As filed with the Securities and Exchange Commission on December 20, 1994
Registration No. 33-____________
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
FORM S-4
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
___________
VALLEY NATIONAL BANCORP
(Exact name of registrant as specified in its charter)
___________
New Jersey
(State or other Jurisdiction of Incorporation of Organization)
___________
6711
(Primary Standard Industrial Classification Code Number)
___________
22-2477875
(I.R.S. Employer Identification No.)
1445 Valley Road
Wayne, New Jersey 07470
201-305-8800
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Gerald H. Lipkin, Chairman & CEO
Valley National Bancorp
1445 Valley Road
Wayne, New Jersey 07470
201-305-8800
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
___________
Please send copies of all communications to:
RONALD H. JANIS, ESQ. VICTOR H. BOYAJIAN, ESQ.
MICHAEL W. ZELENTY, ESQ. FREDERIC M. TUDOR, ESQ.
PITNEY, HARDIN, KIPP & SZUCH SILLS CUMMIS ZUCKERMAN RADIN
P.O. Box 1945 TISCHMAN EPSTEIN & GROSS
Morristown, New Jersey 07962 One Riverfront Plaza
(201) 966-6300 Newark, New Jersey 07102
(201) 643-7000
<PAGE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: At the
Effective Date of the Merger, as defined in the Agreement and Plan of Merger
dated November 9, 1994 (the "Agreement"), among the Registrant, Valley National
Bank and American Union Bank, attached as Appendix A to the Proxy
Statement/Prospectus.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
CALCULATION OF REGISTRATION FEE
================================================================================
Proposed Proposed
Title of each maximum Maximum
class of offering aggregate Amount of
securities to Amount to be price per offering registration
be registered registered unit* price* fee
- --------------------------------------------------------------------------------
Common Stock, 274,985 $7.63 $2,098,136 $724
No Par Value Shares**
================================================================================
* Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act of 1933, as amended, based on
the book value per share for American Union Bank Common Stock as of November 30,
1994.
** The Registrant also registers hereby such additional shares of its common
stock as may be issuable in the Merger pursuant to the anti- dilution provisions
of the Merger Agreement.
___________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
================================================================================
<PAGE>
VALLEY NATIONAL BANCORP
PART I
INFORMATION REQUIRED IN PROSPECTUS
CROSS REFERENCE SHEET
Item 1. Cross Reference Sheet.
Pursuant to Item 501 of Regulation S-K, this cross-reference sheet shows
the location in the Prospectus/Proxy Statement of responses to Items 1 through
19 of Part I of Form S-4.
Location or Heading in
Item Prospectus/Proxy
No. Caption Statement
- ---- ------- -----------------------
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus ................ Forepart of Registration
Statement; Cross
Reference Sheet; Cover
Page of Proxy
Statement/Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus..................................... Inside Front Cover;
Available Information;
Information Incorporated
by Reference; Table of
Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information.................. Summary of Proxy
Statement/Prospectus;
Financial Summary and
Selected Per Share Data
of Valley National
Bancorp; Pro Forma
Combined Financial
Information
4. Terms of the Transaction....................... The Proposed Merger;
Comparison of the Rights
of Shareholders under the
Banking Act of 1948 and
the New Jersey Business
Corporation Act
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<PAGE>
Location or Heading in
Item Prospectus/Proxy
No. Caption Statement
- ---- ------- -----------------------
5. Pro Forma Financial Information................ Pro Forma Combined
Financial Information
6. Material Contracts with the Company Being
Acquired....................................... The Proposed Merger
7. Additional Information Required for
Reoffering by Persons and Parties Deemed to
be Underwriters................................ Not Applicable
8. Interests of Named Experts and Counsel........ Legal Opinion
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.................................... Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants.... Not Applicable
11. Incorporation of Certain Information by
Reference...................................... Information Incorporated
by Reference
12. Information with Respect to S-2 or S-3
Registrants.................................... Not Applicable
13. Incorporation of Certain Information by
Reference...................................... Not Applicable
14. Information with Respect to Registrants other
than S-3 or S-2 Registrants.................... Not Applicable
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies...... Not Applicable
16. Information with Respect to S-2 or
S-3 Companies.................................. Not Applicable
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<PAGE>
Location or Heading in
Item Prospectus/Proxy
No. Caption Statement
- ---- ------- -----------------------
17. Information with Respect to Companies Other
than S-2 or S-3 Companies...................... Business of American
Union Bank; American
Union Bank's Financial
Statements
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies,Consents or
Authorizations are to be Solicited............. Introductory Statement;
The Proposed Merger;
Information Incorporated
by Reference
19. Information if Proxies, Consents or
Authorization Are Not to be Solicited
or in an Exchange Offer........................ Not Applicable
-iii-
<PAGE>
AMERICAN UNION BANK
2784 Morris Avenue
P.O. Box 279
Union, New Jersey 07083
[____________________, 199_]
To Our Shareholders:
American Union Bank ("American") has entered into an Agreement and Plan of
Merger dated as of November 9, 1994 (the "Agreement"), by and among American,
Valley National Bancorp ("Valley"), and Valley's national bank subsidiary,
Valley National Bank ("VNB"), providing for the merger (the "Merger") of
American with and into VNB, which will be the surviving entity in the Merger and
will continue to operate as a subsidiary of Valley. If the Merger is approved
and becomes effective, each outstanding share of Common Stock of American
(except for fractional shares and shares as to which dissenters' rights have
been validly perfected under applicable law) will be exchanged for 0.50 shares
of Common Stock of Valley, subject to adjustment, as more fully set forth in the
Agreement.
The special meeting of the shareholders of American to consider and act
upon the Agreement will be held on [__________], 1995.
In the accompanying material, you will find the Notice of Meeting of
Shareholders of American and a Proxy Statement/Prospectus setting forth actions
to be taken at the meeting, a Proxy, the details of the proposed Merger, the
conditions to consummation of the Merger and information concerning Valley, VNB
and American.
The Board of Directors of American has carefully considered this
transaction and believes that consummation of the Merger in accordance with the
Agreement will be in the best interests of the shareholders of American. THE
BOARD OF DIRECTORS OF AMERICAN HAS APPROVED THE AGREEMENT AND RECOMMENDS A VOTE
IN FAVOR OF THE AGREEMENT. The directors of American intend to vote all of their
shares in favor of the Agreement.
Because of the importance of the Merger to the shareholders of American, we
urge you to complete and sign the enclosed proxy form and return it as soon as
possible in the enclosed postage-prepaid return envelope so that your shares
will be represented. You may nevertheless attend American's meeting and vote in
person if you wish to do so.
The enclosed also constitutes a Prospectus of Valley with respect to the
shares of Valley Common Stock to be issued to the shareholders of American if
the Merger is consummated.
Sincerely,
Gerald F. Metzheiser
President and Chief Executive
Officer
<PAGE>
AMERICAN UNION BANK
2784 Morris Avenue
P.O. Box 279
Union, New Jersey 07083
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON [________________], 1995
To Our Shareholders:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "Meeting")
of American Union Bank ("American") will be held at 2840 Morris Avenue, 3rd
Floor, Union, New Jersey on [________________], 1995 at [_________] a.m., for
the purpose of considering and voting upon the following matters:
1. A proposal to approve an Agreement and Plan of Merger, dated as of
November 9, 1994 (the "Agreement"), by and among American, Valley National
Bancorp ("Valley"), and Valley's national bank subsidiary, Valley National
Bank ("VNB"), providing for the merger (the "Merger") of American with and
into VNB, pursuant to which each share of American common stock outstanding
on the effective date of the Merger will be exchanged for 0.50 shares of
Valley common stock, subject to adjustment, as more fully set forth in the
Agreement.
2. Such other business as may properly come before the Meeting or any
adjournment thereof.
Only those shareholders of record as of the close of business on
[____________], 1994 will be entitled to notice of, and to vote at, the Meeting.
A list of such shareholders will be available at the Meeting.
Consummation of the Merger is subject to certain conditions, including
approval of the Merger by the affirmative vote at the Meeting of at least
sixty-six and two-thirds percent (66 2/3%) of the outstanding shares of American
common stock, whether in person or by proxy. Your vote is important regardless
of the number of shares that you own. Whether or not you plan to attend the
Meeting, please mark, date and sign the enclosed proxy and return it as soon as
possible in the enclosed stamped envelope. You may revoke the proxy at any time
prior to its exercise.
By Order of the Board of Directors,
GERALD F. METZHEISER
President and Chief Executive Officer
Union, New Jersey
[_______________], 1994
THE MERGER IS OF MAJOR IMPORTANCE TO THE SHAREHOLDERS OF AMERICAN.
ACCORDINGLY, SHAREHOLDERS ARE URGED TO READ AND CAREFULLY CONSIDER THE
INFORMATION PRESENTED IN THE ATTACHED PROXY STATEMENT/PROSPECTUS.
<PAGE>
AMERICAN UNION BANK
PROXY STATEMENT
for
Special Meeting of Shareholders
of American Union Bank
to be held on
[____________________], 1995
___________
VALLEY NATIONAL BANCORP
PROSPECTUS
for
Common Stock of Valley National Bancorp
to be issued in connection with
the Merger of American Union Bank
with and into Valley National Bank
___________
This Proxy Statement/Prospectus is being furnished in connection with the
solicitation of proxies by the Board of Directors of American Union Bank
("American") to be used at a special meeting of its shareholders (the "Meeting")
to be held on [_______________], 1995. The purpose of the Meeting is to consider
and vote upon an Agreement and Plan of Merger dated as of November 9, 1994 (the
"Agreement"), by and among American, Valley National Bancorp ("Valley") and
Valley National Bank ("VNB"), Valley's national bank subsidiary, pursuant to
which American will be merged with and into VNB. A copy of the Agreement is
attached as Appendix A to this Proxy Statement/Prospectus.
In accordance with the terms of the Agreement, upon approval of the
Agreement by the shareholders of American, receipt of all requisite regulatory
approvals and satisfaction or waiver of all conditions, American will merge (the
"Merger") into VNB, which will be the surviving entity in the Merger and which
will continue to operate thereafter as a wholly-owned subsidiary of Valley. In
connection with the Merger, each share of common stock of American, $5.00 par
value per share (the "American Common Stock"), issued and outstanding
immediately prior to the Effective Time (as hereinafter defined) (except for
fractional shares and shares as to which dissenters' rights have been validly
perfected under applicable law), will be exchanged for 0.50 shares (the
"Exchange Ratio") of common stock of Valley, no par value (the "Valley Common
Stock"), subject to certain adjustments more fully described in this Proxy
Statement/Prospectus.
Valley has filed a Registration Statement pursuant to the Securities Act of
1933, as amended (the "Act"), covering the shares of Valley Common Stock which
will be issued in connection with the Merger. In addition to constituting the
American Proxy Statement for the Meeting, this document constitutes a Prospectus
of Valley with respect to the Valley Common Stock to be issued if the Merger is
consummated.
American stock certificates should not be returned to American with the
enclosed proxy and should not be forwarded until after receipt of a letter of
transmittal which will be provided to American shareholders upon consummation of
the Merger.
<PAGE>
THE SHARES OF VALLEY COMMON STOCK DESCRIBED IN THE ATTACHED PROXY
STATEMENT/PROSPECTUS ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF
A BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENTAL AGENCY. THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED. THIS PROXY STATEMENT/PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO SELL, TO ANY PERSON IN ANY
JURISDICTION IN WHICH IT WOULD BE UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS AT ANY TIME, NOR ANY
DISTRIBUTION OF SHARES OF VALLEY COMMON STOCK, SHALL UNDER ANY CIRCUMSTANCES
IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
The date of this Proxy Statement/Prospectus is December [____], 1994.
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<PAGE>
AVAILABLE INFORMATION
Valley is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's Regional Offices located at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and 7 World Trade Center, 13th Floor, New York, New York 10048.
Copies of such materials can be obtained from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
Valley has filed with the Commission a Registration Statement on Form S-4
under the Act (together with all amendments and supplements thereto, the
"Registration Statement"), with respect to the securities being offered by this
Proxy Statement/Prospectus. As permitted by the rules and regulations of the
Commission, this Proxy Statement/Prospectus omits certain information, exhibits
and undertakings contained in the Registration Statement. For further
information with respect to Valley and the securities offered hereby, reference
is made to the Registration Statement, including the exhibits thereto.
Statements contained in this Proxy Statement/Prospectus or in any document
incorporated by reference in this Proxy Statement/Prospectus, as to the contents
of any document referred to herein or therein, are not necessarily complete, and
in each instance reference is made to the copy of such document filed as an
exhibit to the Registration Statement or such other document, each such
statement being qualified in all respects by such reference.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by Valley with the Commission are
incorporated herein by reference:
1. Valley's Annual Report on Form 10-K for the year ended December 31, 1993.
2. Valley's Quarterly Reports on Form 10-Q for the quarters ended March 31,
June 30 and September 30, 1994, the latter as amended by Form 10-Q/A filed
on December 20, 1994.
3. Valley's Current Reports on Form 8-K filed with the Commission on March 25,
July 11, August 30, October 19, October 31, November 16 and December 5,
1994.
4. The description of Valley Common Stock set forth in Valley's Registration
Statement on Form 8-A filed by Valley pursuant to Section 12 of the
Exchange Act, and any amendment or report filed for the purpose of updating
such description.
All documents filed by Valley pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of this Proxy Statement/Prospectus
and prior to the Meeting shall be deemed incorporated by reference into this
Proxy Statement/Prospectus and a part hereof from the date of filing of such
documents.
This Proxy Statement/Prospectus incorporates documents by reference which
are not presented herein or delivered herewith. Such documents, other than
certain exhibits to such documents, are available without charge upon written or
oral request made to Alan Eskow, Corporate Secretary, Valley National Bancorp,
1445 Valley Road, Wayne, New Jersey 07470; telephone number (201) 305-8800. In
order to insure timely delivery of the documents, any request should be made by
[_______________], 1995.
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<PAGE>
All information contained or incorporated by reference in this Proxy
Statement/Prospectus with respect to Valley and VNB was supplied by Valley and
all information contained or incorporated by reference in this Proxy
Statement/Prospectus with respect to American was supplied by American. Although
neither Valley nor American have any knowledge that would indicate that any
statements or information relating to the other party contained or incorporated
herein are inaccurate or incomplete, neither Valley nor American can warrant the
accuracy or completeness of such information or statements as they relate to the
other entity or its subsidiaries.
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<PAGE>
TABLE OF CONTENTS
Available Information ....................................................
Information Incorporated by Reference ....................................
Summary of Proxy Statement/Prospectus ....................................
Certain Information Regarding Valley National Bancorp ....................
General .............................................................
Valley National Bank ................................................
Certain Information Regarding American Union Bank ........................
General .............................................................
Recent Developments .................................................
Comparative Per Share Data ...............................................
Financial Summary and Selected Per Share Data of Valley National
Bancorp ................................................................
Selected Financial Data of American Union Bank ...........................
Pro Forma Combined Financial Information .................................
Introductory Statement ...................................................
Purpose of Meeting ..................................................
Recommendation ......................................................
Vote Required; Shares Entitled to Vote ..............................
Solicitation, Voting and Revocation of Proxies ......................
The Proposed Merger ......................................................
General Description .................................................
Consideration .......................................................
Reasons for the Merger ..............................................
Interests of Management of American in the Merger ...................
Opinion of American's Financial Advisor .............................
Resale Considerations with Respect to the Valley Common Stock .......
Conditions to the Merger ............................................
Regulatory Approvals ................................................
Management and Operations After the Merger ..........................
Description of Valley Common Stock ..................................
Exchange of Certificate .............................................
Effective Time; Amendments; Termination .............................
Accounting Treatment of the Merger ..................................
Federal Income Tax Consequences .....................................
Stock Option for Shares of American Common Stock ....................
Rights of Dissenting American Shareholders ..........................
Comparison of the Rights of Shareholders under the Banking Act of 1948
and the New Jersey Business Corporation Act ............................
Management's Discussion and Analysis of Financial Condition
and Results of Operations of American Union Bank .......................
Business of American Union Bank ..........................................
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<PAGE>
Supervision and Regulation of American Union Bank ........................
Security Ownership of Certain Beneficial Owners and Management of
American Union Bank ....................................................
Certain Transactions of American Union Bank ..............................
Shareholder Proposals ....................................................
Legal Opinion ............................................................
Experts ..................................................................
Index to Financial Statements of American Union Bank .....................
APPENDICES:
Appendix A ................................ Agreement and Plan of Merger among
Valley National Bancorp, Valley
National Bank and American Union
Bank dated as of November 9, 1994
Appendix B ................................ Stock Option Agreement between
Valley National Bancorp, Valley
National Bank and American Union
Bank dated as of November 9, 1994
Appendix C ................................ Fairness Opinion of Capital
Consultants of Princeton, Inc.
Appendix D ................................ Subsections (b), (c) and (d) of
Section 215a of Title 12 of the
U.S. Code, "Merger of National
Banks or State Banks into National
Banks"
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<PAGE>
SUMMARY OF PROXY STATEMENT/PROSPECTUS
The following information is a brief summary of certain information with
respect to the matters to be considered at the Meeting. This summary is
necessarily incomplete and is qualified in its entirety by the more detailed
information contained elsewhere in this Proxy Statement/Prospectus. Shareholders
should read carefully the details of this Proxy Statement/Prospectus. Certain
capitalized terms used in this Summary are defined elsewhere in this Proxy
Statement/Prospectus.
MEETING OF AMERICAN SHAREHOLDERS
Date, Time and Place of
Meeting...................... [_____________], 1995, [______] a.m. at 2840
Morris Avenue, 3rd Floor, Union, New Jersey.
Record Date................... [____________________]
Shares Outstanding on Record
Date and Entitled to Vote..... 549,970 Shares of American Common Stock
Purpose of Meeting............ (i) To consider and vote upon a proposal to
approve the Agreement and Plan of Merger dated
as of November 9, 1994 (the "Agreement"), by and
among American Union Bank ("American"), Valley
National Bancorp ("Valley"), and Valley's
national bank subsidiary, Valley National Bank
("VNB"), providing for the merger (the "Merger")
of American with and into VNB, with each share
of American common stock, $5.00 par value per
share (the "American Common Stock"), outstanding
on the effective date of the Merger (except for
fractional shares and shares as to which
dissenters' rights have been validly perfected
under applicable law) being exchanged for 0.50
shares of Valley common stock, no par value (the
"Valley Common Stock"), subject to adjustment in
certain circumstances pursuant to the Agreement,
and (ii) to transact any other business that
properly may be brought before the Meeting.
If the Merger is approved and becomes effective,
American will be merged into VNB, which will be
the surviving entity and which will continue to
operate as a subsidiary of Valley. See "The
Proposed Merger -- General Description; --
Consideration."
Recommendation of the Board of
Directors of American........ The Board of Directors of American has approved
the Merger and recommends that shareholders vote
"FOR" the Merger. See "Introductory Statement
-- Purpose of Meeting;" "The Proposed Merger --
Reasons for the Merger."
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<PAGE>
Vote Required for
Approval of Merger............ The affirmative vote, in person or by proxy, of
at least sixty-six and two-thirds percent (66
2/3%) of the outstanding shares of American
Common Stock is required to approve the Merger.
See "Introductory Statement -- Vote Required;
Shares Entitled to Vote." As of September 30,
1994, the directors of American beneficially
owned in the aggregate 42% of the issued and
outstanding shares of American Common Stock.
American's directors have agreed pursuant to the
Agreement to vote in favor of the Merger.
Consequently, the affirmative vote of an
additional 24 2/3% of the issued and outstanding
shares of American Common Stock will be required
for approval of the Merger. As of September 30,
1994, the executive officers of American who are
not also directors beneficially owned in the
aggregate less than 1% of the issued and
outstanding shares of American Common Stock and
American's counsel, Sills Cummis Zuckerman Radin
Tischman Epstein & Gross, P.A., and its members,
beneficially owned in the aggregate 23% of the
issued and outstanding shares of American Common
Stock.
Description of the Merger..... At the time the Merger becomes effective,
American will be merged into VNB with VNB as the
surviving bank. See "The Proposed Merger --
General Description."
Consideration................. American shareholders (except for shareholders
who have validly perfected their dissenters'
rights under applicable law) will receive 0.50
shares (the "Exchange Ratio") of Valley Common
Stock for each share of American Common Stock
held. The Exchange Ratio is subject to
adjustments in certain circumstances, as more
fully described in this Proxy
Statement/Prospectus. In lieu of receiving
fractional shares of Valley Common Stock,
American shareholders will be entitled to
receive, without interest, a cash payment equal
to the value of any fractional share interest to
which they would otherwise be entitled. The
value of such fractional share interest will be
determined by the Average Closing Price of
Valley Common Stock (as hereinafter defined).
All shares of Valley Common Stock to be issued
to each American shareholder will be aggregated
to constitute as many whole shares as possible
before determining such shareholder's fractional
share interest. See "The Proposed Merger --
Consideration." Under federal banking law, the
American shareholders are entitled to
dissenter's rights in connection with the
Merger. See "The Proposed Merger -- Rights of
Dissenting American Shareholders."
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<PAGE>
Interests of Management of
American in the Merger........ As of September 30, 1994, the directors of
American beneficially owned in the aggregate
42%, and the executive officers of American who
are not also directors beneficially owned in the
aggregate less than 1%, of the issued and
outstanding shares of American Common Stock.
Further, pursuant to the Agreement, Valley has
agreed to endeavor to continue the employment
of all officers and employees of American with
the same or equivalent benefits. See "Security
Ownership and Certain Beneficial Owners and
Management of American Union Bank."
Opinion of American's
Financial Advisor............. The Board of Directors of American has retained
Capital Consultants of Princeton, Inc. ("Capital
Consultants") to evaluate the terms of the
Merger. Capital Consultants has delivered a
written opinion dated December [___], 1994 to
the Board of Directors of American to the effect
that the consideration to be received by the
American shareholders pursuant to the Agreement
is, as of the date of such opinion, fair to such
shareholders from a financial point of view. For
information concerning the matters reviewed,
assumptions made and factors considered by
Capital Consultants, see "The Proposed Merger --
Opinion of American's Financial Advisor" and
Appendix C to this Proxy Statement/Prospectus,
which sets forth Capital Consultants' fairness
opinion in its entirety.
Resale Considerations with
Respect to Valley
Common Stock.................. The shares of the Valley Common Stock to be
issued in the Merger will be registered under
the Act and will be freely transferable, except
for shares received by persons, including
directors and executive officers of American,
who may be deemed to be "affiliates" of American
under Rule 145 promulgated under the Act. See
"The Proposed Merger -- Resale Considerations
with Respect to the Valley Common Stock."
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<PAGE>
Conditions to the Merger...... Consummation of the Merger is contingent upon a
number of conditions, including receiving all
necessary regulatory approvals; the approval of
the Merger by at least sixty-six and two-thirds
percent (66 2/3%) of the issued and outstanding
shares of American Common Stock; an opinion of
Pitney, Hardin, Kipp & Szuch, counsel to Valley,
to the effect that the Merger will result in a
tax free reorganization; and an opinion of
Capital Consultants, advisors to American, that
the Merger is fair to the shareholders of
American from a financial point of view. Capital
Consultant's opinion is included as Appendix C.
See "The Proposed Merger -- Opinion of
American's Financial Advisor; -- Conditions to
the Merger."
Regulatory Approvals.......... Consummation of the Merger requires the approval
of the Comptroller of the Currency (the "OCC").
An application for such approval was filed on
December 16, 1994. While Valley and American
anticipate receiving such approval, there can be
no assurance that it will be granted, or that it
will be granted on a timely basis without
conditions unacceptable to Valley or American.
In addition, Valley received written
confirmation from the Federal Reserve Bank of
New York that the Merger does not require the
approval of the Board of Governors of the
Federal Reserve System (the "Board of
Governors") under Regulation Y. See "The
Proposed Merger -- Regulatory Approvals."
Effective Time................ A closing under the Agreement (the "Closing")
will occur prior to the Effective Time (as
hereinafter defined) on a day mutually agreed to
by Valley and American within 30 days following
receipt of all necessary regulatory approvals. A
Notice to the OCC will be filed by VNB in
connection with the Merger. The date and time
specified in such Notice will be the "Effective
Time". The parties are cooperating to try to
ensure that the Effective Time will be before
the record date (the "Valley Record Date") used
to determine the shareholders of Valley entitled
to receive a dividend on April 1, 1995, although
this date is dependent upon satisfaction of all
conditions precedent, some of which are not
under control of Valley and/or American. See
"The Proposed Merger -- Effective Time;
Amendments; Termination; -- Regulatory
Approvals." In the event that the Effective Time
does not occur before the Valley Record Date,
notwithstanding any restrictions in the
Agreement, American will be permitted to pay a
dividend to its shareholders in an amount equal
to the amount of the dividend its shareholders
would have received from Valley had the
Effective Time occurred prior to the Valley
Record Date. Such a dividend may only be
declared by American's Board of Directors if all
prerequisites to the declaration of a dividend
under applicable law have been met. There can be
no assurance that all such prerequisites will be
met or that American's Board of Directors will
declare a dividend in the event that the
Effective Time does not occur prior to the
Valley Record Date. See "The Proposed Merger --
Effective Time; Amendments; Termination."
-10-
<PAGE>
Termination Rights............ The Agreement may be terminated by either
American or Valley if the Effective Time has not
occurred by June 30, 1995. The Agreement may be
terminated by American if the Average Closing
Price (as defined below) of the Valley Common
Stock is $19.00 or less, subject to adjustment
in certain circumstances pursuant to the
Agreement. The "Average Closing Price" is
defined in the Agreement as the average of the
closing prices of Valley Common Stock as
reported on the New York Stock Exchange and
published in the Wall Street Journal during the
first ten of the fifteen consecutive trading
days immediately preceding the Effective Time.
For a more complete description of other
termination rights available to American and
Valley, see "The Proposed Merger -- Effective
Time; Amendments; Termination; -- Conditions to
the Merger."
Accounting Treatment of
the Merger.................... The Merger is expected to be accounted for as a
pooling-of-interests for financial reporting
purposes. Under the pooling-of-interests method
of accounting, American's historical basis of
assets, liabilities and shareholders equity will
be retained by Valley as the surviving entity.
For a discussion of the effects of pooling-of-
interests accounting, see "Pro Forma Combined
Financial Information" and "The Proposed
Merger -- Accounting Treatment of the Merger."
Federal Income
Tax Consequences.............. The Merger is conditioned upon the receipt of an
opinion of Pitney, Hardin, Kipp & Szuch, counsel
to Valley, to the effect that the Merger will
constitute a tax-free reorganization as defined
in Section 368(a)(1) of the Internal Revenue
Code of 1986, as amended. For information
regarding certain federal income tax matters,
see "The Proposed Merger -- Federal Income Tax
Consequences."
-11-
<PAGE>
Stock Option to Valley
for American Shares........... Valley and American entered into a Stock Option
Agreement dated November 9, 1994 (the "Stock
Option Agreement"), in connection with the
negotiation by Valley and American of the
Agreement. Pursuant to the Stock Option
Agreement, American has granted to Valley an
option (the "Option"), exercisable only under
certain limited and specifically defined
circumstances, to purchase up to 180,000
authorized but unissued shares of American
Common Stock, representing approximately 24.7%
of the shares of American Common Stock which
would be outstanding immediately following the
exercise of the Option, for an exercise price of
$10.00 per share. Valley does not have any
voting rights with respect to the shares of
American Common Stock subject to the Option
prior to exercise of the Option.
The Stock Option Agreement is attached as
Appendix B hereto. In the event that certain
specifically enumerated Triggering Events (as
defined in the Stock Option Agreement) occur and
the Merger is not consummated, Valley would
recognize a gain on the sale of the shares of
American Common Stock received pursuant to the
exercise of the Option if such shares of
American Common Stock were sold at prices
exceeding $10.00 per share. Upon the exercise of
the Option, American's shareholders have the
preemptive right to purchase their pro rata
share of the number of shares purchased by
Valley pursuant to the Option for a price equal
to the lesser of (i) the exercise price paid by
Valley and (ii) the book value of the American
Common Stock as of December 31, 1994. The
ability of Valley to exercise the Option and to
cause up to an additional 180,000 shares of
American Common Stock to be issued, and the
related preemptive rights of American's
shareholders, may be considered a deterrent to
other potential acquirors of control of
American, as they are likely to increase the
cost of an acquisition of all of the shares of
American Common Stock which would then be
outstanding. The exercise of the Option by
Valley may also make a "pooling-of- interests"
accounting treatment unavailable to a subsequent
acquiror. See "The Proposed Merger -- Stock
Option for Shares of American Common Stock."
-12-
<PAGE>
Rights of Dissenting
American Shareholders......... Pursuant to the provisions of Section 215a of
Title 12 of the United States Code ("Section
215a") and Section 148 of the New Jersey Banking
Act of 1948, as amended (the "Banking Act"), any
shareholder of American has the right to dissent
from the Merger by voting against the Merger at
the Meeting or by giving notice in writing at or
prior to the Meeting to the presiding officer of
American that he dissents from the Merger and
does not thereafter vote in favor of the Merger.
If the Merger is consummated, each dissenting
American shareholder who fully complies with the
requirements of Section 215a will be entitled to
receive from Valley a cash payment equal to the
value of his American shares as of the Effective
Time. Section 215a provides that the value of
the shares of any dissenting shareholder shall
be ascertained, as of the Effective Time, by an
appraisal made by a three person committee. Any
dissenting shareholder may appeal this appraisal
to the OCC. The value of the shares ascertained
is required to be paid by Valley promptly to
dissenting shareholders. The number of shares
represented by proxies that are returned signed
but unmarked as to voting instructions will be
voted in favor of the Merger, and therefore will
have waived their rights to dissent. See "The
Proposed Merger -- Rights of Dissenting American
Shareholders" and Appendix D to this Proxy
Statement/Prospectus, which set forth the steps
to be taken by an American shareholder who
wishes to exercise his right of dissent.
Differences in
Shareholders' Rights.......... American is a New Jersey commercial bank
incorporated under the Banking Act, and Valley
is a business corporation incorporated under the
New Jersey Business Corporation Act ("BCA"). The
rights of American shareholders are currently
governed by the Banking Act. At the Effective
Time, each American shareholder will become a
shareholder of Valley and the rights of Valley
shareholders are governed by the BCA. The
Banking Act and the BCA, and the rights of
shareholders thereunder, differ with respect to
voting requirements and various other matters.
In addition, the New Jersey Shareholders
Protection Act, which is part of the BCA and has
no counterpart in the Banking Act, prohibits
certain transactions involving an "interested
shareholder" and a "resident domestic
corporation." See "Comparison of the Rights of
Shareholders Under the Banking Act of 1948 and
the New Jersey Business Corporation Act."
-13-
<PAGE>
PRINCIPAL BUSINESSES
Valley........................ Valley is a bank holding company organized
under the laws of the State of New Jersey
and registered under the Bank Holding Company
Act of 1956, as amended (the "Bank Holding
Company Act"). Valley has one banking
subsidiary, VNB, which operates over 50 branches
located in northern New Jersey. At September 30,
1994, Valley had consolidated assets of
approximately $3.5 billion. Valley's principal
executive offices are located at 1445 Valley
Road, Wayne, New Jersey 07474, and its telephone
number is (201) 305-8800. See "Certain
Information Regarding Valley National Bancorp;"
"Available Information" and "Information
Incorporated by Reference."
American...................... American is a commercial bank chartered under
the laws of the State of New Jersey. American
conducts its operations through its main office
located in Union Township, New Jersey, and
through a branch office located in Roselle Park,
New Jersey. At September 30, 1994, American had
total assets of $55.0 million. American's
principal executive offices are located at 2784
Morris Avenue, P.O. Box 279, Union, New Jersey
07083, and its telephone number is (908)
964-1222. See "Certain Information Regarding
American Union Bank" and "Management's
Discussion and Analysis of Financial Condition
and Results of Operations of American Union
Bank."
-14-
<PAGE>
CERTAIN INFORMATION REGARDING VALLEY NATIONAL BANCORP
General
Valley is a bank holding company registered with the Board of Governors of
the Federal Reserve System (the "Board of Governors") under the Bank Holding
Company Act of 1956, as amended (the "Bank Holding Company Act"). Valley was
organized under the laws of New Jersey in 1983 by VNB for the purpose of
creating a bank holding company for VNB. In addition to VNB, Valley indirectly
owns additional subsidiaries through VNB, including two investment subsidiaries
and a mortgage servicing subsidiary. The corporate headquarters of Valley is
located in Wayne, New Jersey.
As of September 30, 1994, Valley had consolidated assets of approximately
$3.5 billion, deposits of $3.2 billion and shareholders' equity of $280.6
million.
Valley National Bank
VNB, a wholly owned subsidiary of Valley, is a commercial bank established
in 1927 under the laws of the United States of America. It maintains its main
office in Passaic, New Jersey and operates over 50 branches in northern New
Jersey.
VNB provides a full range of commercial and retail bank services, including
the acceptance of demand, savings and time deposits. Retail lending, primarily
residential mortgages and automobile loans, constitutes a substantial part of
VNB's business. VNB also provides commercial loans and mortgages to a variety of
businesses and offers full personal, corporate and pension trust and other
fiduciary services.
Additional information about Valley and VNB is included in documents
incorporated by reference in this Proxy Statement/Prospectus. See "Information
Incorporated By Reference."
CERTAIN INFORMATION REGARDING AMERICAN UNION BANK
General
American, which is a commercial bank chartered under the laws of New
Jersey, engages in the business of commercial and consumer banking. As a
community bank, American offers a wide range of services to individuals, small
businesses and not-for-profit organizations, including demand, savings and time
deposits and commercial and consumer/installment loans, principally in Union
County and southern Essex County, New Jersey. American, which commenced
operations on June 11, 1990, conducts its operations through its main office
located in Union Township, New Jersey and through one branch office located in
Roselle Park, New Jersey (which was opened in September 1993). American is a
non-member bank (i.e. it is not a member of the Federal Reserve System) and its
deposits are insured up to applicable legal limits by the FDIC. At September 30,
1994, American had total assets, deposits and shareholders' equity of $55.0
million, $50.3 million and $4.3 million, respectively.
-15-
<PAGE>
Recent Developments of American Union Bank
In June 1994, American commenced an offering of its common stock. The
offering was undersubscribed and expired in October 1994, with no subscriptions
being accepted by American. As a result of the unconsummated offering, American
incurred a net loss of $98,000 in October 1994, primarily due to the write-off
of net expenses of $148,000 that were associated with the offering. In November
1994, American's net income was $71,000. The amounts set forth above were
derived from unaudited financial statements of American and reflect all
adjustments (consisting of normal recurring adjustments) that are, in the
opinion of American's management, necessary for a fair presentation of such
amounts.
