transfer, purchase, subscription or issuance of
any shares of the Association's capital stock and has not issued any securities
representing the right to purchase, subscribe or otherwise receive any shares of
such capital stock or any securities convertible into any such shares, and there
are no agreements or understandings to which the Association is a party with
respect to voting of any such shares.
3.3. AUTHORITY; NO VIOLATION.
3.3.1. AUTHORITY. The Association has full power and
authority, corporate and otherwise, to execute and deliver this
Agreement and to consummate the transactions contemplated hereby in
accordance with the terms hereof. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly and validly approved by the Board of Directors of the
Association in accordance with the Certificate of Incorporation of the
Association and all applicable laws and regulations. Except for
stockholder approval of the Merger, no other corporate proceedings on
the part of the Association are necessary to consummate the
transactions so contemplated.
-8-
<PAGE>
This Agreement constitutes a valid and binding obligation of the
Association, enforceable against the Association in accordance with its
terms.
3.3.2. Neither the execution and delivery of this Agreement by
the Association, nor the consummation by the Association of the
transactions contemplated hereby in accordance with the terms hereof,
or compliance by the Association with any of the terms or provisions
hereof, will (i) violate any provision of the Association's Certificate
of Incorporation or By-Laws, (ii) assuming that the consents and
approvals set forth below are duly obtained, violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to the Association or any of its properties or
assets, or (iii) except as set forth in the Association Disclosure
Schedule, violate, conflict with, result in a breach of any provisions
of, constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, result in the
termination of, accelerate the performance required by, or result in
the creation of any lien, security interest, charge or other
encumbrance upon any of the properties or assets of the Association
under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, commitment, pledge, permit, deed of trust,
license, lease, contract, agreement or other instrument or obligation
or (assuming that the consents and approvals set forth below are duly
obtained) any judgment, order, decree, law, rule or other restriction
of any governmental authority, in each case to which the Association is
a party, or by which the Association may be bound or to which any of
its assets or properties are subject except, with respect to (ii) and
(iii) above, such as individually or in the aggregate would not have a
material adverse effect on the business, results of operations, assets,
financial condition or prospects (financial and otherwise) (a "Material
Adverse Effect") of the Association and which will not prevent or delay
the consummation of the transactions contemplated hereby. Except for
consents and approvals of or filings or registrations with or notices
to the FDIC, the Office of Thrift Supervision ("OTS"), the New Jersey
Department of Banking ("Department"), the New Jersey Department of
Environmental Protection and Energy ("DEPE"), the stockholders of the
Association, no consents or approvals of or filings or registrations
with or notices to any third party or any public body or authority are
necessary on behalf of the Association in connection with (x) the
execution and delivery by the Association of this Agreement and (y) the
consummation by the Association of the Merger and the other
transactions contemplated hereby (including, without limitation, the
"Post-Closing Merger" as defined herein) (other than consents,
approvals, filings, registrations or notices, the failure of the
Association to obtain which would not have a Material Adverse Effect).
3.4. FINANCIAL STATEMENTS.
3.4.1. The Association Disclosure Schedule sets forth copies
of the consolidated statements of condition of the Association as of
June 30, 1995 and June 30, 1994 and the related consolidated statements
of income, changes in stockholders' equity and cash flows for each of
the fiscal years in the three-year period ended June 30, 1995, in each
case accompanied by the audit reports of KPMG Peat Marwick LLP and
Arthur Andersen LLP, independent public accountants with respect to the
Association, and the unaudited
-9-
<PAGE>
Thrift Financial Reports of the Association as of September 30, 1995
and December 31, 1995 (collectively, the "Association Financial
Statements"). The audited Association Financial Statements (including
the related notes) have been prepared in accordance with generally
accepted accounting principles ("GAAP"), consistently applied during
the periods covered thereby (except as may be indicated therein or in
the notes thereto), and the Thrift Financial Reports have been prepared
in accordance with generally accepted regulatory accounting principles,
consistently applied during the periods covered thereby and the
Association Financial Statements fairly present the consolidated
financial condition of the Association as of the respective dates set
forth therein, and the related consolidated statements of income,
changes in stockholders' equity and cash flows (if any, in the case of
the Thrift Financial Reports) fairly present the results of the
consolidated operations, changes in stockholders' equity and cash flows
of the Association for the respective periods set forth therein.
3.4.2. The books and records of the Association have been
maintained in material compliance with all applicable legal and
accounting requirements.
3.4.3. Except as and to the extent reflected, disclosed or
reserved against in the Association Financial Statements (including the
notes thereto), as of December 31, 1995 (the "Association Statement of
Condition Date") the Association did not have any liabilities, whether
absolute, accrued, contingent or otherwise, material to the business,
operations, assets or financial condition of the Association which were
required by GAAP (consistently applied) to be disclosed in the
Association's consolidated statement of condition as of the Association
Statement of Condition Date or the notes thereto. Since the Association
Statement of Condition Date, the Association has not incurred any
liabilities except in the ordinary course of business and consistent
with prudent banking practice or except as related to the transactions
contemplated by this Agreement.
3.5. BROKER'S AND OTHER FEES. Except for Alex Sheshunoff Investment
Banking, neither the Association nor any of its directors or officers has
employed any broker or finder or incurred any liability for any broker's or
finder's fees or commissions in connection with any of the transactions
contemplated by this Agreement. All agreements with Alex Sheshunoff Investment
Banking are set forth in the Association Disclosure Schedule. There are no other
fees (other than time charges billed at usual and customary rates) payable by
the Association to any consultants, including lawyers, accountants and
investment bankers, in connection with the Merger or which would be triggered by
consummation of the Merger or the termination of the services of such
consultants by the Association. The Association has not paid, and will not pay,
any fees to any attorney, accountant (other than customary accounting fees
payable to KPMG Peat Marwick in an amount not to exceed $5,000), investment
banker (other than fees payable to Alex Sheshunoff Investment Banking in an
amount not to exceed $15,000 plus reasonable out-of-pocket expenses) or other
consultant who or which represents any of the shareholders of the Association.
-10-
<PAGE>
3.6. ABSENCE OF CERTAIN CHANGES OR EVENTS.
3.6.1. Except as disclosed in the Association Disclosure
Schedule, there has not been any material adverse change in the
business, results of operations, assets, prospects (financial or
otherwise) or financial condition of the Association since the
Association Statement of Condition Date, and to the best of the
Association's knowledge, no facts or conditions exist which are likely
to cause such a material adverse change in the future.
3.6.2. Except as disclosed in the Association Disclosure
Schedule, the Association has not taken or permitted any of the actions
described in Section 5.2 hereof between December 31, 1995 and the date
hereof.
3.7. LEGAL PROCEEDINGS. Except as disclosed in the Association
Disclosure Schedule, the Association is not a party to any, and there are no
pending or, to the best of the Association's knowledge, threatened, legal,
administrative, arbitrable or other proceedings, claims, actions or governmental
investigations of any nature (collectively, "Legal Proceedings") against the
Association and there are no pending or, to the best of the Association's
knowledge, threatened Legal Proceedings which seek to enjoin, prohibit or delay
the transactions contemplated hereby. Except as disclosed in the Association
Disclosure Schedule, the Association is not a party to any order, judgment or
decree entered in any lawsuit or proceeding (other than routine foreclosure or
collection orders entered in the ordinary course of business).
3.8. TAXES AND TAX RETURNS.
3.8.1. The Association has duly filed (and until the Effective
Date will so file) all returns, declarations, reports, information
returns and statements ("Returns") required to be filed by it in
respect of any federal, state and local taxes (including withholding
taxes, penalties or other payments required) and has duly paid when due
(and until the Effective Date will so pay) all such taxes due and
payable, other than taxes or other changes which are being contested in
good faith (and disclosed to the Company in writing). The Association
has established (and until the Effective Date will establish) on its
books and records reserves that are adequate for the payment of all
federal, state and local taxes not yet due and payable but which should
be accrued in respect of the Association through such date in
accordance with GAAP. The Association Disclosure Schedule identifies
the federal income tax returns of the Association which have been
examined by the Internal Revenue Service (the "IRS") within the past
six years. No deficiencies were asserted as a result of such
examinations which have not been resolved and paid in full. To the best
knowledge of the Association, there are no audits or other
administrative or court proceedings presently pending nor any other
disputes pending with respect to, or claims asserted for, taxes or
assessments upon the Association, nor has the Association given any
currently outstanding waivers or comparable consents regarding the
application of the statute of limitations with respect to any taxes or
Returns.
3.8.2. Except as set forth in the Association Disclosure
Schedule, the Association (i) has not requested any extension of time
within which to file any Return which Return
-11-
<PAGE>
has not since been filed, (ii) is not a party to any agreement
providing for the allocation or sharing of taxes, (iii) is not required
to include in income any adjustment pursuant to Section 481(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), by reason of a
voluntary change in accounting method initiated by the Association (nor
does the Association have any knowledge that the IRS has proposed any
such adjustment or change of accounting method), and (iv) has not filed
a consent pursuant to Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply.
3.9. REPORTS. The Association has, since January 1, 1991, duly filed
with the OTS and the Department in form which was correct in all
material respects the monthly, quarterly and annual financial reports
required to be filed under applicable laws and regulations, and the
Association promptly will deliver or make available to the Company
accurate and complete copies of such reports.
3.10. CERTAIN CONTRACTS.
3.10.1. Except as disclosed in the Association Disclosure
Schedule, (i) the Association is not a party to or bound by any written
contract or understanding (whether written or oral) with respect to the
employment of any officers, employees, directors or consultants, and
(ii) the consummation of the transactions contemplated by this
Agreement will not (either alone or upon the occurrence of any
additional acts or events) result in any payment (either of severance
pay or otherwise) becoming due from the Association, the Company or any
affiliate of either such entity, to any officer, employee, director or
consultant of the Association. The Association Disclosure Schedule sets
forth true and correct copies of all severance or employment agreements
with officers, directors, employees, agents or consultants to which the
Association is a party.
3.10.2. Except as disclosed in the Association Disclosure
Schedule and except for loan commitments issued in the ordinary course
of business, (i) as of the date of this Agreement, the Association is
not a party to or bound by any commitment, agreement or other
instrument which is material to the business, operations, assets or
financial condition of the Association, but in no event shall a
contract for less than $10,000 per year be deemed material under this
Section 3.10.2 or a contract for more than $25,000 per year be deemed
immaterial under this Section 3.10.2, (ii) no commitment, agreement or
other instrument to which the Association is a party or by which it is
bound limits the freedom of the Association to compete in any line of
business or with any person, and (iii) the Association is not a party
to any collective bargaining agreement.
3.10.3. Except as disclosed in the Association Disclosure
Schedule, the Association or, to the best knowledge of the Association,
any other party thereto, is not in default in any material respect
under any material lease, contract, mortgage, promissory note, deed of
trust, loan or other commitment or arrangement, except for defaults
which individually or in the aggregate would not have a Material
Adverse Effect on the Association.
-12-
<PAGE>
3.11. PROPERTIES AND INSURANCE.
3.11.1. The Association has good and, as to owned real
property, marketable title to all material assets and properties,
whether real, personal or mixed, tangible or intangible, reflected in
the Association's consolidated statement of condition (as set forth in
the Association Disclosure Schedule) as of the Association Statement of
Condition Date, or owned and acquired subsequent thereto (except to the
extent that such assets and properties have been disposed of for fair
value in the ordinary course of business since the Association
Statement of Condition Date), subject to no encumbrances, liens,
mortgages, security interests or pledges, except (i) those items that
secure liabilities that are reflected in said consolidated statement of
condition or the notes thereto or that secure liabilities incurred in
the ordinary course of business after the date of such consolidated
statement of condition, (ii) statutory liens for amounts not yet
delinquent or which are being contested in good faith, (iii) such
encumbrances, liens, mortgages, security interests, pledges and title
imperfections that are not in the aggregate material to the business,
operations, assets and financial condition of the Association and (iv)
with respect to owned real property, title imperfections noted in title
reports set forth in the Association Disclosure Schedule. The
Association as lessee has the right under valid and subsisting leases
to occupy, use, possess and control all real property leased by the
Association in all material respects as presently occupied, used,
possessed and controlled by the Association.