In May 1993, the Financial Accounting Standards Board approved Statement of
Financial Accounting Standards No. 115 -- "Accounting for Certain Investments in
Debt and Equity Securities" ("FAS 115"). FAS 115 addresses the valuation and
recording of debt and equity securities as held to maturity, trading and
available for sale. Under FAS 115, securities classified as available for sale
must be reported at fair value. In December 1993, American retained an
investment advisor to manage a significant portion of its investment portfolio
and gave the investment advisor discretion over that portion of its investment
portfolio subject to American's guidelines. As a result, American was required
to classify a significant portion of its investment portfolio as available for
sale under FAS 115. American's shareholders' equity decreased to $4,276,000 at
September 30, 1994 from $4,285,000 at December 31, 1993. This decrease resulted
in part from unrealized losses on American's investment portfolio attributable
to the reclassification of a large portion of its investment portfolio as
available for sale under FAS 115 (with respect to which American maintains an
allowance for marketable debt and equity securities, which allowance equalled
$165,000, net of tax benefits, at September 30, 1994) and the current
environment of increasing interest rates (which affects the market value of
securities). The continuation of these factors is likely to have an adverse
effect on American's shareholders' equity in the future.
In addition, American's investment advisor regularly bought and sold
securities in accordance with American's guidelines. American incurred a net
loss of $173,000 from the sale of such securities during the first nine months
of 1994 (most of which were sold during the first five months of 1994), which
loss reduced American's net income during such nine-month period to $156,000.
In June 1994, the Board of Directors of American retained a new investment
advisor to help American manage its own investment portfolio. This new
investment advisor was not given discretion over any portion of American's
investment portfolio. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations of American Union Bank -- Financial
Condition; -- Comparison of Operating Results."
-16-
<PAGE>
COMPARATIVE PER SHARE DATA
(Unaudited)
The following table sets forth the earnings per share, cash dividends per
share and period-end book value per share of Valley Common Stock and American
Common Stock for the nine months ended September 30, 1994 and for each of the
years in the three-year period ended December 31, 1993, on an historical and pro
forma basis, as well as pro forma equivalent per share data for American. The
historical per share data have been derived from the financial statements of
Valley and American which are contained herein or incorporated by reference
herein. The pro forma combined share data have been derived after giving effect
to the Merger as if it occurred at the beginning of the period presented using
the pooling-of-interest method of accounting.
The historical per share data for Valley has been restated to retroactively
reflect the effect of stock splits and a stock dividend and the historical per
share data of American has been restated to retroactively reflect a stock
dividend. The historical per share data for Valley does not include the combined
results of Rock Financial Corporation, which was merged into Valley at the close
of business on November 30, 1994, as the combined results would not be
materially different from those presented. See "Pro Forma Combined Financial
Information;" "Financial Summary and Selected Per Share Data of Valley National
Bancorp" and "Selected Financial Data of American Union Bank."
<TABLE>
<CAPTION>
Pro Forma
Equivalent
Historical Historical Pro Forma per American
Valley American Combined Share(1)
---------- ---------- --------- ------------
<S> <C> <C> <C> <C>
Nine Months Ended September 30, 1994
Earnings Per Share $ 1.60 $ 0.28 $ 1.59 $0.80
Book Value Per Share 10.37 7.77 10.42 5.21
Cash Dividends Per Share (2) 0.73 0.00 0.73 0.37
Year Ended December 31, 1993
Earnings Per Share $ 2.05 $ 0.36 $ 2.03 $1.02
Book Value Per Share 9.85 7.79 9.90 4.95
Cash Dividends Per Share (2) 0.78 0.00 0.78 0.39
Year Ended December 31, 1992
Earnings Per Share $ 1.59 $ 0.27 $ 1.58 $0.79
Book Value Per Share 8.33 7.43 8.39 4.20
Cash Dividends Per Share (2) 0.70 0.00 0.70 0.35
Year Ended December 31, 1991
Earnings Per Share $ 1.15 $(0.77) $ 1.12 $0.56
Book Value Per Share 7.43 7.15 7.50 3.75
Cash Dividends Per Share (2) 0.66 0.00 0.66 0.33
<FN>
_______________________________
(1) American pro forma equivalent per share data is computed by multiplying the
pro forma combined per share data (giving effect to the Merger) by the
Exchange Ratio of 0.50.
(2) The amount of future dividends payable by Valley, if any, is subject to the
discretion of Valley's Board of Directors. The Directors normally consider
Valley's and VNB's cash needs, general business conditions, dividends from
subsidiaries and applicable governmental regulations and policies. Pro
forma amounts assume that Valley would have declared cash dividends per
share of Valley Common Stock equal to its historical cash dividends per
share of Valley Common Stock declared.
</FN>
</TABLE>
-17-
<PAGE>
The following table presents information concerning the market price of
Valley Common Stock and American Common Stock for the dates indicated: October
14, 1994, the last business day preceding the announcement of the letter of
intent between the parties with respect to the Merger, and December [__], 1994,
a date shortly prior to mailing this Proxy Statement/Prospectus. The table also
presents the equivalent value of Valley Common Stock per American share which
has been calculated by multiplying the market price of Valley Common Stock on
the dates indicated by the Exchange Ratio of 0.50. The American Common Stock is
not listed for trading on any securities exchange or any automated dealer
quotation system, there are no market makers for such stock, and bid and asked
quotations are not published. To the knowledge of American's management, no
sales of American Common Stock for value have occurred since April 1993.
Accordingly, no market price per share can be established for American Common
Stock. Valley Common Stock is traded on the New York Stock Exchange. American
shareholders are urged to obtain current market quotations for the Valley Common
Stock. Because the Exchange Ratio is fixed, American shareholders are not
assured of receiving any specific market value of Valley Common Stock. The price
of Valley Common Stock at the Effective Time may be higher or lower than the
market price at the time of entering into the letter of intent, the time of
mailing this Proxy Statement/Prospectus or the time of the Meeting.
EQUIVALENT
VALUE
OF VALLEY
STOCK PER
MARKET PRICE SHARE OF
PER SHARE AMERICAN
---------------------------- ----------
VALLEY AMERICAN
------ --------
Closing
-------
October 14, 1994 $26.62 not applicable $13.31
December [_], 1994 [$__.__] not applicable [$__.__]
-18-
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION OF
VALLEY NATIONAL BANCORP
(Unaudited)
Nine Months Ended
September 30
---------------------------
1994 1993
--------- ---------
(Dollar amounts in thousands,
except per share data)
SELECTED STATEMENT OF INCOME DATA:
Total interest income $169,360 $168,148
Total interest expense 64,743 67,055
Net interest income 104,617 101,093
Provision for possible loan losses 2,700 5,000
Net interest income after provision for
possible loan losses 101,917 96,093
Total other income 16,622 20,395
Total other expense 53,696 52,559
Income before income taxes 64,843 63,929
Income taxes 21,774 22,676
Cumulative effect of accounting change 0 (402)
Net income 43,069 40,851
PER SHARE DATA:(1)
Net income before cumulative effect of
accounting change $ 1.60 $ 1.55
Cumulative effect of accounting
change 0 (0.02)
Net income 1.60 1.53
Book value 10.37 9.55
Dividends 0.73 0.58
Return on average assets 1.64% 1.67%
Return of average equity 20.71% 22.65%
_______________________________
(1) The per share data for 1993 has been restated to give retroactive effect to
a stock dividend in 1994.
-19-
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL SUMMARY AND SELECTED PER SHARE DATA
OF VALLEY NATIONAL BANCORP
Years Ended December 31,
------------------------------------------------------------------------------
1993 1992 1991 1990 1989
--------- ---------- ---------- ---------- ----------
(Dollar amounts in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
SELECTED STATEMENT OF INCOME DATA:
Total interest income.......................... $ 224,331 $ 223,004 $ 198,844 $ 174,206 $ 165,958
Total interest expense......................... 88,150 108,146 107,896 95,964 91,349
Net interest income............................ 136,181 114,858 90,948 78,242 74,609
Provision for possible loan losses............ 6,000 16,000 12,000 12,225 2,025
Net interest income after provision for
possible loan losses......................... 130,181 98,858 78,948 66,017 72,584
Total other income............................. 25,027 28,854 12,630 10,343 8,771
Total other expenses........................... 70,895 64,808 48,984 38,941 35,614
Income before income taxes..................... 84,313 62,904 42,594 37,419 45,741
Income taxes................................... 29,668 21,306 12,477 10,289 11,845
Income before cumulative effect of
accounting change............................ 54,645 41,598 30,117 27,130 33,896
Cumulative effect of accounting change......... (402) 0 0 0 0
Net income..................................... $ 54,243 $ 41,598 $ 30,117 $ 27,130 $ 33,896
PER SHARE DATA:(1)
Income before cumulative effect of
accounting change............................. $ 2.06 $ 1.59 $ 1.15 $ 1.04 $ 1.29
Cumulative effect of accounting change......... (0.01) 0 0 0 0
Net income..................................... 2.05 1.59 1.15 1.04 1.29
Book value..................................... 9.85 8.33 7.43 6.91 6.56
Dividends...................................... 0.78 0.70 0.66 0.66 0.64
Return on Average Assets....................... 1.64% 1.38% 1.31% 1.47% 1.95%
Return on Average Equity....................... 22.04% 19.86% 15.87% 15.04% 20.47%
SELECTED STATEMENT OF CONDITION DATA:
Total assets................................... $3,413,502 $3,169,775 $2,864,869 $2,004,220 $1,823,355
Investment securities held to maturity......... 939,993 1,087,753 1,216,088 386,706 295,785
Investment securities available for sale....... 441,482 330,772 0 0 0
Federal funds sold............................. 88,050 67,000 0 22,000 30,000
Loans (net of unearned income)................. 1,802,000 1,519,943 1,376,927 1,451,739 1,352,084
Allowance for possible loan losses............. 35,205 28,772 21,937 15,921 8,925
Deposits....................................... 3,079,757 2,884,774 2,557,359 1,749,300 1,580,501
Federal funds purchased and securities
sold under agreements to repurchase.......... 35,110 23,071 36,027 28,464 18,393
Shareholders' equity........................... 264,428 218,271 194,529 180,643 171,510
<FN>
__________________________________
(1) The per share data has been restated to give retroactive effect to stock splits and dividends.
</FN>
</TABLE>
-20-
<PAGE>
SELECTED FINANCIAL DATA
OF AMERICAN UNION BANK
The following selected financial data of American for the three years ended
December 31, 1993, 1992 and 1991, respectively, and the unaudited nine-month
periods ended September 30, 1994 and 1993, respectively, should be read in
conjunction with the other financial statements and notes thereto of American
Union Bank found elsewhere herein. The selected financial data as of and for the
nine months ended September 30, 1994 and 1993, includes, in the opinion of
management of American, all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation of such periods. The unaudited
selected financial data for the nine months ended September 30, 1994 is not
necessarily indicative of the results of operations that might be expected for
the entire year ending December 31, 1994. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations of American Union
Bank."
<TABLE>
<CAPTION>
For the Nine Months For the Year Ended
Ended September 30, December 31,
------------------------------- --------------------------------------------------
1994(1) 1993 1993 1992 1991
------------ ------------ ------------ ------------ -------------
(Dollars amounts in thousands, (Dollar amounts in thousands, except share and
except share and per share data) per share data)
(unaudited)
<S> <C> <C> <C> <C> <C>
Statements of Income Data:
Interest income ................... $ 2,570 $ 1,922 $ 2,642 $ 2,220 $ 1,536
Interest expense .................. 922 758 1,030 1,004 829
--------- --------- --------- --------- ---------
Net interest income ............... 1,648 1,164 1,612 1,216 707
Provision for loan losses ......... 67 72 150 99 122
--------- --------- --------- --------- ---------
Net interest income after provision
for loan losses ................. 1,581 1,092 1,462 1,117 585
Gain/(loss) on sale of securities,
net ............................. (173) 13 125 53 0
Service charges, commissions and
fees ............................ 218 130 190 124 30
Other expenses .................... (1,470) (1,095) (1,577) (1,144) (1,040)
--------- --------- --------- --------- ---------
Net income (loss) before income tax
expense and extraordinary item .. 156 140 200 150 (425)
Income tax expense ................ 0 0 0 (51) 0
Extraordinary item ................ 0 0 0 51 0
--------- --------- --------- --------- ---------
Net income (loss) ................. $ 156 $ 140 $ 200 $ 150 ($ 425)
========= ========= ========= ========= =========
Income before extraordinary item
per share(2) .................... $ 0.28 $ 0.25 $ 0.36 $ 0.18 ($ 0.77)
Net income (loss) per share(2) .... $ 0.28 $ 0.25 $ 0.36 $ 0.27 ($ 0.77)
Balance Sheet Data:
Total assets ...................... $ 55,039 $ 41,450 $ 47,950 $ 38,322 $ 24,204
Total deposits .................... 50,288 36,953 43,364 34,037 20,069
Total loans ....................... 29,529 21,638 24,956 19,339 14,807
Allowance for loan losses ......... 337 214 292 201 157
Shareholders' equity(3) ........... 4,276 4,225 4,285 4,085 3,935
Weighted average shares
outstanding(4) .................. 549,970 549,970 549,970 549,970 549,970
Financial Ratios:
Return on average assets .......... 0.39% 0.49% 0.50% 0.50% (2.29)%
Return on average shareholders'
equity .......................... 4.97% 4.49% 4.79% 3.78% (10.42)%
Net interest spread ............... 4.28% 4.00% 4.01% 3.81% 3.63%
Cash dividend pay out ............. 0 0 0 0 0
Capital Ratios:
Total risk based capital ratio .... 13.89% 16.59% 14.31% 16.67% 24.28%
Tier I risk based ................. 12.87% 15.79% 13.40% 15.89% 23.34%
Tier I leverage ................... 7.77% 10.19% 8.94% 10.66% 16.26%
<FN>
----------
(1) American incurred a net loss of $98,000 in October 1994 and had net income
of $71,000 in November 1994. See "Certain Information Regarding American
Union Bank--Recent Developments of American Union Bank."
(2) Earnings per share data is computed by dividing earnings by the weighted
average number of shares outstanding.
(3) Effective January 1, 1994, American adopted FAS 115--"Accounting for
Certain Investments in Debt and Equity Securities." As a result, included
in shareholders' equity is an allowance for marketable debt and equity
securities of $165,000 at September 30, 1994.
(4) The weighted average number of shares outstanding for each period has been
adjusted to reflect the ten percent stock dividend declared on April 28,
1994 and paid on June 3, 1994.
</FN>
</TABLE>
-21-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Asset Quality Ratios:
Average shareholders' equity to
average assets ................. 7.88% 10.84% 10.41% 13.19% 21.95%
Nonperforming loans to total loans 1.17% 1.03% 0.89% 0.39% 0.16%
Allowance for loan losses to total
loans .......................... 1.14% 0.99% 1.17% 1.04% 1.06%
Allowance for loan loss
to non-performing loans ........ 97.40% 97.00% 132% 268% 654%
Net charge offs to total loans ... 0.10% 0.35% 0.24% 0.29% 0.02%
</TABLE>
PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial information presents
the Pro Forma Combined Condensed Statement of Condition of Valley and American
at September 30, 1994, December 31, 1993 and 1992 giving effect to the Merger as
if it had been consummated at such date. Also presented are the Pro Forma
Combined Condensed Statements of Income for the nine months ended September 30,
1994 and the years ended December 31, 1993, 1992 and 1991 giving effect to the
Merger as if it was consummated on January 1 of each year. The unaudited pro
forma information is based on the historical financial statements of Valley and
American after giving effect to the Merger under the pooling-of-interests method
of accounting and based upon the assumptions and adjustments contained in the
accompanying Notes to Pro Forma Combined Condensed Financial Statements.
The unaudited pro forma information has been prepared by Valley's
management based upon the historical financial statements and related notes
thereto of Valley and American contained herein or incorporated herein by
reference. The unaudited pro forma information should be read in conjunction
with such historical financial statements and notes. The historical data for
Valley does not include the combined results of Rock Financial Corporation,
which was merged into Valley at the close of business on November 30, 1994, as
the combined results would not be materially different from those presented. The
Pro Forma Combined Condensed Statements of Income are not necessarily indicative
of operating results which would have been achieved had the Merger been
consummated as of the beginning of the periods for which such data are presented
and should not be construed as being representative of future periods.
-22-
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF CONDITION
September 30, 1994
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma(1) Valley and American
Valley American Adjustment Combined
-------------- -------------- ------------ -------------------
(Dollar amounts in thousands)
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks ....................... $ 106,441 $ 1,845 $ 108,286
Federal funds sold ............................ 36,875 1,385 38,260
Investment securities held to maturity ........ 869,935 4,526 874,461
Investment securities available for sale ...... 399,669 17,106 416,775
Loans ......................................... 2,028,649 29,529 2,058,178
Allowance for possible loan losses ............ (35,890) (337) (36,227)
Other assets .................................. 119,719 985 120,704
------------- -------------- ---------------
Total assets .............................. $ 3,525,398 $ 55,039 $ 3,580,437
============= ============== ===============
LIABILITIES
Deposits ...................................... $ 3,180,735 $ 50,288 $ 3,231,023
Borrowings .................................... 39,434 0 39,434
Other liabilities ............................. 24,591 475 25,066
------------- -------------- ---------------
Total liabilities ......................... 3,244,760 50,763 3,295,523
------------- -------------- --------- ---------------
SHAREHOLDERS' EQUITY
Common stock .................................. 15,274 2,750 $ (2,596) 15,428
Surplus ....................................... 115,821 2,750 2,596 121,167
Retained earnings, net ........................ 151,509 (1,224) 150,285
Treasury stock ................................ (1,966) 0 (1,966)
------------- -------------- --------- ---------------
Total shareholders' equity ................ 280,638 4,276 0 284,914
------------- -------------- --------- ---------------
Total liabilities and shareholders' equity .... $ 3,525,398 $ 55,039 $ 3,580,437
============= ============== ===============
<FN>
- ---------
(1) The pro forma adjustment represents the difference between the stated value
of Valley and American stock.
</FN>
</TABLE>
-23-
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF CONDITION
December 31, 1993
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma(1) Valley and American
Valley American Adjustment Combined
-------------- -------------- ------------ -------------------
(Dollar amounts in thousands)
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks ...................... $ 67,455 $ 5,465 $ 72,920
Federal funds sold ........................... 88,050 3,245 91,295
Investment securities held to maturity ....... 939,993 4,903 944,896
Investment securities available for sale ..... 441,482 9,105 450,587
Loans ........................................ 1,802,000 24,956 1,826,956
Allowance for possible loan losses ........... (35,205) (292) (35,497)
Other assets ................................. 109,727 568 110,295
------------- -------------- --------- ---------------
Total assets ............................. $ 3,413,502 $ 47,950 $ 3,461,452
============= ============== ===============
LIABILITIES
Deposits ..................................... $ 3,079,757 $ 43,364 $ 3,123,121
Borrowings ................................... 46,803 0 46,803
Other liabilities ............................ 22,514 301 22,815
------------- -------------- --------- ---------------
Total liabilities ........................ 3,149,074 43,665 3,192,739
------------- -------------- --------- ---------------
SHAREHOLDERS' EQUITY
Common stock ................................. 8,660 2,500 $ (2,360) 8,800
Surplus ...................................... 46,438 2,500 2,360 51,298
Retained earnings, net ....................... 211,296 (715) 210,581
Treasury stock ............................... (1,966) 0 (1,966)
------------- -------------- --------- ---------------
Total shareholders' equity ............... 264,428 4,285 0 268,713
------------- -------------- --------- ---------------
Total liabilities and shareholders' equity ... $ 3,413,502 $ 47,950 $ 3,461,452
============= ============== ===============
<FN>
- --------
(1) The pro forma adjustment represents the difference between the stated value
of Valley and American stock.
</FN>
</TABLE>
-24-
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF CONDITION
December 31, 1992
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma(1) Valley and American
Valley American Adjustment Combined
-------------- -------------- ------------ -------------------
(Dollar amounts in thousands)
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks ....................... $ 89,695 $ 4,337 $ 94,032
Federal funds sold ............................ 67,000 3,440 70,440
Investment securities held to maturity ........ 1,087,753 11,161 1,098,914
Investment securities available for sale ...... 330,772 0 330,772
Loans ......................................... 1,519,943 19,339 1,539,282
Allowance for possible loan lossses ........... (28,772) (201) (28,973)
Other assets .................................. 103,384 246 103,630
------------- -------------- ---------------
Total assets .............................. $ 3,169,775 $ 38,322 $ 3,208,097
============= ============== ===============
LIABILITIES
Deposits ...................................... $ 2,884,774 $ 34,037 $ 2,918,811
Borrowings .................................... 43,197 0 43,197
Other liabilities ............................. 23,533 200 23,733
------------- -------------- ---------------
Total liabilities ......................... 2,951,504 34,237 2,985,741
------------- -------------- ---------------
SHAREHOLDERS' EQUITY
Common stock .................................. 7,180 2,500 $ (2,360) 7,320
Surplus ....................................... 34,457 2,500 2,360 39,317
Retained earnings, net ........................ 177,820 (915) 176,905
Treasury stock ................................ (1,186) 0 (1,186)
------------- -------------- --------- ---------------
Total shareholders' equity ................ 218,271 4,085 0 222,356
------------- -------------- --------- ---------------
Total liabilities and shareholders' equity .... $ 3,169,775 $ 38,322 $ 3,208,097
============= ============== ===============
<FN>
- --------
(1) The pro forma adjustment represents the difference between the stated value
of Valley and American stock.
</FN>
</TABLE>
-25-
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
For the nine months ended September 30, 1994
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Valley and American
Valley American Adjustment Combined
-------------- -------------- ------------ -------------------
(Dollar amounts in thousands, except per share data)
<S> <C> <C> <C>
Total interest income ........................ $ 169,360 $ 2,570 $ 171,930
Total interest expense ....................... 64,743 922 65,665
------------- -------------- ---------------
Net interest income .......................... 104,617 1,648 106,265
Provision for possible loan losses ........... 2,700 67 2,767
------------- -------------- ---------------
Net interest income after provision for
possible loan losse ........................ 101,917 1,581 103,498
Total non-interest income .................... 16,622 45 16,667
Total non-interest expense ................... 53,696 1,470 55,166
------------- -------------- ---------------
Income before income taxes ................... 64,843 156 64,999
Income taxes ................................. 21,774 0 21,774
------------- -------------- ---------------
Net income ................................... $ 43,069 $ 156 $ 43,225
============= ============== ===============
Earnings per share (1) ....................... $ 1.60 $ 0.28 $ 1.59
============= ============== ===============
Weighted average number of shares
outstanding ................................ 26,976,466 549,970 27,251,451
============= ============== ===============
<FN>
- ---------
(1) The historical earnings per share of Valley and American have been
restated to give retroactive effect to stock dividends and splits.
</FN>
</TABLE>
-26-
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
For the year ended December 31, 1993
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Valley and American
Valley American Adjustment Combined
-------------- -------------- ------------ -------------------
(Dollar amounts in thousands, except per share data)
<S> <C> <C> <C>
Total interest income ........................ $ 224,331 $ 2,642 $ 226,973
Total interest expense ....................... 88,150 1,030 89,180
------------- -------------- ---------------
Net interest income .......................... 136,181 1,612 137,793
Provision for possible loan losses ........... 6,000 150 6,150
------------- -------------- ---------------
Net interest income after provision for
possible loan losses ....................... 130,181 1,462 131,643
Total non-interest income .................... 25,027 315 25,342
Total non-interest expense ................... 70,895 1,577 72,472
------------- -------------- ---------------
Income before income taxes ................... 84,313 200 84,513
Income taxes ................................. 29,668 0 29,668
------------- -------------- ---------------
Net income before cumulative effect of
accounting change .......................... 54,645 200 54,845
Cumulative effect of accounting change ....... (402) 0 (402)
------------- -------------- ---------------
Net income ................................... $ 54,243 $ 200 $ 54,443
============= ============== ===============
Earnings per share before cumulative
effect of accounting change (1) ............ $ 2.06 $ 0.36 $ 2.04
============= ============== ===============
Earnings per share (1) ....................... $ 2.05 $ 0.36 $ 2.03
============= ============== ===============
Weighted average number of shares
outstanding ................................ 26,562,155 549,970 26,837,140
============= ============== ===============
<FN>
- ---------
(1) The historical earnings per share of Valley and American have been
restated to give retroactive effect to stock dividends and splits.
</FN>
</TABLE>
-27-
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
For the year ended December 31, 1992
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Valley and American
Valley American Adjustment Combined
-------------- -------------- ------------ -------------------
(Dollar amounts in thousands, except per share data)
<S> <C> <C> <C>
Total interest income ....................... $ 223,004 $ 2,220 $ 225,224
Total interest expense ...................... 108,146 1,004 109,150
------------- -------------- ---------------
Net interest income ......................... 114,858 1,216 116,074
Provision for possible loan losses .......... 16,000 99 16,099
------------- -------------- ---------------
Net interest income after provision for
possible loan losses ...................... 98,858 1,117 99,975
Total non-interest income ................... 28,854 177 29,031
Total non-interest expense .................. 64,808 1,144 65,952
------------- -------------- ---------------
Income before income taxes .................. 62,904 150 63,054
Income taxes ................................ 21,306 51 21,357
------------- -------------- ---------------
Net income before extraordinary item ........ 41,598 99 41,697
Extraordinary item .......................... 0 51 51
------------- -------------- ---------------
Net income .................................. $ 41,598 $ 150 $ 41,748
============= ============== ===============
Earnings per share before extraordinary
item (1) .................................. $ 1.59 $ 0.18 $ 1.58
============= ============== ===============
Earnings per share (1) ...................... $ 1.59 $ 0.27 $ 1.58
============= ============== ===============
Weighted average number of shares
outstanding ............................... 26,178,072 549,970 26,453,057
============= ============== ===============
<FN>
- --------
(1) The historical earnings per share of Valley and American have been restated
to give retroactive effect to stock dividends and splits.
</FN>
</TABLE>
-28-
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
For the year ended December 31, 1991
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Valley and American
Valley American Adjustment Combined
-------------- -------------- ------------ -------------------
(Dollar amounts in thousands, except per share data)
<S> <C> <C> <C>
Total interest income ....................... $ 198,844 $ 1,536 $ 200,380
Total interest expense ...................... 107,896 829 108,725
------------- -------------- ---------------
Net interest income ......................... 90,948 707 91,655
Provision for possible loan losses .......... 12,000 122 12,122
------------- -------------- ---------------
Net interest income after provision for
possible loan losses ...................... 78,948 585 79,533
Total non-interest income ................... 12,630 30 12,660
Total non-interest expense .................. 48,984 1,040 50,024
------------- -------------- ---------------
Income (loss) before income taxes ........... 42,594 (425) 42,169
Income taxes ................................ 12,477 0 12,477
------------- -------------- ---------------
Net income (loss) ........................... $ 30,117 $ (425) $ 29,692
============= ============== ===============
Earnings (loss) per share (1)................ $ 1.15 $ (0.77) $ 1.12
============= ============== ===============
Weighted average number of shares
outstanding ............................... 26,157,765 549,970 26,432,750
============= ============== ===============
<FN>
- --------
(1) The historical earnings per share of Valley and American have been restated
to give retroactive effect to stock dividends and splits.
</FN>
</TABLE>
-29-
<PAGE>
INTRODUCTORY STATEMENT
All information contained in this Proxy Statement/Prospectus with respect
to American was supplied by American for inclusion herein. All information
contained herein or incorporated by reference herein with respect to Valley and
VNB was supplied by Valley. The first date on which this Proxy
Statement/Prospectus and the enclosed form of proxy are being sent to the
shareholders of American is on or about [_______________].
This Proxy Statement/Prospectus does not cover any resales of shares of
Valley Common Stock to be received by shareholders of American upon consummation
of the transactions described herein. Affiliates of American will be subject to
restrictions on their ability to resell the Valley Common Stock received by them
in the Merger. See "The Proposed Merger -- Resale Considerations with Respect to
the Valley Common Stock."
Purpose of Meeting
At the Meeting, the American shareholders will (i) consider and vote upon a
proposal to approve the Agreement; and (ii) act on such other matters as may be
properly brought before the Meeting. A copy of the Agreement is attached as
Appendix A to this Proxy Statement/Prospectus and is incorporated herein by
reference. The Agreement provides for the exchange of 0.50 shares of Valley
Common Stock, subject to adjustment in certain circumstances, for each share of
American Common Stock outstanding at the effective time of the Merger (the
"Effective Time") specified in the notice filed by VNB with the Comptroller of
the Currency ("OCC"), except for shares, if any, owned by shareholders of
American who duly exercise dissenting rights under applicable law, which
dissenting rights are more fully described in "The Proposed Merger -- Rights of
Dissenting American Shareholders."
THE BOARD OF DIRECTORS OF AMERICAN RECOMMENDS THAT THE SHAREHOLDERS OF
AMERICAN VOTE IN FAVOR OF THE MERGER.
Vote Required; Shares Entitled to Vote
Only holders of record of American Common Stock at the close of business on
[______________], 1994 (the "Record Date") are entitled to notice of and to vote
at the Meeting. The number of shares of American Common Stock issued,
outstanding and entitled to vote at the close of business on the Record Date was
549,970. The Merger must be approved by the affirmative vote at the Meeting,
either in person or by proxy, of the holders of at least sixty-six and
two-thirds percent (66 2/3%) of the outstanding shares of American Common Stock.
Holders of American Common Stock of record on the Record Date are entitled
to one vote per share on any matter that may properly come before the Meeting.
As of September 30, 1994, the directors of American beneficially owned
approximately 42% of the shares of American Common Stock outstanding. Pursuant
to the Agreement, the directors of American have agreed to vote their shares for
the Merger. Consequently, the affirmative vote of approximately an additional
24 2/3% of the shares of American Common Stock outstanding as of the Record Date
will be required for the approval of the Merger. As of September 30, 1994,
executive officers of American who are not also directors beneficially owned
approximately less than 1% of the shares of American Common Stock outstanding
and American's counsel, Sills Cummis Zuckerman Radin Tischman Epstein & Gross,
P.A., and its members, as a group, beneficially owned approximately 23% of the
shares
-30-
<PAGE>
of American Common Stock outstanding. See "Security Ownership of Certain
Beneficial Owners and Management of American Union Bank."
Solicitation, Voting and Revocation of Proxies
The enclosed proxy is designed to permit each shareholder of record on the
Record Date to vote on all matters to come before the Meeting. This proxy is
solicited by the Board of Directors of American. Any proxy may be revoked at any
time before its exercise by giving written notice of revocation to [ name ,
title ] of American, at the main office of American at 2784 Morris Avenue, P.O.
Box 279, Union, New Jersey 07083. A subsequently dated and duly executed proxy,
if properly presented, will revoke a prior proxy. Any shareholder entitled to
vote who has previously executed a proxy may attend the Meeting and vote in
person, provided he has filed a written notice of revocation of such proxy with
the Secretary of the Meeting prior to the voting of such proxy. Where a
shareholder specifies a choice in the form of proxy with respect to a matter
being voted upon, the shares represented by the proxy will be voted in
accordance with such specification. If no such specification is made, the shares
represented by proxies will be voted in favor of the Merger.
The Board of Directors of American knows of no matters, other than the
proposed Merger described in this Proxy Statement/Prospectus, that will be
presented for consideration at the Meeting. However, if other matters properly
come before the Meeting, it is intended that the person designated as proxy will
vote upon such additional matter(s) in accordance with his best judgment.
The cost of soliciting proxies for the Meeting will be borne by American.
In addition to the use of the mails, proxies may be solicited personally, by
telephone or telegram, and by directors, officers and employees of American
acting without additional compensation. Arrangements may also be made with
brokers, dealers, nominees and other custodians for the forwarding of
solicitation material to the beneficial owners of stock held of record by such
persons, and such persons may be reimbursed by American for reasonable
out-of-pocket expenses.
THE PROPOSED MERGER
General Description
Descriptions of the Merger and the Agreement (which is attached as Appendix
A to this Proxy Statement/Prospectus) are qualified in their entirety by
reference to the Agreement which is hereby incorporated in this Proxy
Statement/Prospectus by reference. Shareholders are urged to carefully review
the Agreement.
The Agreement provides that, at the Effective Time, American will be merged
with and into VNB and VNB shall be the surviving bank (the "Surviving Bank").
The separate identity and existence of American shall cease upon consummation of
the Merger and all property, rights, powers and franchises of each of American
and VNB shall vest in the Surviving Bank and the Surviving Bank shall continue
to operate as a wholly-owned subsidiary of Valley. The Surviving Bank will be
governed by the Articles of Association and bylaws of VNB in effect immediately
prior to the consummation of the Merger, except that the Articles of Association
of the Surviving Bank shall be amended to increase the capital and delete
certain provisions so that the Articles of Association shall be as set forth in
Schedule 1 to the Agreement. In addition, the directors of VNB shall continue as
the directors of the Surviving Bank after the consummation of the Merger. At the
Effective Time, each share of American Common Stock outstanding immediately
prior to the Effective Time will be converted into 0.50 shares (the "Exchange
Ratio") of
-31-
<PAGE>
newly issued Valley Common Stock, subject to certain adjustments, except
for shareholders of American who perfect their rights of dissent from the Merger
pursuant to, and who are entitled to the rights and remedies provided in,
Section 215a of Title 12 of the U.S. Code, as more fully described
under--"Consideration" and--"Rights of Dissenting American Shareholders."
Consideration
At the Effective Time, each share of American Common Stock outstanding will
automatically be converted into 0.50 shares of Valley Common Stock, except for
shares, if any, owned by shareholders of American who duly exercise dissenting
rights under Section 215a of Title 12 of the U.S. Code. See "--Rights of
Dissenting American Shareholders."
The Exchange Ratio is subject to adjustment to take into account any stock
split, stock dividend, stock combination, reclassification or similar
transaction by Valley with respect to the Valley Common Stock.
No holder of American Common Stock will be entitled to receive any
fractional shares of Valley Common Stock, but instead will be entitled to
receive, without interest, a cash payment in the amount equal to the value of
such fractional share interest, determined by multiplying such holder's
fractional interest by the Average Closing Price of Valley Common Stock. The
"Average Closing Price" is defined in the Agreement as the average of the
closing prices of Valley Common Stock as reported on the New York Stock Exchange
and published in the Wall Street Journal during the first ten of the fifteen
consecutive trading days immediately preceding the Effective Time. All shares of
Valley Common Stock that individual American shareholders are entitled to
receive in exchange for each share of American Common Stock held will be
aggregated to constitute as many whole shares of Valley Common Stock as possible
before determining the amount of a cash payment for fractional shares.