3.11.2. The business operations and all insurable properties
and assets of the Association are insured for its benefit against all
risks which, in the reasonable judgment of the management of the
Association, should be insured against, in each case under policies or
bonds issued by insurers of recognized responsibility, in such amounts
with such deductibles and against such risks and losses as are in the
reasonable opinion of the management of the Association adequate for
the business engaged in by the Association. As of the date hereof, the
Association has not received any notice of cancellation or notice of a
material amendment of any such insurance policy or bond and is not in
default under any such policy or bond, no coverage thereunder is being
disputed and all material claims thereunder have been filed in a timely
fashion.
3.12. MINUTE BOOKS. The minute books of the Association contain
accurate records of all meetings and other corporate action held of its
stockholders and Board of Directors (including committees thereof), for all
meetings held and actions taken since January 1, 1991.
3.13. RESERVES. As of the Association Statement of Condition Date, the
allowance for loan losses in the Association Financial Statements was adequate
based upon all factors required to be considered by the Association in
determining the amount of such allowance. The methodology used to compute such
allowance complies in all material respects with all applicable OTS and
Department policies. As of the Association Statement of Condition Date, the
reserve for OREO properties in the Association Financial Statements was adequate
based upon all factors required to be considered by the Association in
determining the amount of such reserve.
-13-
<PAGE>
3.14. NO PARACHUTE PAYMENTS. No officer, director, employee or agent
(or former officer, director, employee or agent) of the Association is entitled
now, or will or may be entitled to as a consequence of this Agreement or the
Merger, to any payment or benefit from the Association, the Company or any
subsidiary of the Association or the Company which if paid or provided would
constitute an "excess parachute payment", as defined in Section 280G of the Code
or regulations promulgated thereunder. The Association has established an
adequate reserve in accordance with GAAP on the Association Financial Statements
for all amounts payable to Gary Restivo pursuant to the Settlement Agreement,
dated February 9, 1995 (the "Settlement Agreement").
3.15. DISCLOSURE. No representation or warranty contained in Article
III of this Agreement or in the Association Disclosure Schedule contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements herein or therein not misleading.
3.16. EMPLOYEE PLANS. Except as set forth in the Association Disclosure
Schedule, the Association does not maintain, and has no liability of any kind or
nature whatsoever (whether known or unknown, actual or contingent) under any
former, employee benefit, welfare, bonus, deferred compensation, pension, profit
sharing, stock option, employee stock ownership, consulting, severance or fringe
benefit plans, formal or informal, written or oral, or any trust agreements
related thereto, relating to any present or former directors, officers or
employees of the Association.
3.17. COMPLIANCE WITH LAWS AND ORDERS. Except as set forth in the
Association Disclosure Schedule, the business of the Association has not been,
and is not being, conducted in violation of any law, ordinance, regulation,
judgment, order, decree, license or permit of any governmental entity
(including, without limitation, all statutes, rules and regulations pertaining
to the conduct of the banking business and the exercise of trust powers), except
for possible violations which individually or in the aggregate do not, and,
insofar as reasonably can be foreseen, in the future shall not, have a Material
Adverse Effect on the Association. Except as set forth in the Association
Disclosure Schedule, no investigation or review by any governmental entity with
respect to the Association is pending or, to the knowledge of the Association,
threatened, nor has any governmental entity indicated an intention to conduct
the same, in each case other than those the outcome of which shall not have a
Material Adverse Effect on the Association.
3.18. AGREEMENTS WITH BANK REGULATORS. Except as set forth in the
Association Disclosure Schedule, neither the Association nor any of its
shareholders is a party to any agreement or memorandum of understanding with, or
a party to any commitment letter, Board resolution submitted to a regulatory
authority or similar undertaking to, or is subject to any order or directive by,
or is a recipient of any extraordinary supervisory letter from, any governmental
entity which restricts materially the conduct of the Association's business, or
in any manner relates to its capital adequacy, its credit or reserve policies,
its management or its stockholders, nor has the Association been advised by any
governmental entity that it is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
decree,
-14-
<PAGE>
agreement, memorandum of understanding, extraordinary supervisory letter,
commitment letter or similar submission, except as set forth in the Association
Disclosure Schedule. The Association Disclosure Schedule also describes the
status of any such matter. The Association is required by Section 32 of the
Federal Deposit Insurance Act to give prior notice to a Federal banking agency
of the proposed addition of an individual to its board of directors or the
employment of an individual as a senior executive officer.
3.19. ASSOCIATION ACTION. The Board of Directors of the Association (at
a meeting duly called and held) has by the requisite vote of all directors
present (a) approved this Agreement and (b) directed that the Agreement be
submitted for consideration by the Association's stockholders.
3.20. ENVIRONMENTAL MATTERS.
3.20.1. (a) For purposes of this Section 3.20.1, the following terms
shall have the following meanings:
"Branch Property" means all real property presently or formerly owned
or operated by the Association on which branches or facilities are or were
located.
"Environmental Law" means any applicable federal, state or local
statute, law, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree, injunction, directive, requirement
or agreement with any Governmental Entity, now existing, relating to: (a) the
protection, preservation or restoration of the environment (including, without
limitation, air, water vapor, surface water, groundwater, drinking water supply,
surface land, subsurface land, plant and animal life or any other natural
resource), or to human health or safety, or (b) the exposure to, or the use,
storage, recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Hazardous Substances, in each case
as amended. The term Environmental Law includes, without limitation, (x) the
following statutes, each as amended:
(i) the federal Clean Air Act;
(ii) the federal Clean Water Act;
(iii) the federal Water Pollution Control Act of 1972;
(iv) the federal Resource Conservation and Recovery Act of 1976
(including the Hazardous and Solid Waste Amendments thereto) ("RCRA");
(v) the federal Comprehensive Environmental Response Compensation
Liability Act of 1980 (including the Superfund Amendments and Reauthorization
Act of 1986) ("CERCLA");
(vi) the federal Toxic Substances Control Act;
(vii) the federal Occupational Safety and Health Act of 1970;
-15-
<PAGE>
(viii) the federal Emergency Planning and Community Right-to-Know Act
of 1986;
(ix) the federal Safe Drinking Water Act;
(x) the federal Solid Waste Disposal Act;
(xi) the federal Insecticide, Fungicide and Rodenticide Act; and
(xii) the Industrial Site Recovery Act ("ISRA").
and (y) 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 Substance.
"Hazardous Substance" means any substance, whether liquid, solid or
gas, listed, defined, designated, or classified as hazardous, toxic,
radioactive, or dangerous under any applicable Environmental Law, whether by
type or by quantity. Hazardous Substance includes, without limitation, (i) any
"hazardous substance" as defined in CERCLA, (ii) any "hazardous waste" as
defined in RCRA, and (iii) any toxic waste, pollutant, contaminant, hazardous
substance, toxic substance, hazardous waste, special waste or petroleum or any
derivative or by-product thereof, radon, radioactive material, asbestos,
asbestos containing material, urea formaldehyde foam insulation, lead and poly
chlorinated biphenyls ("PCBs").
"Real Property" means the Branch Property, all real property classified
by the Association as OREO and all real property (including property held as
trustee or in any other fiduciary capacity) over which the Association currently
or formerly has exercised dominion, management or control.
(b) Except as set forth in the Association Disclosure Schedule or as
would not have a Material Adverse Effect on the Association:
(i) the Association is and has been in compliance with all
applicable Environmental Laws,
(ii) the Real Property does not contain any Hazardous
Substance in violation of any applicable Environmental Law,
(iii) the Association has not received any written notices,
demand letters or written requests for information from any
governmental entity or any third-party indicating that the
Association may be in violation of, or liable under, any
Environmental Law.
(iv) there are no civil, criminal or administrative actions,
suits, demands, claims, hearings, investigations or
proceedings pending or threatened against the Association
-16-
<PAGE>
with respect to the Association or the Real Property relating
to any violation, or alleged violation, of any Environmental
Law;
(v) no reports have been filed, or are required to be filed,
by the Association concerning the release of any Hazardous
Substance or the threatened or actual violation of any
Environmental Law on or at the Real Property;
(vi) to the knowledge of the Association, there are no
underground storage tanks on, in or under any of the Branch
Property and no underground storage tanks have been abandoned
or removed from any Branch Property while such Branch Property
was owned or operated by the Association; and
(vii) to the knowledge of the Association, the Association has
not incurred, and none of the Real Property is presently
subject to, any liabilities (fixed or, to the knowledge of the
Association, contingent) relating to any suit, settlement,
court order, administrative order, judgment or claim asserted
or arising under any Environmental Law.
(c) For purposes of this Section 3.20, "to the knowledge of the
Association" shall mean to the knowledge of each person with the title of Vice
President of the Association or higher.
(d) There are no permits, licenses or registrations required under any
Environmental Law with respect to the Branch Property presently operated by the
Association;
(e) The Association has not received written notice that any part of
the Real Property has been or is listed as a site having thereon Hazardous
Substances pursuant to any Environmental Law.
3.21. LABOR RELATIONS. Except as set forth in the Association
Disclosure Schedule, the Association is not a party to or bound by any
collective bargaining agreement respecting its employees, nor is there pending,
or to the best knowledge of the Association threatened, any strike, walk out or
other work stoppage or labor organizational effort.
3.22. INDEMNIFICATION. Except as set forth in the Certificate of
Incorporation and By-Laws of the Association or in the Association Disclosure
Schedule, (i) the Association is not a party to any indemnification agreement
with any of its present or future directors, officers, employees, agents or
other persons who serve or served in any other capacity with any other
enterprise at the request of the Association (a "Covered Person"), and (ii) to
the best knowledge of the Association, there are no claims for which any Covered
Person would be entitled to indemnification under the Certificate of
Incorporation or By-Laws of the Association, or otherwise.
-17-
<PAGE>
ARTICLE IV-REPRESENTATIONS AND WARRANTIES OF THE COMPANY
References herein to "Company Disclosure Schedules" shall mean all of
the disclosure schedules required by this Article IV, dated as of the date
hereof and referenced to the specific sections and subsections of Article IV of
this Agreement, which have been delivered on the date hereof by the Company to
the Association. The Company hereby represents and warrants to the Association
as follows:
4.1. ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of New Jersey. The Company has full
power and authority, corporate and otherwise, to own or lease all of its
properties and assets and to carry on its business as it is now being conducted.
4.2 AUTHORITY; NO VIOLATION.
4.2.1. AUTHORITY. The Company has full power and authority,
corporate and otherwise, to execute and deliver this Agreement and to
consummate the transactions contemplated hereby in accordance with the
terms hereof. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly approved by the Board of Directors of the Company in accordance
with the Certificate of Incorporation of the Company and all applicable
laws and regulations. No other corporate proceedings on the part of the
Company are necessary to consummate the transactions so contemplated.
This Agreement constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms.
4.2.2. Neither the execution and delivery of this Agreement by
the Company, nor the consummation by the Company of the transactions
contemplated hereby in accordance with the terms hereof, or compliance
by the Company with any of the terms or provisions hereof, will (i)
violate any provision of the Company's Certificate of Incorporation or
By-Laws, (ii) assuming that the consents and approvals set forth below
are duly obtained, violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to
the Company or any of its properties or assets, or (iii) except as set
forth in the Company Disclosure Schedule, violate, conflict with,
result in a breach of any provisions of, constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a
default) under, result in the termination of, accelerate the
performance required by, or result in the creation of any lien,
security interest, charge or other encumbrance upon any of the
properties or assets of the Company under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, commitment,
pledge, permit, deed of trust, license, lease, contract, agreement or
other instrument or obligation or any judgment, order, decree, law,
rule or other restriction of any governmental authority, in each case
to which the Company is a party, or by which the Company may be bound
or to which any of its assets or properties are subject except, with
respect to (ii) and (iii) above, such as individually or in the
aggregate will not have a Material Adverse Effect on the Company and
its subsidiaries taken as a whole and which will not prevent or delay
the consummation of the transactions contemplated hereby.