Reasons for the Merger
THE BOARD OF DIRECTORS OF AMERICAN HAS APPROVED THE AGREEMENT, BELIEVES IT
TO BE IN THE BEST INTERESTS OF THE SHAREHOLDERS OF AMERICAN AND RECOMMENDS THAT
AMERICAN SHAREHOLDERS VOTE "FOR" THE AGREEMENT. The Board of Directors of
American believes that the terms of the Agreement are fair to American's
shareholders. In approving the Agreement, the Board evaluated the business,
financial and market factors affecting American, Valley's historical financial
results, the liquidity and trading characteristics of the Valley Common Stock,
the dividend income of the Valley Common Stock and the American Common Stock,
the outlook for each institution in a changing banking and financing services
industry, and its consultation with its financial advisor. The Board also noted
that American would effectively become part of a larger entity that would
compete more effectively in the communities served by American by offering a
number of new or expanded services to residents of such communities.
Although American has realized net income during 1992, 1993 and the first
nine months of 1994, the Board believes that shareholders of American would be
better served by converting their investment in American into an investment in
Valley at the Exchange Ratio pursuant to the terms of the Agreement. Among other
things, Valley, as a more diversified institution with substantially greater
assets than American, is better positioned to succeed in the increasingly
competitive environment in which banks are now operating. As part of Valley, the
offices of American will have the support of Valley's greater resources and
broader access to markets for capital and lendable funds. This greater scope and
depth of services coupled with the ability to offer larger loans should enable
the offices of American to serve effectively a wider range of customers. In
addition, the Board of Directors believes that ownership of Valley Common Stock,
which is traded on the New York Stock Exchange, will provide American
shareholders with a far more liquid investment than will continued ownership of
American Common
-32-
<PAGE>
Stock. Finally, the Board of Directors believes that Valley's operations
and business philosophy are consistent with those of American.
The Board of Directors did not attach relative weight to the factors it
considered in reaching its decision but, considering all factors discussed
above, determined that the Merger pursuant to the Agreement is in the best
interest of, and is fair to, American's shareholders.
Valley entered into the Agreement with American as part of Valley's ongoing
strategy of growth through acquisitions.
Interests of Management of American in the Merger
As of September 30, 1994, the directors of American beneficially owned
approximately 42%, and executive officers of American who are not also directors
beneficially owned less than 1%, of the shares of American Common Stock
outstanding. See "Security Ownership of Certain Beneficial Owners and
Management of American Union Bank."
Pursuant to the Agreement, Valley has agreed to endeavor to continue the
employment of all officers and employees of American.
In addition to the foregoing, the Agreement requires Valley to provide the
directors, officers and agents of American indemnification equivalent to that
provided by the current Certificate of Incorporation and Bylaws of American with
respect to acts or omissions occurring prior to the Effective Time, for a period
of six years from the Effective Time or, in the case of matters occurring prior
to the Effective Time which have not been resolved prior to the sixth
anniversary of the Effective Time, until such matters are finally resolved.
Opinion of American's Financial Advisor
On October 26, 1994, American's Board of Directors retained Capital
Consultants of Princeton, Inc. ("Capital Consultants") to act as American's
financial advisor and to render its opinion with respect to the fairness, from a
financial point of view, to the shareholders of American of the consideration to
be received in the Merger.
Capital Consultants is regularly engaged in the valuation of banks, bank
holding companies, savings and loan associations, and thrift holding companies
in connection with mergers, acquisitions and other securities transactions.
Capital Consultants has knowledge of, and experience with, the New Jersey
banking and thrift market and financial organizations operating in that market
and was selected by American because of its knowledge of, experience with, and
reputation in the financial services industry. Capital Consultants is not a
market maker in either Valley Common Stock or American Common Stock.
Capital Consultants has delivered to the Board of Directors of American its
opinion that, based on and subject to various items set forth in its written
opinion, the consideration to be received by American's shareholders pursuant to
the Agreement is fair from a financial point of view to American's shareholders.
In requesting Capital Consultant's advice and opinion, American's Board did not
impose any limitations upon Capital Consultants with respect to the
investigations made or procedures followed by it in rendering its opinion.
-33-
<PAGE>
The full text of the written opinion of Capital Consultants dated as of
December [___], 1994, which sets forth assumptions made and matters considered,
is attached as Appendix C to this Proxy Statement/Prospectus. Descriptions of
the opinion of Capital Consultants in this Proxy Statement/Prospectus are
qualified in their entirety by reference to such opinion. American's
shareholders are urged to read such opinion in its entirety. Capital
Consultants' opinion is directed only to the financial terms of the Merger and
does not constitute a recommendation to any American shareholder as to how such
shareholder should vote at the Meeting. The summary information regarding
Capital Consultants' opinion and the procedures followed in rendering such
opinion set forth in this Proxy Statement/Prospectus is qualified in its
entirety by reference to the full text of such opinion.
In arriving at its opinion, Capital Consultants reviewed and analyzed,
among other things: (i) the Merger Agreement; (ii) the Registration Statement on
Form S-4 of Valley of which this Proxy Statement/Prospectus is a part; (iii)
publicly available information relating to Valley and American including, for
Valley, annual reports to shareholders and annual reports on Form 10-K filed
with the Commission for the years ended December 31, 1991 through 1993 and the
quarterly reports to shareholders and quarterly reports on Form 10-Q filed with
the Commission for the periods ended March 31, June 30 and September 30, 1994,
and for American, annual reports to shareholders for the years ended December
31, 1991 through 1993 and quarterly reports of Consolidated Conditions and
Income as filed with the Federal Deposit Insurance Corporation (the "FDIC") for
the periods ended March 31, June 30 and September 30, 1994; (iv) certain
historical operating and financial information provided to Capital Consultants
by the managements of American and Valley; (v) historical and current market
data for the American Common Stock and the Valley Common Stock; (vi) the
publicly available financial data and stock market performance data of publicly
traded banking and thrift institutions which Capital Consultants deemed
generally comparable to American and Valley; (vii) the nature and terms of
recent acquisitions and merger transactions involving banking institutions and
bank and thrift holding companies that Capital Consultants considered reasonably
similar to American and Valley in financial character, operating character,
historical performance, geographic market and economy; and (viii) such other
studies, analyses, inquiries and reports as Capital Consultants deemed
appropriate. In addition, Capital Consultants conducted meetings with members of
senior management of American and Valley for purposes of reviewing the foregoing
and the future prospects of American and Valley. Capital Consultants evaluated
the pro forma ownership of the Valley Common Stock by American's shareholders,
relative to the pro forma contribution of American's assets, deposits, equity
and earnings to the pro forma resulting company in the Merger. Capital
Consultants also took into account its experience in other transactions, as well
as its knowledge of the banking and thrift industries and its experience in
securities valuations.
In rendering its opinion, Capital Consultants assumed, without independent
verification, the accuracy and completeness of the financial and other
information and representations provided to it by American and Valley. Capital
Consultants did not conduct a physical inspection of any of the properties or
assets of American or Valley and has not made any independent evaluations or
appraisal of any properties, assets or liabilities of American or Valley.
Capital Consultants has assumed and relied upon the accuracy and completeness of
the publicly available financial and other information provided to it, has
relied upon the representations and warranties of American and Valley made
pursuant to the Agreement, and has not independently attempted to verify any of
such information.
In rendering its opinion, Capital Consultants has also assumed that in the
course of obtaining the necessary regulatory approvals for the Merger, no
conditions will be imposed that will have a material adverse effect on the
contemplated benefits of the Merger on a pro forma basis to American.
-34-
<PAGE>
In arriving at its opinion, Capital Consultants performed a variety of
financial analyses. Capital Consultants believes that its analyses must be
considered as a whole and that consideration of portions of such analyses and
the factors considered therein, without considering all factors and analyses,
could create an incomplete view of the analyses and the process underlying
Capital Consultants' opinion. The preparation of an opinion with respect to
fairness, from a financial point of view, of the consideration to be received by
shareholders is a complex process involving judgments and is not necessarily
susceptible to partial analyses and summary description.
In its analyses, Capital Consultants made numerous assumptions with respect
to American's and Valley's industry performance, business and economic
conditions and other matters, many of which are beyond the control of American
and/or Valley. Any estimates reflected in Capital Consultants' analyses are not
necessarily indicative of future results or values, which may be significantly
more or less favorable than such estimates. Estimates of values of companies do
not purport to be appraisals or necessarily reflect the prices at which
companies or their securities may actually be sold.
The following is a brief summary of the analyses performed by Capital
Consultants with respect to American and Valley in connection with the opinion
of Capital Consultants, certain of which analyses were presented to American's
Board of Directors by Capital Consultants.
Valuation Analysis - Using a valuation analysis, Capital Consultants
estimated the present value of theoretical values of American based on a range
of price-to-earnings ("P/E") multiples between 12.0x and 14.0x and a range of
discount rates between 6% and 8%. The range of values were based on a range of
estimated earnings for the next three years assuming annual earnings growth
rates between 5% and 10%. The results of this analysis indicated a range of
theoretical values for American between $4.01 per share (5% earnings growth
rate; P/E of 12.0x; 8% discount rate) and $5.68 per share (10% growth rate; P/E
of 14.0x; 6% discount rate). Capital Consultants prepared a net present value
analysis that indicated theoretical values for American based on a range of
terminal book value multiples between 1.30x and 1.50x and a range of discount
rates between 6% and 8%. Capital Consultants also determined the range of
terminal multiples of selected comparable companies. Such comparable companies
are referred to in the Comparable Company Analysis and Transaction Analysis set
forth below. The terminal values were discounted to present value using discount
rates which reflect assumptions regarding the required rates of return of the
current and prospective shareholders of American Common Stock in these economic
times. The range of present values per share of American resulting from the
above-referenced assumptions is $9.80 to $11.96.
Comparable Company Analysis - Capital Consultants compared the operating
performance of American to publicly traded commercial banks that Capital
Consultants deemed to be similar to American. The group consists of thirteen New
Jersey publicly traded commercial banks with total assets of between $50 million
and $100 million and with an equity to assets ratio in excess of 6.8%. Capital
Consultants compared American with these institutions based on selected
operating fundamentals, including capital adequacy, profitability and asset
quality. Using pricing data as of June 30, 1994, the median price to stated book
value was 0.81% for the group of comparable commercial banks. American Common
Stock has a very limited trading market and is not listed on any securities
exchange and therefore no price information was available for the period ending
June 30, 1994. If the median price to stated book value of the group of
comparable commercial banks were applied to American Common Stock, it would
produce a price of $6.11 per share. At June 30, 1994, the median equity to
assets ratio was 9.1% for the group of comparable commercial banks and 7.7% for
American. The median return on average equity for the twelve months ending June
30, 1994 was 8.1% for the comparable group of commercial banks and 1.3% for
American. Assuming a valuation of Valley's offer of $13.00 in Valley Common
Stock for each share of American Common Stock (based upon an Exchange Ratio of
0.50
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shares of Valley Common Stock for each share of American Common Stock at a
price of $26.00 for each share of Valley Common Stock, which was the approximate
average trading price of Valley Common Stock during the period that the
Agreement was being negotiated), the Valley offer represented 159% of American's
book value.
Finally, Capital Consultants compared the market price, market-to-book
value and price-to-earnings multiples of the Valley Common Stock with individual
market multiples and medians of twenty New Jersey publicly traded banks and bank
holding companies having total assets between $100 million and $34 billion. The
analysis also compared returns on average assets and average equity of Valley to
those of selected financial institutions and the medians of the comparable
group. The analysis indicated that the Valley Common Stock traded on September
30, 1994 at a price-to-earnings multiple of 12.6 times trailing twelve months
earnings for the period ended September 30, 1994, as compared to a comparative
group medium of 12.3 times trailing twelve months earnings for the period ended
September 30, 1994. While the Valley Common Stock traded at a price-to-book
value of 2.54%, the comparative group median was 1.45%. Valley's financial
performance, as measured by returns on average assets and average equity, was
1.63% and 20.1%, respectively, as compared to the median of the comparable
financial institutions which was 0.90% and 13.1%, respectively. The Capital
Consultants analyses also included summary income statement and balance sheet
data and selected ratio analyses for Valley and various other potential
acquirors of American.
Contribution Analysis - Capital Consultants prepared a contribution
analysis showing the percentage of assets, deposits, net common equity and the
first nine months of 1994 net income American would contribute to the combined
company on a pro forma basis, and compared these percentages to the pro forma
ownership after the Merger. This analysis showed that American would contribute
1.5% of pro forma consolidated total assets, 1.6% of pro forma consolidated
deposits, 1.5% of pro forma consolidated shareholders' equity and 0.4% of pro
forma consolidated net income for the first nine months of 1994, while American
shareholders would hold 1.0% of the pro forma ownership of Valley.
Impact Analysis - Capital Consultants analyzed the financial implications
of the Merger on Valley's earnings per common share and book value per common
share. This analysis was based on September 30, 1994 financial data for Valley
and American and indicated that the acquisition of American by Valley would be
(on a pro forma basis for the nine months ended September 30, 1994, assuming the
acquisition was effective as of January 1, 1994) approximately 0.6% dilutive to
the earnings per share of Valley Common Stock and approximately 0.5% accretive
to tangible book value per share of Valley Common Stock on a fully diluted
basis.
Comparable Transaction Analysis - Capital Consultants performed an analysis
of prices and premiums offered in recently announced commercial bank and bank
holding company transactions in the region. Multiples of earnings and fully
diluted book value implied by the consideration to be received by American's
shareholders in the Merger were compared with multiples offered in such regional
transactions, which included pending and completed acquisitions announced
between January 1, 1993 and October 14, 1994. The median offer price to book
value for this regional group of comparable transactions was 154%. The
equivalent offer price to book value for American was 159% based on the assumed
Valley offer price of $13.00 for each outstanding share of American Common Stock
and American's book value as of September 30, 1994. Capital Consultants also
reviewed the core capital ratio to total assets of the comparative group and
non-performing assets as a percentage of total assets and in both analyses,
American was better than the median of the comparative group.
It is important to note that when Capital Consultants took into account the
values shown in the comparables used in connection with the rendering of its
opinion, no company or transaction used in these
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analyses was identical to American or the Merger. Accordingly, an analysis
of the results of the foregoing is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies involved, the timing of the transactions and
prospective buyer interest, the earnings trends and prospects for the future, as
well as other factors that could affect the public trading values of the
companies included in the comparisons.
For Capital Consultants' services in connection with the Merger, American
has agreed to pay Capital Consultants a fee of approximately $15,000 plus
reimbursement for reasonable out-of-pocket expenses. American has also agreed to
indemnify Capital Consultants against certain liabilities, including liabilities
under the federal securities laws. American has paid Capital Consultants $7,500
and will pay an additional $7,500 upon consummation of the Merger, which
additional amount shall not be due if the Merger is not consummated. The amount
of Capital Consultants fee was determined by negotiation between American and
Capital Consultants.
Resale Considerations With Respect to the Valley Common Stock
The shares of Valley Common Stock that will be issued if the Merger is
consummated have been registered under the Securities Act of 1933, as amended
(the "Act") and will be freely transferable, except for shares received by
persons, including directors and executive officers of American, who may be
deemed to be "affiliates" of American under Rule 145 promulgated under the Act.
An "affiliate" of an issuer is defined generally as a person who "controls" the
issuer. Directors, executive officers and 10% shareholders are generally
presumed by the Commission to control the issuer. Affiliates may not sell their
shares of Valley Common Stock acquired pursuant to the Merger, except pursuant
to an effective registration statement under the Act covering the Valley Common
Stock or in compliance with Rule 145 or another applicable exemption from the
registration requirements of the Act.
Persons who may be deemed to be "affiliates" of American have delivered
letters to Valley in which they have agreed to certain restrictions on their
ability to sell, transfer or otherwise dispose of ("transfer") any American
Common Stock owned by them and any Valley Common Stock acquired by them in the
Merger. Pursuant to the accounting rules governing a pooling-of-interests, the
affiliates of American have agreed not to transfer the shares during a period
commencing with the period beginning 30 days prior to the Effective Time and
ending on the date on which financial results covering at least 30 days of
post-merger combined operations of Valley and American have been published by
Valley or filed by Valley on a Form 8-K, 10-Q or 10-K. Also, in connection with
the pooling-of-interests rules, the affiliates have agreed not to transfer their
American Common Stock in the period prior to 30 days before the Effective Time
without giving Valley advance notice and an opportunity to object if the
transfer would interfere with pooling-of-interests accounting for the Merger.
Pursuant to Rule 145, the affiliates have also agreed to refrain from
transferring Valley Common Stock acquired by them in the Merger, except in
compliance with certain restrictions imposed by Rule 145. Certificates
representing the shares of Valley Common Stock acquired by each such person
pursuant to the Merger will bear a legend reflecting that the shares are
restricted in accordance with the letter signed by such person and may not be
transferred except in compliance with such restrictions.
Persons who may be deemed "affiliates" of Valley have also delivered
letters in which they have agreed not to transfer Valley Common Stock
beneficially owned by them in violation of the pooling-of-interests restrictions
set forth above with respect to American.
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Conditions to the Merger
Consummation of the Merger is subject to the satisfaction or waiver of
certain conditions, including (i) approval by the affirmative vote of the
holders of sixty-six and two-thirds percent (66 2/3%) of the outstanding shares
of American Common Stock, whether in person or by proxy; (ii) the receipt of all
consents, approvals and authorizations of all necessary federal government
authorities and expiration of all required waiting periods, necessary for the
consummation of the Merger (see "-- Regulatory Approvals"); and (iii) the
effectiveness of the registration statement covering the shares of Valley Common
Stock to be issued to American shareholders, which shares shall also have been
approved for listing on the New York Stock Exchange. In addition, consummation
of the Merger is conditioned upon receipt by the parties of an opinion of
Pitney, Hardin, Kipp & Szuch to the effect that the exchange of American Common
Stock for Valley Common Stock is a tax-free reorganization within the meaning of
Section 368 of the Internal Revenue Code (the "Code"). See "--Federal Income
Tax Consequences."
Consummation of the Merger is also conditioned on, among other things, (i)
the continued accuracy in all material respects of the representations and
warranties of American, Valley and VNB contained in the Agreement; (ii) the
performance by American, Valley and VNB, in all material respects, of all of
their respective obligations under the Agreement; (iii) the absence of any
litigation that would restrain or prohibit the consummation of the Merger; and
(iv) receipt by the Board of Directors of American of a Fairness Opinion of
Capital Consultants(which has been received and is attached as Appendix C to
this Proxy Statement/Prospectus). See "-- Opinion of American's Financial
Advisor."
The obligation of Valley to consummate the Merger is further subject to the
condition that the Merger be treated by Valley as a pooling-of-interests for
accounting purposes.
In addition to the above described conditions, American may terminate the
Agreement in the event that the Average Closing Price of Valley Common Stock is
less than $19.00 per share, subject to adjustment in certain circumstances
pursuant to the Agreement. Valley has the right to terminate the Agreement if
any application for any necessary regulatory or governmental approval contains
conditions which materially impair the value of American, taken as a whole, to
Valley. Further, either Valley or American may terminate the Agreement (i) if
the Effective Time shall not have occurred on or prior to June 30, 1995; (ii) if
the shareholders of American fail to approve the Agreement at the Meeting; or
(iii) if any application for any necessary regulatory or governmental approval
is denied or withdrawn at the recommendation of the applicable regulatory agency
or governmental authority, unless any such occurrence was caused by the failure
of the terminating party to perform or observe its agreements set forth in the
Agreement. Either Valley or American may also terminate the Agreement if (i)
there has occurred a material adverse change in the business, operations, assets
or financial condition of any other party; (ii) any other party materially
breaches any of its representations, warranties, covenants, agreements or
obligations under the Agreement; or (iii) any closing condition cannot
reasonably be met by any other party after the other party has had a reasonable
opportunity to cure such condition. The Agreement may also be terminated with
the written consent of all of the parties.
American has agreed that prior to the Effective Time, except as otherwise
approved by Valley in writing or as permitted or required by the Agreement, it
will not (i) change any provision of its Certificate of Incorporation or Bylaws
or any similar governing documents; (ii) change the number of shares of, or
issue any more shares of or grant any option or right with respect to, American
Common Stock, or split, combine or reclassify any shares of, or declare, set
aside or pay any dividend, or other distribution in respect of, American Common
Stock, or redeem or otherwise acquire any shares of American Common Stock; (iii)
grant any severance or termination pay (other than pursuant to policies of
American in effect on the date of the Agreement or as agreed to by Valley in
writing) to, or enter into
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or amend any employment agreement with, any of its directors, officers
or employees; adopt any new employee benefit plan or arrangement of any type or
amend any such existing benefit plan or arrangement; or award any increase in
compensation or benefits to its directors, officers or employees, except with
respect to salary increases and bonuses in the ordinary course of business and
consistent with past practices and policies; (iv) sell or dispose of any
substantial amount of assets or incur any significant liabilities other than in
the ordinary course of business consistent with past practices and policies; (v)
make any capital expenditures outside of the ordinary course of business other
than pursuant to binding commitments existing on the date of the Agreement and
other than expenditures necessary to maintain existing assets in good repair;
(vi) file any application or make any contract with respect to branching or site
location or relocation; (vii) agree to acquire any business or entity in any
manner whatsoever (other than to realize upon collateral for a defaulted loan);
(viii) make any material change in its accounting methods or practices, other
than changes required in accordance with generally accepted accounting
principles; or (ix) agree to do any of the foregoing.
American has further agreed that it shall not, directly or indirectly,
encourage or solicit or hold discussions or negotiations with, or provide any
information to, any person, entity or group (other than Valley) concerning any
merger or sale of shares of capital stock or sale of substantial assets or
liabilities not in the ordinary course of business, or similar transactions
involving American (an "Acquisition Transaction"), except that American may (i)
enter into discussions or negotiations or provide information in connection with
an unsolicited possible Acquisition Transaction if the Board of Directors of
American, after consulting with counsel, determines that such discussions or
negotiations should be commenced in the exercise of its fiduciary
responsibilities or such information should be furnished in the exercise of its
fiduciary responsibilities; and (ii) respond to inquiries from its shareholders
in the ordinary course of business. American has agreed to promptly communicate
to Valley the terms of any proposal, whether written or oral, which it may
receive in respect of any Acquisition Transaction and the fact that it is having
discussions or negotiations with, or supplying information to, a third party in
connection with a possible Acquisition Transaction.
Regulatory Approvals
Consummation of the Merger is subject, among other things, to prior receipt
of all necessary regulatory approvals. On December 7, 1994, Valley received
written confirmation from the Federal Reserve Bank of New York that the Merger
does not require the approval of the Board of Governors of the Federal Reserve
System (the "Board of Governors") under Regulation Y promulgated under the Bank
Holding Company Act. On December 16, 1994, Valley filed an application with the
OCC for approval of the Merger under the Federal Deposit Insurance Corporation
Act. The approval of the OCC is required in order for the Merger to be
consummated. While both Valley and American anticipate receiving such required
approval, there can be no assurance that it will be granted, or that it will be
granted on a timely basis and without conditions that Valley or American find
unacceptable.
Management and Operations After the Merger
At the Effective Time, as a result of the Merger, American will be merged
into VNB which will be the surviving entity in the Merger. The Agreement does
not provide that any of the directors or executive officers of American will
become directors or executive officers of Valley or VNB.
The location of the principal office of Valley will remain unchanged--1445
Valley Road, Wayne, New Jersey. The branch offices of American will serve as
branch offices of VNB.
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Description of Valley Common Stock
The authorized capital stock of Valley consists of 37,537,500 shares of
common stock. As of September 30, 1994, 27,064,564 shares of Valley Common Stock
were issued and outstanding, excluding treasury shares.
General. Valley is a New Jersey general business corporation governed by
the New Jersey Business Corporation Act and a registered bank holding company
under the Bank Holding Company Act. The following description of the Valley
Common Stock sets forth certain general terms of the Valley Common Stock.
Dividend Rights. Holders of Valley Common Stock are entitled to dividends
when, as and if declared by the Board of Directors of Valley out of funds
legally available for the payment of dividends. The only statutory limitation is
that such dividends may not be paid when Valley is insolvent. Because funds for
the payment of dividends by Valley must come primarily from the earnings of
Valley's bank subsidiary, as a practical matter, any restrictions on the ability
of VNB to pay dividends will act as restrictions on the amount of funds
available for payment of dividends by Valley.
As a national banking association, VNB is subject to limitation on the
amount of dividends it may pay to Valley, VNB's only shareholder. Prior approval
by the OCC is required to the extent the total of all dividends to be declared
by VNB in any calendar year exceeds net profits, as defined, for that year
combined with VNB's retained net profits from the preceding two calendar years,
less any transfers to capital surplus. Under this limitation, VNB could declare
dividends in 1994 without prior approval of the OCC of up to $53,348,000 plus an
amount equal to VNB's net profits for 1994 to the date of such dividend
declaration.
Valley is also subject to the certain Board of Governors' policies which
may, in certain circumstances, limit its ability to pay dividends. These
policies require, among other things, that a bank holding company maintain a
minimum capital base. The Board of Governors would most likely seek to prohibit
any dividend payment which would reduce a holding company's capital below these
minimum amounts.
Voting Rights. At meetings of shareholders, holders of Valley Common Stock
are entitled to one vote per share. The quorum for shareholders' meeting is a
majority of the outstanding shares. Generally, actions and authorizations to be
taken or given by shareholders require the approval of a majority of the votes
cast by holders of Valley Common Stock at a meeting at which a quorum is
present.
Liquidation Rights. In the event of liquidation, dissolution or winding up
of Valley, holders of Valley Common Stock are entitled to share equally and
ratably in assets available for distribution after payment of debts and
liabilities.
Assessment and Redemption. All outstanding shares of Valley Common Stock
are fully paid and nonassessable. The Valley Common Stock is not redeemable at
the option of the issuer or the holders thereof.
Other Matters. The transfer agent and registrar for Valley Common Stock is
presently American Stock Transfer and Trust Company. Valley Common Stock is
traded on the New York Stock Exchange, and is registered with the Commission
under Section 12(b) of the Exchange Act. Valley also has outstanding stock
purchase warrants issued in connection with a prior acquisition. As of September
30, 1994 warrants to purchase 586,238 shares of Valley Common Stock were
outstanding.
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Exchange of Certificates
At the Effective Time, holders of certificates formerly representing shares
of American Common Stock will cease to have any rights as American shareholders
and their certificates automatically will represent the shares of Valley Common
Stock into which their shares of American Common Stock will have been converted
by the Merger. As soon as practicable after the Effective Time, Valley will send
written notice to each holder of record of American Common Stock immediately
prior to the Effective Time (other than those that exercise their dissenter's
rights as further described in --"Rights of Dissenting American Shareholders"),
indicating the number of shares of Valley Common Stock for which such holder's
shares of American Common Stock have been exchanged.
Holders of outstanding certificates for American Common Stock, upon proper
surrender of such certificates to Valley, will receive, promptly after the
Effective Time, a certificate representing the full number of shares of Valley
Common Stock into which the shares of American Common Stock previously
represented by the surrendered certificates have been converted. At the time of
issuance of a new stock certificate, each shareholder so entitled will receive a
check for the amount of the fractional share interest, if any, to which he may
be entitled.
Each share of Valley Common Stock for which shares of American Common Stock
are exchanged will be deemed to have been issued at the Effective Time.
Accordingly, American shareholders who receive Valley Common Stock in the Merger
will be entitled to receive any dividend or other distribution which may be
payable to holders of record of Valley Common Stock as of dates on or after the
Effective Time. However, no dividend or other distribution will actually be paid
with respect to any shares of Valley Common Stock until the certificate or
certificates formerly representing shares of American Common Stock have been
surrendered, at which time any accrued dividends and other distributions on such
shares of Valley Common Stock will be paid without interest. See
"--Consideration." In addition, in the event that the Effective Time does not
occur before the record date used to determine the shareholders of Valley
entitled to receive a dividend on April 1, 1995, pursuant to the Agreement,
American will be permitted to declare a dividend in an amount equal to the
amount that its shareholders would have received from Valley had the Effective
Time occurred prior to such record date. However, there can be no assurance that
such a dividend will be declared and paid by American. See "--Effective Time;
Amendments; Termination."
Holders of American Common Stock should not send in their certificates
until they receive instructions from Valley.
Effective Time; Amendments; Termination
The Effective Time will be the time and date specified in a notice to the
OCC filed by VNB. A closing under the Agreement (the "Closing") will occur prior
to the Effective Time on a day mutually agreed to by Valley and American within
30 days following the receipt of all necessary government approvals and the
satisfaction and waiver of all conditions precedent to the Merger. See
"--Conditions to the Merger." At the Closing, documents required to satisfy the
conditions to the Merger of the respective parties will be exchanged. The
parties are cooperating to try to ensure that the Effective Time will be before
the record date (the "Valley Record Date") used to determine the shareholders of
Valley entitled to receive a dividend on April 1, 1995. However, no assurances
can be given that all conditions to the Merger will be met or waived by such
date.
The Agreement provides that in the event that the Effective Time does not
occur before the Valley Record Date, notwithstanding any restrictions contained
in the Agreement on the issuance of dividends
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by American, American shall be permitted to declare and pay a dividend to
its shareholders in an amount equal to the amount of the dividend its
shareholders would have received from Valley had the Effective Time occurred
prior to the Valley Record Date.
The determination of whether a dividend will be declared and paid by
American will be made by American's Board of Directors. American's ability to
pay dividends is determined in accordance with the New Jersey Banking Act of
1948, as amended, and, in some instances, further restrictions imposed by the
FDIC. Under applicable law, no cash dividend can be paid by American unless,
following the payment of such dividend, the capital stock of American will be
unimpaired and American will have a surplus of not less than fifty percent of
its capital stock or, if not, the payment of such dividend will not reduce the
surplus of American. The Board's power to declare and issue dividends is subject
to the oversight and approval of the New Jersey Commissioner of Banking. There
can be no assurance that American will declare and pay a dividend in the event
that the Effective Time does not occur before the Valley Record Date.
The Agreement may be amended, modified or supplemented with respect to any
of its terms by the mutual consent of Valley, VNB and American at any time prior
to the Effective Time.
Upon the termination of the Agreement, the transactions contemplated
thereby (other than the confidentiality provisions contained therein) will be
abandoned without further action by any party and each party will bear its own
expenses. In the event of a termination, each party will retain all rights and
remedies it may have at law or equity under the Agreement.
Accounting Treatment of the Merger
The Merger is expected to be accounted for by Valley under the
pooling-of-interests method of accounting in accordance with generally accepted
accounting principles. See "Pro Forma Combined Financial Information."
Federal Income Tax Consequences
THE FEDERAL INCOME TAX DISCUSSION SET FORTH BELOW IS INCLUDED FOR GENERAL
INFORMATION ONLY. IT MAY NOT BE APPLICABLE TO CERTAIN CLASSES OF TAXPAYERS,
INCLUDING INSURANCE COMPANIES, SECURITIES DEALERS, FINANCIAL INSTITUTIONS,
FOREIGN PERSONS AND PERSONS WHO ACQUIRED SHARES OF AMERICAN COMMON STOCK AS
COMPENSATION. AMERICAN SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISERS
AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE
APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX LAWS.
General. It is intended that the Merger will be treated as a tax-free
reorganization as defined in Section 368(a)(1)(A) of the Internal Revenue Code
of 1986, as amended (the "Code"), and that, accordingly, no gain or loss will be
recognized by Valley, American or VNB or to the shareholders of American upon
the exchange of their shares of American Common Stock solely for shares of
Valley Common Stock pursuant to the Merger. Counsel to Valley is required, as a
condition of closing, to provide an opinion to Valley and to American, with
respect to the matter covered by the foregoing sentence. With respect to this
Proxy Statement/Prospectus, counsel has provided an opinion that, based upon the
circumstances as they presently exist, it expects to be able to render the
required opinion.
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Consequences of Receipt of Cash in Lieu of Fractional Shares. In general,
cash paid in lieu of fractional share interests in corporate reorganizations is
treated as having been received in part or full payment in exchange for the
fractional share interest (and therefore subject to capital gains treatment if
the related shares are held as capital assets) if the cash distribution is
undertaken solely for purposes of saving the corporation the expense and
inconvenience of issuing and transferring fractional shares and is not
separately bargained for consideration.
Basis of Valley Common Stock. The basis of Valley Common Stock received by
a American shareholder who receives solely Valley Common Stock will be the same
immediately after the exchange, as the basis of such shareholder's American
Common Stock exchanged therefor. Where an American shareholder receives both
Valley Common Stock and cash, the basis of the Valley Common Stock received will
equal (i) the basis of the American Common Stock exchanged therefor, (ii)
decreased by the amount of cash received and (iii) increased by the amount of
gain recognized, if any, on the exchange.
Holding Period. The holding period of Valley Common Stock received by an
American shareholder will include the holding period for the American Common
Stock exchanged therefor.
Stock Option for Shares of American Common Stock
Valley and American entered into a Stock Option Agreement dated November 9,
1994 (the "Stock Option Agreement"), in connection with the negotiation of the
Agreement. The Stock Option Agreement is set forth as Appendix B hereto.
Descriptions of the Stock Option Agreement in this Proxy Statement/Prospectus
are qualified in their entirety by reference to the Stock Option Agreement.
Pursuant to the terms of the Stock Option Agreement, American has granted to
Valley an option (the "Option") to purchase up to 180,000 authorized but
unissued shares of American Common Stock, representing approximately 24.7%, of
the shares of American Common Stock which would be outstanding immediately
following the exercise of the Option, at a price of $10.00 per share. Valley
does not have any voting rights with respect to shares of American Common Stock
subject to the Option prior to exercise of the Option.
In the event that certain specifically enumerated Triggering Events (as
hereinafter described) occur, including but not limited to the acquisition of
beneficial ownership of at least 20% of the outstanding American shares by a
person or group other than Valley or an affiliate of Valley, Valley may exercise
the Option in whole or in part. In the event that a Triggering Event occurs and
the Merger is not consummated, Valley would recognize a gain on the sale of the
shares of American Common Stock received pursuant to the exercise of the Option
if such shares of American Common Stock were sold at prices exceeding $10.00 per
share.
Upon each exercise of the Option by Valley, each shareholder of American
has the preemptive right to purchase that proportion of shares of American
Common Stock to be issued to Valley which the par value of the shares of
American Common Stock held by such shareholder bears to the aggregate par value
of all shares of American Common Stock before such issuance. The Stock Option
Agreement provides that the purchase price to be paid by each shareholder of
American for each additional share of authorized but unissued American Common
Stock purchased shall equal the lesser of the exercise price and the book value
per share as of December 31, 1994.