-18-
<PAGE>
Except for consents and approvals of or filings or registrations with
or notices to the FDIC, the Office of the Comptroller of the Currency
(the "OCC"), the Department, the DEPE, the Federal Reserve Board and
the OTS, no consents or approvals of or filings or registrations with
or notices to any third party or any public body or authority are
necessary on behalf of the Company in connection with (x) the execution
and delivery by the Company of this Agreement and (y) the consummation
by the Company of the Merger and the other transactions contemplated
hereby.
4.3 FINANCES. At the Closing, the Company will have sufficient cash
resources to consummate the Merger and to pay the Per Share Consideration.
4.4 CAPITAL RATIO. The Company has no reason to believe that as of the
Closing, on a pro forma basis giving effect to the Merger, (i) the Company's
Tier I risk-based capital ratio will be less than 4%, (ii) the Company's total
risk-based capital ratio will be less than 8%, or (iii) the Company's leverage
ratio will be less than 5%.
4.5 CRA COMPLIANCE. The Company has no reason to believe that it is in
material violation of the provisions of the Community Reinvestment Act of 1977,
as amended.
4.6. ABSENCE OF CERTAIN CHANGES OR EVENTS. There has not been any
material adverse change in the business, results of operations, assets,
prospects (financial or otherwise) or financial condition of the Company and its
subsidiaries since September 30, 1995 and, to the best of the Company's
knowledge, no facts or conditions exist which are likely to cause such a
material adverse change in the future.
4.7. REPORTS. The Company's bank subsidiary, Union Center National Bank
(the "Bank"), has, since January 1, 1995, duly filed with the OCC in form which
was correct in all material respects the monthly, quarterly and annual financial
reports required to be filed under applicable laws and regulations, and the Bank
promptly will deliver or make available to the Association accurate and complete
copies of such reports.
4.8. DISCLOSURE. No representation or warranty contained in Article IV
of this Agreement or in the Company Disclosure Schedule contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements herein or therein not misleading.
4.9. AGREEMENTS WITH BANK REGULATORS. Neither the Company nor the Bank
is a party to any agreement or memorandum of understanding with, or a party to
any commitment letter, Board resolution submitted to a regulatory authority or
similar undertaking to, or is subject to any order or directive by, or is a
recipient of any extraordinary supervisory letter from, any governmental entity
which would materially affect the ability of the Company to perform its
obligations hereunder nor has the Company or the Bank been advised by any
governmental entity that it is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
decree, agreement, memorandum of understanding, extraordinary
-19-
<PAGE>
supervisory letter, commitment letter or similar submission, except as disclosed
in the Company Disclosure Schedule.
4.10. COMPANY ACTION. The Board of Directors of the Company (at a
meeting duly called and held) has by the requisite vote of all directors present
(a) determined that the Merger is advisable and in the best interests of the
Company and (b) approved this Agreement and the transactions contemplated
hereby, including the Merger.
4.11. BROKER'S FEES. Other than Capital Consultants of Princeton, Inc.,
no person is or will be entitled to a broker's, finder's, investment banker's,
financial adviser's or similar fee from the Company in connection with this
Agreement or any of the transactions contemplated hereby. The fees and expenses
of Capital Consultants of Princeton, Inc. shall be the sole responsibility of
the Company.
ARTICLE V-COVENANTS
5.1. ACQUISITION PROPOSALS. The Association shall not, directly or
indirectly, and shall instruct and otherwise use its best efforts to cause its
stockholders, officers, directors, employees, agents or advisors or other
representatives or consultants not to, directly or indirectly, (i) encourage,
solicit or initiate any proposals or offers from any person relating to any
acquisition or purchase of all or a material amount of the assets of, or any
securities of, or any merger, consolidation or business combination with, the
Association (such transactions are referred to herein as "Acquisition
Transactions") or (ii) participate in any discussions or negotiations regarding,
or furnish to any other person any information with respect to, an Acquisition
Transaction. The Association shall promptly notify the Company orally and in
writing of any proposal or offer regarding an Acquisition Transaction, any
inquiries with respect thereto and any request for information relating thereto.
Such written notification shall include the identity of the entity making such
inquiry or Acquisition Transaction proposal or offer or request and such other
information with respect thereto as is reasonably necessary to apprise the
Company of the material terms of such Acquisition Transaction proposal or offer
or request and all other material information relating thereto.
5.2. INTERIM OPERATIONS OF THE ASSOCIATION. During the period from the
date of this Agreement to the Effective Date, except as expressly provided in
this Agreement, as required by law, or as otherwise approved in writing and in
advance by the Company:
5.2.1. CONDUCT OF BUSINESS. The Association shall conduct its
business only in, and not take any action except in, the ordinary
course of the Association's business. The Association shall use
reasonable efforts to preserve intact the business organization of the
Association, to keep available the services of its present key officers
and employees and to preserve the goodwill of those having business
relationships with the Association. Without limiting the generality of
the foregoing, the Association shall not pay interest on its deposits
(or offer other incentives which have the effect of increasing the rate
of
-20-
<PAGE>
interest otherwise payable on such deposits) at a rate per annum which
is significantly in excess of market interest rates on deposits of
similar type, size and maturity.
5.2.2. CERTIFICATE OF INCORPORATION AND BY-LAWS. The
Association shall not make any change or amendment to its Certificate
of Incorporation or By-Laws .
5.2.3. CAPITAL STOCK. The Association shall not issue or sell
any shares of capital stock or any other securities or issue any
subscriptions, options, warrants, rights, convertible securities or
enter into any agreements or commitments of any character relating to
the issued or unissued capital stock or other securities of the
Association obligating the Association to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital
stock of the Association or obligating the Association to grant, extend
or enter into any subscription, option, warrant, right, convertible
security or other similar agreement or commitment or enter into any
arrangement or contact with respect to the purchase or voting of shares
of its capital stock, or adjust, split, combine or reclassify any of
its capital stock or other securities or make any other changes in its
capital structure.
5.2.4. DIVIDENDS. The Association shall not declare, set
aside, pay or make any dividend or other distribution or payment
(whether in cash, stock or property) with respect to, or purchase or
redeem, any shares of its capital stock; provided, however, that the
payments to Alex Sheshunoff Investment Banking contemplated by Section
3.5 and compliance with the provisions of Section 6.3.6 and 6.3.8 shall
be deemed not to violate the provisions of this Section 5.2.4.
5.2.5. EMPLOYEE PLANS, COMPENSATION, ETC. Except as set forth
in the Association Disclosure Schedule, the Association shall not adopt
or amend any bonuses, profit sharing, compensation, severance,
termination, stock option, pension, retirement, deferred compensation,
employment or other employee benefit agreements, trusts, plans, funds,
employee stock ownership, consulting, severance or fringe benefit plan,
formal or informal, written or oral, or other arrangements for the
benefit or welfare of any director, officer or employee, or (except
pursuant to commitments of the Association existing as of the date
hereof as disclosed in the Association Disclosure Schedule) increase
the compensation or fringe benefits of any director, officer or
employee (other than in the ordinary course of business consistent with
past practices) or pay any benefit not required by any existing plan or
arrangement (including, without limitation, the granting of stock
options or stock appreciation rights) or take any action or grant any
benefit not required under the terms of any existing agreements,
trusts, plans, funds or other such arrangements or enter into any
contract, agreement, commitment or arrangement to do any of the
foregoing.
5.2.6. REPRESENTATIONS AND COVENANTS. The Association shall
not take any action, or knowingly omit to take any action, that would,
or that would reasonably be expected to, result in (A) any of the
representations and warranties of the Association set forth in
-21-
<PAGE>
Article III becoming untrue or (B) any of the conditions to closing set
forth in Sections 6.1 or 6.3 not being satisfied.
5.2.7. OTHER ACTIONS. The Association shall not take any action
that would, in any such case, (i) materially delay or adversely affect
the ability of the Association or its shareholders to obtain any
approvals of governmental entities required to permit consummation of
the Merger or (ii) materially adversely affect its ability to perform
its obligations under this Agreement.
5.2.8. ENVIRONMENTAL ACTIONS. The Association shall not change any
of its existing policies and practices with respect to taking any
action that results or would be likely to result in it being deemed to
exercise dominion, management or control over collateral securing any
extension of credit (other than residential and one-to-four-family
dwellings); PROVIDED, HOWEVER that such practices comply with all
Environmental Laws and PROVIDED FURTHER, HOWEVER that the Association
shall not take any such action with respect to any outstanding
extension of credit (other than residential and one-to-four-family
dwellings) in an amount of $25,000 or more or in connection with which
there is reasonably anticipated to be an environmental exposure of
$5,000 or more without prior consultation with the Company.
5.3. COMPANY REPRESENTATIONS AND COVENANTS. The Company shall not take
any action, or knowingly omit to take any action, that would, or that would
reasonably be expected to, result in (A) any of the representations and
warranties of the Company set forth in Article IV becoming untrue or (B) any of
the conditions to closing set forth in Sections 6.1 or 6.2 not being satisfied.
5.4. ACCESS AND INFORMATION. Upon reasonable notice and at reasonable
times, the Association shall afford to the Company and its representatives
(including, without limitation, directors, officers and employees of the Company
and its affiliates and counsel, accountants and other professionals retained by
it) access during normal business hours throughout the period prior to the
Effective Date to the books, records (including, without limitation, tax returns
and work papers of independent auditors), properties, personnel and to such
other information as the Company reasonably requests; PROVIDED, HOWEVER, that
the Association shall not be required to provide access to any such information
if the providing of such access (i) would violate a binding contractual
obligation, (ii) would, as advised by outside counsel, be reasonably likely to
result in the loss or impairment of any privilege with respect to such
information or (iii) would be precluded by any law, ordinance, regulation,
judgment, order, decree, license or permit of any governmental entity. Any
access granted to the Company pursuant to this Section 5.4 shall not in any way
limit any representation or warranty set forth in this Agreement. The rights and
obligations of each of the Bank and the Association pursuant to the
Confidentiality Letter Agreements ("Confidentiality Agreements") between the
Bank and the Association, shall survive the execution and delivery of this
Agreement, and all information heretofore and hereafter obtained by the Company
or any of its advisors pursuant to this Section 5.4 or otherwise shall be deemed
Evaluation Material (as that term is defined in such Confidentiality Agreements)
and shall remain subject to the provisions of such Confidentiality Agreements
until the Effective Date.
-22-
<PAGE>
5.5. CERTAIN FILINGS, CONSENTS AND ARRANGEMENTS. The Company, the Bank
and the Association shall (a) cooperate with the Company in filing all
applications and reports required to be filed with all applicable governmental
entities between the date of this Agreement and the Effective Date with respect
to the Merger and the other transactions contemplated by this Agreement
(including without limitation the Post-Closing Merger (as hereinafter defined)
described in Section 5.6 hereof), (b) cooperate with one another (i) in promptly
determining whether any other filings are required to be made or consents,
approvals, permits or authorizations are required to be obtained under any other
applicable federal, state or foreign law or regulation and (ii) in promptly
making any such filings, furnishing information required in connection therewith
and seeking timely to obtain any such consents, approvals, permits or
authorizations and (c) subject to the qualifications set forth in the proviso in
Section 5.4, deliver to the other party hereto copies of all such reports and
filings promptly after they are filed. Notwithstanding anything to the contrary
contained in this Agreement, the Company shall not be required to take any
action that would subject it to any obligations under ISRA unless the Effective
Date shall have occurred.
5.6 POST-CLOSING MERGER. Immediately after the Effective Date, the
Company, as the sole shareholder of the Association and the Bank, intends to
merge the Association with and into the Bank (the "Post-Closing Merger"). The
Association shall, at the Company's expense, take all actions reasonably
requested by the Company, including without limitation the processing of all
applications and filings contemplated by Section 5.5 hereof) in order to enable
the Company to effect the Post-Closing Merger immediately after the Effective
Date. For purposes of this Agreement, the term "Surviving Bank" shall mean the
Bank as the surviving entity of the Post-Closing Merger and the term
"Constituent Banks" shall mean the parties to the Post-Closing Merger.
5.7. LOAN SALES. From time to time after the date hereof and prior to
the Closing, the Company shall have the right to require the Association to
dispose of one or more of the loans or other extensions of credit listed on
Schedule 5.7 (the "Affected Loans") at the Closing. In the event that the
Company wishes to exercise its rights under this Section 5.7, the Company shall
give written notice to the Association referencing this Section 5.7 and setting
forth the Affected Loans to be disposed. Promptly after receipt of such notice,
the Association shall use its best efforts to dispose of the Affected Loans for
cash to a bona fide purchaser in the open market at the Closing. The Association
shall provide the Company with regular updates regarding the status of the
Association's disposition activities upon request. Notwithstanding the
foregoing, the Association shall not be required to comply with the provisions
of this Section 5.7 until the Effective Date.
5.8. ASSESSMENT ACCRUALS. To the extent permitted under GAAP, prior to
the Closing the Association shall make appropriate provisions on its financial
statements to account for any "special" or "one-time" SAIF assessments which may
be imposed on the deposits of the Association subsequent to the Effective Date.
Notwithstanding the foregoing, the Association shall not be required to comply
with the provisions of this Section 5.8 until the Effective Date.
-23-
<PAGE>
5.9. OTHER ADJUSTMENTS. Prior to the Closing, the Association shall
write down the value of its bank premises to an amount which approximates the
fair value of such premises as determined by the appraisals obtained by the
Company. Notwithstanding the foregoing, the Association shall not be required to
comply with the provisions of this Section 5.9 until the Effective Date.
5.10. ADDITIONAL AGREEMENTS. Subject to the terms and conditions herein
provided, each of the parties hereto shall use its best efforts to take
promptly, or cause to be taken, all actions and to do promptly, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement (including, without limitation, the Post-Closing Merger),
including, without limitation, using its best efforts to obtain all necessary
actions or non-actions, extensions, waivers, consents and approvals from all
applicable governmental entities, effecting all necessary registrations and
filings (including, without limitation, making all filings under any applicable
banking and securities laws) and obtaining any required contractual consents.
If, at any time after the Effective Date, the Surviving Bank considers or is
advised that any deeds, bills of sale, assignments, assurances or any other
actions or things are necessary or desirable to vest, perfect or confirm of
record or otherwise in the Surviving Bank its right, title or interest in, to or
under any of the rights, properties or assets of either of the Constituent Banks
acquired or to be acquired by the Surviving Bank as a result of, or in
connection with the Merger or the Post-Closing Merger or otherwise to carry out
the purposes of this Agreement, the officers and directors of the Surviving Bank
shall be authorized to execute and deliver, in the name and on behalf of each of
the Constituent Banks or otherwise, all such deeds, bills of sale, assignments
and assurances and to take and do, in the name and on behalf of each of the
Constituent Banks or otherwise, all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title and
interest in, to and under such rights, properties or assets in the Surviving
Bank or otherwise to carry out the purposes of this Agreement.
5.11. PUBLICITY. The initial press release announcing this Agreement
shall be a joint press release reasonably acceptable to the Association and the
Company, and thereafter (until the Effective Date) the Association and the
Company shall consult with each other before issuing any press releases with
respect to the transactions contemplated hereby or making any filings with any
governmental entity with respect thereto.
5.12. ISRA APPROVAL. The Association, at its sole cost and expense,
shall obtain prior to the Effective Date (i) a determination from the DEPE that
the Merger is not subject to the requirements of ISRA, or (ii) an order issued
by the DEPE pursuant to ISRA authorizing the consummation of the transaction
contemplated by this Agreement prior to the issuance of any "Negative
Declarations" or approval of any "Clean-Up Plans," as such terms are defined
under ISRA or (iii) "Negative Declarations" or approvals of any "Clean-up Plans"
with respect to each property in New Jersey which the Association owns or
operates, in each case to the extent that such property renders the provisions
of ISRA applicable to the transaction contemplated by this Agreement. The
Association will post or have posted with the DEPE a surety bond or other
financial security approved by the DEPE in an amount requested by the DEPE as
required in furtherance of the Association's obligations under this covenant.
-24-
<PAGE>
5.13. EMPLOYEE MATTERS. The Company shall interview all of the existing
employees of the Association so as to determine their relative qualifications
and shall make appropriate staffing decisions with respect to those employees as
the Company may determine in its sole discretion.
5.14. TRANSFER COVENANTS. From and after the date hereof, the
Association shall not reflect on its books any Transfer (as such term is defined
in the Inducement Agreement) of Trust Shares (as such term is defined in the
Inducement Agreement) except in accordance with the terms of the Inducement
Agreement.
5.15. PAYMENT OF CERTAIN AMOUNTS. Prior to Closing, the Association
shall have fully discharged all of its obligations under the Settlement
Agreement.
5.16. TRUTH IN LENDING COVENANTS. The Association shall take all
actions as may be necessary or advisable to fully resolve all outstanding
violations of the Truth in Lending Act ("TILA") and/or the provisions of
Regulation Z promulgated thereunder, whether existing on the date hereof or
arising prior to the Closing (the "TILA Violations"), on or prior to the Closing
or as soon thereafter as practicable. Without limiting the generality of the
foregoing, the Association shall (i) within 40 business days after the date
hereof, deliver to all persons entitled thereto appropriate notices of their
right to rescind extensions of credit made by the Association meeting the
requirements of TILA and 12 C.F.R. 226.23(A) (as determined in the written
opinion of Hehl & Hehl, special independent counsel to the Association, which
opinion shall be satisfactory, in form and substance, to the Company), (ii)
rescind any outstanding extension of credit which is the subject of a TILA
Violation if such rescission is timely requested by any person entitled by TILA
and Regulation Z to rescind such credit, (iii) pay any statutory and other
damages resulting from the TILA Violations, and (iv) pay any other fines,
penalties, charges, costs, expenses or damages incurred in connection with the
provisions of this Section 5.16; PROVIDED, HOWEVER, that the Company expressly
acknowledges that the Association shall have the right to institute appropriate
proceedings if the Association deems such proceedings to be reasonably necessary
in fully resolving the TILA Violations and the effects thereof.
5.17. PLANNING BOARD DETERMINATIONS. The Association shall use its best
efforts to obtain the Planning Board determinations contemplated by the letter
agreement, dated February 14, 1996 (the "Side Letter"), from Washington Group,
Ltd., Lehigh Financial Corp., the Stockholder and Mildred Margolis to the
Company and the Association.
ARTICLE VI-CONDITIONS
6.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Date of the following conditions:
6.1.1. The Merger shall have been approved and adopted by the
requisite vote of the holders of the Common Stock.
-25-
<PAGE>
6.1.2. All authorizations, consents, orders or approvals of, and
all expirations of waiting periods imposed by, any governmental entity
or other third party (collectively, "Consents") which are necessary for
the consummation of the Merger and the Post-Closing Merger (other than
immaterial Consents, the failure to obtain which would not have a
material adverse effect on the Company or the Association) shall have
been obtained or shall have occurred and shall be in full force and
effect at the Effective Date; PROVIDED, HOWEVER, that the entry by a
court, in any suit brought by a private party or governmental entity
challenging the Merger or the Post-Closing Merger as violative of the
antitrust laws, of an order or decree permitting the Merger or the
Post-Closing Merger, but requiring that any of the businesses, product
lines or assets of the Bank or the Association be held separate
thereafter, shall not be deemed to satisfy the conditions specified in
this Section 6.1.2.
6.1.3. No temporary restraining order, preliminary or permanent
injunction or other order by any federal or state court in the United
States which prevents the consummation of the Merger or the
Post-Closing Merger shall have been issued and remains in effect.
6.2. CONDITIONS TO OBLIGATIONS OF THE ASSOCIATION TO EFFECT THE MERGER. The
obligation of the Association to effect the Merger shall be subject to the
fulfillment or waiver at or prior to the Effective Date of the additional
following conditions:
6.2.1. The Company shall have performed in all material respects
its covenants contained in this Agreement required to be performed at
or prior to the Effective Date.
6.2.2. The representations and warranties of the Company contained
in this Agreement shall be true in all material respects when made, and
as of the Effective Date as if made at and as of such time, except as
expressly contemplated or permitted by this Agreement and except for
representations and warranties relating to a time or times other than
the Effective Date which were or shall be true in all material respects
at such time or times.
6.2.3. The Company shall have delivered to the Association a
Certificate dated the date of the Closing, signed by the President or
Chief Financial Officer of the Company that, to the best of his
knowledge and belief after due inquiry, the conditions set forth in
Sections 6.2.1 and 6.2.2 have been satisfied.
6.3. CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE MERGER. The
obligation of the Company to effect the Merger shall be subject to the
fulfillment or waiver at or prior to the Effective Date of the additional
following conditions:
6.3.1. The Association shall have performed in all material
respects its covenants contained in this Agreement required to be
performed at or prior to the Effective Date.
-26-
<PAGE>
6.3.2. The representations and warranties of the Association
contained in this Agreement shall be true in all material respects when
made, and as of the Effective Date as if made at and as of such time,
except as expressly contemplated or permitted by this Agreement and
except for representations and warranties relating to a time or times
other than the Effective Date which were or shall be true in all
material respects at such time or times.
6.3.3. The Association shall have delivered to the Company a
Certificate dated the date of the Closing, signed by the Chief
Executive Officer or Chief Financial Officer of the Association that,
to the best of his knowledge and belief after due inquiry, the
conditions set forth in Sections 6.3.1 and 6.3.2 have been satisfied.
6.3.4. The Trustee shall have voted in favor of the transactions
contemplated hereby, including the Merger, and no default, breach or
violation of any of the representations, warranties, covenants and
agreements of the Trustee contained in the Inducement Agreement (or any
certificate or other document delivered pursuant thereto) shall have
occurred and be continuing.
6.3.5. Prior to or at the Closing, the Company shall have received
general releases, in form and substance satisfactory to the Company,
executed by each of the Trustee and the Stockholder, in favor of the
Association and certain related parties and containing such other terms
as the Company may reasonably require.
6.3.6. Prior to or at the Closing, the Bank and the Stockholder
shall have entered into an agreement, in form and substance
satisfactory to the Bank, granting the Bank the right to either
terminate the Association's lease of the premises located at 952
Stuyvesant Avenue, Union, New Jersey on the 90th day after the Closing
or, at the Bank's option, continue such lease on a month-to month basis
for up to three months after the end of such 90-day period and
containing such other terms as the Bank may reasonably require.
6.3.7. The aggregate deposits of the Association as of a date not
more than five business days prior to the Closing shall not be less
than $62.5 million and the Association shall have provided the Company
with satisfactory evidence regarding the composition and amounts of
such deposits as of such date.
6.3.8. The Association shall have entered into agreements
satisfactory to the Bank regarding the premises located at 944
Stuyvesant Avenue, Union, New Jersey such that the Surviving Bank shall
not be obligated either to lease such premises from the owner thereof
or to sublet such premises to any sublessee thereof and such other
agreements relating to such premises as are described in the Side
Letter.
6.3.9. The Company shall have received all such assurances as it
shall reasonably require to the effect that the Post-Closing Merger may
be consummated immediately after the Effective Date without any further
approvals or consents of any governmental authority.