The term "Triggering Event" is defined to mean the occurrence of any of the
following events: a person or group, as such terms are defined in the Exchange
Act and the rules and regulations thereunder, other than Valley or an affiliate
of Valley, (i) acquires beneficial ownership (as such term
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is defined in Rule 13d-3 promulgated under the Exchange Act) of at least
20% of the then outstanding shares of American Common Stock; (ii) enters into a
letter of intent or an agreement with American pursuant to which such person or
any affiliate of such person would (a) merge or consolidate, or enter into any
similar transaction, with American, (b) acquire all or a significant portion of
the assets or liabilities or American, or (c) acquire beneficial ownership of
securities representing, or the right to acquire the beneficial ownership or to
vote securities representing, 20% or more of the then outstanding shares of
American Common Stock; (iii) makes a filing with bank or thrift regulatory
authorities or publicly announces a bona fide proposal (a "Proposal") for (a)
any merger, consolidation or acquisition of all or a significant portion of all
the assets or liabilities of American or any other business combination
involving American, or (b) a transaction involving the transfer of beneficial
ownership of securities representing, or the right to acquire beneficial
ownership or to vote securities representing, 20% or more of the outstanding
shares of American Common Stock, and thereafter, if such Proposal has not been
publicly withdrawn (as defined below) at least 15 days prior to the Meeting and
American's shareholders fail to approve the Merger by the vote required by
applicable law at the Meeting; or (iv) makes a bona fide proposal and
thereafter, but before such Proposal has been publicly withdrawn, American
willfully breaches any of its covenants contained in the Agreement in a manner
that would materially interfere with its ability to consummate the Merger or
materially reduce the value of the transaction to Valley. The definition of
"Triggering Event" also includes (i) the solicitation of proxies in opposition
to approval of the Merger by any party owning more than 5% of the American
Common Stock; and (ii) the taking of any direct or indirect action by American
or any of its directors, officers or agents, to invite, encourage or solicit any
proposal which has as its purpose a tender offer for the shares of American
Common Stock, a merger, consolidation, plan of exchange, plan of acquisition or
reorganization of American, or a sale of shares of American Common Stock or any
significant portion of its assets or liabilities. Under the Stock Option
Agreement, a significant portion means 25% of the assets or liabilities of
American. "Publicly withdrawn" for purposes of the Stock Option Agreement means
an unconditional bona fide withdrawal of a Proposal coupled with a public
announcement of no further interest in pursuing such Proposal or acquiring any
controlling influence over American or in soliciting or inducing any other
person (other than Valley or any affiliate) to do so.
Valley may not sell, assign or otherwise transfer its rights and
obligations under the Stock Option Agreement in whole or in part to any person
or any group of persons other than to an affiliate of Valley, except upon the
occurrence of a Triggering Event. The Option may not be exercised (i) in the
absence of any required governmental or regulatory approval or consent necessary
for American to issue the American Common Stock subject to the Option or Valley
to exercise the Option, or prior to the expiration or termination of any waiting
period required by law, or (ii) so long as any injunction or other order, decree
or ruling issued by any federal or state court of competent jurisdiction is in
effect which prohibits the sale or delivery of the American Common Stock subject
to the Option.
The Stock Option Agreement further provides that after the occurrence of a
Triggering Event and upon receipt of a written request from Valley, American
shall prepare and file a registration statement with the Commission covering the
Option and such number of shares of American Common Stock subject thereto as
Valley shall specify in its request, and shall use its best efforts to cause
such registration statement to become effective; provided, however, that in no
event will Valley have the right to have more than one such registration
statement become effective.
The Stock Option Agreement terminates upon either the termination of the
Agreement or the consummation of the transactions contemplated thereby; provided
that if the Agreement terminates after the occurrence of a Triggering Event, the
Stock Option Agreement will not terminate until the later of 12 months following
the date of termination of the Agreement or the consummation of any proposed
transactions which constitute the Triggering Event.
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The ability of Valley to exercise the Option and to cause up to an
additional 180,000 shares of American Common Stock to be issued, and the related
preemptive rights of the shareholders of American, may be considered a deterrent
to other potential acquisitions of control of American because they are likely
to increase the cost of an acquisition of all of the shares of American Common
Stock that would be outstanding.
The exercise of the Option by Valley may also make "pooling-of-interests"
accounting treatment unavailable to a subsequent acquiror.
Rights of Dissenting American Shareholders
Pursuant to the provisions of Section 215a of Title 12 of the United States
Code ("Section 215a") and of the New Jersey Banking Act of 1948, as amended
(which provides that federal law shall govern with respect to this issue), any
shareholder of American has the right to dissent from the Merger and to obtain
payment of the value (determined as provided below) of his American Common Stock
if the Merger is consummated.
Any shareholder of American who contemplates exercising the right to
dissent is urged to read carefully the applicable provisions of Section 215a
which are attached as Appendix D to this Proxy Statement/Prospectus. The
following is a summary of the steps to be taken if the right to dissent is to be
exercised. This summary is qualified in its entirety by the full text of
Appendix D to this Proxy Statement/Prospectus.
Each step must be taken in the indicated order and in strict compliance
with the applicable provisions of Section 215a in order to perfect dissenter's
rights. Any deviations from such steps may result in the forfeiture of
dissenter's rights.
If the Merger is consummated, shareholders of American who vote against the
proposed Merger at the Meeting or give notice of dissent in writing (addressed
to Mr. Gerald Metzheiser, President, American Union Bank, 2784 Morris Avenue,
P.O. Box 279, Union, New Jersey 07083) at or prior to the Meeting (and do not
thereafter vote in favor of the Merger) will be entitled to receive from Valley
the value of their shares of American Common Stock as of the date of the
consummation of the Merger in cash upon written request made to Valley before
the 30th day after the consummation of the Merger, accompanied by the surrender
of their stock certificates. The value of the shares of any dissenting
shareholder shall be ascertained in accordance with the applicable provisions of
Section 215a, by an appraisal made by a committee composed of one person
selected by the majority vote of persons exercising such appraisal rights, one
person selected by the Board of Directors of Valley, and one person selected by
the two so selected. The valuation agreed upon by any two of the three
appraisers shall govern.
If the valuation so fixed shall not be satisfactory to a dissenting
shareholder who has requested payment, that shareholder may, within five days
after receiving notification of the appraised value, appeal to the OCC, which
shall cause a reappraisal to be made which shall be final and binding with
respect to the shares of the person appealing the appraisal. If, within 90 days
from the consummation of the Merger, for any reason one or more of the
above-mentioned appraisers is not selected or such appraisers fail to determine
the value of such shares, the OCC shall, upon written request of any interested
party, cause an appraisal to be made which shall be final and binding on all
parties. The expenses of the OCC in making the reappraisal or the appraisal, as
the case may be, shall be paid by Valley. Any stockholder of American who votes
against the proposed Merger, or who gives notice in writing at or prior to the
Meeting (addressed to Mr. Gerald Metzheiser, President, American Union Bank,
2784 Morris Avenue,
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P.O. Box 279, Union, New Jersey 07083) that he dissents, will be notified
in writing of the date of the consummation of the Merger.
The failure of a dissenting stockholder to vote against the Merger will not
constitute a waiver of appraisal rights if the stockholder gives written notice
of dissent (addressed to Mr. Gerald Metzheiser, President, American Union Bank,
2784 Morris Avenue, P.O. Box 279, Union, New Jersey 07083) at or prior to the
Meeting. Regardless of whether a stockholder records his or her dissent by
voting against the Merger or giving written notice of dissent, a dissenting
stockholder must also make written request to Valley to receive the value of his
or her shares at any time before 30 days after the consummation of the Merger.
Shareholders whose shares are represented by proxies that are returned signed
but unmarked as to voting instructions will be voted in favor of the Merger and,
unless revoked (as described in "Introductory Statement -- Solicitation, Voting
and Revocation of Proxies"), will have waived their right to dissent.
COMPARISON OF THE RIGHTS OF SHAREHOLDERS
UNDER THE BANKING ACT OF 1948 AND
THE NEW JERSEY BUSINESS CORPORATION ACT
American is a New Jersey commercial bank incorporated under the New Jersey
Banking Act of 1948, as amended (the "Banking Act"), and Valley is a business
corporation incorporated in New Jersey under the New Jersey Business Corporation
Act (the "BCA"). The rights of American shareholders are currently governed by
New Jersey banking law. At the Effective Time, each American shareholder will
become a shareholder of Valley and the rights of shareholders of Valley are
governed by New Jersey corporate law. The following is a comparison of certain
provisions of New Jersey corporate law and New Jersey banking law. This summary
does not purport to be complete and is qualified in its entirety by reference to
the Banking Act and the BCA, which statutes may change from time to time, and
the Certificate of Incorporation of Valley, which also may be changed.
Voting Requirements
The Banking Act generally provides that an amendment to the certificate of
incorporation of a New Jersey state chartered bank requires the affirmative vote
of two-thirds of the outstanding stock entitled to vote thereon. The Banking Act
provides that a New Jersey state chartered bank conversion into, merger into, or
consolidation with, a national bank or another New Jersey state chartered bank
requires the affirmative vote of two-thirds of the bank's capital stock entitled
to vote. American's Certificate of Incorporation does not contain greater vote
provisions than those required by the Banking Act.
Under the BCA, unless a greater vote is specified in the certificate of
incorporation, any amendment to a New Jersey corporation's certificate of
incorporation, the voluntary dissolution of the corporation, or the sale or
other disposition of all or substantially all of a corporation's assets
otherwise than in the ordinary course of business or the merger or consolidation
of the corporation with another corporation, requires in each case the
affirmative vote of a majority of the votes cast by shareholders of the
corporation entitled to vote thereon. Valley's Certificate of Incorporation
presently does not contain provisions specifying a greater vote in certain
circumstances.
Under the BCA, the holders of a class or series of shares are entitled to
vote as a class upon a proposed amendment to the certificate of incorporation,
whether or not entitled to vote thereon by the provisions of the certificate of
incorporation, if the amendment would exclude or limit their right to vote
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on any matter, limit or deny their preemptive rights, cancel or otherwise
adversely affect their dividends which have accrued but have not been declared,
create a new class or series having or convertible into shares having rights or
preferences superior to the class or increase the rights or preference of any
class or series. In addition, notwithstanding any provision of the certificate
of incorporation, the holders of a class or series of shares whose rights or
preferences would be subordinated or otherwise adversely affected by a proposed
amendment are entitled to vote as a class if the amendment would affect their
shares in the following manner: (i) decrease the par value; (ii) effect a
conversion, exchange or reclassification of their shares; (iii) effect a
conversion or exchange of any shares of another class or series into their class
or series; (iv) change the designation, preferences, limitations or relative
rights of their shares; (v) change the shares into a different number of shares,
or into the same number of another class or series; or (vi) divide their shares
into a series or determine the designation, preferences, limitation or relative
rights of any such series, or authorize the board to take any such action. The
Banking Act has no similar provisions regarding class voting on amendments to a
New Jersey state chartered bank's certificate of incorporation.
All shareholder voting rights of American are vested in the holders of the
American Common Stock. All shareholder voting rights of Valley are vested in the
holders of the Valley Common Stock.
Cumulative Voting
Under the Banking Act, there is no ability for a New Jersey state chartered
bank to provide for cumulative voting. Under the BCA, shareholders of a New
Jersey corporation do not have cumulative voting rights in the election of
directors unless the certificate of incorporation so provides, and Valley's
Certificate of Incorporation does not presently provide for cumulative voting.
Classified Board of Directors
Under the Banking Act, there is no ability for a New Jersey state chartered
bank to provide for a classified board of directors. The BCA permits a New
Jersey corporation to provide for a classified board in its certificate of
incorporation. The Certificate of Incorporation of Valley does not provide for a
classified Board of Directors; the entire Board is elected each year.
Rights of Dissenting Shareholders
Generally, shareholders of a New Jersey state chartered bank who dissent
from a conversion, merger or consolidation of the bank are entitled to appraisal
rights. The shareholders of American have statutory rights of appraisal with
respect to the Merger. See "The Proposed Merger -- Rights of Dissenting American
Shareholders."
Shareholders of a New Jersey corporation who dissent from a merger,
consolidation, sale of all or substantially all of the corporation's assets or
certain other corporate transactions are generally entitled to appraisal rights.
No statutory right of appraisal exists, however, where the stock of the New
Jersey corporation is (i) listed on a national securities exchange, (ii) is held
of record by not less than 1,000 holders, or (iii) where the consideration to be
received pursuant to the merger, consolidation or sale consists of cash or
securities or other obligations which, after the transaction, will be listed on
a national securities exchange or held of record by not less than 1,000 holders.
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Shareholder Consent to Corporate Action
The Banking Act provides that any action required or permitted to be taken
at a meeting of shareholders may be taken without a meeting if the shareholders
unanimously consent in writing.
Except as otherwise provided by the certificate of incorporation (and
Valley's Certificate of Incorporation presently is silent on this issue), the
BCA permits any action required or permitted to be taken at any meeting of a
corporation's shareholders, other than the annual election of directors, to be
taken without a meeting upon the written consent of shareholders who would have
been entitled to cast the minimum number of votes necessary to authorize such
action at a meeting of shareholders at which all shareholders entitled to vote
were present and voting. The annual election of directors, if not conducted at a
shareholders' meeting, may only be effected by unanimous written consent. Under
the BCA, a shareholder vote on a plan of merger or consolidation, if not
conducted at a shareholders' meeting, may only be effected by either: (i)
unanimous written consent of all shareholders entitled to vote on the issue with
advance notice to any other shareholders, or (ii) written consent of
shareholders who would have been entitled to cast the minimum number of votes
necessary to authorize such action at a meeting, together with advance notice to
all other shareholders.
Dividends
The Banking Act provides that a New Jersey state chartered bank may declare
and pay dividends on its outstanding stock so long as, following the payment of
such dividend, the capital stock of the bank will be unimpaired and the bank
will have a surplus of not less than fifty percent of its capital stock or, if
not, the payment of such dividend will not reduce the surplus of the bank.
American is subject to additional regulatory restrictions on its ability to pay
cash dividends. See "The Proposed Merger--Effective Time; Amendments;
Termination."
Unless there are other restrictions contained in its certificate of
incorporation (and Valley's Certificate of Incorporation presently contains
none), the BCA generally provides that a New Jersey corporation may declare and
pay dividends on its outstanding stock so long as the corporation is not
insolvent and would not become insolvent as a consequence of the dividend
payment. Because funds for the payment of dividends by Valley must come
primarily from the earnings of Valley's bank subsidiary, as a practical matter,
any restrictions on the ability of VNB to pay dividends act as restrictions on
the amount of funds available for the payment of dividends by Valley. At
September 30, 1994, Valley had $78.8 million available for shareholder
dividends. For a description of the regulatory restrictions on dividend payments
by VNB to Valley, see "The Proposed Merger -- Description of Valley Common Stock
- -- Dividend Rights."
By-laws
Under the Banking Act, the authority to adopt, amend, or repeal the by-laws
of a New Jersey state chartered bank is held exclusively by the bank's board of
directors.
Under the BCA, the board of directors of a New Jersey corporation has the
power to adopt, amend, or repeal the corporation's by-laws, unless such powers
are reserved in the certificate of incorporation to the shareholders (which
Valley's Certificate of Incorporation presently does not do).
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Preemptive Rights
Under the Banking Act and American's By-Laws, shareholders of American have
preemptive rights to subscribe for a pro rota portion of any additional shares
of American Common Stock issued by American from time to time. Under the BCA,
shareholders of New Jersey corporations have only such preemptive rights as may
be provided in the certificate of incorporation. Valley's Certificate of
Incorporation does not provide shareholders with preemptive rights.
Shareholder Protection Legislation
The New Jersey Shareholders Protection Act (the "NJSPA") prohibits certain
transactions involving an "interested shareholder" and a "resident domestic
corporation." An "interested shareholder" is one that is directly or indirectly
a beneficial owner of 10% or more of the voting power of the outstanding voting
stock of a resident domestic corporation. The NJSPA prohibits certain business
combinations between an interested shareholder and a resident domestic
corporation for a period of five years after the date the interested shareholder
acquired its stock, unless the business combination was approved by the resident
domestic corporation's board of directors prior to the stock acquisition date.
After the five-year period expires, the prohibition on certain business
combinations continues unless the combination is approved by the affirmative
vote of two-thirds of the voting stock not beneficially owned by the interested
shareholder, the combination is approved by the board prior to the interested
shareholder's stock acquisition date or certain fair price provisions are
satisfied. The Banking Act contains no provisions similar to those set forth in
the NJSPA.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF
AMERICAN UNION BANK
General
American's results of operations depend primarily on its net interest
income, which is the difference between interest income on its interest-earning
assets, such as loans and investment securities, and the interest paid on its
interest-bearing liabilities, such as its deposits. The amount of net interest
income is a function of the difference between the weighted average rate
received on interest-earning assets and the weighted average rate paid on
interest-bearing liabilities, as well as the average level of interest-bearing
assets as compared with that of interest-bearing liabilities. Net income is also
affected by the amount of non-interest income and by operating expenses.
In addition, American has followed a strategy of not paying any cash
dividends, although it paid a ten percent stock dividend to its shareholders on
June 3, 1994. American's ability to pay dividends is determined by the Board of
Directors in accordance with the Banking Act and, in some instances, further
restrictions imposed by the FDIC. For a discussion of restrictions affecting
American's ability to pay dividends, see "The Proposed Merger--Effective Time;
Amendments; Termination."
In May 1993, the Financial Accounting Standards Board approved Statement of
Financial Accounting Standards No. 115--"Accounting for Certain Investments in
Debt and Equity Securities" ("FAS 115"). FAS 115 addresses the valuation and
recording of debt and equity securities as held to maturity, trading and
available for sale. Under this standard, only debt and equity securities that
American has the positive intent and ability to hold to maturity would be
classified as held to maturity and reported at amortized cost (with no period to
period adjustments). A debt or equity security purchased and held principally
for the purpose of sale in the near term should be classified as a trading
security. Securities classified as trading are reported at fair value with
changes in fair value from period to period included in earnings. Debt and
equity securities not otherwise classified as held to maturity or trading should
be classified as available for sale. Securities that are available for sale are
reported at fair value with changes in the fair value from period to period
included as a separate component of equity. FAS 115 has been adopted by
American's Board of Directors, effective January 1, 1994. The
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implementation of FAS 115 may result in the volatility of capital amounts
reported over time and may negatively impact American's regulatory capital
position and earnings. Management of American expects that American's financial
statements for the year ended December 31, 1994 will be adversely affected by
losses from the sale of securities.
Financial Condition
Total assets were $55,039,000, $47,950,000 and $38,322,000 at September 30,
1994, December 31, 1993 and December 31, 1992, respectively. Growth in deposits
has provided virtually all of the funding for the growth in total assets during
the relevant periods. Deposits were $50,288,000, $43,364,000 and $34,037,000 at
September 30, 1994, December 31, 1993 and December 31, 1992, respectively.
American's total loan portfolio was $29,529,000 $24,956,000 and $19,339,000 at
September 30, 1994, December 31, 1993, and December 31, 1992, respectively. The
growth in the total loan portfolio was attributable to an increase in business
development activities.
In December 1993, American retained an investment advisor to manage a
significant portion of its investment portfolio and gave the investment advisor
discretion over that portion of its investment portfolio subject to American's
guidelines. As a result, American was required to classify a significant portion
of its investment portfolio as available for sale under FAS 115. In addition,
funds available from deposits not used to finance loans were used to purchase
securities classified as available for sale. In June 1994, the Board of
Directors of American retained a new investment advisor to help American manage
its own investment portfolio. This new investment advisor, which was not given
discretion over any portion of the investment portfolio, has a broader
investment philosophy which emphasizes management of liquidity, interest rate
risk, assets/liabilities and maximization of yields on the investment portfolio.
Investment securities were $688,000, $772,000 and $4,898,000 at September
30, 1994, December 31, 1993 and December 31, 1992, respectively. Mortgage-backed
securities were $3,694,000, $3,934,000 and $6,263,000 at September 30, 1994,
December 31, 1993 and December 31, 1992, respectively. The decreases from 1992
to 1993 reflect American's decision in December 1993 to retain an investment
advisor. As a result of this decision, a significant portion of investment
securities and mortgage-backed securities were sold or allowed to mature and the
proceeds reinvested in other securities which were classified as available for
sale.
Securities available for sale were $9,105,000 at December 31, 1993 as
compared to December 31, 1992 (when no assets were so classified). At September
30, 1994, securities available for sale were $17,106,000. The increase in
securities available for sale was principally a consequence of American's
decision in December 1993 to retain an investment advisor, which regularly
bought and sold securities in accordance with American's guidelines.
Overnight Federal funds sold totaled $1,385,000, $3,245,000 and $3,440,000
at September 30, 1994, December 31, 1993 and December 31, 1992, respectively.
Shareholders' equity was $4,276,000, $4,285,000 and $4,085,000 at September
30, 1994, December 31, 1993 and December 31, 1992, respectively. The decrease in
shareholders' equity during the first nine months of 1994 resulted in part from
unrealized losses on American's investment portfolio attributable to the
reclassification of a large portion of its investment portfolio as available for
sale under FAS 115 (with respect to which American maintains an allowance for
marketable debt and equity securities, which allowance equalled $165,000, net of
tax benefit, at September 30, 1994) and the current environment of increasing
interest rates (which affects the market value of securities). The continuation
of these factors is likely to have an adverse effect on American's shareholders'
equity in the future. See "--Comparison of Operating Results."
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Comparison of Operating Results
Net Income. Net income was $200,000 for the year ended December 31, 1993,
as compared to $150,000 for the year ended December 31, 1992, an increase of
33%. This change reflects an increase in net interest income, a gain on the sale
of securities and fee-based revenue. These increases were partially offset by an
increase in the provision for loan losses and non-interest expenses principally
attributable to American's expansion, including the opening of the new branch
office in Roselle Park and the relocation of the main office in Union Township
to larger facilities.
Net income was $156,000 (including a net loss on the sale of securities of
$173,000) for the nine months ended September 30, 1994. In comparison, net
income was $140,000 (including a net gain of $13,000 on the sale of securities)
for the comparable period in 1993. The $173,000 net loss during the nine months
ended September 30, 1994 resulted primarily from the sale of various securities
in American's portfolio during the first five months of 1994. See "--Financial
Condition."
In June 1994, American commenced an offering of its common stock. The
offering was undersubscribed and expired in October 1994, with no subscriptions
being accepted by American. As a result of the unconsummated offering, American
incurred a net loss of $98,000 in October 1994, primarily due to the write-off
of net expenses of $148,000 that were associated with the offering. In November
1994, American's net income was $71,000. The amount of the net loss for October
1994 and the net income for November 1994 were derived from unaudited financial
statements of American and reflect all adjustments (consisting of normal
recurring adjustments) that are, in the opinion of American's management,
necessary for a fair presentation of such amounts.
Net Interest Income. The results of operations of American depend to a
large extent on net interest income. Net interest income is the difference
between the interest income American earns on its loans, investments and other
interest-earning assets, and the interest cost of deposits and other
interest-bearing liabilities necessary to fund these interest-earning assets.
Interest rates are highly sensitive to many factors, including domestic and
international economic and political conditions and governmental monetary
policies. Conditions such as inflation, recession, unemployment, money supply,
international disorders and other factors beyond the control of American may
affect interest rates and adversely affect American's operations.
In general, the net interest income of a financial institution will be
benefited if the institution has a negative interest sensitivity gap during
periods of declining interest rates and a positive interest sensitivity gap
during periods of increasing interest rates, and vice-versa. While American
monitors its interest rate sensitivity and attempts to reduce the risk of a
significant decrease in net interest income caused by a change in interest
rates, American's negative interest sensitivity gap in the twelve-month period
following September 30, 1994 can be expected to adversely affect its net
interest income in the future if the current trend of increasing market rates of
interest continues. See "--Interest Rate Sensitivity and Liquidity".
Net interest income was $1,612,000 in 1993, an increase of $396,000 or 33%
over the 1992 level of $1,216,000. Net interest income was $1,648,000 for the
nine months ended September 30, 1994, an increase of $484,000 or 42% over the
net interest income of $1,164,000 for the nine months ended September 30, 1993.
These increases resulted primarily from the fact that total interest income
increased more than interest paid on deposits during the relevant periods.
American's cost of funds decreased to 2.89% in 1993 from 3.88% in 1992,
while the average yield on interest-earning assets decreased to 6.90% in 1993
from 7.69% in 1992, causing the interest rate spread to expand to 4.01% in 1993
from 3.81% in 1992. The cost of funds decreased to 2.54% for the
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nine-month period ended September 30, 1994 from 2.98% for the comparable
prior period, while the average yield on interest-earning assets decreased to
6.82% for the nine-month period ended September 30, 1994 as compared to 6.98% in
the comparable prior period. These changes caused the interest rate spread to
increase to 4.28% during the nine-month period ended September 30, 1994 from
4.00% during the nine-month period ended September 30, 1993. Although American's
cost of funds has decreased during the first nine months of 1994, generally an
institution's cost of funds will increase during a period of increasing market
rates of interest. Thus, if the current trend of increasing market rates of
interest continues, American's cost of funds is likely to increase, which is
likely to have an adverse effect on American's interest rate spread. See
"--Interest Rate Sensitivity and Liquidity".
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The following tables provide an analysis of American's net interest
income, net interest spread and net interest margin for the periods indicated:
<TABLE>
<CAPTION>
September 30, 1994 September 30, 1993
----------------------------------- ------------------------------------
Average Revenue/ Yield/ Average Revenue/ Yield/
Balance Expense Rate Balance Expense Rate
------- ------- ------- ------- ------- -------
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-Earning Assets:
Investment Securities ................. $20,909 $ 793 5.07% $14,235 $ 534 5.02%
Federal Funds Sold .................... 2,196 58 3.53% 2,413 51 2.83%
Loans ................................. 27,305 1,719 8.42% 20,152 1,337 8.87%
------- ------ ----- ------- ------ -----
Total Interest-Earning Assets ......... $50,410 $2,570 6.82% $36,800 $1,922 6.98%
======= ------ ----- ======= ------ -----
Interest-Bearing Liabilities:
Demand Accounts ....................... $15,867 $ 142 1.20% $ 9,031 $ 111 1.64%
Time Deposits ......................... 32,741 780 3.19% 24,961 647 3.47%
------- ------ ----- ------- ------ -----
Total Interest-Bearing
Liabilities ......................... $48,608 $ 922 2.54% $33,992 $ 758 2.98%
======= ------ ----- ======= ------ -----
Net Interest Income ................... $1,648 $1,164
====== ======
Net Interest Spread ................... 4.28% 4.00%
===== =====
Net Interest Margin ................... 4.37% 4.23%
===== =====
</TABLE>
<TABLE>
<CAPTION>
December 31, 1993 December 31, 1992
----------------------------------- ------------------------------------
Average Revenue/ Yield/ Average Revenue/ Yield/
Balance Expense Rate Balance Expense Rate
------- ------- ------- ------- ------- -------
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-Earning Assets:
Investment Securities ................. $14,658 $ 731 4.99% $10,050 $ 587 5.84%
Fed Funds Sold ........................ 2,641 76 2.88% 1,313 43 3.27%
Loans ................................. 20,982 1,835 8.75% 17,505 1,590 9.08%
------- ------ ----- ------- ------ -----
Total Interest-Earning
Assets .............................. $38,281 $2,642 6.90% $28,868 $2,220 7.69%
======= ------ ----- ======= ------ -----
Interest-Bearing
Liabilities:
Demand Accounts ....................... $ 9,597 $ 149 1.55% $ 6,119 $ 120 1.96%
Time Deposits ......................... 26,063 881 3.38 19,767 884 4.47%
------- ------ ----- ------- ------ -----
Total Interest-Bearing
Liabilities ......................... $35,660 $1,030 2.89% $25,886 $1,004 3.88%
======= ------ ----- ======= ------ -----
Net Interest Income ................... $1,612 $1,216
====== ======
Net Interest Spread ................... 4.01% 3.81%
===== =====
Net Interest Margin ................... 4.21% 4.21%
===== =====
</TABLE>
Interest Income. Total interest income for the year ended December 31, 1993
was $2,642,000, an increase of $422,000 or 19% over the total interest income of
$2,220,000 for the year ended December 31, 1992. Loans represent the largest
component of interest-earning assets. Interest and fees
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on loans during 1993 was $1,835,000, which is $245,000 or 15% higher than
interest and fees of $1,590,000 on loans during 1992. The increase in interest
income was primarily attributable to an increase in the average loans
outstanding to $20,982,000 in 1993 from $17,505,000 in 1992 and an increase in
average investment securities to $14,658,000 in 1993 from $10,050,000 in 1992.
Virtually the entire increase in the amount of loans outstanding was
attributable to an increase in commercial loans. The increase in interest income
was partially offset by a decline in yields for the affected periods. Interest
income on investments increased to $731,000 in 1993 from $587,000 in 1992,
principally as a result of higher average balances in 1993. The average yield on
American's overall investment portfolio decreased to 4.99% in 1993 from 5.84% in
1992, principally as a result of a general decline in interest rates.
Interest income increased 34% to $2,570,000 for the nine months ended
September 30, 1994, as compared to $1,922,000 for the nine months ended
September 30, 1993. This increase was largely attributable to an increase in
average interest-earning assets to $50,410,000 from $36,800,000 over the prior
nine-month period, the effects of which were partially offset by a decrease in
the average yield on interest-earning assets to 6.82% in 1994 from 6.98% in
1993.
Interest Expense. Total interest expense in 1993 was $1,030,000 as compared
to $1,004,000 in 1992. The total interest expense was relatively unchanged
(despite an increase in the average deposits of $9,774,000) primarily as a
result of a decline in the interest expense for savings and time deposits
(reflecting lower interest rates and the maturing and repricing of certificates
of deposits) and an increase in noninterest bearing business transaction
accounts as a percentage of American's overall deposit base.
Interest expense was $922,000 for the nine months ended September 30, 1994,
as compared to $758,000 in the prior comparable period. The increase was
primarily a consequence of a 43% increase in average deposits to $14,616,000,
which was offset by a decline in the yield on total interest-bearing liabilities
to 2.54% during the nine months ended September 30, 1994, from 2.98% in the
prior comparable period.
Allowance and Provision for Loan Losses; Non-Performing Loans. Regardless
of credit standards, there is a risk of loss in every loan portfolio. The
allowance for loan losses is a reserve established through charges to earnings
in the form of a provision for loan losses. Management of American establishes a
provision for loan losses based upon its assessment of the inherent risk in, and
the growth of, the loan portfolio. A review of the quality of the loan portfolio
is conducted internally by management of American on a quarterly basis with the
results presented to American's Board of Directors. This evaluation considers,
in addition to individual loan review, several factors including, but not
limited to, general economic conditions, loan portfolio composition, prior loan
losses, and an estimation by American's management of future potential losses.
The provision for loan losses was $150,000 in 1993 and $99,000 in 1992. As of
December 31, 1993, the allowance for loan losses was $292,000 or 1.17% of total
loans, compared to $201,000 or 1.04% of total loans as of December 31, 1992. The
principal reasons for the increase in the amount of the provision for loan
losses was the increase in the size of the loan portfolio and a decision by the
Board of Directors to increase the overall allowance for loan losses near the
end of 1993.
The provision for loan losses was $67,000 for the first nine months of
1994, as compared to $72,000 for the comparable prior period. As of September
30, 1994, the allowance for loan losses was $337,000 or 1.14% of total loans,
compared to $292,000 or 1.17% of total loans as of December 31,
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<PAGE>
1993. The increase in the amount of the allowance for loan losses was primarily
due to an increase in the amount of total loans.
The following table provides an analysis of American's allowance for loan
losses as of the dates indicated:(1)
<TABLE>
<CAPTION>
September 30, December 31,
------------- -----------------
1994 1993 1992
---- ---- ----
(Dollar amounts in thousands)
<S> <C> <C> <C>
Balance at beginning of period .......................... $292 $201 $157
----- ----- -----
Charge-offs (domestic):
Commercial, financial and agricultural ................ 20 50 25
Real estate--construction ............................. 0 0 0
Real estate--mortgage ................................. 0 0 0
Installment loans to individuals ...................... 0 0 20
Lease financing ....................................... 2 9 10
----- ----- -----
Recoveries (domestic): .................................. 0 0 0
----- ----- -----
Net chargeoffs .......................................... 22 59 55
----- ----- -----
Provisions charged to operations ........................ 67 150 99
----- ----- -----
Balance at end of period ................................ $337 $292 $201
===== ===== =====
Ratio of net charge-offs during the period to
average loans outstanding during the period ........... 0.11% 0.28% 0.31%
===== ===== =====
<FN>
- --------------------
(1) As of September 30, 1994, December 31, 1993 and December 31, 1992, American
had no foreign loans and no loans which were "troubled debt restructurings"
as defined in Financial Accounting Standards No. 15 -- "Accounting by
Debtors and Creditors for Troubled Debt Restructurings."
</FN>
</TABLE>
American places loans on non-accrual status when principal or interest is
past due 90 days or more, provided that American's Senior Loan Committee may
choose not to account for any such loan on a non-accrual basis if the
delinquency is technical in nature and there is a clear understanding of when
payment will be made. Loans for which payments are less than 90 days past due
are placed on non-accrual status where there exists serious doubt as to
collectibility. At September 30, 1994, American had 11 non-performing loans
aggregating $346,000, $169,000 of which were non-accrual loans and $177,000 of
which were accruing loans past due 90 days. This compares to nine non-performing
loans at December 31, 1993 aggregating $222,000, $200,000 of which were
non-accrual loans and $22,000 of which were accruing loans past due 90 days.
There were no commitments as of September 30, 1994 to lend additional funds to
borrowers whose loans were classified as non-performing.
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<PAGE>
The following table summarizes the composition of American's non-performing
assets as of the dates indicated:
<TABLE>
<CAPTION>
September 30, December 31,
------------- ----------------
1994 1993 1992
---- ---- ----
(Dollar amounts in thousands)
<S> <C> <C> <C>
Loans past due 90 days and still accruing ............. $177(1) $ 22 $ 0
Non-accrual loans ..................................... 169 200 75
---- ---- ----
Total non-performing loans .......................... $346 $222 $ 75
==== ==== ====
Non-performing loans to total loans ................... 1.17% 0.89% 0.39%
Non-performing loans to total assets .................. 0.63% 0.46% 0.20%
<FN>
- --------------------
(1) Includes loans which have matured and are required to be categorized as
non-performing. The loans continue to be current as to the payment of
interest.