-27-
<PAGE>
6.3.10. The Company shall have received satisfactory evidence that
(i) the Association has taken all actions necessary to resolve all
outstanding TILA Violations in accordance with Section 5.16 and (ii)
subject to the provisions of Section 5.16, at the Closing the
Association is in full compliance in all respects with the provisions
of TILA and Regulation Z promulgated thereunder; PROVIDED, HOWEVER,
that this condition shall be deemed not to have been met if the costs
incurred or expected to be incurred by the Association in complying
with the provisions of Section 5.16 (including, without limitation, all
out-of-pocket expenses, the fees and disbursements of counsel to the
Association, all fines, penalties, charges, costs, expenses or damages,
all interest and fees foregone or refunded in respect of extensions of
credit which are rescinded pursuant to Section 5.16 and all expenses
incurred or to be incurred in connection with any proceedings relating
thereto) exceed $30,000 in the aggregate, net of all amounts actually
received by the Association in reimbursement thereof prior to Closing
(collectively, "TILA Costs"). For purposes of this Section 6.3.10, TILA
Costs shall be reduced by the sum of (i) the aggregate amount of
Qualifying TILA Costs deducted from the Per Share Consideration in
respect thereof as provided in Section 2.3 hereof and (ii) the
aggregate amount, if any, deposited by the Company into the Escrow
Account in accordance with Section 2.3.
6.3.11. The Company shall have received satisfactory evidence that
the representations and warranties set forth in the second paragraph of
the Side Letter are true and correct in all material respects as of the
Closing.
ARTICLE VII-MISCELLANEOUS
7.1. TERMINATION. This Agreement may be terminated at any time prior to
the Effective Date, whether before or after approval by the stockholders of the
Association:
7.1.1. by mutual consent of the Company and the Association;
7.1.2. by either the Company or the Association if the Merger
shall not have been consummated on or before December 31, 1996
(provided the terminating party is not otherwise in material breach of
its obligations under this Agreement);
7.1.3. by either the Company or the Association, in the event of
(i) a breach by the other party of any representation or warranty
contained herein, which breach has not been cured within thirty (30)
days after the giving of written notice to the breaching party of such
breach and which breaches, individually or in the aggregate, would
cause the conditions set forth in Sections 6.2.2, 6.3.2 or 6.3.4 as the
case may be, not to be met if the date of the action described above
were the date of the Closing or (ii) a material breach by the other
party of any of the covenants or agreements contained herein, which
breach has not been cured within thirty (30) days after the giving of
written notice to the breaching party of such breach;
-28-
<PAGE>
7.1.4. by the Association if any of the conditions specified in
Sections 6.1 and 6.2 have not been met or waived by the Association at
such time as such conditions can no longer be satisfied;
7.1.5. by the Company if any of the conditions specified in
Sections 6.1 and 6.3 have not been met or waived by the Company at such
time as such condition can no longer be satisfied; and
7.1.6. by the Company in the event of any material breach of the
provisions of the Inducement Agreement.
7.2. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND AGREEMENTS. The
representations, warranties and covenants in this Agreement shall terminate at
the Effective Date or the earlier termination of this Agreement pursuant to
Section 7.1, as the case may be; PROVIDED, HOWEVER, that if the Merger is
consummated, Sections 5.10, 7.2 and 7.5 hereof shall survive the Effective Date
to the extent contemplated by such Sections; PROVIDED, FURTHER, HOWEVER that the
last sentence of Section 5.4 and all of Section 7.5 hereof shall in all events
survive any termination of this Agreement.
7.3. INTERPRETATION. Unless the contest of this Agreement expressly
indicates otherwise, (i) any singular term in this Agreement shall include the
plural and any plural term shall include the singular and (ii) the term section
or schedule shall mean a section or schedule of or to this Agreement. Each of
the parties hereto acknowledge that this Agreement has been prepared jointly by
the parties hereto, and shall not be strictly construed against either party.
7.4. PARTIES IN INTEREST; ASSIGNMENT. This Agreement is not intended to
nor shall it confer upon any other person other than the parties hereto any
rights or remedies.
7.5. EXPENSES.
7.5.1. Subject to Section 7.5.2, the parties hereto shall each be
responsible for their own costs and expenses relating to this
Agreement.
7.5.2. If this Agreement is terminated by the Association or the
Company pursuant to Sections 7.1.3, 7.1.4 or 7.1.5, respectively,
because of the willful breach of any representation, warranty,
covenant, undertaking or restriction contained in this Agreement and if
the terminating party is not in material breach of any representation,
warranty, covenant, undertaking or restriction contained in this
Agreement, then the breaching party shall pay all costs and expenses of
the terminating party; PROVIDED, HOWEVER, that if this Agreement is
terminated under circumstances other than those described in the
preceding clauses of this Section 7.5.2, all costs and expenses
incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses. Nothing contained in this Section 7.5.2 shall constitute or
shall
-29-
<PAGE>
be deemed to constitute liquidated damages for the willful breach by a
party of the terms of this Agreement or otherwise limit the rights of
the non-breaching party.
7.5.3. Final settlement with respect to payment of fees and
expenses by the parties to this Agreement pursuant to Section 7.5.2
shall be made within thirty (30) days of the termination of this
Agreement.
7.6. ENFORCEMENT OF THE AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties hereto shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
7.7. SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by and rule of law or public
policy, all other terms and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party hereto. Upon any such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the partes hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated by this Agreement are consummated to the
extent possible.
7.8. NOTICES. All notices or other communications required or permitted
hereunder shall be in writing and shall be delivered personally, by facsimile or
sent by certified, registered or express air mail, postage prepaid, and shall be
deemed given when so delivered personally, or by facsimile, or if mailed, five
days after the date of mailing, as follows:
If to the Company: 2455 Morris Avenue
Union, New Jersey 07083
Telephone: (908) 688-9500
Facsimile: (908) 688-3043
Attention: Jack Davis
With a copy to: Lowenstein, Sandler, Kohl,
Fisher & Boylan
65 Livingston Avenue
Roseland, New Jersey 07068
Telephone: (201) 992-8700
Facsimile: (201) 992-5820
Attention: Peter H. Ehrenberg, Esq.
If to the Association: 950 Stuyvesant Avenue
-30-
<PAGE>
Union, New Jersey 07083
Telephone: (908) 686-6655
Facsimile: (908) 851-9523
Attention: Joseph LaMountain
With copies to: Levy, Lybeck, Bertele & Beck
385 Morris Avenue
P.O. Box 478
Springfield, New Jersey 07081
Telephone: (201) 912-7200
Facsimile: (201) 912-7272
Attention: E. Robert Levy, Esq.
and: Horace J. DePodwin
c/o Economic Studies, Inc.
One Gateway Center
Suite 420
Newark, New Jersey 07102-4082
Telephone: (201) 621-0180
Facsimile: (201) 621-0182
and: Pitney, Hardin, Kipp & Szuch
200 Campus Drive
Florham Park, New Jersey 07932-0950
Telephone: (201) 966-6300
Facsimile: (201) 966-1550
Attention: Joseph Lunin, Esq.
7.9. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New Jersey without
reference to choice of law principles thereof.
7.10. ASSIGNMENT; SUCCESSORS AND ASSIGNS. This Agreement may not be
assigned, and any attempted assignment shall be null and void. This Agreement
shall be binding on and inure to the benefit of the parties hereto and their
respective successors, assigns and legal representatives.
7.11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original agreement, but all of
which together shall constitute one and the same instrument.
7.12. TITLES AND HEADINGS. The titles, headings and table of contents
in this Agreement are for reference purposes only, and shall not in any way
affect the meaning or interpretation of this Agreement.
-31-
<PAGE>
7.13. ENTIRE AGREEMENT. This Agreement, including the Schedules
attached hereto, and the Confidentiality Agreement shall constitute the entire
agreement among the parties with respect to the matters covered hereby and shall
supersede all previous written, oral or implied understandings among them with
respect to such matters.
7.14. AMENDMENT AND MODIFICATION. This Agreement may only be amended or
modified in writing signed by the party against whom enforcement of such
amendment or modification is sought.
7.15. WAIVER. Except as otherwise required by law, any of the terms and
conditions of this Agreement may be waived at any time by the party or parties
entitled to the benefit thereof, but only by a writing signed by the party or
parties waiving such terms or conditions.
[Remainder of page intentionally left blank]
-32-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
CENTER BANCORP, INC.
By: ________________________________
Name:
Title:
LEHIGH SAVINGS BANK, S.L.A.
By: ________________________________
Name:
Title:
-33-
FIRST AMENDMENT
FIRST AMENDMENT, dated March 19, 1996 (this "Amendment"), to the Agreement
and Plan of Merger, dated as of February 14, 1996 (the "Merger Agreement"), by
and between Center Bancorp, Inc. (the "Company") and Lehigh Savings Bank, S.L.A.
("Lehigh").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company and Lehigh previously entered into the Merger
Agreement;
WHEREAS, pursuant to the Merger Agreement a subsidiary of the Company
("Merger Sub") is to be merged with and into Lehigh; and
WHEREAS, the Merger Agreement provides that Merger Sub will be a New Jersey
state chartered capital stock savings and loan association; and
WHEREAS, the Company and Lehigh have agreed that it is in their mutual best
interests that the Merger Agreement be amended to provide that Merger Sub will
be a national association organized under the National Bank Act, as amended, and
to make certain other changes relating thereto; and
WHEREAS, except as expressly amended pursuant to the terms of this
Amendment, the Merger Agreement shall continue in full force and effect;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and intending to be legally bound, the parties hereto agree as follows:
Section 1. The first recital of the Merger Agreement is hereby deleted in
its entirety and replaced with the following:
"WHEREAS, the respective Boards of Directors of the Company and the
Association, by the requisite vote required under applicable law, have each
determined that it is in the best interests of the Company and the
Association and their respective stockholders for the Company to acquire
the Association by (i) organizing an interim national association (the
"Merger Sub") and (ii) merging Merger Sub with and into the Association
upon the terms and subject to the conditions set forth herein (the
"Merger");"
Section 2. Section 1.1 of the Merger Agreement is hereby deleted in its
entirety and replaced with the following:
"1.1. Merger. Subject to the terms and conditions of this Agreement,
on the Effective Date (as defined in Section 1.2), the Merger Sub shall be
merged with and into the Association and the separate legal existence of
Merger Sub shall thereupon cease in accordance with the applicable
provisions of the National Bank
<PAGE>
Act, as amended (the "Act"), and any other applicable law. The Merger shall
be treated as a taxable purchase of the Common Stock of the Association by
the Company for federal and state income tax purposes."
Section 3. Section 1.2 of the Merger Agreement is hereby deleted in its
entirety and replaced with the following:
"1.2. Effective Date. As soon as practicable following fulfillment or
waiver of the conditions specified in Article VI, and provided that this
Agreement has not been terminated or abandoned pursuant to Section 7.1,
Merger Sub and the Association (the "Constituent Entities") shall take all
action (in the manner contemplated by this Agreement) necessary under the
Act and any other applicable law to cause the Merger to become effective.
The date upon which the Merger is declared effective by the applicable
regulatory authority is hereinafter referred to as the "Effective Date.""
Section 4. Section 1.3 of the Merger Agreement is hereby deleted in its
entirety and replaced with the following:
"1.3. Effect of Merger. The Merger shall have the effects specified in
the Act and other applicable law. Without limiting the generality of the
foregoing, the corporate existence of each of Merger Sub and the
Association shall be merged into each other and all of their respective
rights, privileges and franchises, and their respective right, title and
interest in and to all property of whatever kind, whether real, personal or
mixed, and things in action and every right, privilege, interest or asset
of value or benefit then existing shall be vested in the Association as the
surviving entity of the Merger (sometimes hereinafter referred to as the
"Surviving Entity")."
Section 5. Section 1.5 of the Merger Agreement is hereby deleted in its
entirety and replaced with the following:
"1.5. Certificate of Incorporation and By-laws. The Certificate of
Incorporation and By-Laws of Merger Sub in effect immediately prior to the
Effective Date shall be the Certificate of Incorporation and By-Laws of the
Surviving Entity, until duly amended in accordance with their terms and
applicable law."