</FN>
</TABLE>
The amount of gross interest income that would have been recorded for the
nine months ended September 30, 1994 if the non-accrual loans as of such date
had been current in accordance with their original terms and had been
outstanding throughout such period or since origination, if held for part of
such period, and the amount of interest income on such loans that was included
is net income for such period, is not material.
Except for loans accounted for on a non-accrual basis as of September 30,
1994, management of American is not aware of any significant possible credit
problems of borrowers which causes such management to have serious doubts as to
the ability of such borrowers to comply with their present loan repayment terms
and which may cause such loans to be accounted for on a non-accrual basis.
However, there can be no assurance that borrowers who currently comply with
their loan repayment terms will continue to do so or that any loans not
accounted for on a non-accrual basis as of September 30, 1994 will not
thereafter be accounted for on a non-accrual basis.
In addition, as of September 30, 1994, American had no interest bearing
assets (other than loans) that would be accounted for on a non-accrual basis or
that were accruing and were contractually past due 90 days or more.
Other Income. Although not as significant as net interest income in
influencing American's results of operations, other income of $315,000 and
$177,000 contributed to American's earnings for 1993 and 1992, respectively. The
gain on the sale of securities was $125,000 and $53,000 for 1993 and 1992,
respectively. Service charges, commissions and fees equalled $190,000 and
$124,000 for 1993 and 1992, respectively.
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<PAGE>
Other income was $45,000 for the nine months ended September 30, 1994, as
compared to $143,000 for the prior comparable period. The decrease was
attributable in part to net losses on the sale of securities of $173,000 during
the nine months ended September 30, 1994, as compared to net gains of $13,000
for the prior comparable period. This was offset by an increase to $218,000 for
service charges, commissions and fees earned during the nine-month period ended
September 30, 1994, from $130,000 for the prior comparable period.
Other Expense. Total other expense was $1,577,000 for 1993 and $1,144,000
for 1992, an increase of 38%. This increase was principally attributable to
American's expansion, including the opening of the Roselle Park branch office
and the relocation of the main office in Union Township. Salaries and employee
benefit expense increased by $174,000 or 35% from 1992 to 1993. This increase
was partially attributable to the hiring of an additional senior executive
officer and an increase in staffing related to the opening of the Roselle Park
branch office, as well as general salary increases. Occupancy expense increased
to $203,000 in 1993 from $126,000 in 1992, an increase of 61%. A portion of the
remaining increase in other expense was attributable to operating expense
associated with continuing asset growth.
Total other expense was $1,470,000 for the nine months ended September 30,
1994 as compared to $1,095,000 for the prior comparable period, an increase of
34%. Salaries and employee benefit expense increased by $164,000 or 34% for the
nine months ended September 30, 1993, as compared to the prior comparable
period. Occupancy expense increased to $201,000 for the nine months ended
September 30, 1994 from $126,000 for the prior comparable period, an increase of
60%. These increases were generally attributable to continuing expenses
associated with American's expansion, including the relocation of its main
office and the opening of an additional branch in Roselle Park.
INTEREST RATE SENSITIVITY AND LIQUIDITY
Interest Rate Sensitivity. American seeks to manage interest rate
sensitivity to avoid net interest margin risk and to enhance consistent growth
of net interest income through periods of changing rates. Interest rate risk
arises from mismatches between repricing or maturity characteristics of assets
and liabilities. More assets repricing or maturing than liabilities over a given
time frame is considered asset sensitive, and more liabilities repricing or
maturing than assets is considered liability sensitive. An asset sensitive
position will generally enhance earnings in a rising interest rate environment
and will negatively impact earnings in a falling interest rate environment, and
a liability sensitive position will generally enhance earnings in a falling
interest rate environment and negatively impact earnings in a rising interest
rate environment. American uses simulation analysis to determine the sensitivity
of net interest income to changes in interest rates. The simulations estimate
net interest income exposure based upon repricing mismatches, volume
projections, yield curves and spread relationships.
Interest rate sensitivity varies with different types of interest-earning
assets and interest-bearing liabilities. Overnight Federal funds (with respect
to which rates change daily) and loans which are tied to the prime rate differ
considerably from long-term investment securities and fixed-rate loans.
Similarly, time deposits are much more interest sensitive than regular savings
accounts.
The following table sets forth the contractual maturity or repricing
distribution of American's interest-earning assets and interest-bearing
liabilities as of September 30, 1994, American's interest
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<PAGE>
sensitivity gap (i.e., interest-sensitive assets less interest-sensitive
liabilities), the ratio of cumulative total interest-earning assets to
cumulative total interest-bearing liabilities, and American's cumulative
interest sensitivity gap ratio:
Interest Rate Sensitivity Analysis as of September 30, 1994
<TABLE>
<CAPTION>
Assets/Liabilities Subject To Within Within Within Within Within
Interest Rate Adjustment 3 Mos. 6 Mos. 1 Yr. 5 Yrs. 10 Yrs. Total
------------------------ ------ ------ ------ ------ ------ -----
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Loans & Leases:
Fixed rate by maturity................................... $ 815 $ 650 $ 1,415 $11,438 $1,410 $15,728
Floating rate by interval................................ 13,801 -- -- -- -- 13,801
Securities:
Fixed rate by maturity .................................. 899 843 3,139 13,759 2,187 20,827
Floating rate by interval................................ -- -- -- -- --
Federal Funds sold and other short-term investments........ 1,109 -- -- -- -- 1,109
------- ------ ------ ------- ------ -------
TOTAL INTEREST-EARNING ASSETS ....................... $16,624 $1,493 $4,554 $25,197 $3,597 $51,465
------- ------ ------ ------- ------ -------
Interest bearing DDA....................................... $ 7,341 -- -- 1,237 -- 8,578
Savings accounts........................................... 16,471 -- -- 1,848 -- 18,319
Time deposits $100M & over ................................ 922 619 400 100 -- 2,041
Time deposits under $100M.................................. 4,715 3,228 3,633 1,866 -- 13,442
------- ------ ------ ------- ------ -------
TOTAL INTEREST-BEARING LIABILITIES................... 29,449 3,847 $4,033 $ 5,051 -- $42,380
------- ------ ------ ------- ------ -------
NET POSITION (INTEREST SENSITIVITY GAP).................... (12,825) (2,354) 521 20,146 3,597
======= ====== ====== ======= ======
CUMULATIVE INTEREST SENSITIVITY GAP........................ (12,825) (15,179) (14,658) 5,488 9,085
======= ====== ====== ======= ======
RATIO OF CUMULATIVE GAP TO TOTAL ASSETS.................... (23.3%) (27.6%) (26.6%) 10.0% 16.5%
======= ====== ====== ======= ======
</TABLE>
The amount of American's interest-sensitive liabilities (generally,
deposits with maturities of one year or less) have in the past not matched the
amount of its interest-sensitive assets (assets which reprice based on an index
or have short term maturities.). This imbalance is referred to as an interest
sensitivity gap, and measures the potential impact of changes to earnings based
on changes in the general level of interest rates. In general, the net interest
income of a financial institution will be benefited if the institution has a
negative interest sensitivity gap during periods of declining interest rates and
a positive interest sensitivity gap during periods of increasing interest rates.
Likewise, net interest income generally will be adversely affected if a
financial institution has a positive interest sensitivity gap during periods of
declining interest rates or a negative interest sensitivity gap during periods
of increasing interest rates. American's negative interest sensitivity gap
during the twelve-month period following September 30, 1994 can be expected to
adversely affect its net interest income in the future if the current trend of
increasing market rates of interest continues.
For a number of reasons, the table set forth above reflecting American's
interest rate sensitivity analysis is not a complete picture of the possible
effect of interest rate changes in American's net interest income. First,
changes in the general level of interest rates will not affect all categories of
assets and liabilities equally or simultaneously. Second, the table represents a
one-day position; variations occur daily as American adjusts
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<PAGE>
its interest sensitivity throughout the year. Third, assumptions must be made to
construct such a table. For example, there are several savings products
categorized as interest sensitive in the 30 day interval; however, they may be
adjusted less frequently than changes in the leading rate indicators. Fourth,
the re-pricing distribution of interest-sensitive assets may not be indicative
of the liquidity of those assets. Finally, since this table is based on
contractual maturities, it does not include estimates of early principal
payments on mortgage and installment loans.
Liquidity. American's liquidity is a measure of its ability to fund loans,
withdrawals of deposits and other cash outflows in a cost effective manner.
American's principal source of funds is deposits and, to a lesser extent,
scheduled amortization and prepayments of loan principal. In addition, American
has available other sources of credit, including borrowings, sales and
maturities of investment securities and funds provided by operations. While loan
payments and maturing investments are relatively predictable sources of funds,
deposit flows are greatly influenced by general interest rates, economic
conditions and competition. See "Business of American Union Bank -- Deposits and
Other Sources of Funds."
American's primary source of cash from financing activities during the
first nine months of 1994, as well as during 1993 and 1992, was from the net
increase in deposits. American's total deposits equalled $50,288,000,
$43,364,000 and $34,037,000 as of September 30, 1994, December 31, 1993 and
December 31, 1992, respectively.
Cash provided by operating activities has been relatively insignificant
compared to cash provided by financing activities. The principal portion of cash
flow provided from operating activities has come from net income before
provision for loan losses. The absence of significant cash flows from operations
requires American to manage the net changes in retail deposit levels and loan
demand to provide adequate liquidity.
To further support and enhance its liquidity position, American seeks to
establish lines of credit with other banks. Presently, American has a $1,000,000
unsecured line of credit with each of two banks, all of which remains available
as of September 30, 1994. In addition, American may borrow from the Federal Home
Loan Bank of New York ("FHLB"), subject to certain limitations. Based on the
level of American's assets at September 30, 1994, American's FHLB borrowing
limit was $2,751,000, all of which remained available at that date.
It has been American's goal to invest the deposits acquired from financing
activities in its loan portfolio as quickly as is practicable, consistent with
sound lending standards and without sacrificing liquidity. The increase in funds
provided by deposit inflows has been more than sufficient to provide for
American's lending demand. During 1993 and 1992, the net increase in total loans
amounted to $5,617,000 and $4,532,000, respectively. The net increase in total
loans from December 31, 1993 to September 30, 1994 equalled $4,573,000. At
September 30, 1994, American had outstanding commitments to make loans totaling
$1,339,000 and approved but unused lines of credit extended to customers
totaling $7,083,000. Funds provided by deposits which could not be invested in
loans are generally invested in U.S. Treasury and Agency obligations with
varying maturities and in overnight Federal funds sold. See "Business of
American Union Bank -- Investment Portfolio."
American has an Asset/Liability Management Committee ("ALCO") which is
comprised entirely of members of senior management of American. This committee,
which advises the Investment Committee of American's Board of Directors, is
responsible for reviewing interest rate risk and evaluating future liquidity
needs over various time periods. Its primary goals are to maintain an
appropriate balance between interest-earning assets and interest-bearing
liabilities and to assure adequate liquidity. The ALCO meets at least quarterly
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<PAGE>
with American's financial advisors who present simulations, analyses and reports
and who help the ALCO to determine strategies and changes in the structure and
repricing characteristics of items reflected on American's balance sheet to keep
pace with economic conditions, regulatory requirements and American's planning
framework. See "Business of American Union Bank -- Investment Portfolio."
Capital
At September 30, 1994, American's shareholders' equity totaled $4,276,000,
as compared to $4,285,000 at December 31, 1993. This decrease is primarily
attributable to net realized and unrealized losses in American's investment
portfolio partially offset by earnings from core operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
American Union Bank -- Financial Condition."
The FDIC has adopted minimum risk-based and leverage capital guidelines.
The minimum required ratio of qualifying total capital to risk-weighted assets
(including certain off-balance sheet items, such as standby letters of credit)
is 8%, of which at least 4% must consist of Tier 1 capital. Tier 1 capital
consists of common equity and qualifying perpetual preferred stock (less certain
intangibles). Total capital consists of Tier 1 capital, mandatory convertible
debt securities, qualifying subordinated debt, other preferred stock and a
portion of the allowance for loan losses up to 1.25% of total calculated assets.
The minimum required leverage ratio (Tier 1 capital to average total assets) is
3% for banking organizations that meet certain specified criteria, including
that they have the highest regulatory rating. All other banking organizations
are required to maintain a leverage ratio of 3% plus an additional cushion of at
least 100 to 200 basis points. Minimum leverage ratios for each bank are
evaluated through the ongoing regulatory examination process.
The following table sets forth the dollar amounts and capital ratios
required to be maintained by American under the FDIC's applicable regulations
and American's actual and pro-forma dollar amounts of capital and ratios of
total capital to total regulatory or risk-weighted assets, as applicable, at
September 30, 1994:
<TABLE>
<CAPTION>
Regulatory
Minimum Actual
------------------- ------------------
<S> <C> <C> <C> <C>
Tier I Risk Based Capital......... $1,344,000 4.00% $4,276,000 12.87%
Tier I Leverage Capital........... $2,230,000 5.00%(1) $4,276,000 7.77%
Total Risk Based Capital.......... $2,687,000 8.00% $4,613,000 13.89%
<FN>
- ----------------------
(1) As noted in the discussion above, an institution's minimum Tier 1 leverage
capital ratio can range from 3% to 5%. At September 30, 1994, American's
Tier 1 leverage capital ratio was 7.77%.
</FN>
</TABLE>
American has always sought to maintain a capital position sufficient to
support its business needs and exceed all regulatory requirements.
Impact of Inflation
The financial statements and related financial data and notes presented
herein have been prepared in accordance with GAAP, which require the measurement
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<PAGE>
of financial position and operating results in terms of historical dollars,
without considering changes in the relative purchasing power of money over time
due to inflation.
Unlike most industrial companies, virtually all of the assets and
liabilities of American are monetary in nature. As a result, interest rates have
a more significant impact on American's performance than the effects of general
price levels. Although interest rates generally move in the same direction as
inflation, the magnitude of such changes varies. The possible effect of
fluctuating interest rates is discussed more fully elsewhere. See "--Interest
Rate Sensitivity and Liquidity."
BUSINESS OF AMERICAN UNION BANK
General
American, which is a commercial bank chartered under the laws of New
Jersey, engages in the business of commercial and consumer banking. As a
community bank, American offers a wide range of services to individuals, small
businesses and not-for-profit organizations, including demand, savings and time
deposits and commercial and consumer/installment loans, principally in Union
County and southern Essex County, New Jersey. American, which commenced
operations on June 11, 1990, conducts its operations through its main office
located in Union Township, New Jersey and through one branch office located in
Roselle Park, New Jersey (which was opened in September 1993). American is a
non-member bank (i.e. it is not a member of the Federal Reserve System) and its
deposits are insured up to applicable legal limits by the FDIC. At September 30,
1994, American had total assets, deposits and shareholders' equity of
$55,039,000, $50,288,000 and $4,276,000, respectively.
Since its inception, American has experienced significant growth primarily
due to an increase in deposits. American's strategy has been to pursue deposit
growth as the primary source of funds for its lending and investment activities
while at the same time maintaining a strong capital position. American has
sought to encourage this growth by providing a high level of personal service as
well as an attractive array of deposit programs.
American's business is subject to periodic fluctuations based on general
national and local economic conditions. The fluctuations are neither predictable
nor controllable and may have materially adverse consequences on the operation
and financial condition of American even if other favorable events occur.
American's financial condition is especially subject to fluctuations in the
economic conditions prevailing in New Jersey where both of its branches are
located.
Lending
American engages in a variety of lending activities which are primarily
categorized as commercial and consumer/installment lending. Commercial lending
(consisting of commercial real estate, commercial business, construction and
other commercial lending) is currently American's main lending focus. Sources to
fund American's loans are derived primarily from deposits. See "-- Deposits and
Other Sources of Funds;" "Management's Discussion and Analysis of Financial
Condition and Results of Operations of American Union Bank -- Interest Rate
Sensitivity and Liquidity."
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<PAGE>
American presently generates all of its loans in the State of New Jersey
with a significant portion in Union and southern Essex counties. At September
30, 1994, American's loan portfolio totaled $29,529,000 and its lending limit to
one borrower under applicable regulations was $641,400, or 15% of capital.
Commercial and consumer/installment loans comprised 59% and 41%, respectively,
of American's loan portfolio.
Loans are generated through American's marketing efforts, its present
customers, walk-in customers and referrals. American has been able to maintain a
high overall credit quality through the establishment and observance of prudent
lending policies and practices. American has established a written loan policy
for each of its categories of loans. These loan policies have been adopted by
American's Board of Directors and are reviewed periodically. While secured loans
in excess of $200,000 (and unsecured loans in excess of $10,000) generally must
be approved by American's Board of Directors or its Loan and Executive
Committee, management of American has the authority to approve such loans under
certain enumerated circumstances. All loans to directors (and their affiliates)
must be approved by American's Board of Directors.
In managing the growth of its loan portfolio, American has focused on: (i)
the application of prudent underwriting criteria; (ii) establishing internal
lending limits below American's legal lending authority; (iii) active
involvement by American's senior management and Board of Directors in the loan
approval process; (iv) active monitoring of loans to ensure that repayments are
made in a timely manner and to identify potential problem loans; and (v) review
of select aspects of American's loan portfolio by its independent auditors.
Commercial Loans. American's commercial loan portfolio consists primarily
of commercial business loans to small and medium-sized businesses and to
individuals for business purposes, commercial real estate loans, construction
loans and other commercial loans. At September 30, 1994, American's commercial
business loans totaled $4.4 million, its commercial real estate loans totaled
$6.6 million, its construction loans totaled $1.5 million and its other
commercial loans totaled $5.0 million.
Commercial business loans are usually made to finance the purchase of
inventory or new or used equipment and to provide short-term working capital.
These loans are generally secured, although they are sometimes made on an
unsecured basis. As of September 30, 1994, the average commercial business loan
was $57,000. Commercial business loans are usually secured by the real property,
receivables, inventory, equipment, and/or other assets of the borrower. To
further enhance its security position, American also generally requires personal
guarantees in connection with these loans. These loans are made on both a line
of credit and a fixed-term basis and normally mature in one to five years.
Commercial real estate loans are made to acquire new property or to
refinance currently owned property. These loans are typically related to
commercial business loans and are secured by the underlying real estate used in
the businesses, and/or real or personal property of the principal(s), of the
borrower. American usually offers those loans on both a fixed and a variable
interest rate basis with a three to five year maturity and a 15 to 20 year
amortization schedule.
Construction loans are made by American on a short-term basis for both
residential and non-residential properties and are secured by real and personal
property. Construction loans are usually for a term of 12 months. Funds for
construction loans are disbursed as phases of construction are completed.
Commercial loans that exceed established lending limits are accomplished
through participations principally with other commercial banks. See "-- Deposits
and Other Sources of Funds."
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<PAGE>
American has established written underwriting guidelines for commercial
loans. In granting commercial loans, American looks primarily to the borrower's
cash flow as the principal source of loan repayment. Collateral and personal
guarantees may also be sources of repayment. A credit report and/or a Dun &
Bradstreet report is typically obtained on all prospective borrowers and a real
estate appraisal is required on all commercial real estate loans. Generally, the
maximum loan to value ratio on commercial real estate loans is 75%. All
appraisals are performed by a state licensed or certified independent appraiser.
American virtually always requires the personal guarantees of the principals of
corporations to which it lends.
Commercial loans are often larger and may involve greater risks than other
types of loans. Because payments on such loans are often dependent on successful
operation of the property or business involved, the borrowers' ability to repay
such loans may be subject to adverse changes in the real estate market or the
economy. Construction loans involve additional risks because funds are advanced
based on the security of the project under construction. American seeks to
minimize these risks through its underwriting guidelines. There can be no
assurances, however, that American will be successful in its efforts to minimize
these risks.
Consumer and Installment Loans. American offers a full range of consumer
and installment loans. Consumer loans consist of automobile loans, personal
loans, home equity lines of credit and loans, and overdraft protection. In
addition, American from time to time purchases loans from financial service
companies. These loans comply with American's underwriting guidelines and are
generally for terms no greater than five years. At September 30, 1994, the
aggregate principal amount of loans purchased from financial service companies
was $6,676,000. While American generally seeks to be indemnified for losses
arising in connection with purchased loans (including the right to require the
seller to repurchase delinquent loans), American has purchased loans from The
Money Store, Inc. which limit such recourse. Recourse in connection with such
purchased loans is limited to the right to require The Money Store, Inc., during
any consecutive twelve-month period, to repurchase loans that are delinquent 90
days in an amount not to exceed the lesser of $1,000,000 or 10% of the then
outstanding loans. American had required The Money Store, Inc. to repurchase a
loan with a balance of $93,000 in December 1992 and a loan with a balance of
$94,993 in September 1994. At September 1994, the outstanding principal amount
of loans purchased from The Money Store, Inc. equalled $1,158,000. See "--
Certain Transactions of American Union Bank." In addition, American has
purchased leases generally without recourse to the seller. At September 30,
1994, there were $740,000 of such leases outstanding.
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<PAGE>
The following table summarizes the components of the loan portfolio of
American as of September 30, 1994 and as of December 31, 1993 and 1992:(1)
<TABLE>
<CAPTION>
September 30, December 31,
------------- -------------------------
1994 1993 1992
------------- -------- --------
(Dollar amounts in thousands)
<S> <C> <C> <C>
Commercial business............ $ 4,410 $ 3,791 $ 2,113
Commercial real estate......... 6,564 4,865 2,820
Construction................... 1,546 1,144 775
Other.......................... 5,003 4,538 4,612
------- ------- -------
Total commercial............ 17,523 14,338 10,320
Consumer and other............. 11,952 10,563 8,869
Mortgage....................... 54 55 150
------- ------- -------
Total loans.................... 29,529 24,956 19,339
Allowance for loan losses(2)... (337) (292) (201)
Deferred loan fees........... (45) (30) (43)
------- ------- -------
Net loans...................... $29,147 $24,634 $19,095
======= ======= =======
<FN>
- ----------------------
(1) Except as indicated, there is no concentration of any type of loans made by
American which exceeds 10% of its total loans.
(2) For a discussion of the allowance for loan losses, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
American Union Bank -- Comparison of Operating Results."
</FN>
</TABLE>
Investment Portfolio
American's investment portfolio consists primarily of U.S. Treasury and
U.S. Agency securities. Government regulations limit the type and quality of
instruments in which American may invest its funds. See "Supervision and
Regulation of American Union Bank."
American has established a written investment policy which is reviewed
annually. The investment policy identifies investment criteria and states
specific objectives in terms of risk, interest rate sensitivity and liquidity.
American's primary investment goal is to acquire the best mix of securities for
its investment portfolio in terms of quality, term and marketability. Since
-65-
<PAGE>
December 1993, American has retained certain independent investment advisors to
manage or assist American in managing its investment portfolio. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of American Union Bank -- Interest Rate Sensitivity and Liquidity; --
Financial Condition."
American also has an Investment Committee which is comprised of its
President and certain members of its Board of Directors. This Investment
Committee is responsible for reviewing interest rate risk and evaluating future
liquidity needs over various time periods. Not less frequently than quarterly,
the Investment Committee meets with the ALCO and American's financial advisor to
examine, among other things, future maturities and forecasts of the amounts of
deposits and loans, and to establish guidelines for securities to be purchased
and sold. American's President and another senior executive officer of American
will then purchase or sell securities in accordance with these guidelines. The
Investment Committee monitors American's investment portfolio to ensure that its
guidelines are being complied with. The Board of Directors also reviews
American's investment portfolio on a monthly basis and reviews minutes from the
meetings of the Investment Committee. At September 30, 1994, the market value of
American's combined investment portfolio was $21 million with an average
duration of 2.3 years. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations of American Union Bank -- Interest Rate
Sensitivity and Liquidity."
The following tables present the mix of the investment portfolio (which
includes securities available for sale, investment and mortgage-backed
securities held to maturity and FHLB stock) along with the book and market
values of those components as of September 30, 1994 and 1993 and as of December
31, 1993 and 1992:
<TABLE>
<CAPTION>
September 30, 1994 September 30, 1993
--------------------- --------------------
Amortized Market Amortized Market
Cost Value Cost Value
--------- ------- --------- --------
(Dollar amounts in thousands)
<S> <C> <C> <C> <C>
U.S. Treasury Securities.................... $15,374 $15,217 $ 2,520 $ 2,657
U.S. Agency Mortgage-Backed Securities...... 5,871 5,367 12,661 12,655
Other....................................... 663 658 1,101 1,101
------- ------- ------- -------
Total Investment Securities................. $21,908 $21,242 $16,282 $16,413
======= ======= ======= =======
December 31, 1993 December 31, 1992
--------------------- --------------------
Amortized Market Amortized Market
Cost Value Cost Value
--------- ------- -------- -------
(Dollar amounts in thousands)
U.S. Treasury Securities.................... $ 9,605 $ 9,598 $ 4,513 $ 4,555
U.S. Agency Mortgage-Backed Securities...... 3,934 3,829 6,263 6,239
Other....................................... 469 473 385 372
------- ------- ------- -------
Total Investment Securities................. $14,008 $13,900 $11,161 $11,166
======= ======= ======= =======
</TABLE>
-66-
<PAGE>
Deposits and Other Sources of Funds
Deposits are the primary source of funds used by American for lending and
other general business purposes. In addition to deposits, American may derive
additional funds from principal repayments on loans, the sale of loans and
investment securities and borrowings from other financial institutions and the
FHLB (which lends to the member institutions within its assigned region). Loan
amortization payments have historically been a relatively predictable source of
funds. The level of deposit liabilities can vary significantly and is influenced
by prevailing interest rates, money market conditions, general economic
conditions and competition. See "Management's Discussion and Analysis of
Financial Condition and Results of Operation of American Union Bank -- Interest
Rate Sensitivity and Liquidity." To date, American has not derived a material
portion of its funds from sources other than deposits and principal repayments
from loans.
American's deposits consist of checking accounts, regular savings accounts,
money market accounts and certificates of deposit. American also offers
Individual Retirement Accounts. Deposits are obtained from individuals,
partnerships, corporations and unincorporated businesses in American's market
area. American attempts to control the flow of deposits primarily by pricing its
accounts to remain generally competitive with other financial institutions in
its market area, although American does not necessarily seek to match the
highest rates paid by competing institutions.
At September 30, 1994, deposits totaled $50,288,000 million, or 91% of
American's total assets. Approximately 69% of American's deposit base consisted
of demand deposit and savings accounts. Time deposits of $100,000 or more
totaled $2,041,000 at September 30, 1994, of which $922,000 mature within three
months from such date, $1,019,000 mature between three and 12 months from such
date and $100,000 mature between 12 and 60 months from such date.
At September 30, 1994, American's five largest customers accounted for
approximately 11.8% of its average deposits. The loss of one or more of these
customers or a substantial decrease in the amount of their deposits (without
offsetting additional deposits from new or existing customers) could have an
adverse impact upon American. Although there can be no assurances, management of
American believes that American's present liquidity position would mitigate the
effect of any loss of any of these deposits.
The following table presents American's deposit base by branch:
<TABLE>
<CAPTION>
As of September 30, 1994 As of December 31, 1993
--------------------------- ---------------------------
Percent of Percent of
Deposits Total Deposits Deposits Total Deposits
----------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
Union Township...... $45,172,000 90% $41,111,000 95%
Roselle Park........ 5,116,000 10% 2,253,000 5%
----------- ---- ----------- ----
$50,288,000 100% $43,364,000 100%
=========== ==== =========== ====
</TABLE>
-67-
<PAGE>
Competition
American experiences substantial competition in attracting and retaining
deposits and in making loans. American competes with commercial banks, savings
banks and savings and loan associations, as well as with regional and national
insurance companies and non-bank banks, regulated small loan companies and local
credit unions, regional and national issuers of money market funds and corporate
and government borrowers. The primary factors affecting competition for deposits
are interest rates, the quality and range of financial services offered and the
convenience of office locations and office hours. The primary factors in
competing for loans are interest rates, loan origination fees and the quality
and range of lending services offered. Other factors which affect competition
include the general availability of lendable funds and credit, general and local
economic conditions and the quality of service provided to customers.
In New Jersey generally, and in American's Union and southern Essex County
market in particular, large commercial banks, as well as savings banks and
savings and loan associations, dominate the banking and thrift industries.
American's principal market, Union Township, Union County, is highly saturated
with at least an estimated 30 offices of other financial institutions servicing
a population of approximately 50,000. By virtue of their larger capital, asset
size and/or reserves, many such institutions have substantially greater lending
limits and other resources than American. In addition, many such institutions
are empowered to perform a wider range of services, including trust services,
than American is empowered to perform.
In addition to having established deposit bases and loan portfolios, these
institutions, particularly the large regional commercial and savings banks, have
the ability to finance extensive advertising campaigns and to allocate
considerable resources to locations and products perceived as profitable. These
institutions also have larger lending limits (ceilings on credit a bank may
provide a single customer that are linked to the institution's capital) and, in
certain cases, lower funding costs (the price a bank must pay for deposits and
other borrowed monies used to make loans to customers). American's legal lending
limit to one borrower or group of affiliated borrowers is 15 percent of
American's capital, which lending limit equalled $641,400 as of September 30,
1994. Accordingly, the size of loans which many of American's competitors with
greater capitalization may offer is larger than American's. Although American
has engaged in loan participations with other commercial banks for loans which
would otherwise have been in excess of American's legal lending limits, no
assurance can be given that such participations will continue to be available on
terms which are favorable to American and its customers.
Employees
As of September 30, 1994, American had 21 full-time and four part-time
employees. American's employees do not have a collective bargaining agreement.
American believes its relationship with its employees to be satisfactory.
Legal Proceedings
American is not presently involved in any legal proceedings which
American's management believes to be material to its financial condition or
results of operations. As the nature of American's business involves providing
certain financial services, the collection of loans and the enforcement and
-68-
<PAGE>
validity of mortgages and other liens, American is plaintiff or defendant in
various legal proceedings which may be considered as arising in the ordinary
course of its business.
Premises
American leases its 3,000 square foot principal office in Union Township,
New Jersey. The current monthly rental of $3,738 is subject to periodic
adjustment. The lease expires February 28, 1998 with renewal options available
through 2018. In the event that additional rental space becomes available in the
building in which American's principal office is located, American has an option
to rent any portion of such space which is not rented by one certain other
tenant of that office building (which tenant has a right of first refusal).
In addition, American leases its 2,500 square foot branch office in Roselle
Park, New Jersey. The current monthly rental of $2,417 is subject to periodic
adjustment. The lease expires May 31, 1996 with renewal options available
through 2008.
SUPERVISION AND REGULATION OF AMERICAN UNION BANK
Banking remains a closely regulated industry. Consequently, banks incur
additional tangible costs, such as the cost of compliance (e.g., record-keeping
and reporting), and intangible costs imposed by vulnerability to changes in
federal and state regulatory policy.
As a New Jersey chartered non-member commercial bank, American is subject
to regulation and examination by, and the supervision and control of, the New
Jersey Commissioner of Banking. As an FDIC-insured institution, American is also
subject to regulation and examination by, and the supervision and control of,
the FDIC. Additionally, American is subject to numerous federal, state, and
local laws regulating the taking of deposits, the extension of credit, and the
provision of banking services. American must, for example, comply with capital
adequacy requirements imposed upon FDIC-insured banks as further discussed
herein. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations of American Union Bank -- Capital." American is subject to
federal regulations governing disclosure of credit terms to borrowers (Federal
Truth-In-Lending Act), discrimination among credit customers (Equal Credit
Opportunity Act) and permissible credit collection practices (Fair Credit
Reporting Act). Additional federal legislation to which American is subject
includes rules concerning customers' rights and liabilities arising from the use
of automated teller machines (Regulation E of the Electronic Funds Transfer Act)
and regulations limiting the "float" American may maintain on check deposits.
Since 1989, Congress passed two major pieces of banking legislation, the
Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"),
and the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"). FIRREA and FDICIA have significantly changed the thrift and
commercial banking industries in an effort to protect deposit insurance funds
and depositors by, among other things, revising and limiting the types and
amounts of investment financial institutions may make, significantly increasing
minimum regulatory capital requirements and broadening the scope of powers of
federal bank and thrift regulators over financial institutions and affiliated
persons. These laws, and the resulting implementing regulations, have subjected
American and the banking industry to extensive regulation, supervision and
examination by the FDIC. This has resulted in increased deposit insurance
-69-
<PAGE>
premiums and increased administrative, professional and compensation expenses
incurred to comply with the increased number of new regulations and policies.
The regulatory structure created gives the regulatory authorities extensive
authority in connection with their supervisory and enforcement activities and
examination policies. Further, Congress could enact future legislation that
could significantly affect the powers, authority and operations of American.
Under the Community Reinvestment Act, as amended ("CRA"), as implemented by
FDIC regulations, a bank has a continuing and affirmative obligation, consistent
with its safe and sound operation, to help meet the credit needs of its entire
community, including low-income and moderate-income neighborhoods. CRA does not
establish specific lending requirements or programs for financial institutions
and it does not limit an institution's discretion to develop the types of
products and services that it believes are best suited to its particular
community, provided they are consistent with CRA. CRA requires the FDIC to
assess an institution's record of meeting the credit needs of its community and
to take such record into account in its evaluation of certain applications by
such institution. Effective July 1, 1990, CRA, as amended by FIRREA, requires
public disclosure of an institution's CRA rating and requires that the FDIC
provide a written evaluation of an institution's CRA performance utilizing a
four-tiered descriptive rating system. An institution's CRA rating is taken into
account in determining whether to grant charters, branches and other deposit
facilities, relocations, mergers, consolidations and acquisitions. Poor
performance may be the basis for denying an application. In addition, under
applicable regulations a bank having a less than satisfactory rating is not
entitled to participate on the bid list for RTC and FDIC offerings. In August
1994, American's CRA rating was upgraded from "needs to improve" to
"satisfactory."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT OF AMERICAN UNION BANK
The Board of Directors of American owns approximately 42% of the shares of
American Common Stock. Pursuant to the Agreement, the directors of American have
agreed to vote their shares for the Merger. Consequently, the affirmative vote
of approximately an additional 24 2/3% of the shares of American Common Stock
will be required for approval of the Merger. The executive officers of American
who are not also directors own approximately less than 1% of the shares of
American Common Stock and American's counsel, Sills Cummis Zuckerman Radin
Tischman Epstein & Gross, P.A., together with certain individual members of that
firm, owns approximately 23% of the shares of American Common Stock (the Board
of Directors and executive officers of American and such counsel and their
respective affiliates are sometimes hereinafter referred to as the "Control
Group"). The Control Group, through its direct and indirect beneficial ownership
of approximately 66% of the shares of American Common Stock, controls the
affairs of American. See "Introductory Statement -- Vote Required; Shares
Entitled to Vote."
-70-
<PAGE>
The following table sets forth information, as of September 30, 1994, with
respect to the American Common Stock ownership of each person known by American
to own beneficially more than 5% of the shares of American's Common Stock, and
the ownership of all directors and all directors and executive officers as a
group:
<TABLE>
<CAPTION>
Shares Beneficially Owned(1)(2)
-------------------------------
Name of
Beneficial Owner(3) Number Percent
- ---------------------- ------ -------
<S> <C> <C>
Alan Turtletaub(4).................. 77,905 14.2%
Frank Manna(5)...................... 30,614 5.6%
Allen Tucker(6)..................... 29,264 5.3%
Abraham Schlussel................... 24,344 4.4%
Joseph Vizzoni(7)................... 24,145 4.4%
Morton Dear......................... 15,405 2.8%
Gerald F. Metzheiser(8)............. 11,693 2.1%
Bruce Schonbraun(9)................. 10,965 2.0%
Anthony Medici(10).................. 2,750 *
Ervin Samuels(11)................... 2,475 *
Saul Lupin.......................... 1,336 *
George J. Albanese.................. 110 *
All Directors and Executive
Officers of American as a group
(15 persons)...................... 232,325 42.2%
Sills Cummis Zuckerman
Radin Tischman Epstein &
Gross, P.A. and Members of
the Firm(12)...................... 128,618 23.4%
Total Counsel and Directors
and Executive Officers of
American.......................... 360,943 65.6%
======= =====
<FN>
- -----------------------------
* Represents less than 1% of the class outstanding.
(1) Reflects the payment of a ten percent stock dividend on June 3, 1994 to
shareholders of record as of May 10, 1994.
(2) Based on information provided to American.
(3) The business address of Sills Cummis Zuckerman Radin Tischman Epstein &
Gross, P.A. is One Riverfront Plaza, Newark, New Jersey 07102. The business
address of each other beneficial owner is 2784 Morris Avenue, Union, New
Jersey 07083.
</FN>
</TABLE>
-71-
<PAGE>
(4) Includes 26,950 shares owned by The Money Store, Inc., which Mr. Turtletaub
and certain family members control, and 550 shares owned by certain family
members. Mr. Turtletaub disclaims beneficial ownership of the shares owned
by family members.
(5) Includes 30,504 shares owned by Margaret Darrin over which Mr. Manna
holds power of attorney. Mr. Manna disclaims beneficial ownership of these
shares.
(6) Includes 5,505 shares owned by certain family members of Mr. Tucker.
Mr. Tucker disclaims beneficial ownership of these shares.
(7) Includes 14,163 shares owned by certain family members; 2,200 shares
owned by The Joseph Jake Vizzoni Trust of which a family member is trustee
and 2,200 shares owned by The Palma K.M. Vizzoni Trust of which a family
member is trustee.
(8) Includes 2,752 shares owned by certain family members. Mr. Metzheiser
disclaims beneficial ownership of these shares.
(9) Includes 8,281 shares owned by certain family members.
(10) Includes 2,640 shares owned by Mr. Medici and certain family members.
(11) Includes 2,200 shares owned by Mr. Samuels and certain family members.
Mr. Samuels disclaims beneficial ownership of 1,100 of these shares.
(12) Includes 26,337 shares owned by certain family members as to which
beneficial ownership is disclaimed. In addition, the shares owned by Sills
Cummis Zuckerman Radin Tischman Epstein & Gross, P.A. and its Members are
pledged in connection with a loan made to such firm.
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<PAGE>
CERTAIN TRANSACTIONS OF AMERICAN UNION BANK
As part of its efforts to invest excess funds generated from deposits not
otherwise loaned or invested in securities, American has from time to time
purchased loans from The Money Store, Inc., a company controlled by Mr.
Turtletaub and members of his family. American has made purchases ranging from
$85,000 to $1,121,000 on nine occasions between November 21, 1991 and
December 31, 1992.
Loan prices are negotiated on an individual basis and American is under no
obligation to purchase any loans. American owned an aggregate principal amount
of $1,158,000, $1,759,000 and $2,987,000 of these loans as of September 30,
1994, December 31, 1993 and December 31, 1992, respectively. American has the
right to require The Money Store, Inc. to repurchase, in each consecutive
twelve-month period, loans that are delinquent 90 days in an amount not to
exceed the lesser of $1,000,000 or 10% of the then outstanding loans. American
had required The Money Store, Inc. to repurchase a loan with a balance of
$93,000 in December 1992 and a loan with a balance of $94,993 in September 1994
(which $94,993 loan is less than 10% of the outstanding loans purchased from The
Money Store, Inc. as of September 30, 1994). Morton Dear, a shareholder and
director of American, serves as Executive Vice President and Chief Financial
Officer of The Money Store, Inc. Mr. Anthony Medici, a shareholder and director
of American, also serves as an Executive Vice President of The Money Store, Inc.
The law firm of Sills Cummis Zuckerman Radin Tischman Epstein & Gross,
P.A., which together with certain of its members, beneficially owns
approximately 23% of the American Common Stock, was paid $74,425 and $45,964 in
1993 and 1992, respectively, in connection with legal services rendered to
American. In addition, as of September 30, 1994, American has paid such firm
$126,860 in 1994 for legal services provided to American, including those
provided in connection with American's unsuccessful common stock offering
earlier in 1994. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations of American Union Bank -- Comparison of
Operating Results" and "Security Ownership of Certain Beneficial Owners and
Management of American Union Bank."
The following table sets forth indebtedness in excess of $10,000 of certain
directors and executive officers of American and their respective affiliates as
of September 30, 1994 (including contingent indebtedness such as letters of
credit and guarantees).
<TABLE>
<CAPTION>
Original Amount
Name Type Affiliation Balance Outstanding
- ---------- --------------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Manna Commercial Loan Director $500,000 $481,781
Samuels Commercial Loan Director $250,000 $ 20,000
Schlussel Letter of Credit Director $ 70,000 0
Schonbraun Guarantee Director $213,000 $196,253
Vizzoni Commercial Loans Director $ 45,000 $ 32,728
Tucker Letter of Credit Director $ 95,000 0
</TABLE>
This indebtedness (other than the guarantee) is secured by mortgages and/or
security interests in real or personal property owned by these persons or their
affiliates. In addition, the assets of two directors have been hypothecated to
secure all or a portion of loans made to unrelated parties (which loans had an
aggregate principal amount of $520,000 outstanding as of September 30, 1994).
-73-
<PAGE>
In addition, four members of the law firm of Sills Cummis Zuckerman Radin
Tischman Epstein & Gross, P.A. have each borrowed in excess of $10,000 from
American through loans or home equity lines of credit. As of September 30, 1994,
the aggregate outstanding principal amount of these loans was approximately
$311,000. One of these loans (which has an outstanding principal amount of
approximately $250,000) is unsecured; all others are secured by mortgages or
other security interests. Availability under existing home equity lines of
credit was approximately $195,000 as of September 30, 1994.
Management of American believes that the transactions set forth above are
on terms no less favorable than those involving unaffiliated parties.
SHAREHOLDER PROPOSALS
If the Merger has not been consummated prior to American's 1995 Annual
Meeting, which is usually held on the fourth Thursday in April, any proposal
which an American shareholder wishes to have included in the proxy solicitation
materials of American to be used in connection with the 1995 Annual Meeting must
be presented to American no later than [_______________].
LEGAL OPINION
Certain legal matters relating to the issuance of the shares of Valley
Common Stock offered hereby and certain tax consequences of the Merger will be
passed upon by Pitney, Hardin, Kipp & Szuch, counsel to Valley.
EXPERTS
The financial statements of American as of December 31, 1993 and 1992 and
for each of the years in the three-year period ended December 31, 1993 included
in this Proxy Statement/Prospectus have been so included in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants, and
have been included in this Proxy Statement/Prospectus upon the authority of said
firm as experts in accounting and auditing. The report of KPMG Peat Marwick LLP
for the year ended December 31, 1993 refers to a change in the method of
accounting for income taxes. KPMG Peat Marwick LLP will have a representative at
the Meeting who will have an opportunity to make a statement if such
representative desires, and who will be available to respond to appropriate
questions.
The consolidated financial statements of Valley as of December 31, 1993 and
1992 and for each of the years in the three-year period ended December 31, 1993
have been incorporated by reference herein in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, and are incorporated
by reference herein upon the authority of said firm as experts in accounting and
auditing. The report of KPMG Peat Marwick LLP covering the December 31, 1993
consolidated financial statements refers to a change in accounting for income
taxes.
-74-
<PAGE>
INDEX TO FINANCIAL STATEMENTS OF AMERICAN UNION BANK
Page
----
Independent Auditors' Report ............................................ F-1
Statements of Condition as of December 31, 1993 and 1992 ................ F-2
Statements of Operations for the years ended December 31,
1993, 1992 and 1991 ................................................... F-3
Statements of Stockholders' Equity for the years ended
December 31, 1993, 1992 and 1991 ...................................... F-4
Statements of Cash Flows for the years ended
December 31, 1993, 1992 and 1991 ...................................... F-5
Notes to financial statements for the years ended
December 31, 1993, 1992 and 1991 ...................................... F-6
Statements of Condition as of September 30, 1994
(unaudited) and December 31, 1993 ..................................... FF-1
Statements of Operations for the nine-month periods
ended September 30, 1994 and 1993 (unaudited) ......................... FF-2
Statements of Stockholders' Equity for the nine-month
periods ended September 30, 1994 and 1993 (unaudited) ................. FF-3
Statements of Cash Flows for nine-month periods
ended September 30, 1994 and 1993 (unaudited) ......................... FF-4
Notes to the financial statements for the nine-month periods
ended September 30, 1994 and 1993 (unaudited) ......................... FF-5
-75-
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
American Union Bank:
We have audited the accompanying statements of condition of American Union Bank
as of December 31, 1993 and 1992, and the related statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1993. These financial statements are the
responsibility of the Bank's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Union Bank at December
31, 1993 and 1992, and the results of its operations and its cash flows for each
of the years in the three-year period ended December 31, 1993 in conformity with
generally accepted accounting principles.
As discussed in note 1 to the financial statements, the Bank adopted the
provisions of the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," as of January 1,
1993.
KPMG PEAT MARWICK LLP
Short Hills, New Jersey
February 3, 1994, except as to
notes 1(j) and 15, which
are as of April 28, 1994
F-1
<PAGE>
<TABLE>
<CAPTION>
AMERICAN UNION BANK
Statements of Condition
December 31, 1993 and 1992
(Dollars in Thousands)
Assets 1993 1992
---- ----
<S> <C> <C>
Cash and cash equivalents:
Cash and due from banks (note 2) ..................................... $ 2,151 $ 1,040
Federal funds sold ................................................... 3,245 3,440
Other short-term investments ......................................... 3,314 3,297
------- -------
8,710 7,777
Securities available for sale (market value $9,106 at December 31,
1993) (note 3)........................................................... 9,105 -
Investment securities held to maturity (market value $768 and $4,927
at December 31, 1993 and 1992, respectively) (note 4) ................... 772 4,898
Mortgage-backed securities (market value $3,829 and $6,239 at
December 31, 1993 and 1992, respectively) (note 5) ...................... 3,934 6,263
Federal Home Loan Bank stock .............................................. 197 -
Loans (notes 6 and 12):
Commercial ........................................................... 14,338 10,320
Mortgage ............................................................. 55 150
Consumer and other ................................................... 10,563 8,869
Deferred loan fees ................................................... (30) (43)
Allowance for loan losses ............................................ (292) (201)
------- -------
Net loans .......................................... 24,634 19,095
------- -------
Accrued interest receivable ............................................... 201 217
Fixed assets, net (note 7) ................................................ 365 38
Other assets .............................................................. 32 34
------- -------
Total assets ....................................... $47,950 $38,322
======= =======
Liabilities and Stockholders' Equity
Liabilities:
Deposits (note 9):
Non-interest bearing demand ....................................... $ 5,727 $ 3,569
Interest bearing demand ........................................... 7,894 7,359
Certificates of deposit ........................................... 12,620 9,528
Savings and other ................................................. 17,123 13,581
------- -------
Total deposits ...................................... 43,364 34,037
Accounts payable and accrued liabilities ............................. 301 200
------- -------
Total liabilities ................................... 43,665 34,237
------- -------
Stockholders' equity (notes 11 and 15):
Common stock, par value $5 per share. Authorized 1,000,000
shares; issued and outstanding 500,000 shares in 1993
and 1992 ............................................................ 2,500 2,500
Additional paid-in capital ............................................ 2,500 2,500
Accumulated deficit ................................................... (715) (915)
------- ------
Total stockholders' equity .......................... 4,285 4,085
Commitments and contingencies (notes 8 and 13)
Total liabilities and stockholders' equity .......... $47,950 $38,322
======= =======
See accompanying notes to financial statements.
</TABLE>
F-2
<PAGE>
<TABLE>
<CAPTION>
AMERICAN UNION BANK
Statements of Operations
Years ended December 31, 1993, 1992 and 1991
(Dollars in Thousands, Except Share Data)
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Interest income:
Interest and fees on loans .......................... $1,835 $1,590 $ 795
Interest on short-term investments .................. 50 105 58
Interest on securities available for sale ........... 10 - 591
Interest on investments - taxable ................... 671 482 -
Interest on Federal funds sold ...................... 76 43 92
------- ------ ------
Total interest income ............................. 2,642 2,220 1,536
Interest expense (note 9) ............................. 1,030 1,004 829
------- ------- ------
Net interest income ............................... 1,612 1,216 707
Provision for loan losses (note 6) .................... 150 99 122
------- ------- ------
Net interest income after pro-
vision for loan losses .......................... 1,462 1,117 585
------- ------- ------
Other income:
Gain on sale of securities, net ..................... 125 53 -
Service charges, commissions and fees ............... 90 124 30
------- ------- ------
Total other income ................................ 315 177 30
------- ------- ------
Other expenses:
Salaries and employee benefits ...................... 677 503 456
Professional services ............................... 140 102 103
Occupancy (note 8) .................................. 203 126 155
Data processing ..................................... 214 190 148
Advertising ......................................... 63 33 49
Insurance ........................................... 103 80 50
Other operating expenses ............................ 177 110 79
------- ------- ------
Total other expenses .............................. 1,577 1,144 1,040
------- ------- ------
Net income (loss) before income
tax expense and extraor-
dinary item ..................................... 200 150 (425)
Income tax expense (note 10) .......................... - 51 -
------- ------- -----
Net income (loss) before extraor-
dinary item ..................................... 200 99 (425)
Extraordinary item - utilization of net op-
erating loss carryforwards (note 10) ................ - 51 -
------- ------- -----
Net income (loss) ................................. $ 200 $ 150 $ (425)
======= ======= ======
Net income (loss) per share:
Before extraordinary item ........................... $.36 $.18 $(.77)
Extraordinary item .................................. - .09 -
---- ---- -----
$.36 $.27 $(.77)
==== ==== =====
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
AMERICAN UNION BANK
Statements of Stockholders' Equity
Years ended December 31, 1993, 1992 and 1991
(Dollars in Thousands)
Addi-
tional Total
Common stock paid- Accumu- stock-
---------------- in lated holders'
Shares Amount capital deficit equity
------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C>
Balance at Dec. 31, 1990 ................. 500,000 $2,500 $2,500 $ (640) $4,360
Net loss ................................. - - - (425) (425)
------- ------ ------ ------- ------
Balance at Dec. 31, 1991.................. 500,000 2,500 2,500 (1,065) 3,935
Net income ............................... - - - 150 150
Balance at Dec. 31, 1992 ................. 500,000 2,500 2,500 (915) 4,085
Net income ............................... - - - 200 200
------- ------ ------ ------- ------
Balance at Dec. 31, 1993.................. 500,000 $2,500 $2,500 $ (715) $4,285
======= ====== ====== ======= ======
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
AMERICAN UNION BANK
Statements of Cash Flows
Years ended December 31, 1993, 1992 and 1991
(Dollars in Thousands)
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ...................................................... $ 200 $ 150 $ (425)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Provision for loan losses ....................................... 150 99 122
Depreciation .................................................... 77 78 107
Net amortization (accretion) on investment
securities, securities available for
sale and mortgage-backed securities ........................... 27 (12) (18)
Amortization of deferred loan fees .............................. (76) (32) (25)
Gain on sales of securities, net ................................ (125) (53) -
Change in operating assets and liabilities:
Decrease (increase) in accrued interest
receivable .................................................. 16 (12) (122)
Decrease (increase) in other assets ........................... 2 (3) (25)
Increase in accounts payable and accrued
liabilities ................................................. 101 - 56
------ ------ -------
Net cash provided by (used in)
operating activities ............................... 372 215 (330)
------ ------ -------
Cash flows from investing activities:
Maturities of investment securities ................................... 4,871 2,855 3,959
Proceeds from sale of securities available for sale ................... 10,861 - -
Proceeds from sales of investment securities .......................... 516 2,061 -
Purchase of securities available for sale ............................. (9,097) - -
Purchase of investment securities ..................................... (3,500) (5,246) (2,997)
Purchase of mortgage-backed securities ................................ (7,430) (5,945) (1,353)
Principal received from mortgage-backed securities .................... 1,227 1,296 339
Purchase of Federal Home Loan Bank stock .............................. (197) - -
Increase in loans, net ................................................ (3,461) (3,136) (8,535)
Purchase of loans ..................................................... (2,152) (1,414) (2,399)
Purchase of fixed assets .............................................. (404) (3) (4)
------ ------ -------
Net cash used in investing
activities ......................................... (8,766) (9,532) (10,990)
------ ------ -------
Cash flows from financing activities - increase in
deposits, net ............................................................ 9,327 13,968 8,090
------ ------ -------
Increase (decrease) in cash
and cash equivalents ............................... 933 4,651 (3,230)
Cash and cash equivalents at beginning of year ............................. 7,777 3,126 6,356
------ ------ -------
Cash and cash equivalents at end of year ................................... $8,710 $7,777 $ 3,126
====== ====== =======
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
AMERICAN UNION BANK
Notes to Financial Statements
December 31, 1993, 1992 and 1991
(1) Summary of Significant Accounting Policies
A description of the significant accounting policies which are followed by
American Union Bank (the Bank) in preparing and presenting these financial
statements is presented below:
(a) Organization
The Bank, which operates in a competitive environment, is a commercial
bank which provides a full range of banking services to individuals
and corporate customers in New Jersey. The Bank is regulated by state
and Federal agencies and is subject to periodic examinations by those
regulatory authorities.
(b) Basis of Financial Statement Presentation
The financial statements have been prepared in conformity with
generally accepted accounting principles. In preparing the financial
statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the
date of the statement of condition and revenues and expenses for the
year. Actual results could differ significantly from those estimates.
Material estimates that are particularly susceptible to significant
change in the near term relate to the determination of the allowance
for loan losses. In connection with the determination of the allowance
for loan losses, management utilizes independent appraisals for
significant properties.
(c) Statements of Cash Flows
For purposes of reporting cash flows, cash and cash equivalents
include cash on hand, cash due from banks, Federal funds sold, mutual
funds and commercial paper which have maturities of three months or
less. Generally, Federal funds are sold for one-day periods. At
December 31, 1993, the Bank has invested $2,130,000 in Federal funds
sold with one correspondent bank.
During 1993, the Bank transferred approximately $2,236,000 and
$8,513,000 of investment securities and mortgage-backed securities,
respectively, to securities available for sale. These transfers are
considered noncash investing activities for purposes of the statement
of cash flows.
Interest paid during the years ended December 31, 1993, 1992 and 1991
totaled $1,004,000, $1,012,000 and $784,000, respectively.
F-6
<PAGE>
AMERICAN UNION BANK
Notes to Financial Statements, Continued
(1) Summary of Significant Accounting Policies, cont.
(d) Securities Available for Sale
Management determines the appropriate classification of securities at
the time of purchase. If management has the intent and the Bank has
the ability at the time of purchase to hold securities until maturity
or on a long-term basis, they are classified as investment securities.
Securities to be held for indefinite periods of time and not intended
to be held to maturity or on a long-term basis are classified as
available for sale. Gains or losses on sales of securities available
for sale are based upon the specific identification method.
Securities available for sale are carried at the lower of cost or
market, using the aggregate method as an adjustment to income.
(e) Investment Securities and Mortgage-backed Securities
Securities are stated at cost less principal reductions, if any, and
adjusted for amortization of premiums and accretion of discounts which
are recognized as adjustments to interest income over the terms of the
respective securities. Management determines the appropriate
classification of securities at the time of purchase. If management
has the intent and the Bank has the ability at the time of purchase to
hold securities until maturity or on a long-term basis, they are
classified as investments and carried at amortized historical cost.
Securities to be held for indefinite periods of time and not intended
to be held to maturity are classified as available for sale and
carried at the lower of cost or market value. Securities held for
indefinite periods of time include securities that management intends
to use as part of its asset liability strategy and that may be sold in
response to changes in interest rates, resultant prepayment risk and
other factors. Gains or losses are recognized using the specific
identification method at the time the securities are sold. Any
permanent decline in market value is recorded when incurred.
Mortgage-backed securities are stated at cost less principal
reductions and adjusted for amortization of premiums and accretion of
discounts, which are recognized as adjustments to interest income over
the term of the respective security. The Bank has the ability to hold
mortgage-backed securities to maturity and generally intends to hold
such mortgage-backed securities to maturity.
(f) Loans
Loans are stated at their principal amount outstanding. Interest
income on loans is accrued and credited to interest income when
earned. The accrual of income on loans is discontinued when certain
factors
F-7
<PAGE>
AMERICAN UNION BANK
Notes to Financial Statements, Continued
(1) Summary of Significant Accounting Policies, cont.
(f) Loans, cont.
indicate reasonable doubt as to collectibility of such income, and the
interest income on such loans is recognized only when subsequently
collected. Loan origination fees and certain direct loan origination
costs are deferred and recognized over the life of the loan as an
adjustment to yield using a method which approximates the interest
method.
(g) Allowance for Loan Losses
Losses on loans are charged to the allowance for loan losses.
Additions to this allowance are made by recoveries of loans previously
charged off and by a provision charged to expense. The determination
of the balance of the allowance for loan losses is based on an
analysis of the loan portfolio, economic conditions and other factors
warranting recognition. In addition, various regulatory agencies, as
an integral part of their examination process, periodically review the
allowance for loan losses. Such agencies may require the Bank to
recognize additions to the allowance based on their judgments about
information available to them at the time of their examination.
(h) Fixed Assets
Fixed assets are stated at cost, net of accumulated depreciation and
amortization, which is provided for using the straight-line method
based upon useful lives of five years for furniture and fixtures and
two to five years for leasehold improvements.
(i) Income Taxes
The Bank has adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" (Statement 109). The adoption of
Statement 109 changes the Bank's method of accounting for income taxes
from the deferred method required under Accounting Principles Board
Opinion No. 11 (APB 11) to the asset and liability method under
Statement 109.
(j) Net Income (Loss) Per Share
Net income (loss) per share is computed by dividing net income (loss)
by the weighted average number of shares outstanding. For the years
ended December 31, 1993, 1992 and 1991 the average shares outstanding
were 549,970. The weighted average number of shares outstanding for
each period has been adjusted to reflect the 10% stock dividend
declared in April 1994.
F-8
<PAGE>
AMERICAN UNION BANK
Notes to Financial Statements, Continued
(2) Cash
The Bank is required to maintain a cash reserve balance at its
correspondent bank, which averaged $22,400 for the years ended December 31,
1993, 1992 and 1991.
(3) Securities Available for Sale
Securities available for sale at December 31, 1993 are summarized as
follows (in thousands):
<TABLE>
<CAPTION>
Gross Gross
unreal- unreal-
Amortized ized ized Market
cost gains losses value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Government and agency obligations ....... $ 9,105 $ 1 - $ 9,106
===== === === =======
</TABLE>
Securities available for sale represent securities to be held for
indefinite periods of time and not intended to be held to maturity or on a
long-term basis.
During the year ended December 31, 1993, proceeds from the sale of
securities available for sale of $10,861,000 were received, resulting in
gross gains of $122,000 and gross losses of $10,000. There were no sales of
securities available for sale during the years ended December 31, 1992 and
1991.
(4) Investment Securities Held to Maturity
At December 31, 1993 and 1992, the amortized cost and market value of
investment securities held to maturity are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
1993
--------------------------------------------
Gross Gross
Amor- unreal- unreal-
tized ized ized Market
cost gains losses value
----- ----- ------ -------
<S> <C> <C> <C> <C>
U.S. Treasury securities ..................... $ 500 $ - $ 8 $ 492
Other securities ............................. 272 4 - 276
----- --- --- -----
$ 772 $ 4 $ 8 $ 768
===== === === =====
</TABLE>
F-9
<PAGE>
AMERICAN UNION BANK
Notes to Financial Statements, Continued
(4) Investment Securities Held to Maturity, cont.
<TABLE>
<CAPTION>
1992
--------------------------------------------
Gross Gross
Amor- unreal- unreal-
tized ized ized Market
cost gains losses value
---- ----- ------ ------
<S> <C> <C> <C> <C>
U.S. Treasury securities .................... $ 4,513 $ 42 $ - $ 4,555
Other securities ............................ 385 - 13 372
------- ---- --- -------
$ 4,898 $ 42 $ 13 $ 4,927
======= ==== ==== =======
</TABLE>
Investment securities held to maturity represent securities that management
has the intent and the Bank has the ability to hold until maturity or on a
long-term basis. Investment securities at December 31, 1993 mature as
follows (in thousands):
Esti-
Amor- mated
tized market
cost value
---- ------
One to five years ............... $ 772 $ 768
===== =====
Gross gains in the amount of approximately $13,000 and $53,000 were
realized on sales of investment securities for the years ended December 31,
1993 and 1992, respectively. There were no gross losses on the sale of
investment securities during 1993 and 1992. There were no sales of
investment securities during the year ended December 31, 1991.
(5) Mortgage-backed Securities
Mortgage-backed securities at December 31, 1993 and 1992 are summarized as
follows (in thousands):
<TABLE>
<CAPTION>
1993
---------------------------------------------
Gross Gross
Carry- unreal- unreal-
ing ized ized Market
value gains losses value
------- ----- ------ ------
<S> <C> <C> <C> <C>
FHLMC participation certificates ................... $ 1,985 - $ 63 $ 1,922
FNMA participation certificates .................... 1,949 - 42 1,907
------- -- ----- -------
$ 3,934 - $ 105 $ 3,829
======= == ===== =======
</TABLE>
F-10
<PAGE>
AMERICAN UNION BANK
Notes to Financial Statements, Continued
(5) Mortgage-backed Securities, cont.
<TABLE>
<CAPTION>
1992
----------------------------------------------
Gross Gross
Carry- unreal- unreal-
ing ized ized Market
value gains losses value
----- ----- ------ ------
<S> <C> <C> <C> <C>
FHLMC participation certificates ................... $ 3,205 $ 34 $ 17 $ 3,222
FNMA participation certificates .................... 2,012 - 43 1,969
FHLB term note ..................................... 1,046 2 - 1,048
------- ---- ---- -------
$ 6,263 $ 36 $ 60 $ 6,239
======= ==== ==== =======
</TABLE>
Securities with an amortized cost of approximately $500,000 were pledged to
secure certain public fund deposits as required by law.
There were no sales of mortgage-backed securities during the years ended
December 31, 1993, 1992 and 1991.
(6) Allowance for Loan Losses
Transactions in the allowance for loan losses for the years ended December
31, 1993 and 1992 are as follows (in thousands):
1993 1992
---- ----
Balance at beginning of year ............. $ 201 $ 157
Provision for loan losses ................ 150 99
Charge-offs .............................. (59) (55)
----- -----
Balance at end of year ................... $ 292 $ 201
===== =====
As of December 31, 1993 and 1992, loans in the amount of $200,000 and
$74,699, respectively, were on a nonaccrual status.
(7) Fixed Assets
Fixed assets at December 31, 1993 and 1992 consist of the following (in
thousands):
1993 1992
---- ----
Leasehold improvements ......................... $ 345 $ 115
Furniture, fixtures and equipment .............. 337 163
----- -----
Total fixed assets ........................ 682 278
Less accumulated depreciation .................. 317 240
----- -----
Net carrying value ........................ $ 365 $ 38
===== =====
F-11
<PAGE>
AMERICAN UNION BANK
Notes to Financial Statements, Continued
(8) Leases
The Bank leases three locations, two of which are used for operating
branches under operating leases with terms of two to five years with
renewable options to the Bank. In addition, the Bank has a two-year
operating lease for an automobile. The future minimum lease payments for
operating leases with initial or remaining terms in excess of one year from
December 31, 1993 are as follows:
1994 ................. $ 99,000
1995 ................. 74,000
1996 ................. 59,000
1997 ................. 45,000
1998 ................. 22,000
=======
Rental expense was approximately $106,000, $37,000 and $35,000 for the
years ended December 31, 1993, 1992 and 1991, respectively.
(9) Deposits
The time remaining to maturity of certificates of deposit of $100,000 or
more as of December 31, 1993 and 1992 is summarized as follows (in
thousands):
1993 1992
---- ----
Three months or less .......................... $ 603 $ 211
Over three months but within six months ....... 214 312
----- -----
Total ................................ $ 817 $ 523
===== =====
Interest expense on these certificates of deposit amounted to approximately
$15,000 and $60,000 for the years ended December 31, 1993 and 1992,
respectively.
(10) Federal and State Income Taxes
As discussed in note 1, the Bank adopted Statement 109 as of January 1,
1993. At January 1, 1993 and December 31, 1993, the Bank has recorded a
valuation allowance equal to the net deferred tax asset due to the lack of
taxable income in the statutory carryback period and the operating history
of the
F-12
<PAGE>
AMERICAN UNION BANK
Notes to Financial Statements, Continued
(10) Federal and State Income Taxes, cont.
Bank. Therefore, there is no amount recorded as a cumulative effect of
change in accounting for income taxes as of January 1, 1993. Prior years'
financial statements have not been restated to apply the provisions of
Statement 109.
The Bank has utilized net operating loss carryforwards to offset 1993
taxable income. A reconciliation between the effective income tax expense
and the amount computed using the applicable statutory Federal tax rate of
34% for the year ended December 31, 1993 is as follows (in thousands):
Income tax at statutory rates of pretax income ........ $ 68
State income tax, net of Federal benefit .............. 12
----
80
Change in valuation allowance for net deferred
tax asset ........................................... (80)
----
$ -
====
Income tax expense for the years ended December 31, 1992 and 1991 (as
accounted for under APB 11) is comprised of the following (in thousands):
1992 1991
---- ----
Current:
Federal ................................. $ - $ -
State ................................... - -
---- ---
- -
Charge in lieu of Federal and
state income taxes ....................... (51) -
---- ---
Total income tax expense ........... $ 51 $ -
==== ===
The charge in lieu of Federal and state income taxes is equivalent to the
provision for income taxes that would have been required in the absence of
the net operating loss carryforward.
F-13
<PAGE>
AMERICAN UNION BANK
Notes to Financial Statements, Continued
(10) Federal and State Income Taxes, cont.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax asset at December 31, 1993 are as follows (in
thousands):
Deferred tax assets:
Allowance for doubtful accounts $ 102
Loan fees 12
Securities available for sale -
Net operating loss carryforward 59
Organizational cost 47
Depreciation 57
Other 3
Valuation allowance (280)
-----
Net deferred tax asset $ -
=====
The valuation allowance for the net deferred tax asset decreased from
$360,000 at January 1, 1993 to $280,000 at December 31, 1993.
At December 31, 1993, the Bank had a tax loss carryforward of approximately
$154,000 and $123,000 available to offset Federal and state taxable income,
respectively, in future periods. These carryforwards expire through the
year 2006 and 1998, respectively.
(11) Dividends Restriction and Capital Requirements
New Jersey law provides that no dividend may be paid unless, after the
payment of such dividend, the capital stock of the Bank will not be
impaired and either the Bank will have statutory surplus of not less than
50% of its capital stock or the payment of such dividend will not reduce
the statutory surplus of the Bank.
The Federal Deposit Insurance Corporation (FDIC) has adopted risk-based
capital guidelines which require a minimum ratio of 8% of total risk-based
capital to assets, as defined in the guidelines. Financial institutions
which fail to meet the risk-based capital requirement are subject to asset
growth and other limitations under the FDIC guidelines.
The FDIC supplemented the risk-based capital guidelines with an additional
capital ratio referred to as the leverage ratio or core capital ratio. The
FDIC regulations require a financial institution to maintain a minimum
leverage ratio of 4% to 5%, depending upon the condition of the
institution.
F-14
<PAGE>
AMERICAN UNION BANK
Notes to Financial Statements, Continued
(11) Dividends Restriction and Capital Requirements, cont.
The Federal Deposit and Insurance Corporation Improvement Act of 1991
(FDICIA) required the Federal bank regulatory authorities to take prompt
corrective action with respect to depository institutions which do not meet
minimum capital standards and other safety and soundness regulations which
have not been finalized. In response to FDICIA, regulators have adopted
regulations which establish a system for prompt regulatory corrective
action with respect to depository institutions which do not meet minimum
capital requirements. The "prompt corrective action" regulations
established five categories of depository institutions: "well-capitalized,"
"adequately capitalized," "undercapitalized," "significantly
undercapitalized," and "critically undercapitalized." Each category relates
to the level of capital for the depository institution. A
"well-capitalized" depository institution is one that significantly exceeds
the minimum level required by regulation (i.e., total risk-based capital
ratio of 10% or greater, a Tier 1 risk-based capital ratio of 6% or greater
and a leverage ratio of 5% or greater). At December 31, 1993, the Bank is
in compliance with regulatory capital requirements.
(12) Related-party Transaction
Loans to directors and executive officers and their affiliated interests
were $797,000 and $313,000 at December 31, 1993 and 1992, respectively.
Management is of the opinion that these loans were made on the same terms
and conditions as loans to nonrelated borrowers.
Included in consumer and other loans at December 31, 1993 and 1992 is
approximately $1,759,000 and $2,987,000, respectively, of loans purchased
from and serviced by a corporation that owns stock in the Bank. Several
officers of this corporation are also directors of the Bank. These loans
are secured by second mortgages on residential properties. Management is of
the opinion that these loans meet the Bank's normal lending criteria and
the purchase was made on the same terms and conditions as purchases from
nonrelated parties.
(13) Commitments and Contingencies
The Bank is a party to transactions with off-balance-sheet risk in the
normal course of business in order to meet the financing needs of its
customers. These transactions consist of commitments to extend credit.
These transactions involve, to varying degrees, elements of credit and
interest rate risk in excess of the amount recognized in the accompanying
financial statements.