Section 6. Section 1.6 of the Merger Agreement is hereby deleted in its
entirety and replaced with the following:
"1.6 Directors and Officers. The directors and officers of Merger Sub
immediately prior to the Effective Date shall be the directors and
officers, respectively, of the Surviving Entity, from and after the
Effective Date, until their successors have been duly elected or appointed
and qualified or until their earlier
-2-
<PAGE>
death, resignation or removal in accordance with the terms of the Surviving
Entity's Certificate of Incorporation and By-Laws and applicable law."
Section 7. Except as expressly amended pursuant to the terms of this Amendment,
the Merger Agreement shall continue in full force and effect.
[Remainder of page intentionally left blank]
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first above written.
CENTER BANCORP, INC.
By: ------------------------------
Name: John J. Davis
Title: President and Chief Executive Officer
LEHIGH SAVINGS BANK, S.L.A.
By: ------------------------------
Name: Joseph LaMountain
Title: President and Chief Executive Officer
-4-
<PAGE>
SECOND AMENDMENT
----------------
SECOND AMENDMENT, dated April 30, 1996 (this "Amendment"), to the Agreement
and Plan of Merger, dated as of February 14, 1996, as amended as of March 19,
1996 (the "Merger Agreement"), by and between Center Bancorp, Inc. (the
"Company") and Lehigh Savings Bank, S.L.A. ("Lehigh").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company and Lehigh previously entered into the Merger
Agreement; and
WHEREAS, Lehigh has suffered certain realized and unrealized losses in its
investment portfolio since December 31, 1995; and
WHEREAS, the Company and Lehigh have agreed that (i) Lehigh will liquidate
substantially all of its investment portfolio no later than the close of
business on the date hereof and (ii) the Per Share Consideration will be reduced
as set forth herein; and
WHEREAS, the Company and Lehigh wish to make certain other changes in the
terms of the Merger Agreement as provided herein; and
WHEREAS, except as expressly amended pursuant to the terms of this
Amendment, the Merger Agreement shall continue in full force and effect;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and intending to be legally bound, the parties hereto agree as follows:
Section 1. Section 1.5 of the Merger Agreement is hereby deleted in its
entirety and replaced with the following:
"1.5. Certificate of Incorporation and By-Laws. The Certificate of
Incorporation and By-Laws of the Association in effect immediately prior to
the Effective Date shall be the Certificate of Incorporation and By-Laws of
the Surviving Entity, until duly amended in accordance with their terms and
applicable law."
Section 2. Section 2.1.1 of the Merger Agreement is hereby amended by
deleting the words "$15.2867 per share" in clause (c) thereof and inserting in
lieu thereof the words "$14.140308 per share".
Section 3. Section 3.2 of the Merger Agreement is hereby amended by
deleting the number "392,500" and inserting in lieu thereof the number
"392,495".
Section 4. Section 3.6.1 of the Merger Agreement is hereby deleted in its
entirety and replaced with the following:
<PAGE>
"3.6.1. Except as disclosed in the Association Disclosure Schedule and
excluding (i) losses of up to $1 million realized subsequent to December
31, 1995 and on or before April 30, 1996 solely as a result of the
liquidation of the Association's investment portfolio as provided in
Section 5.18 or in anticipation thereof, (ii) decreases in the
Association's operating income occurring from and after April 30, 1996
solely as a result of the liquidation of the Association's investment
portfolio as provided in Section 5.18, and (iii) losses related to the
Affected Loans, there has not been any material adverse change in the
business, results of operations, assets, prospects (financial or otherwise)
or financial condition of the Association since the Association Statement
of Condition Date, and to the best of the Association's knowledge, no facts
or conditions exist which are likely to cause such a material adverse
change in the future."
Section 5. Article V of the Merger Agreement is hereby amended by adding
immediately after Section 5.17 thereof the following:
"Section 5.18. LIQUIDATION OF INVESTMENT PORTFOLIO; CERTIFICATION OF
FAIR MARKET VALUE. Not later than the close of business on April 30, 1996,
except for up to $500,000 face amount thereof, which may be sold at any
time, but in no event later than May 10, 1996, the Association shall sell
for cash all of the securities then held in its investment portfolio, other
than U.S. treasury securities, and shall promptly thereafter reinvest the
net proceeds of such sale in such appropriate investments as the
Association may determine in its sole discretion. Two business days prior
to the Closing, the Association shall provide to the Company a schedule,
certified by the Chief Executive Officer or Chief Financial Officer of the
Association, showing in reasonable detail the fair market value of the
Association's investment portfolio (determined in accordance with GAAP) as
of the close of business on the immediately preceding business day."
Section 6. Article V of the Merger Agreement is hereby amended by adding
immediately after Section 5.18 thereof the following:
"Section 5.19. EXCULPATION AND INDEMNIFICATION. The Association
acknowledges that (i) it has acted voluntarily in proposing to liquidate
its investment portfolio as provided herein, and (ii) it has been and will
continue to be in sole control of, and solely responsible for, the
management and operation of its own affairs until the Merger has been
consummated. Accordingly, regardless of whether or not the Merger is
consummated, neither the Company nor its officers, directors, employees,
agents, representatives, shareholders or affiliates shall have any
liability to the Association, the Trustee, the trust created pursuant to
the Trust Agreement, the Stockholder, the other stockholders of the
Association or any person asserting claims on behalf of or in right of any
of the foregoing in connection with or as a result of (i) the management
and operation of the Association prior to consummation of the Merger
(except as may arise solely by operation of law upon consummation of the
Merger), (ii) the liquidation of the
-2-
<PAGE>
Association's investment portfolio as provided in Section 5.18 hereof, and
(iii) any losses incurred by the Association or its shareholders in
connection with (i) and (ii) above. The Association shall, jointly and
severally with any other person or entity having a similar obligation,
defend, indemnify and hold harmless the Company and its officers,
directors, employees, agents, representatives, shareholders and affiliates
from and against any and all losses, claims, damages, liabilities or
expenses (including, without limitation, costs of investigation and the
fees and disbursements of counsel) based on, relating to or arising out of
the matters set forth in clauses (i), (ii) and (iii) of the preceding
sentence."
Section 7. Section 7.1.2 of the Merger Agreement is hereby amended by
deleting the date "December 31, 1996" and inserting in lieu thereof the date
"September 30, 1996".
Section 8. Section 7.2 of the Merger Agreement is hereby amended by
deleting the last proviso thereof in its entirety and replacing it with the
following:
"PROVIDED, FURTHER, HOWEVER that the last sentence of Section 5.4 and all
of Sections 5.19 and 7.5 hereof shall in all events survive any termination
of this Agreement."
Section 9. Simultaneously herewith, the Association is delivering to the
Company the following, and this Amendment shall not be effective for any purpose
prior to the receipt thereof by the Company:
(a) A letter executed by the Trustee, in substantially the form of Annex I
hereto;
(b) A letter executed by all of the signatories to the Side Letter, other
than the Stockholder and the Stockholder's spouse, in substantially the form of
Annex II hereto;
(c) A letter executed by the Stockholder and the Stockholder's spouse, in
substantially the form of Annex III hereto;
(d) A general release executed by the Stockholder and the Stockholder's
spouse, in substantially the form of Annex IV hereto.
Section 10. Except as expressly amended pursuant to the terms of this
Amendment, the Merger Agreement shall continue in full force and effect.
Section 11. Capitalized terms used herein have the respective meanings
ascribed thereto in the Merger Agreement unless otherwise defined herein. This
Amendment may be executed in counterparts, each of which shall be deemed to be
an original and all of which together shall constitute one and the same
instrument.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first above written.
CENTER BANCORP, INC.
By: ______________________________
Name: John J. Davis
Title: President and Chief Executive Officer
LEHIGH SAVINGS BANK, S.L.A.
By: ______________________________
Name: Joseph LaMountain
Title: President and Chief Executive Officer
-4-
<PAGE>
ANNEX I
[Trustee's Letterhead]
April 30, 1996
Center Bancorp, Inc.
2455 Morris Avenue
Union, New Jersey 07083
Attention: John J. Davis, Chief Executive Officer
Dear Mr. Davis:
In order to induce Center Bancorp, Inc. (the "Company") to execute and
deliver the Second Amendment (the "Amendment") to the Agreement and Plan of
Merger, dated as of February 14, 1996, as amended as of March 19, 1996 (the
"Merger Agreement"), by and between the Company and Lehigh Savings Bank, S.L.A.
("Lehigh") and as required by Section 9(a) thereof, on behalf of the trust (the
"Trust") created by the Trust Agreement, dated as of November 9, 1992, by and
among David Margolis, the undersigned and the Office of Thrift Supervision, I
hereby acknowledge and consent to the Amendment and the execution and delivery
thereof by the Company and Lehigh, and confirm that, after giving effect to the
terms of the Amendment (including, but not limited to, the reduction in the
aggregate merger consideration to $5,550,000), the Inducement Agreement, dated
as of February 14, 1996, by and between the Company and the undersigned remains
in full force and effect.
In addition, as required by the Amendment, the undersigned agrees that
regardless of whether or not the Merger is consummated, neither the Company nor
its officers, directors, employees, agents, representatives, shareholders or
affiliates shall have any liability to the Trust, the undersigned or any person
asserting claims on behalf of or in the right of the Trust or the undersigned in
connection with or as a result of (i) the management and operation of Lehigh
prior to consummation of the Merger (except as may arise solely by operation of
law upon consummation of the Merger), (ii) the liquidation of Lehigh's
investment portfolio as provided in Section 5.18 of the Merger Agreement (as
added by the Amendment), and (iii) any losses incurred by Lehigh or its
shareholders in connection with (i) and (ii) above.
<PAGE>
Capitalized terms used herein have the respective meanings ascribed thereto
in the Merger Agreement unless otherwise defined herein.
Very truly yours,
Horace J. DePodwin
-2-
<PAGE>
ANNEX II
April 30, 1996
Center Bancorp, Inc.
2455 Morris Avenue
Union, New Jersey 07083
Attention: John J. Davis, Chief Executive Officer
Dear Mr. Davis:
In order to induce Center Bancorp, Inc. (the "Company") to execute and
deliver the Second Amendment (the "Amendment") to the Agreement and Plan of
Merger, dated as of February 14, 1996, as amended as of March 19, 1996, by and
between the Company and Lehigh Savings Bank, S.L.A. ("Lehigh") and as required
by Section 9(a) thereof, the undersigned hereby acknowledge and consent to the
Amendment and the execution and delivery thereof by the Company and Lehigh, and
confirm that, after giving effect to the terms of the Amendment (including, but
not limited to, the reduction in the aggregate merger consideration to
$5,550,000), the Side Letter, dated February 14, 1996, addressed to the Company
and Horace J. DePodwin and executed by the undersigned remains in full force and
effect.
This letter may be executed in counterparts, each of which shall be deemed
an original and all of which shall together constitute one and the same
instrument.
Very truly yours,
WASHINGTON GROUP, LTD.
by Washington Financial Corp.
General Partner
By: -------------------------
Stephen R. Spector, Vice President
LEHIGH FINANCIAL CORP.
By: -------------------------
<PAGE>
Stephen R. Spector, President
-2-
<PAGE>
ANNEX III
April 30, 1996
Center Bancorp, Inc.
2455 Morris Avenue
Union, New Jersey 07083
Attention: John J. Davis, Chief Executive Officer
Dear Mr. Davis:
In order to induce Center Bancorp, Inc. (the "Company") to execute and
deliver the Second Amendment (the "Amendment") to the Agreement and Plan of
Merger, dated as of February 14, 1996, as amended as of March 19, 1996 (the
"Merger Agreement"), by and between the Company and Lehigh Savings Bank, S.L.A.
("Lehigh") and as required by Section 9(a) thereof, the undersigned hereby
acknowledge and consent to the Amendment and the execution and delivery thereof
by the Company and Lehigh, and confirm that, after giving effect to the terms of
the Amendment (including, but not limited to, the reduction in the aggregate
merger consideration to $5,550,000), the Side Letter, dated February 14, 1996,
addressed to the Company and Horace J. DePodwin (the "Trustee") and executed by
the undersigned remains in full force and effect.