The Bank uses the same credit policies and collateral requirements in
making commitments and conditional obligations as it does for
on-balance-sheet loans. Commitments to extend credit are agreements to lend
to customers as long as there is no violation of any condition established
in the contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since the commitments
may expire without being drawn upon, the total commitment amounts do not
necessarily represent
F-15
<PAGE>
AMERICAN UNION BANK
Notes to Financial Statements, Continued
(13) Commitments and Contingencies, cont.
future cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by the Bank upon extension of credit, is
based on management's credit evaluation of the borrower. Collateral held
varies. Outstanding loan commitments at December 31, 1993 and 1992 were
approximately $3,604,000 and $1,498,000, respectively.
Substantially all of the Bank's lending activity is with customers located
within the State of New Jersey.
At December 31, 1993 and 1992, the Bank had commitments to lend
approximately $2,093,000 and $1,688,000, respectively, in unused commercial
and other lines of credit. There were no other committed funds at December
31, 1993.
(14) Recent Accounting Pronouncements
In May 1993, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 114, "Accounting by
Creditors for Impairment of a Loan" (Statement 114). Statement 114 requires
that impaired loans be measured based upon a present value of expected
future cash flows discounted at the loan's effective interest rate, or at
fair value if the loan is collateral-dependent. Statement 114 is effective
for fiscal years beginning after December 15, 1994.
In May 1993, the FASB issued Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities"
(Statement 115). Statement 115 addresses the accounting and reporting for
investment in debt and equity securities. Under Statement 115, investments
should be classified in one of three categories: "held to maturity,"
"trading" or "available for sale."
A debt or equity security which the Bank has the positive intent and
ability to hold to maturity should be classified as "held to maturity" and
accounted for at amortized cost.
A debt or equity security purchased and held principally for the purpose of
sale in the near term should be classified as a "trading" security. These
securities are reported at fair value with changes in fair value from
period to period included in earnings.
Debt and equity securities not otherwise classified as "held to maturity"
or "trading" should be classified as "available for sale." These securities
are reported at fair value with changes in the fair value from period to
period included as a separate component of equity.
Statement 115 is effective for the year ending December 31, 1994 and its
adoption is not expected to have a significant impact on the financial
statements of the Bank.
F-16
<PAGE>
AMERICAN UNION BANK
Notes to Financial Statements, Continued
(15) Recent Developments
Stock Dividend
In April 1994, the Board of Directors of the Bank unanimously approved the
issuance of a 10% stock dividend to stockholders of record as of May 10,
1994.
F-17
<PAGE>
AMERICAN UNION BANK
Statements of Condition
September 30, 1994 and December 31, 1993
(Dollars in Thousands)
Sep.30, Dec.31,
Assets 1994 1993
------- -------
(Unaudited)
Cash and cash equivalents:
Cash and due from banks .......................... $ 1,845 $ 2,151
Federal funds sold ............................... 1,385 3,245
Other short-term investments ..................... - 3,314
------ -------
3,230 8,710
------ -------
Securities available for sale ...................... 17,106 9,105
Investment securities held to maturity ............. 688 772
Mortgage-backed securities ......................... 3,694 3,934
Federal Home Loan Bank stock ....................... 144 197
Loans:
Commercial ....................................... 17,523 14,338
Mortgage ......................................... 54 55
Consumer and other ............................... 11,952 10,563
Deferred loan fees ............................... (45) (30)
Allowance for loan losses ........................ (337) (292)
------- -------
Net loans ...................................... 29,147 24,634
------- -------
Accrued interest receivable ........................ 394 201
Fixed assets, net .................................. 310 365
Other assets ....................................... 326 32
------- -------
Total assets ..................................... $55,039 $47,950
======= =======
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Non-interest bearing demand .................... $ 7,884 $ 5,727
Interest bearing demand ........................ 8,572 7,894
Certificates of deposit ........................ 15,483 12,620
Savings and other .............................. 18,349 17,123
------- -------
Total deposits ............................... 50,288 43,364
Accounts payable and accrued liabilities ........... 475 301
------- -------
Total liabilities ........................... 50,763 43,665
------- -------
Stockholders' equity:
Common stock, par value $5 per share. Authorized
1,000,000 shares; issued and outstanding
550,000 shares at Sep. 30, 1994 and 500,000
shares at Dec. 31, 1993 ........................ 2,750 2,500
Additional paid-in capital ....................... 2,750 2,500
Accumulated deficit .............................. (1,059) (715)
Allowance for marketable debt and equity
securities ..................................... (165) -
Total stockholders' equity ................... 4,276 4,285
Commitments and contingencies ......................
------- -------
Total liabilities and stockholders' equity ....... $55,039 $47,950
======= =======
See accompanying notes to unaudited financial statements.
FF-1
<PAGE>
AMERICAN UNION BANK
Statements of Operations
Nine-month Periods ended
September 30, 1994 and 1993
(Dollars in Thousands, Except Share Data)
(Unaudited)
1994 1993
------ ------
Interest income:
Interest and fees on loans ............................. $1,719 $1,337
Interest on short-term investments ..................... 30 44
Interest on securities available for sale .............. 453 -
Interest on investments - taxable ...................... 310 490
Interest on Federal funds sold ......................... 58 51
------ ------
Total interest income ................................ 2,570 1,922
Interest expense ......................................... 922 758
------ ------
Net interest income .................................... 1,648 1,164
Provision for loan losses ................................ 67 72
------ ------
Net interest income after provision for loan losses .... 1,581 1,092
------ ------
Other income:
(Loss) gain on sale of securities, net ................. (173) 13
Service charges, commissions and fees .................. 218 130
------ ------
Total other income ................................... 45 143
------ ------
Other expenses:
Salaries and employee benefits ......................... 643 479
Professional services .................................. 141 109
Occupancy .............................................. 201 126
Data processing ........................................ 177 157
Advertising ............................................ 34 34
Insurance .............................................. 97 75
Other operating expenses ............................... 177 115
------ ------
Total other expenses ................................... 1,470 1,095
------ ------
Net income ........................................... $ 156 $ 140
====== ======
Net income per share ................................. $0.28 $0.25
===== =====
See accompanying notes to unaudited financial statements.
FF-2
<PAGE>
AMERICAN UNION BANK
Statements of Stockholders' Equity
Nine-month Periods ended
September 30, 1994 and 1993
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Allowance
for
marketable
Common stock Additional Accumu- debt and Total
----------------- paid-in lated equity stockholders'
Shares Amount capital deficit securities equity
------ ------ ---------- ------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at Dec. 31, 1992 ................ 500,000 $2,500 2,500 (915) - 4,085
Net income .............................. - - - 140 - 140
------- ------ ----- ------ ---- -----
Balance at Sep. 30, 1993 ................ 500,000 $2,500 2,500 (775) - 4,225
======= ====== ===== ====== ==== =====
Balance at Dec. 31, 1993 ................ 500,000 2,500 2,500 (715) - 4,285
Stock dividend .......................... 250 250 250 (500) - -
Net income .............................. - - - 156 - 156
Net unrealized holding losses on
securities available for sale,
net of income tax benefit of $81 ...... - - - - (165) (165)
------- ------ ----- ------ ---- -----
Balance at Sep. 30, 1994 (unaudited) .... 500,250 $2,750 2,750 (1,059) (165) 4,276
======= ====== ===== ====== ==== =====
See accompanying notes to unaudited financial statements.
</TABLE>
FF-3
<PAGE>
AMERICAN UNION BANK
Statements of Cash Flows
Nine-month Periods ended
September 30, 1994 and 1993
(Dollars in Thousands)
(Unaudited)
1994 1993
------ ------
Cash flows from operating activities:
Net income .............................................. $ 156 $ 140
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Provision for loan losses ............................ 67 72
Depreciation ........................................ 84 42
Net (accretion) amortization on investment
securities, securities available for sale and
mortgage-backed securities ......................... (142) 27
Amortization of deferred loan fees .................. (55) (57)
Loss (gain) on sales of securities, net ............. 173 (13)
Changes in operating assets and liabilities:
Increase in accrued interest receivable ........... (193) (113)
Increase in other assets .......................... (183) (33)
Increase in accounts payable and accrued
liabilities ...................................... 174 72
------- ------
Net cash provided by operating activities ................ 81 137
------- ------
Cash flows from investing activities:
Maturities of investment securities ..................... - 2,000
Maturities of securities available for sale ............. 3,640 -
Proceeds from sale of securities available for sale ..... 21,440 -
Proceeds from sales of investment securities ............ - 3,916
Purchase of securities available for sale ............... (33,547) -
Purchase of investment securities ....................... - (4,684)
Purchase of mortgage-backed securities .................. - (8,640)
Principal received from mortgage-backed securities ...... 483 2,279
Proceeds from the sale of Federal Home Loan Bank stock .. 53 -
Increase in loans, net .................................. (4,525) (2,299)
Purchase of fixed assets ................................ (29) (301)
------- ------
Net cash used in investing activities ................. (12,485) (7,729)
------- ------
Cash flows from financing activities - increase in
deposits, net............................................. 6,924 2,916
------- ------
Decrease in cash and cash equivalents ................... (5,480) (4,676)
Cash and cash equivalents at beginning of period .......... 8,710 7,777
------- ------
Cash and cash equivalents at end of period ................ $ 3,230 $3,101
======= ======
See accompanying notes to unaudited financial statements.
FF-4
<PAGE>
AMERICAN UNION BANK
Notes to Unaudited Financial Statements
September 30, 1994 and 1993
(Information as of September 30, 1994 and for the nine-month periods
ended September 30, 1994 and 1993 is unaudited)
(1) Summary of Significant Accounting Policies
The financial statements include the accounts of American Union Bank
("American").
The statement of condition at September 30, 1994, the statements of
operations for the nine-month periods ended September 30, 1994 and 1993, the
statements of stockholders' equity for the nine-month periods ended September
30, 1994 and 1993 and the statements of cash flows for the nine-month periods
ended September 30, 1994 and 1993 have been prepared by American on an accrual
basis without audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial condition, results of operations, and cash flows at September 30, 1994
for all periods presented have been made. The results of operations for the
nine-month period ended September 30, 1994 are not necessarily indicative of the
operating results for the full year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. These financial statements are to be read in conjunction with
the December 31, 1993 audited financial statements and notes thereto.
American has adopted, as of January 1, 1994, Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" (SFAS 115). SFAS 115 requires that securities available for
sale be reported at fair value with changes in the carrying value from period to
period included as a separate component of stockholders' equity.
(2) Securities Available for Sale
Securities available for sale at September 30, 1994 are summarized as
follows (in thousands):
Gross Gross
unreal- unreal-
Amortized ized ized Market
cost gains losses value
--------- ------- -------- ------
U.S. Government and agency obligations ... $ 2,508 - (160) $ 2,348
U.S. Treasury securities ................. 14,874 - (116) 14,758
------- --- ---- -------
$17,382 - (276) $17,106
======= === ==== =======
Securities available for sale represent securities to be held for
indefinite periods of time and not intended to be held to maturity or on a
long-term basis.
During the nine-month period ended September 30, 1994, proceeds from the
sale of securities available for sale of $21,440,000 were received, resulting in
gross gains of $43,000 and gross losses of $216,000.
FF-5
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of November 9, 1994
("Agreement"), is among Valley National Bancorp ("Valley"), a corporation
chartered under the laws of the State of New Jersey, Valley National Bank, a
national banking association and subsidiary of Valley ("VNB"), and American
Union Bank, a commercial bank chartered under the laws of the State of New
Jersey ("American Union").
Valley and VNB desire to acquire American Union and American Union's Board
of Directors has determined, based upon the terms and conditions hereinafter set
forth, that the acquisition is in the best interests of American Union and its
stockholders. The acquisition will be accomplished by merging American Union
into VNB with VNB as the surviving bank, and American Union shareholders
receiving the consideration hereinafter set forth. The Boards of Directors of
American Union, Valley and VNB have duly adopted and approved this Agreement and
the Board of Directors of American Union has directed that it be submitted to
its shareholders for approval.
American Union, Valley and VNB entered into a letter of intent, dated
October 14, 1994 (the "Letter of Intent") and a Stock Option Agreement, dated
October 14, 1994 (the "Valley Stock Option") in contemplation of entering into
this Agreement.
Accordingly, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time (as hereafter defined), American Union shall be merged with
and into VNB under the charter of VNB (the "Merger") in accordance with the
National Bank Act and the New Jersey Banking Act of 1948, as amended, and VNB
shall be the surviving bank (the "Surviving Bank").
1.2. Effect of the Merger. At the Effective Time (as hereafter defined),
the Surviving Bank shall be considered the same business and corporate entity as
each of American Union and VNB and thereupon and thereafter, all the property,
rights, powers and franchises of each of American Union and VNB shall vest in
the Surviving Bank and the Surviving Bank shall be subject to and be deemed to
have assumed all of the debts, liabilities, obligations and duties of each of
American Union and VNB and shall have succeeded to all of each of their
relationships, fiduciary or otherwise, as fully and to the same extent as if
such property rights, privileges, powers, franchises, debts, obligations, duties
and relationships had been originally acquired, incurred or entered into by the
Surviving Bank.
1.3. Articles of Association. The Articles of Association of VNB as it
exists immediately prior to the Effective Time shall continue as the Articles of
Association of the Surviving Bank, except that the Articles of Association of
the Surviving Bank shall be amended to increase the capital and delete certain
provisions so that the Articles of Association shall be as set forth in Schedule
1, until otherwise amended as provided by law.
1.4. Bylaws. The Bylaws of VNB as they exist immediately prior to the
Effective Date shall continue as the Bylaws of the Surviving Bank until
otherwise amended as provided by law.
1.5. Directors and Officers. The directors and officers of VNB as of the
Effective Time shall continue as the directors and officers of the Surviving
Bank.
1.6. Effective Time and Closing. The Merger shall become effective (and be
consummated) upon the date specified in a notice to the Comptroller of the
Currency (the "OCC") filed by VNB with the approval of American Union, which
approval shall not be unreasonably withheld. The date and time specified in such
notice shall be the "Effective Time". A closing (the "Closing") shall take place
prior to the Effective Time at 10:00 a.m., on a day mutually agreed to by Valley
and American Union within thirty (30) days following the receipt of all
necessary regulatory and governmental approvals and consents and the expiration
of all statutory waiting periods in respect thereof and the satisfaction or
waiver of the conditions to the consummation of the Merger specified in Article
VI hereof (other than the delivery of certificates, opinions and other
instruments and documents to be delivered at the Closing), at VNB's main office
or at such other place, time or date as VNB and American Union may mutually
agree upon. The notice from VNB to the OCC shall specify as the Effective Time
the close of business on the date of the Closing as agreed to by VNB and
American Union.
<PAGE>
-2-
1.7. Capital Stock. As of September 30, 1994, VNB had capital of
$9,787,655, divided into 1,957,533 shares of common stock, each of $5.00 par
value, $24,263,818 of surplus, and undivided profits of $222,146,848. As of
September 30, 1994, American Union had capital of $2,749,850, divided into
549,970 shares of common stock, each of $5.00 par value, $2,749,850 of surplus,
and $(1,224,139) of undivided profits. At the Effective Time, the amount of
capital stock of VNB shall be $9,787,655, divided into 1,957,533 shares of
common stock, each of $5.00 par value, and VNB shall have a surplus of
$28,539,379 and undivided profits, including capital reserves, which when
combined with the capital and surplus will be equal to the combined capital
structures of VNB and American Union as stated in the preceding two sentences,
adjusted however, for (i) earnings and expenses between September 30, 1994 and
the Effective Time and (ii) the acquisition of RockBank by VNB if the same shall
close between September 30, 1994 and the Effective Time.
ARTICLE II
CONVERSION OF AMERICAN UNION SHARES
2.1. Conversion of American Union Shares. Each share of common stock, $5.00
par value, of American Union ("American Union Common Stock"), issued and
outstanding immediately prior to the Effective Time (other than Dissenting
Shares as defined in Section 2.3) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into and represent the
right to receive 0.50 (the "Exchange Ratio") shares of Valley's common stock, no
par value ("Valley Common Stock"), subject to adjustments as set forth in the
subsections to this Section 2.1.
(a) The Exchange Ratio shall be appropriately adjusted for any stock split,
stock dividend, stock combination, reclassification or similar transaction
("Capital Change") effected by Valley with respect to Valley Common Stock
between the date hereof and the Effective Date. The parties shall mutually agree
upon such adjustment in writing or, if unable to agree, shall arbitrate the
dispute, using a mutually agreed upon arbitrator whose decision shall be final
and non-appealable.
(b) No fractional shares of Valley Common Stock will be issued, and in lieu
thereof, each holder of American Union Common Stock who would otherwise be
entitled to a fractional interest will receive, as soon as practicable after the
Effective Time, an amount in cash determined by multiplying such fractional
interest by the Average Closing Price. The "Average Closing Price" shall mean
the average price of Valley Common Stock calculated based upon the closing price
during the first 10 of the 15 consecutive trading days immediately preceding the
Closing. The Average Closing Price shall be determined by (x) first, recording
the closing price (the "Daily Price") of Valley Common Stock reported on the New
York Stock Exchange and published in The Wall Street Journal during the first 10
of the 15 consecutive trading days immediately preceding the Closing; and
(y) second, computing the average of the Daily Prices in the 10 day period.
2.2. Exchange of Shares.
(a) American Union and Valley hereby appoint Valley National Bank, Trust
Department (the "Exchange Agent") as the Exchange Agent for purposes of
effecting the conversion of American Union Common Stock. All fees and expenses
of the Exchange Agent shall be paid by Valley. As soon as practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record (a
"Record Holder") of a certificate or certificates which, immediately prior to
the Effective Time represented outstanding shares of American Union Common Stock
(other than Dissenting Shares as defined in Section 2.3) (the "Certificates"), a
mutually agreed upon letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent), and instructions
for use in effecting the surrender of the Certificates in exchange for Valley
Common Stock (and cash in lieu of fractional shares) as provided in Section 2.1.
Upon surrender of a Certificate for exchange and cancellation to the Exchange
Agent, together with such letter of transmittal, duly executed, the Record
Holder shall be entitled to promptly receive in exchange for such Certificate
the consideration as provided in Section 2.1 hereof and the Certificates so
surrendered shall be cancelled. The Exchange Agent shall not be obligated to
deliver or cause to be delivered to any Record Holder the consideration to which
such Record Holder would otherwise be entitled until such Record Holder
surrenders the Certificate for exchange or, in default thereof, an appropriate
Affidavit of Loss and Indemnity Agreement and/or a bond as may be reasonably
required in each case by Valley. Notwithstanding the time of surrender of the
Certificates, Record Holders (other than holders of Dissenting Shares) shall be
deemed shareholders of Valley for all purposes from the Effective Time, except
that Valley shall withhold the payment of dividends from any Record Holder until
such Record Holder effects the exchange of Certificates for Valley Common Stock.
(Such Record Holder shall receive such withheld dividends, without interest,
upon effecting the share exchange.)
<PAGE>
-3-
(b) After the Effective Time, there shall be no transfers on the stock
transfer books of American Union of the shares of American Union Common Stock
which were outstanding immediately prior to the Effective Time and, if any
Certificates representing such shares are presented for transfer, they shall be
cancelled and exchanged for the Merger consideration.
(c) If payment of the consideration pursuant to Section 2.1 hereof is to be
made in a name other than that in which the Certificate surrendered in exchange
therefor is registered, it shall be a condition of such payment that the
Certificate so surrendered shall be properly endorsed (or accompanied by an
appropriate instrument of transfer) and otherwise in proper form for transfer,
and that the person requesting such payment shall pay to the Exchange Agent in
advance any transfer or other taxes required by reason of the payment to a
person other than that of the registered holder of the Certificate surrendered,
or required for any other reason, or shall establish to the reasonable
satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
2.3. Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, any holder of American Union Common Stock shall have the right to
dissent in the manner provided in the National Bank Act, 12 U.S.C. Section 215a,
and if all necessary requirements of the National Bank Act are met, such shares
shall be entitled to payment in cash from VNB of the fair value of such shares
as determined in accordance with the National Bank Act. All shares of American
Union Common Stock as to which the holder properly exercises dissenters' rights
in accordance with the National Bank Act shall constitute "Dissenting Shares"
unless and until such rights are waived by the party initially seeking to
exercise such rights.
2.4 VNB Common Stock. The shares of common stock of VNB outstanding
immediately prior to the Effective Time shall not be affected by the Merger but
shall be the same number of shares of the Surviving Bank.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AMERICAN UNION
References herein to "American Union Disclosure Schedule" 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 American Union
to Valley and VNB. American Union hereby represents and warrants to Valley and
VNB as follows:
3.1. Organization.
(a) American Union is a New Jersey banking corporation whose deposits are
insured by the Bank Insurance Fund of the Federal Deposit Insurance Corporation
("FDIC") to the fullest extent permitted by law. American Union is duly
organized, validly existing and in good standing under the laws of the State of
New Jersey. American Union has the corporate power and authority to own or lease
all of its properties and assets and to carry on its business as it is now being
conducted and is duly licensed or qualified to do business and is in good
standing in each jurisdiction in which the nature of the business conducted by
it or the character or location of the properties and assets owned or leased by
it makes such licensing or qualification necessary, except where the failure to
be so licensed, qualified or in good standing would not have a material adverse
effect on the business, operations, assets or financial condition of American
Union.
(b) American Union has no Subsidiaries. The term "Subsidiary", when used in
this Agreement with respect to American Union, means any corporation, joint
venture, association, partnership, trust or other entity in which American Union
has, directly or indirectly at least a 50% interest or acts as a general
partner. The American Union Disclosure Schedule sets forth true and complete
copies of the Certificate of Incorporation and Bylaws of American Union as in
effect on the date hereof. Except as set forth in the Disclosure Schedule,
American Union does not own or control, directly or indirectly, any equity
interest in any corporation, company, association, partnership, joint venture or
other entity and owns no real estate, except real estate used for its banking
premises.
<PAGE>
-4-
3.2. Capitalization. The authorized capital stock of American Union
consists of 1,000,000 shares of American Union Common Stock and no shares of
preferred stock. As of the date hereof, there were 549,970 shares of American
Union Common Stock issued and outstanding and no shares issued and held in the
treasury. All issued and outstanding shares of American Union Common Stock have
been duly authorized and validly issued, are fully paid, and nonassessable and
are subject to pre-emptive rights. Except for the Valley Stock Option, American
Union neither has nor is bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling for the
transfer, purchase or issuance of any shares of capital stock of American Union
or any securities representing the right to purchase or otherwise receive any
shares of such capital stock or any securities convertible into or representing
the right to subscribe for any such shares, and there are no agreements or
understandings with respect to voting of any such shares.
3.3. Authority; No Violation.
(a) Subject to the approval of this Agreement and the transactions
contemplated hereby by the stockholders of American Union, and subject to the
parties obtaining all necessary regulatory approvals, American Union has full
corporate power and authority 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 American Union. Except for the approvals described in
paragraph (b) below, no other corporate proceedings on the part of American
Union are necessary to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by American Union and
constitutes the valid and binding obligation of American Union, enforceable
against American Union in accordance with its terms.
(b) Neither the execution and delivery of this Agreement by American Union,
nor the consummation by American Union of the transactions contemplated hereby
in accordance with the terms hereof, or compliance by American Union with any of
the terms or provisions hereof, will (i) violate any provision of American
Union's Certificate of Incorporation or other governing instrument or Bylaws,
(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 American Union or any of its properties or
assets, or (iii) except as set forth in the American Union 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
American Union under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which American Union is a party, or by which it or
any of its properties or assets may be bound or affected except, with respect to
(ii) and (iii) above, such as individually and in the aggregate will not have a
material adverse effect on the business, operations, assets or financial
condition of American Union, or the ability of American Union to consummate the
transactions contemplated hereby. Except for consents and approvals of or
filings or registrations with or notices to the third parties listed in the
American Union Disclosure Schedule, the OCC, the Commissioner of Banking of the
State of New Jersey (the "Commissioner"), the Securities and Exchange Commission
(the "SEC"), and the stockholders of American Union, 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 American Union in connection with
(x) the execution and delivery by American Union of this Agreement and (y) the
consummation by American Union of transactions contemplated hereby.
3.4. Financial Statements.
(a) The American Union Disclosure Schedule sets forth copies of the
statements of condition of American Union as of December 31, 1991, 1992 and
1993, and the related statements of income, stockholders' equity and cash flows
for the periods ended December 31 in each of the three years 1991 through 1993,
in each case accompanied by the audit report of KPMG Peat Marwick, independent
public accountants with respect to American Union, and the unaudited statements
of condition and related statements of income, stockholders' equity and cash
flows of American Union for the periods ended March 31, June 30, and September
30, 1994, as filed with the FDIC (collectively, the "American Union Financial
Statements"). The American Union Financial Statements (including the related
notes) have been prepared in accordance with generally accepted accounting
principles consistently applied during the periods involved (except as approved
by such independent public accountants and disclosed therein), and fairly
present the financial condition of American Union as of the respective dates set
forth therein, and the related statements of income, stockholders' equity and
cash flows fairly present the results of the operations, stockholders' equity
and cash flows of American Union for the respective periods set forth therein.
<PAGE>
-5-
(b) The books and records of American Union have been and are being
maintained in material compliance with applicable legal and accounting
requirements, and reflect only actual transactions.
(c) Except as and to the extent reflected, disclosed or reserved against in
the American Union Financial Statements (including the notes thereto), as of
September 30, 1994 American Union did not have any liabilities, whether
absolute, accrued, contingent or otherwise, which are material to the business,
operations, assets or financial condition of American Union. Since September 30,
1994 and to the date hereof, American Union has not incurred any liabilities
except in the ordinary course of business and consistent with prudent banking
practice, and except as specifically contemplated by this Agreement or relating
to other matters disclosed in this Agreement.
3.5. Broker's and Other Fees. Neither American Union 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. Except as set forth in
the American Union Disclosure Schedule, there are no fees (other than time
charges billed at usual and customary rates) payable to any consultants,
including lawyers and accountants, in connection with this transaction or which
would be triggered by consummation of this transaction or the termination of the
services of such consultants by American Union.
3.6. Absence of Certain Changes or Events.
(a) Except as set forth in the American Union Disclosure Schedule, there
has not been any material adverse change in the business, operations, assets or
financial condition of American Union since September 30, 1994 and to the best
of American Union's knowledge, no facts or conditions exist which American Union
believes will cause or is likely to cause such a material adverse change in the
future.
(b) Except as set forth in the American Union Disclosure Schedule, American
Union has not taken or permitted any of the actions set forth in Section 5.2
hereof between September 30, 1994 and the date hereof and American Union has
conducted its business only in the ordinary course, consistent with past
practice.
3.7. Legal Proceedings. Except as disclosed in the American Union
Disclosure Schedule, American Union is not a party to any, and there are no
pending or, to the best of American Union's knowledge, threatened, material
legal, administrative, arbitral or other proceedings, claims, actions or
governmental investigations of any nature against American Union. Except as
disclosed in the American Union Disclosure Schedule, American Union is not a
party to any material order, judgment or decree entered against American Union
in any lawsuit or proceeding.
3.8. Taxes and Tax Returns.
(a) American Union has duly filed (and until the Effective Time 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 (and until the Effective Time will so pay) all such taxes due
and payable, other than taxes or other charges which are being contested in good
faith. American Union has established (and until the Effective Time will
establish) on its books and records reserves that it reasonably believes are
adequate for the payment of all federal, state and local taxes not yet due and
payable, but are anticipated to be incurred in respect of American Union through
the Effective Time. Except as set forth in the American Union Disclosure
Schedule, the federal income tax returns of American Union have been examined by
the Internal Revenue Service (the "IRS") (or are closed to examination due to
the expiration of the applicable statute of limitations) and no deficiencies
were asserted as a result of such examinations which have not been resolved and
paid in full. Except as set forth in the American Union Disclosure Schedule, the
applicable state income tax returns of American Union have been examined by the
applicable authorities (or are closed to examination due to the expiration of
the statute of limitations) and no deficiencies were asserted as a result of
such examinations which have not been resolved and paid in full. To the best
knowledge of American Union, there are no audits or other administrative or
court proceedings presently pending, or claims asserted, for taxes or
assessments upon American Union nor has American Union given any currently
outstanding waivers or comparable consents regarding the application of the
statute of limitations with respect to any taxes or tax Returns.
(b) Except as set forth in the American Union Disclosure Schedule, American
Union (i) has not requested any extension of time within which to file any tax
Return which Return 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 American Union (nor does American Union
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.
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3.9. Employee Benefit Plans.
(a) Except as set forth in the American Union Disclosure Schedule, American
Union does not maintain or contribute to any "employee pension benefit plan",
within the meaning of Section 3(2)(A) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), "employee welfare benefit plan", within the
meaning of Section 3(1) of ERISA, stock option plan, stock purchase plan,
deferred compensation plan, severance plan, bonus plan, employment agreement or
other similar plan, program or arrangement. American Union has not, since
September 2, 1974, contributed to any "Multiemployer Plan", within the meaning
of Sections 3(37) and 4001(a)(3) of ERISA.
(b) Except with respect to customary health and disability benefits, there
are no unfunded benefits obligations which are not accounted for by reserves
shown on the American Union Financial Statements and established under generally
accepted accounting principles, or otherwise noted on such American Union
Financial Statements.
(c) Except as agreed to by Valley in writing, the consummation of the
transactions contemplated by this Agreement will not (i) entitle any current or
former employee of American Union to severance pay or any similar payment or
(ii) result in payments not deductible by reason of Section 280G of the Code or
regulations promulgated or proposed thereunder.
3.10. Reports.
(a) Each communication mailed by American Union to all of its stockholders
since January 1, 1991, and each annual, quarterly or special report, and proxy
statement, as of its date, complied in all material respects with all applicable
statutes, rules and regulations enforced or promulgated by the applicable
regulatory agency and did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading; provided that disclosures as of a later
date shall be deemed to modify disclosures as of an earlier date.
(b) American Union has, since January 1, 1991, duly filed with the FDIC in
correct form the monthly, quarterly and annual reports required to be filed
under applicable laws and regulations, and American Union promptly will deliver
or make available to Valley accurate and complete copies of such reports. The
American Union Disclosure Schedule lists all examinations of American Union
conducted by either the FDIC or the New Jersey Department of Banking since
January 1, 1991 and the dates of any responses thereto submitted by American
Union.
3.11. American Union Information. The information relating to American
Union to be contained in the Proxy Statement/Prospectus (as defined in Section
5.6(a) hereof) to be delivered to stockholders of American Union in connection
with the solicitation of their approval of this Agreement and the transactions
contemplated hereby, as of the date the Proxy Statement/Prospectus is mailed to
stockholders of American Union, and up to and including the date of the meeting
of stockholders to which such Proxy Statement/Prospectus relates, will not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The information relating to American Union
in the Registration Statement (as defined in Section 5.6(a) hereof), as of the
date of the filing thereof, will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
3.12. Compliance with Applicable Law.
(a) General. Except as set forth in the American Union Disclosure Schedule,
American Union holds all material licenses, franchises, permits and
authorizations necessary for the lawful conduct of its business under and
pursuant to each, and has complied with and is not in default in any respect
under any, applicable law, statute, order, rule, regulation, policy and/or
guideline of any federal, state or local governmental authority relating to
American Union (other than where such defaults or non-compliances will not,
alone or in the aggregate, result in a material adverse effect on the business,
operations, assets or financial condition of American Union) and American Union
has not received notice of violation of, and does not know of any violations
(other than violations which will not, alone or in the aggregate, result in a
material adverse effect on the business, operations, assets or financial
condition of American Union) of, any of the above.
(b) CRA. Without limiting the foregoing, except as set forth in the
American Union Disclosure Schedule, American Union has complied in all material
respects with the Community Reinvestment Act ("CRA") and received a CRA rating
of "satisfactory" as of its last examination, and American Union has not
received any written notice from any persons asserting that such person would
object to the consummation of this Merger due to the CRA performance of or
rating of American Union.
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3.13. Certain Contracts.
(a) Except as disclosed in the American Union Disclosure Schedule, (i)
American Union is not a party to or bound by any contract or understanding
(whether written or, to the best of its knowledge, oral) with respect to the
employment or termination of any present or former officers, employees,
directors or consultants. The American Union Disclosure Schedule sets forth true
and correct copies of all written employment agreements or termination
agreements with officers, employees, directors, or consultants to which American
Union is a party.
(b) Except as disclosed in the American Union Disclosure Schedule, (i) as
of the date of this Agreement, American Union 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 American Union, (ii) no commitment,
agreement or other instrument to which American Union is a party or by which it
is bound limits the freedom of American Union to compete in any line of business
or with any person, and (iii) American Union is not a party to any collective
bargaining agreement.
(c) Except as disclosed in the American Union Disclosure Schedule, neither
American Union nor, to the best knowledge of American Union, any other party
thereto, is in default in any material respect under any material lease,
contract, mortgage, promissory note, deed of trust, loan agreement or other
commitment or arrangement.
3.14. Properties and Insurance.
(a) American Union has good and, as to owned real property, if any,
marketable title to all material assets and properties, whether real or
personal, tangible or intangible, reflected in American Union's balance sheet as
of December 31, 1993, 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 December 31, 1993), subject to no
encumbrances, liens, mortgages, security interests or pledges, except (i) those
items that secure liabilities that are reflected in such balance sheet or the
notes thereto or incurred in the ordinary course of business after the date of
such balance sheet, (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 American Union and (iv) with respect to owned real property, if any, title
imperfections noted in title reports delivered to Valley prior to the date
hereof. American Union, as lessee, has the right under valid and subsisting
leases to occupy, use, possess and control, in all material respects, all real
property leased by it, as presently occupied, used, possessed and controlled by
it.
(b) The American Union Disclosure Schedule lists all policies of insurance
and bonds covering business operations and insurable properties and assets of
American Union, all risks insured against, and the amount thereof and
deductibles relating thereto. Except as set forth in the American Union
Disclosure Schedule, as of the date hereof, American Union 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 in any material respect under such policy
or bond, and, to the best of its knowledge, no coverage thereunder is being
disputed and all material claims thereunder have been filed in a timely fashion.
3.15. Minute Books. The minute books of American Union contain accurate
records of all meetings and other corporate action held of its stockholders and
Boards of Directors (including committees of its Boards of Directors).