In addition, as required by the Amendment, the undersigned agree that
regardless of whether or not the Merger is consummated, neither the Trustee nor
the Company nor the Company's officers, directors, employees, agents,
representatives, shareholders or affiliates shall have any liability to the
undersigned or any person asserting claims on behalf of or in the right of any
of the undersigned in connection with or as a result of (i) the management and
operation of Lehigh prior to consummation of the Merger (except as may arise
solely by operation of law upon consummation of the Merger), (ii) the
liquidation of Lehigh's investment portfolio as provided in Section 5.18 of the
Merger Agreement (as added by the Amendment), and (iii) any losses incurred by
Lehigh or its shareholders in connection with (i) and (ii) above. The
undersigned shall, jointly and severally with each other and any other person or
entity having a similar obligation, defend, indemnify and hold harmless the
Trustee, the Company and the Company's officers, directors, employees, agents,
representatives, shareholders and affiliates from and against any and all
losses, claims, damages, liabilities or expenses (including, without limitation,
costs of investigation and the fees and disbursements of counsel) based on,
relating to or arising out of the matters set forth in clauses (i), (ii) and
(iii) of the preceding sentence.
<PAGE>
Capitalized terms used herein have the respective meanings ascribed thereto
in the Merger Agreement unless otherwise defined herein. This letter may be
executed in counterparts, each of which shall be deemed an original and all of
which shall together constitute one and the same instrument.
Very truly yours,
-----------------------------
David Margolis
-----------------------------
Mildred Margolis
-2-
<PAGE>
ANNEX III
GENERAL RELEASE
---------------
FOR VALUE RECEIVED, the undersigned, on their own behalf and on behalf of
their respective heirs, successors, assigns, personal representatives and any
and all persons or entities claiming by or through any of them, do hereby
release and forever discharge, as of the effective date (the "Effective Date")
of the transactions contemplated by the Agreement and Plan of Merger, dated as
of February 14, 1996, as amended as of April 30, 1996 (the "Merger Agreement"),
by and between Lehigh Savings Bank, S.L.A. ("Lehigh") and Center Bancorp, Inc.,
Lehigh, its predecessors in interest, its successors and assigns, and its and
their respective directors, officers, shareholders, employees, parents,
subsidiaries, agents and representatives and any and all persons or entities
claiming by or through any of them (collectively, "Released Persons") of and
from any and all manner of actions, causes of action, suits, account reckonings,
covenants, agreements, damages, judgments, claims and demands whatsoever, at law
or in equity, whether known or unknown, contingent or matured, and whether
currently existing or hereafter arising, which the undersigned ever had, now
have or may hereafter have against Lehigh and the Released Persons arising from
the beginning of the world until the Effective Date, however and wherever
arising.
This Release shall not be effective for any purpose until the Effective
Date. In the event that the Merger Agreement is terminated prior to the
Effective Date, this Release shall be of no further force and effect.
The undersigned acknowledge that this Release has been specifically
bargained for and constitutes a material condition precedent to the execution,
delivery and effectiveness of the Second Amendment to the Merger Agreement.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have
executed this Release as of the 30th day of April, 1996.
WITNESS:
- ------------------------------ ------------------------------
Name: David Margolis
WITNESS:
- ------------------------------ ------------------------------
Name: Mildred Margolis
INDUCEMENT AGREEMENT
--------------------
INDUCEMENT AGREEMENT, dated February 14, 1996, by and between Horace J.
DePodwin, solely in his capacity as trustee (the "Trustee") under the Trust
Agreement, dated as of November 9, 1992 (the "Trust Agreement"), by and among
Lehigh Savings Bank, S.L.A., a New Jersey chartered capital stock savings and
loan association (the "Association"), David Margolis (the "Shareholder"),
Mildred Margolis and the Office of Thrift Supervision ("OTS") and Center
Bancorp, Inc., a New Jersey corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Trustee is the trustee under the Trust Agreement; and
WHEREAS, pursuant to the Trust Agreement, the Trustee is holding in trust
for the benefit of the Shareholder 392,489 shares (together with all other
shares of capital stock of the Association, if any, which the Trustee may hold
pursuant to the Trust Agreement as a result of any stock split, stock dividend,
reclassification, recapitalization or otherwise of the capital stock of the
Association, the "Trust Shares") of the Common Stock, par value $10 per share
(the "Common Stock"), of the Association; and
WHEREAS, the Association and the Company have negotiated the terms and
conditions of a proposed Agreement and Plan of Merger (the "Merger Agreement")
pursuant to which, among other things, a subsidiary of the Company will merge
with and into the Association and the shareholders of the Association, including
the Trustee on behalf of the Shareholder, will receive the Per Share
Consideration specified in the Merger Agreement for each outstanding share of
Common Stock (except in certain circumstances); and
WHEREAS, as a condition to entering into the Merger Agreement and
performing its obligations thereunder, the Company has required that the Trustee
make certain representations and warranties and agree to certain terms and
conditions as set forth herein; and
WHEREAS, in order to induce the Company to enter into the Merger Agreement
and perform its obligations thereunder, the Trustee has agreed to make the
representations and warranties and to agree to the terms and conditions set
forth herein;
NOW, THEREFORE, in consideration of the premises, and intending to be
legally bound, the parties hereto agree as follows:
<PAGE>
ARTICLE I
VOTING OF TRUST SHARES; NO TRANSFERS
Section 1.1. VOTING OF TRUST SHARES. The Trustee hereby irrevocably agrees
to vote the Trust Shares in favor of the Merger, subject only to Section 1.3
hereof. In furtherance of the foregoing and not in limitation thereof, if deemed
reasonably necessary by either the Association or the Company, the Trustee shall
(i) cause the Trust Shares to be present in person or by proxy at any meeting of
the shareholders of the Association (including any adjournments or postponements
thereof) called to consider and vote upon the Merger and the transactions
contemplated by the Merger Agreement and shall vote the Trust Shares or cause
the Trust Shares to be voted in favor thereof at such meeting or (ii) execute
one or more written consents approving the Merger and the other transactions
contemplated by the Merger Agreement.
Section 1.2. PROHIBITION ON TRANSFERS; RESTRICTIVE LEGEND. (a) Subject to
Section 1.3, without the prior written consent of the Company, during the term
of this Agreement the Trustee shall not transfer, sell, assign, pledge,
hypothecate, give, create a security interest in or lien on, place in trust
(voting or otherwise), transfer by operation of law (other than by way of a
merger or consolidation of the Association), grant a proxy with respect to or in
any other way encumber or dispose of, directly or indirectly and whether or not
voluntarily (each, a "Transfer"), any of the Trust Shares and shall not vote the
Trust Shares on any matter in a manner that is inconsistent with the purposes of
this Agreement.
(b) The Trustee shall cause the Association not to reflect on its books any
Transfer of Trust Shares to any person except in accordance with this Agreement.
Promptly following the execution and delivery of this Agreement, the Trustee
shall exchange the certificates representing the Trust Shares for certificates
of like tenor which shall be stamped or endorsed with a legend in substantially
the following form:
TRANSFERS AND VOTING IN RESPECT OF THE SHARES OF COMMON STOCK REPRESENTED BY
THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF AN AGREEMENT DATED FEBRUARY 14,
1996 BY AND BETWEEN CENTER BANCORP, INC. AND HORACE J. DEPODWIN, AS TRUSTEE,, A
COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE ASSOCIATION
AND MAY BE OBTAINED WITHOUT CHARGE UPON WRITTEN REQUEST TO THE ASSOCIATION.
Section 1.3. OTS APPROVAL. Notwithstanding anything to the contrary
contained in this Agreement, the provisions of Article I hereof shall be of no
further force and effect in the event that the OTS does not approve the Merger
and the other transactions contemplated by the Merger Agreement (including this
Agreement).
-2-
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE TRUSTEE
The Trustee hereby represents and warrants to the Company as follows:
Section 2.1. CAPACITY; AUTHORIZATION. The Trustee is the trustee under the
Trust Agreement and as such has the authority and the capacity to execute and
deliver this Agreement and to perform his obligations hereunder. The Trustee is
under no impairment or other disability, legal, physical, mental or otherwise,
whether or not arising out of the Trust Agreement, that would preclude or limit
the ability of the Trustee to perform his obligations hereunder. The Trustee has
full power and authority under the Trust Agreement to execute and deliver this
Agreement and to perform his obligations hereunder, all of which have been duly
authorized by all requisite action. The Trustee has the power and authority to
bind the Shareholder to the terms hereof by his execution and delivery of this
Agreement. This Agreement as been duly authorized, executed and delivered by the
Trustee and constitutes a valid and binding agreement of the Trustee,
enforceable against the Trustee in accordance with its terms.
Section 2.2. NON-CONTRAVENTION. Neither the execution and delivery of this
Agreement by the Trustee nor the performance by the Trustee of his obligations
hereunder will (i) violate or result in a breach (with or without the lapse of
time, the giving of notice or both) of or constitute a default under (A) any
contract, agreement, commitment, indenture, mortgage, lease, pledge, note,
license, permit or other instrument or obligation or (B) any judgment, order,
decree, law, rule or regulation or other restriction of any governmental
authority, in each case to which the Trustee is a party or by which he or the
Trust Shares are bound or to which the Trust Shares are subject, or (iii) result
in the creation or imposition of any lien, claim, charge, mortgage, pledge,
security interest, equity, restriction or other encumbrance (collectively,
"Encumbrances") on the Trust Shares.
Section 2.3. NO CONSENTS. Other than the receipt of nonapproval of the OTS
pursuant to the Trust Agreement, no notice to, filing with, or authorization,
registration, consent or approval of any governmental authority or other person
is necessary for the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby by the Trustee.
Section 2.4. TRUST AGREEMENT; STATUS OF TRUSTEE. A true and complete copy
of the Trust Agreement, and any amendments, supplements and modifications
thereto, is attached hereto as Exhibit A. The Trust Agreement (as so amended,
modified or supplemented) remains in full force and effect. No breach or default
or event which, with the giving of notice, the lapse of time, or both would
constitute a breach or default under the Trust Agreement has occurred and is
continuing. Neither the Trustee nor, to the Trustee's best knowledge, the
Shareholder has taken any actions for the purpose or with the intent of (i)
further amending, modifying or supplementing the Trust Agreement, (ii)
Transferring the Trust Shares (except as contemplated by this Agreement and the
Merger Agreement), (iii) causing the Trustee to resign as trustee under the
-3-
<PAGE>
Trust Agreement, or (iv) removing or seeking the removal of the Trustee as
trustee under the Trust Agreement, and no such action is, to the Trustee's best
knowledge, contemplated.
Section 2.5. OWNERSHIP OF THE TRUST SHARES. The Trustee owns the Trust
Shares of record for the benefit of the Shareholder, free and clear of any
Encumbrances, other than Encumbrances created by the Trust Agreement. Other than
the Trust Agreement, there are no voting trust arrangements, shareholder
agreements or other agreements (i) granting any option, warrant or right of
first refusal with respect to the Trust Shares to any person, (ii) restricting
the right of the Trustee to sell the Trust Shares to the Company pursuant to the
Merger Agreement, or (iii) restricting any other right of the Trustee with
respect to the Trust Shares. Subject to the receipt of nonapproval of the OTS
pursuant to the Trust Agreement, the Trustee has the absolute and unrestricted
right, power and capacity to sell, assign and transfer the Trust Shares to the
Company pursuant to the terms of the Merger Agreement, free and clear of any
Encumbrances. Upon delivery to the Company of the Certificates representing the
Trust Shares at Closing in exchange for the Per Share Consideration to be paid
by the Company at the Closing, the Company will acquire good, valid and
marketable title to the Trust Shares, free and clear of any Encumbrances.
Section 2.6. BROKERS. No person is or will be entitled to a broker's,
finder's, investment banker's, financial adviser's or similar fee from the
Trustee in connection with this Agreement or the Merger Agreement or any of the
transactions contemplated hereby or thereby.
Section 2.7. FULL DISCLOSURE. No representation or warranty made by the
Trustee in this Agreement or any certificate delivered, or to be delivered, by
or on behalf of the Trustee pursuant hereto contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading.
There is no fact or circumstance that the Trustee has not disclosed to the
Company in writing that the Trustee presently believes could reasonably be
expected to have a material adverse effect on the ability of the Trustee to
perform his obligations under this Agreement.
ARTICLE III
Covenants of the Trustee
Section 3.1. CERTAIN AFFIRMATIVE COVENANTS OF THE TRUSTEE. From and
after the date hereof until the earlier of the termination of the Merger
Agreement or the Effective Time, the Trustee shall (i) use his best efforts to
take, or cause to be taken, all action, and to do, or cause to be done, all
things reasonably necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement and the Merger Agreement, including but not limited to, obtaining
consents, approvals and the receipt of nonapproval of the OTS and all other
governmental entities and third parties necessary to the consummation of the
transactions contemplated by this Agreement, (ii) provide the Company with true
and complete copies of all correspondence and memoranda between the Trustee and
the OTS, (iii) use his best efforts to include the Company or its designated
representative in all conversations between the Trustee and the OTS and (iv)
promptly inform the
-4-
<PAGE>
Company in writing of any material breach of or change in the representations
and warranties contained in Article II hereof.
Section 3.2. CERTAIN NEGATIVE COVENANTS OF THE TRUSTEE. From and after the
date hereof until the earlier of the termination of the Merger Agreement or the
Effective Time, the Trustee shall not and shall use his best efforts to cause
the Shareholder not to (i) enter into any contract, agreement or commitment or
take any other action which, if entered into or taken prior to the date of this
Agreement, would cause any representation or warranty of the Trustee to be
untrue, (ii) incur, create or suffer to exist any Encumbrance on the Trust
Shares, other than Encumbrances existing under the Trust Agreement as of the
date hereof and Encumbrances created hereby, (iii) amend, modify or supplement
the Trust Agreement or (iv) take or omit to be taken any action which could
reasonably be expected to delay, hinder or make impossible or illegal the
transactions contemplated by this Agreement and the Merger Agreement.
Section 3.3. NO ACQUISITION PROPOSALS. The Trustee shall not, directly or
indirectly, and shall instruct and otherwise use his best efforts to cause the
Shareholder and their respective agents, advisors and other representatives not
to, directly or indirectly, (i) encourage, solicit or initiate any proposals or
offers from any person relating to any acquisition or purchase of all or a
material amount of the assets of, or any securities of, or any merger,
consolidation or business combination with, the Association (such transactions
are referred to herein as "Acquisition Transactions") or (ii) participate in any
discussions or negotiations regarding, or furnish to any other person any
information with respect to, an Acquisition Transaction. The Trustee shall
promptly notify the Company orally and in writing of any proposal or offer
regarding an Acquisition Transaction, any inquiries with respect thereto and any
request for information relating thereto. Such written notification shall
include the identify of the entity making such inquiry or Acquisition
Transaction proposal or offer or request and such other information with respect
thereto as is reasonably necessary to apprise the Company of the material terms
of such Acquisition Transaction proposal or offer or request and all other
material information relating thereto.
Section 3.4. AFFIRMATION OF REPRESENTATIONS AND WARRANTIES; COMPLIANCE WITH
TERMS. At the Closing, the Trustee will deliver to the Company a certificate
certifying that the representation and warranties of the Trustee contained
herein are true and correct in all respects as of the Closing and that the
Trustee has duly performed or complied with all of the covenants, obligations
and conditions to be performed or complied with by him under the terms of this
Agreement on or prior to or at Closing.
Section 3.5. DELIVERY OF CERTIFICATES. At the Closing, the Trustee shall
deliver to the Company the Certificates representing the Trust Shares properly
endorsed or otherwise in proper form for surrender, with all signatures
guaranteed.
Section 3.6. EXECUTION OF GENERAL RELEASE. Prior to or at the Closing, the
Trustee shall deliver to the Company a general release, in form and substance
satisfactory to the Company, executed by each of the Trustee and the
Shareholder, in favor of the Association and certain related parties and
containing such other terms as the Company may reasonably require.
-5-
<PAGE>
Section 3.7. FURTHER ASSURANCES. In the event that at any time after
Closing any further action is necessary to carry out the purposes of this
Agreement, the Trustee shall, at the Company's cost, take all such action
without any further consideration therefor.
ARTICLE IV
TERMINATION
Section 4.1. TERMINATION. This Agreement may be terminated as follows:
(a) by mutual consent of the parties hereto;
(b) by the Company if the Trustee shall breach in any material respect any
of his representations, warranties, covenants, obligations or agreements
contained in this Agreement; and
(c) by any party hereto in the event that the Merger Agreement is
terminated prior to Closing.
Section 4.2. EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 4.1 hereof, all rights and obligations of the parties
hereunder shall terminate and no party shall have any liability to any other
party, except for obligations of the parties hereto in Sections 4.3 and 5.2,
which shall survive the termination of this Agreement, and except nothing herein
will relieve any party from liability for any breach of any representation,
warranty, covenant, obligation or agreement contained herein prior to such
termination.
Section 4.3. LIMITATION OF LIABILITY; EQUITABLE REMEDIES. The Company
acknowledges that the Trustee has entered into this Agreement as trustee under
the Trust Agreement and not in his personal capacity. Accordingly, the Trustee
shall not be personally liable to the Company, or any of its affiliates for any
costs, damages, losses, liabilities or obligations (collectively, "Damages")
suffered by any of them as a result of a breach or violation by the Trustee of
the terms hereof, unless caused by the gross negligence or willful misconduct of
the Trustee. The Trustee acknowledges that any breach by the Trustee of the
terms hereof would result in immediate and irreparable harm to the Company for
which an adequate remedy would not be available at law. Accordingly, in the
event of any breach, or threatened breach, of the provisions of this Agreement,
the Company shall be entitled to an order of specific performance or other
injunctive relief in addition to any other rights and remedies to which the
Company may be entitled, whether at law or in equity, and the Trustee hereby
consents to the entry of an order providing such relief. The Company shall not
be required to post any bond or other security in connection with any such
action for specific performance or other injunctive relief. The provisions of
this Section 4.3 shall survive the expiration or termination of this Agreement.
-6-
<PAGE>
ARTICLE V
MISCELLANEOUS
Section 5.1. NOTICES. All notices or other communications required or
permitted hereunder shall be in writing and shall be delivered personally, by
facsimile or sent by certified, registered or express air mail, postage prepaid,
and shall be deemed given when so delivered personally, or by facsimile, or if
mailed, five days after the date of mailing, as follows:
If to the Trustee: c/o Economic Studies, Inc.
One Gateway Center
Suite 420
Newark, New Jersey 07102-4082
Telephone: (201) 621-0180
Facsimile: (201) 621-0182
With a copy to: Pitney, Hardin, Kipp & Szuch
200 Campus Drive
Florham Park, New Jersey 07932-0950
Telephone: (201) 966-6300
Facsimile: (201) 966-1550
Attention: Joseph Lunin, Esq.
If to the Company: 2455 Morris Avenue
Union, New Jersey 07083
Telephone: (908) 688-9500
Facsimile: (908) 688-3043
Attention: Jack Davis
With a copy to: Lowenstein, Sandler, Kohl,
Fisher & Boylan
65 Livingston Avenue
Roseland, New Jersey 07068
Telephone: (201) 992-8700
Facsimile: (201) 992-5820
Attention: Peter H. Ehrenberg, Esq.
or to such other address as any party hereto shall notify the other parties
hereto (as provided above) from time to time.
Section 5.2. EXPENSES. Regardless of whether the transactions provided for
in this Agreement are consummated, except as otherwise provided herein, each
party hereto shall pay his own expenses incident to this Agreement and the
transactions contemplated herein.
-7-
<PAGE>
Section 5.3. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the United States and, to the extent
not inconsistent therewith, the internal laws of the State of New Jersey,
without reference to the choice of law principles thereof.
Section 5.4. ASSIGNMENT; SUCCESSORS AND ASSIGNS; NO THIRD PARTY RIGHTS.
This Agreement may not be assigned by operation of law or otherwise, and any
attempted assignment shall be null and void; provided, however, that the
provisions of this sentence shall not prohibit the appointment of a successor
trustee under the Trust Agreement. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
successors, assigns and legal representatives (including, but not limited to,
any successor trustee under the Trust Agreement). This Agreement shall be for
the sole benefit of the parties to this Agreement and their respective heirs,
successors, assigns and legal representatives and is not intended, nor shall be
construed, to give any person, other than the parties hereto and their
respective heirs, successors, assigns and legal representatives, any legal or
equitable right, remedy or claim hereunder.
Section 5.5. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original agreement, but all of which together
shall constitute one and the same instrument.
Section 5.6. TITLES AND HEADINGS. The titles and headings in this Agreement
are for reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 5.7. ENTIRE AGREEMENT. This Agreement, including the Exhibits
attached hereto, constitutes the entire agreement among the parties with respect
to the matters covered hereby and supersedes all previous written, oral or
implied understandings among them with respect to such matters.
Section 5.8. AMENDMENT AND MODIFICATION. This Agreement may only be amended
or modified in writing signed by the party against whom enforcement of such
amendment or modification is sought.
Section 5.9. WAIVER. Any of the terms or conditions of this Agreement may
be waived at any time by the party or parties entitled to the benefit thereof,
but only by a writing signed by the party or parties waiving such terms or
conditions.
Section 5.10. SEVERABILITY. The invalidity of any portion hereof shall not
affect the validity, force or effect of the remaining portions hereof. If it is
ever held that any restriction hereunder is too broad to permit enforcement of
such restriction to his fullest extent, such restriction shall be enforced to
the maximum extent permitted by law.
Section 5.11. NO STRICT CONSTRUCTION. Each of the parties hereto
acknowledges that this Agreement has been prepared jointly by the parties
hereto, and shall not be strictly construed against any party.
-8-
<PAGE>
Section 5.12. CAPITALIZED TERMS. Capitalized terms used herein shall have
the respective meanings ascribed thereto in the Merger Agreement unless
otherwise defined herein.
[Remainder of page intentionally left blank]
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
-------------------------------
Horace J. DePodwin, as Trustee
CENTER BANCORP, INC.
By: ---------------------------
Name:
Title:
-10-
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 12,117
<INT-BEARING-DEPOSITS> 274,700
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 53,317
<INVESTMENTS-CARRYING> 200,176
<INVESTMENTS-MARKET> 254,720
<LOANS> 98,625
<ALLOWANCE> (1,073)
<TOTAL-ASSETS> 376,852
<DEPOSITS> 333,872
<SHORT-TERM> 12,705
<LIABILITIES-OTHER> 1,903
<LONG-TERM> 0
0
0
<COMMON> 4,261
<OTHER-SE> 24,111
<TOTAL-LIABILITIES-AND-EQUITY> 376,852
<INTEREST-LOAN> 1,974
<INTEREST-INVEST> 3,890
<INTEREST-OTHER> 96
<INTEREST-TOTAL> 5,960
<INTEREST-DEPOSIT> 2,369
<INTEREST-EXPENSE> 2,504
<INTEREST-INCOME-NET> 3,456
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,994
<INCOME-PRETAX> 1,607
<INCOME-PRE-EXTRAORDINARY> 372
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,235
<EPS-PRIMARY> 0.55
<EPS-DILUTED> 0.55
<YIELD-ACTUAL> 6.88
<LOANS-NON> 0
<LOANS-PAST> 551
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,073
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 1,073
<ALLOWANCE-DOMESTIC> 666
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 407
</TABLE>