3.16. Environmental Matters. Except as disclosed in the American Union
Disclosure Schedule, American Union has not received any written notice,
citation, claim, assessment, proposed assessment or demand for abatement
alleging that American Union (either directly or as a successor-in-interest in
connection with the enforcement of remedies to realize the value of properties
serving as collateral for outstanding loans) is responsible for the correction
or clean-up of any condition material to the business, operations, assets or
financial condition of American Union. Except as disclosed in the American Union
Disclosure Schedule, American Union has no knowledge that any toxic or hazardous
substances or materials have been emitted, generated, disposed of or stored on
any property owned or leased by American Union in any manner that violates or,
after the lapse of time may violate, any presently existing federal, state or
local law or regulation governing or pertaining to such substances and
materials.
3.17. Reserves. As of the date hereof, the allowance for possible loan and
lease losses in the American Union Financial Statements was adequate at the time
based upon past loan loss experiences and potential losses in the portfolio at
the time to cover all known or reasonably anticipated loan losses.
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3.18. Disclosure. There are no material facts concerning the business,
operations, assets or financial condition of American Union which have not been
disclosed to Valley which would have a material adverse effect on the business,
operations or financial condition of American Union. Valley hereby acknowledges
that it has been informed of the circumstances surrounding the expiration of
American Union's 1994 proposed common stock offering. No representation or
warranty contained in Article III of this Agreement contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements herein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF VNB AND VALLEY
References herein to the "Valley Disclosure Schedule" 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 Valley to American
Union. Valley hereby represents and warrants to American Union as follows:
4.1. Corporate Organization.
(a) Valley is a corporation duly organized and validly existing and in good
standing under the laws of the State of New Jersey. Valley has the corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as it is now being conducted, and is duly licensed or
qualified to do business and is in good standing in each jurisdiction in which
the nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed, qualified
or in good standing would not have a material adverse effect on the business,
operations, assets or financial condition of Valley or any of its Subsidiaries
(defined below). Valley is registered as a bank holding company under the Bank
Holding Company Act of 1956, as amended (the "BHCA").
(b) Each of the Subsidiaries of Valley are listed in the Valley Disclosure
Schedule. The term "Subsidiary" when used in this Agreement with reference to
Valley means any corporation, joint venture, association, partnership, trust or
other entity in which Valley has, directly or indirectly, at least a 50%
interest or acts as a general partner. Each Subsidiary of Valley is duly
organized and validly existing and in good standing under the laws of the
jurisdiction of its incorporation. VNB is a national bank whose deposits are
insured by the Bank Insurance Fund of the FDIC to the fullest extent permitted
by law. Each Subsidiary of Valley has the corporate power and authority to own
or lease all of its properties and assets and to carry on its business as it is
now being conducted and is duly licensed or qualified to do business and is in
good standing in each jurisdiction in which the nature of the business conducted
by it or the character or location of the properties and assets owned or leased
by it makes such licensing or qualification necessary, except where the failure
to be so licensed, qualified or in good standing would not have a material
adverse effect on the business, operations, assets or financial condition of
Valley or any of its Subsidiaries. The Valley Disclosure Schedule sets forth
true and complete copies of the Articles of Association and Bylaws of VNB as in
effect on the date hereof.
4.2. Capitalization. The authorized capital stock of Valley consists solely
of [37,537,500] shares of Valley Common Stock. As of September 30, 1994, there
were 27,064,564 shares of Valley Common Stock issued and outstanding, including
113,003 treasury shares. Since such date, and from time to time hereafter,
Valley may repurchase shares of its Common Stock. Since September 30, 1994, to
and including the date of this Agreement, no additional shares of Valley Common
Stock have been issued except in connection with exercises of options granted
under the Long-Term Stock Incentive Plan of Valley (the "Valley Option Plan") or
grants of restricted stock under the Valley Option Plan or upon exercise of
outstanding Warrants (as hereafter defined). As of September 30, 1994, except
for: (a) 443,213 shares of Valley Common Stock issuable upon exercise of
outstanding stock options and stock appreciation rights granted pursuant to the
Valley Option Plan, (b) up to 586,139 shares issuable upon exercise of the
outstanding warrants issued by Valley in connection with the acquisition of
Mayflower Financial Corporation (the "Warrants"), and (c) 10,312 shares of
Valley Common Stock issuable upon exercise of outstanding stock options granted
to a consultant for Valley, there were no shares of Valley Common Stock issuable
upon the exercise of outstanding stock options or otherwise. All issued and
outstanding shares of Valley Common Stock, and all issued and outstanding shares
of capital stock of Valley's Subsidiaries, have been duly authorized and validly
issued, are fully paid, nonassessable and free of preemptive rights, and are
free and clear of all liens, encumbrances, charges, restrictions or rights of
third parties. All of the outstanding shares of capital stock of Valley's
Subsidiaries are owned by Valley free and clear of any liens, encumbrances,
charges, restrictions or rights of third parties. Except for the options and
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stock appreciation rights referred to above under the Valley Option Plan and the
Warrants, and shares of Valley Common Stock to be issued (and options for shares
of Valley Common Stock to be issued) in connection with the Agreement and Plan
of Merger, dated as of August 26, 1994, among Valley, VNB, Rock Financial
Corporation and RockBank (the "Rock Agreement"), neither Valley nor any of
Valley's Subsidiaries has or is bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling for the
transfer, purchase or issuance of any shares of capital stock of Valley or
Valley's Subsidiaries or any securities representing the right to otherwise
receive any shares of such capital stock or any securities convertible into or
representing the right to purchase or subscribe for any such shares, and there
are no agreements or understandings with respect to voting of any such shares.
No additional grants of awards, or exercises of outstanding awards, under the
Valley Option Plan, or exercises of Warrants, prior to the Effective Time shall
be required to be disclosed or reported to American Union to keep this
representation true or correct.
4.3. Authority; No Violation.
(a) Valley and VNB have full corporate power and authority 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 Valley and VNB. No other corporate
proceedings on the part of Valley and VNB are necessary to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Valley and VNB and constitutes a valid and binding
obligation of Valley and VNB, enforceable against Valley and VNB in accordance
with its terms.
(b) Neither the execution or delivery of this Agreement nor the
consummation by Valley and VNB of the transactions contemplated hereby in
accordance with the terms hereof, will (i) violate any provision of the
Certificate of Incorporation on other governing instrument or Bylaws of Valley
or VNB, (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 Valley or VNB or any of their
respective properties or assets, or (iii) violate, conflict with, result in a
breach of any provision 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 Valley or VNB under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which Valley or VNB is a
party, or by which Valley or VNB or any of their properties or assets may be
bound or affected, except, with respect to (ii) and (iii) above, such as
individually and in the aggregate will not have a material adverse effect on the
business, operations, assets or financial condition of Valley and Valley's
Subsidiaries on a consolidated basis, or the ability of Valley and VNB to
consummate the transactions contemplated hereby. Except for consents and
approvals of or filings or registrations with or notices to the OCC, the
Commissioner, the SEC, applicable state securities bureaus or commissions, and
the New York Stock Exchange (the "NYSE"),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 Valley or VNB in connection with (a) the
execution and delivery by Valley or VNB of this Agreement and (b) the
consummation by Valley of the Merger and the other transactions contemplated
hereby. To the best of Valley's knowledge, no fact or condition exists which
Valley has reason to believe will prevent it or VNB from obtaining the
aforementioned consents and approvals within the time frame contemplated hereby.
4.4. Financial Statements.
(a) Valley has previously delivered to American Union copies of the
consolidated statements of financial condition of Valley as of December 31,
1991, 1992 and 1993, the related consolidated statements of income, changes in
stockholders' equity and of cash flows for the periods ended December 31 in each
of the three fiscal years 1991 through 1993, in each case accompanied by the
audit report of KPMG Peat Marwick, independent public accountants with respect
to Valley, and the unaudited consolidated statements of condition of Valley as
of March 31, June 30, and September 30, 1994, and the related unaudited
consolidated statements of income, changes in stockholders' equity and cash
flows for the three months then ended as reported in Valley's Quarterly Reports
on Form 10-Q, filed with the SEC under the Securities and Exchange Act of 1934,
as amended (the "1934 Act") (collectively, the "Valley Financial Statements").
The Valley Financial Statements (including the related notes), have been
prepared in accordance with generally accepted accounting principles
consistently applied during the periods involved (except as approved by such
independent public accountants and disclosed therein), and fairly present the
consolidated financial position of Valley and its consolidated subsidiaries as
of the respective dates set forth therein, and the related consolidated
statements of income, changes in stockholders' equity and of cash flows
(including the related notes, where applicable) fairly present the results of
the consolidated operations and changes in stockholders' equity and of cash
flows of Valley and its consolidated subsidiaries for the respective fiscal
periods set forth therein.
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(b) The books and records of Valley have been and are being maintained in
material compliance with applicable legal and accounting requirements, and
reflect only actual transactions.
(c) Except as and to the extent reflected, disclosed or reserved against in
the Valley Financial Statements (including the notes thereto), as of September
30, 1994 neither Valley nor any of its Subsidiaries had or has, as the case may
be, any obligation or liability, whether absolute, accrued, contingent or
otherwise, which are material to the business, operations, assets or financial
condition of Valley or any of its Subsidiaries. Since September 30, 1994,
neither Valley nor any of its Subsidiaries have incurred any liabilities, except
in the ordinary course of business and consistent with prudent banking practice.
4.5. Brokerage Fees. Except for fees to be paid to MG Advisors, Inc. (which
shall be the sole responsibility of Valley), neither Valley nor VNB nor any of
their respective 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.
4.6. Absence of Certain Changes or Events. There has not been any material
adverse change in the business, operations, assets or financial condition of
Valley and Valley's Subsidiaries on a consolidated basis since September 30,
1994 and to the best of Valley's knowledge, no fact or condition exists which
Valley believes will cause or is likely to cause such a material adverse change
in the future.
4.7. Valley Information. The information relating to Valley, this Agreement
and the transactions contemplated hereby in the Proxy Statement/Prospectus (as
defined in Section 5.6(a) hereof), as of the date of the mailing of the Proxy
Statement/Prospectus, and up to and including the date of the meeting of
stockholders of American Union to which such Proxy Statement/Prospectus relates,
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The information
relating to Valley, this Agreement and the transactions contemplated hereby in
the Registration Statement (as defined in Section 5.6(a) hereof), as of the date
of the filing thereof, will not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
4.8. Capital Adequacy. At the Effective Time, after taking into effect the
Merger and the transactions contemplated hereunder, Valley will have sufficient
capital to satisfy all applicable regulatory capital requirements.
4.9. Valley Common Stock. At the Effective Time, the Valley Common Stock to
be issued pursuant to the terms of Section 2.1, when so issued, shall be duly
authorized, validly issued, fully paid, and non-assessable, free of preemptive
rights and free and clear of all liens, encumbrances or restrictions created by
or through Valley.
4.10. Legal Proceedings. Except as disclosed in the Valley Disclosure
Schedule, neither Valley nor any of its Subsidiaries is a party to any, and
there are no material pending or, to the best of Valley's knowledge, threatened,
legal, administrative, arbitral or other proceedings, claims, actions or
governmental investigations of any nature against Valley or any of its
Subsidiaries which, if decided adversely to Valley, or any of its Subsidiaries,
would have a material adverse effect on the business, operations, assets or
financial condition of Valley and its Subsidiaries on a consolidated basis.
Except as disclosed in the Valley Disclosure Schedule, neither Valley nor any of
Valley's Subsidiaries is a party to any order, judgment or decree entered
against Valley or any such Subsidiary in any lawsuit or proceeding which would
have a material adverse affect on the business, operations, assets or financial
condition of Valley and its Subsidiaries on a consolidated basis.
4.11. Taxes and Tax Returns. Valley and each of its Subsidiaries has duly
filed (and until the Effective Time will so file) all 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 (and
until the Effective Time will so pay) all such taxes due and payable, other than
taxes or other charges which are being contested in good faith. Valley and each
of its Subsidiaries have established (and until the Effective Time will
establish) on its books and records reserves that it reasonably believes are
adequate for the payment of all federal, state and local taxes not yet due and
payable, but are anticipated to be incurred in respect of Valley and its
Subsidiaries through the Effective Time. No deficiencies exist or have been
asserted based upon the federal income tax returns of Valley and VNB. To the
best knowledge of Valley, there are no audits or other administrative or court
proceedings pending, or claims asserted, for taxes or assessments upon Valley or
any of its Subsidiaries.
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4.12. Employee Benefit Plans.
(a) Valley and its Subsidiaries maintain or contribute to certain "employee
pension benefit plans" (the "Valley Pension Plans"), as such term is defined in
Section 3 of ERISA, and "employee welfare benefit plans" (the "Valley Welfare
Plans"), as such term is defined in Section 3 of ERISA. Since September 2, 1974,
neither Valley nor its Subsidiaries have contributed to any "Multiemployer
Plan", as such term is defined in Section 3(37) of ERISA.
(b) Each of the Valley Pension Plans and each of the Valley Welfare Plans
has been operated in compliance in all material respects with the provisions of
ERISA, the Code, all regulations, rulings and announcements promulgated or
issued thereunder, and all other applicable governmental laws and regulations.
4.13. Reports.
(a) Each communication mailed by Valley to all of its stockholders since
January 1, 1991, and each annual, quarterly or special report, and proxy
statement as of its date, complied in all material respects with all applicable
statutes, rules and regulations enforced or promulgated by the applicable
regulatory agency and did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading; provided that disclosures as of a later
date shall be deemed to modify disclosures as of an earlier date.
(b) Valley and VNB have, since January 1, 1991, duly filed with the OCC and
the FRB in correct form the monthly, quarterly and annual reports required to be
filed under applicable laws and regulations, and Valley, upon request, promptly
will deliver or make available to American Union accurate and complete copies of
such reports.
4.14. Compliance with Applicable Law. Valley and its Subsidiaries hold all
material licenses, franchises, permits and authorizations necessary for the
lawful conduct of their respective businesses under and pursuant to each, and
has complied with and is not in default in any respect under any, applicable
law, statute, order, rule, regulation, policy and/or guideline of any federal,
state or local governmental authority or the NYSE relating to Valley and its
Subsidiaries (other than where such default or non-compliance will not result in
a material adverse effect on the business, operations, assets or financial
condition of Valley and its Subsidiaries on a consolidated basis), and neither
Valley nor any of its Subsidiaries has received notice of violation of, and does
not know of any violations (other than violations which will not, alone or in
the aggregate, result in a material adverse effect on the business operations,
assets or financial condition of Valley and its Subsidiaries on a consolidated
basis) of, any of the above.
4.15. Properties and Insurance.
(a) Valley and its Subsidiaries have good and, as to owned real property,
marketable title to all material assets and properties, whether real or
personal, tangible or intangible, reflected in Valley's consolidated balance
sheet as of December 31, 1993, 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 December 31, 1993). Valley and
its Subsidiaries as lessees have the right under valid and subsisting leases to
occupy, use, possess and control in all material respects, all real property
leased by them as presently occupied, used, possessed and controlled by them.
(b) The business operations and all insurable properties and assets of
Valley and its Subsidiaries are insured for their benefit against all risks
which, in the reasonable judgment of the management of Valley should be insured
against, with such deductibles and against such risks and losses as are in the
opinion of the management of Valley adequate for the business engaged in by
Valley and its Subsidiaries. As of the date hereof, Valley has not received any
notice of cancellation of or material amendment to any such insurance policy or
bond and is not in default in any material respect under any such policy or
bond, and, to the best of its knowledge, no coverage thereunder is being
disputed and all material claims thereunder have been filed in a timely fashion.
4.16. Minute Books. The minute books of Valley and its Subsidiaries contain
accurate records of all meetings and other corporate action held of their
respective stockholders and Boards of Directors (including committees of their
respective Boards of Directors).
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4.17. Environmental Matters. Except as disclosed in the Valley Disclosure
Schedule, neither Valley nor any of its Subsidiaries has received any written
notice, citation, claim, assessment, proposed assessment or demand for abatement
alleging that Valley or any of its Subsidiaries (either directly or as a
successor-in-interest in connection with the enforcement of remedies to realize
the value of properties serving as collateral for outstanding loans) is
responsible for the correction or clean-up of any condition material to the
business, operations, assets or financial condition of Valley or its
Subsidiaries. Except as disclosed in the Valley Disclosure Schedule, Valley has
no knowledge that any toxic or hazardous substances or materials have been
emitted, generated, disposed of or stored on any property owned or leased by
Valley or any of its Subsidiaries in any manner that violates or, after the
lapse of time may violate, any presently existing federal, state or local law or
regulation governing or pertaining to such substances and materials, the
violation of which would have a material adverse effect on the business,
operations, assets or financial condition of Valley and its Subsidiaries on a
consolidated basis.
4.18. Reserves. As of the date hereof, the allowance for possible loan and
lease losses in the Valley Financial Statements was adequate based at the time
upon past loan loss experiences and potential losses in the portfolio at the
time to cover all known or reasonably anticipated loan losses.
4.19. Disclosures. Except for other acquisition transactions which have not
yet been publicly disclosed by Valley, there are no material facts concerning
the business, operations, assets or financial condition of Valley which would
have a material adverse effect on the business, operations or financial
condition of Valley which have not been disclosed to American Union directly or
indirectly by access to any filing by Valley under the 1934 Act. No
representation or warranty contained in Article IV of this Agreement contains
any untrue statement of a material fact or omits to state a material fact
necessary to make the statements herein not misleading.
ARTICLE V
COVENANTS OF THE PARTIES
5.1. Conduct of the Business of American Union. During the period from the
date of this Agreement to the Effective Time, American Union shall conduct its
business and engage in transactions permitted hereunder only in the ordinary
course and consistent with prudent banking practice, except with the prior
written consent of Valley, which consent will not be unreasonably withheld.
American Union also shall use its best efforts to (i) preserve its business
organization intact, (ii) keep available to itself the present services of its
employees and (iii) preserve for itself and Valley the goodwill of its customers
and others with whom business relationships exist, in each case provided that
American Union shall not be required to take any unreasonable or extraordinary
act or any action which would conflict with any other term of this Agreement.
5.2. Negative Covenants and Dividend Covenants.
American Union agrees that from the date hereof to the Effective Time,
except as otherwise approved by Valley in writing or as permitted or required by
this Agreement, it will not:
(a) change any provision of its Certificate of Incorporation or Bylaws
or any similar governing documents;
(b) change the number of shares of its authorized capital stock or
issue any more shares of American Union Common Stock or other capital stock
or issue or grant any option, warrant, call, commitment, subscription,
right to purchase or agreement of any character relating to the authorized
or issued capital stock of American Union or any securities convertible
into shares of such stock, or split, combine or reclassify any shares of
its capital stock, or declare, set aside or pay any dividend, or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of its capital stock, or redeem or otherwise acquire
any shares of such capital stock;
(c) grant any severance or termination pay (other than pursuant to
policies of American Union in effect on the date hereof and disclosed to
Valley in the American Union Disclosure Schedule or as agreed to by Valley
in writing) to, or enter into or amend any employment agreement with, any
of its directors, officers or employees; adopt any new employee benefit
plan or arrangement of any type or amend any such existing benefit plan or
arrangement; or award any increase in compensation or benefits to its
directors, officers or employees except with respect to salary increases
and bonuses in the ordinary course of business and consistent with past
practices and policies;
(d) sell or dispose of any substantial amount of assets or incur any
significant liabilities other than in the ordinary course of business
consistent with past practices and policies;
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(e) make any capital expenditures outside of the ordinary course of
business other than pursuant to binding commitments existing on the date
hereof and other than expenditures necessary to maintain existing assets in
good repair;
(f) file any applications or make any contract with respect to
branching or site location or relocation;
(g) agree to acquire in any manner whatsoever (other than to realize
upon collateral for a defaulted loan) any business or entity;
(h) make any material change in its accounting methods or practices,
other than changes required in accordance with generally accepted
accounting principles; or
(i) agree to do any of the foregoing.
5.3. No Solicitation. American Union shall not, directly or indirectly,
encourage or solicit or hold discussions or negotiations with, or provide any
information to, any person, entity or group (other than Valley) concerning any
merger or sale of shares of capital stock or sale of substantial assets or
liabilities not in the ordinary course of business, or similar transactions
involving American Union (an "Acquisition Transaction"). Notwithstanding the
foregoing, American Union may (i) enter into discussions or negotiations or
provide information in connection with an unsolicited possible Acquisition
Transaction if the Board of Directors of American Union, after consulting with
counsel, determines that such discussions or negotiations should be commenced in
the exercise of its fiduciary responsibilities or such information should be
furnished in the exercise of its fiduciary responsibilities; and (ii) respond to
inquiries from its shareholders in the ordinary course of business. American
Union will promptly communicate to Valley the terms of any proposal, whether
written or oral, which it may receive in respect of any Acquisition Transaction
and the fact that it is having discussions or negotiations with, or supplying
information to, a third party in connection with a possible Acquisition
Transaction.
5.4. Current Information. During the period from the date of this Agreement
to the Effective Time, American Union will, at the request of Valley, cause one
or more of its designated representatives to confer on a monthly or more
frequent basis with representatives of Valley regarding American Union's
business, operations, properties, assets and financial condition and matters
relating to the completion of the transactions contemplated herein. Without
limiting the foregoing, after granting any loan or extension of credit by
renewal or otherwise, American Union will send to Valley a description (i.e., a
copy of the loan documents) for each new loan or extension of credit, and each
renewal of an existing loan or extension of credit, in excess of $250,000. As
soon as reasonably available, but in no event more than 45 days after the end of
each fiscal quarter (other than the last fiscal quarter of each fiscal year)
ending after the date of this Agreement, American Union will deliver to Valley
American Union's call reports filed with the FDIC and Valley will deliver to
American Union Valley's quarterly reports on Form 10-Q, as filed with the SEC
under the 1934 Act. As soon as reasonably available, but in no event more than
90 days after the end of each fiscal year, American Union will deliver to Valley
and Valley will deliver to American Union their respective Annual Reports.
5.5. Access to Properties and Records; Confidentiality.
(a) American Union shall permit Valley and its agents and representatives,
including, without limitation, officers, directors, employees, attorneys,
accountants and financial advisors (collectively, "Representatives"), and Valley
and VNB shall permit American Union and its Representatives reasonable access to
their respective properties, and shall disclose and make available to Valley and
its Representatives or American Union and its Representatives, as the case may
be, all books, papers and records relating to their respective assets, stock
ownership, properties, operations, obligations and liabilities, including, but
not limited to, all books of account (including the general ledger), tax
records, minute books of directors' and stockholders' meetings, organizational
documents, bylaws, material contracts and agreements, filings with any
regulatory authority, independent auditors' work papers (subject to the receipt
by such auditors of a standard access representation letter), litigation files,
plans affecting employees, and any other business activities or prospects in
which Valley and its representatives or American Union and its representatives
may have a reasonable interest. Neither party shall be required to provide
access to or to disclose information where such access or disclosure would
violate or prejudice the rights of any customer or would contravene any law,
rule, regulation, order or judgment. The parties will use their best efforts to
obtain waivers of any such restriction and in any event make appropriate
substitute disclosure arrangements under circumstances in which the restrictions
of the preceding sentence apply. American Union acknowledges that Valley may be
involved in discussions concerning other potential acquisitions and Valley shall
not be obligated to disclose such information to American Union except as such
information is publicly disclosed by Valley.
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(b) All information furnished by the parties hereto previously in
connection with transactions contemplated by this Agreement or pursuant hereto
shall be used solely for the purpose of evaluating the Merger contemplated
hereby and shall be treated as the sole property of the party delivering the
information until consummation of the Merger contemplated hereby and, if such
Merger shall not occur, each party and each party's Representatives shall return
to the other party all documents or other materials containing, reflecting or
referring to such information, will not retain any copies of such information,
shall keep confidential all such information, and shall not directly or
indirectly use such information for any competitive or commercial purposes or
any other purpose not expressing permitted hereby. Each party hereto shall
inform its Representatives of the terms of this Section 5.5. Any breach of this
Section 5.5 by a Representative of a party hereto shall conclusively be deemed
to be a breach thereof by such party. In the event that the Merger contemplated
hereby does not occur or this Agreement is terminated, all documents, notes and
other writings prepared by a party hereto or its Representatives based on
information furnished by the other party, and all other documents and records
obtained from another party hereto in connection herewith, shall be promptly
destroyed. The obligation to keep such information confidential shall continue
for five years from the date the proposed Merger is abandoned but shall not
apply to (i) any information which (A) the party receiving the information can
establish by convincing evidence was already in its possession prior to the
disclosure thereof to it by the other party; (B) was then generally known to the
public other than as a result of a disclosure by any party hereto or its
Representative; (C) became known to the public through no fault of the party
receiving such information; or (D) was disclosed to the party receiving such
information by a third party not bound by an obligation of confidentiality; or
(ii) disclosures pursuant to a legal requirement or in accordance with an order
of a court of competent jurisdiction, provided that in the event of any
disclosure required by this clause (ii), the disclaiming party will give at
least ten (10) days prior written notice of such disclosure to the other parties
and shall not disclose any such information without an opinion of counsel
supporting its position that such information must be disclosed.
(c) In addition to all other remedies that may be available to any party
hereto in connection with a breach by any other party hereto of its or its
Representative's obligations hereunder, each party hereto shall be entitled to
specific performance and injunctive and other equitable relief. Each party
hereto waives, and agrees to use its best efforts to cause its Representatives
to waive, any requirement to secure or post a bond in connection with any such
relief.
5.6. Regulatory Matters.
(a) For the purposes of holding the meeting of American Union stockholders
referred to in Section 5.7 hereof and registering or otherwise qualifying under
applicable federal and state securities laws Valley Common Stock to be issued to
Record Holders in connection with the Merger, the parties hereto shall cooperate
in the preparation and filing by Valley of a Registration Statement with the SEC
which shall include an appropriate proxy statement and prospectus satisfying all
applicable requirements of applicable state and federal laws, including the
Securities Act of 1933, as amended (the "1933 Act"), the 1934 Act and applicable
state securities laws and the rules and regulations thereunder. (Such proxy
statement and prospectus in the form mailed by American Union to the American
Union shareholders and optionees, together with any and all amendments and
supplements thereto, is herein referred to as the "Proxy Statement/Prospectus"
and the various documents to be filed by Valley under the 1933 Act with the SEC
to register for sale the Valley Common Stock to be issued to Record Holders and
optionees, including the Proxy Statement/Prospectus, together with any and all
amendments and supplements thereto, are referred to herein as the "Registration
Statement").
(b) Valley shall furnish information concerning Valley as is necessary in
order to cause the Proxy Statement/Prospectus, insofar as it relates to Valley,
to comply with Section 5.6(a) hereof. Valley agrees promptly to advise American
Union if at any time prior to the American Union shareholder meeting referred to
in Section 5.7 hereof, any information provided by Valley in the Proxy
Statement/Prospectus becomes incorrect or incomplete in any material respect and
to provide American Union with the information needed to correct such inaccuracy
or omission. Valley shall furnish American Union with such supplemental
information as may be necessary in order to cause the Proxy
Statement/Prospectus, insofar as it relates to Valley, to comply with Section
5.6(a) after the mailing thereof to American Union shareholders.
(c) American Union shall furnish Valley with such information concerning
American Union as is necessary in order to cause the Proxy Statement/Prospectus,
insofar as it relates to American Union, to comply with Section 5.6(a) hereof.
American Union agrees promptly to advise Valley if, at any time prior to the
American Union shareholder's meeting referred to in Section 5.7 hereof,
information provided by American Union in the Proxy Statement/Prospectus becomes
incorrect or incomplete in any material respect and to provide Valley with the
information needed to correct such inaccuracy or omission. American Union shall
furnish Valley with such supplemental information as may be necessary in order
to cause the Proxy Statement/Prospectus, insofar as it relates to American
Union, to comply with Section 5.6(a) after the mailing thereof to American Union
shareholders.
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(d) Valley shall promptly make such filings as are necessary in connection
with the offering of the Valley Common Stock with applicable state securities
agencies and shall use all reasonable efforts to qualify the offering of the
Valley Common Stock under applicable state securities laws at the earliest
practicable date. American Union shall promptly furnish Valley with such
information regarding the American Union shareholders as Valley requires to
enable it to determine what filings are required hereunder. American Union
authorizes Valley to utilize in such filings the information concerning American
Union provided to Valley in connection with, or contained in, the Proxy
Statement/Prospectus. Valley shall furnish American Union with drafts of all
such filings, shall provide American Union the opportunity to comment thereon,
and shall keep American Union advised of the status thereof. Valley and American
Union shall as promptly as practicable file the Registration Statement
containing the Proxy Statement/Prospectus with the SEC, and each of Valley and
American Union shall promptly notify the other of all communications, oral or
written, with the SEC concerning the Registration Statement and the Proxy
Statement/Prospectus.
(e) Valley shall cause the Valley Common Stock to be issued in connection
with the Merger to be listed on the NYSE.
(f) The parties hereto will cooperate with each other and use their best
efforts to prepare all necessary documentation, to effect all necessary filings
and to obtain all necessary permits, consents, approvals and authorizations of
all third parties and governmental bodies necessary to consummate the
transactions contemplated by this Agreement as soon as possible, including,
without limitation, those required by the OCC. The parties shall each have the
right to review in advance and comment on all information relating to the other,
as the case may be, which appears in any filing made with, or written material
submitted to, any third party or governmental body in connection with the
transactions contemplated by this Agreement. Valley and VNB shall cause their
application to the OCC to be filed (i) within 45 days of the date hereof, so
long as American Union provides all information necessary to complete the
application within 30 days of the date hereof, or (ii) within 15 days after all
such information is provided, if American Union does not provide all such
information within such 30 day period. Valley shall provide to American Union
drafts of all filings and applications referred to in this Section 5.6(f) and
shall give American Union the opportunity to comment thereon prior to their
filing.
(g) Each of the parties will promptly furnish each other with copies of
written communications received by them or any of their respective Subsidiaries
from, or delivered by any of the foregoing to, any governmental body in respect
of the transactions contemplated hereby.
5.7. Approval of Stockholders. American Union will (a) take all steps
reasonably necessary duly to call, give notice of, convene and hold a meeting of
the stockholders of American Union as soon as reasonably practicable for the
purpose of securing the approval by such stockholders of this Agreement, (b)
subject to the qualification set forth in Section 5.3 hereof, recommend to the
stockholders of American Union the approval of this Agreement and the
transactions contemplated hereby and use its best efforts to obtain, as promptly
as practicable, such approval, and (c) cooperate and consult with Valley with
respect to each of the foregoing matters. In connection therewith, each director
of American Union agrees to vote his or her shares of American Union in favor of
the Merger.
5.8. Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
reasonably necessary, proper or advisable under applicable laws and regulations
to satisfy the conditions to Closing and to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
using reasonable efforts to lift or rescind any injunction or restraining order
or other order adversely affecting the ability of the parties to consummate the
transactions contemplated by this Agreement and using its best efforts to
prevent the breach of any representation, warranty, covenant or agreement of
such party contained or referred to in this Agreement and to promptly remedy the
same. Nothing in this section shall be construed to require any party to
participate in any threatened or actual legal, administrative or other
proceedings (other than proceedings, actions or investigations to which it is
otherwise a party or subject or threatened to be made a party or subject) in
connection with consummation of the transactions contemplated by this Agreement
unless such party shall consent in advance and in writing to such participation
and the other party agrees to reimburse and indemnify such party for and against
any and all costs and damages related thereto.
5.9. Public Announcements. The parties hereto shall cooperate with each
other in the development and distribution of all news releases and other public
disclosures with respect to this Agreement or any of the transactions
contemplated hereby, except as may be otherwise required by law or regulation or
as to which the party releasing such information has used its best efforts to
discuss with the other party in advance.
<PAGE>
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5.10. Failure to Fulfill Conditions. In the event that Valley or American
Union determines that a material condition to its obligation to consummate the
transactions contemplated hereby cannot be fulfilled on or prior to June 30,
1995 and that it will not waive that condition, it will promptly notify the
other party. Except for any acquisition or merger discussions Valley may enter
into with other parties, American Union and Valley will promptly inform the
other of any facts applicable to American Union or Valley, respectively, or
their respective directors, officers or Subsidiaries, that would be likely to
prevent or materially delay approval of the Merger by any governmental authority
or which would otherwise prevent or materially delay completion of the Merger.
5.11. Disclosure Supplements. From time to time prior to the Effective
Time, each party hereto will promptly supplement or amend (by written notice to
the other) its respective Disclosure Schedules delivered pursuant hereto with
respect to any matter hereafter arising which, if existing, occurring or known
at the date of this Agreement, would have been required to be set forth or
described in such Schedules or which is necessary to correct any information in
such Schedules which has been rendered materially inaccurate thereby. For the
purpose of determining satisfaction of the conditions set forth in Article VI,
no supplement or amendment to such Schedules shall correct or cure any warranty
which was untrue when made, but supplements or amendments may be used to
disclose subsequent facts or events to maintain the truthfulness of any
warranty.
5.12. Transaction Expenses of American Union. American Union shall mutually
agree with Valley about printing arrangements for the Proxy Statement/Prospectus
before entering into any binding contract for such expenses and shall avoid, to
the extent possible, author's alterations after the Proxy Statement/Prospectus
is sent to the printer.
5.13. Closing. The parties hereto shall cooperate and use reasonable
efforts to try to cause the Effective Time to occur in the first quarter of
1995. In the event that: (a) the Effective Time does not occur before the record
date (the "Record Date") used to determine the shareholders of Valley entitled
to receive a dividend on April 1, 1995 and (b) the Proxy Statement/Prospectus is
filed with the SEC prior to December 15, 1994, then notwithstanding Section
5.2(b) hereof, American Union shall be permitted to declare and pay a dividend
to its shareholders in an amount equal to the amount of the dividend its
shareholders would have received from Valley had the Effective Date occurred
prior to the Record Date.
5.14. Indemnification. Valley agrees that it will, or if it is not
permitted to do so under applicable law, it will cause VNB to, after the
Effective Time, and to the extent permitted by applicable law, provide to the
former and then current directors, officers and agents of American Union
indemnification equivalent to that provided by the Certificate of Incorporation
and By-laws of American Union with respect to acts or omissions occurring prior
to the Effective Time, whether asserted prior to or after the Effective Time,
including without limitation, the authorization of this Agreement and the
transactions contemplated hereby, for a period of six years from the Effective
Time, or in the case of matters occurring prior to the Effective Time which have
not been resolved prior to the sixth anniversary of the Effective Time, until
such matters are finally resolved. To the extent permitted by applicable law,
Valley or VNB (as applicable) shall advance expenses to former and current
officers and directors of American Union in connection with the foregoing
indemnification.
5.15. Employment Matters. Valley will endeavor to continue the employment
of all officers and employees of American Union with the same or equivalent
salary and benefits. If prior to the Effective Time Valley believes it will be
unable to continue the employment of any employee of American Union, Valley and
American Union will mutually agree in writing upon a severance policy.
5.16. Pooling and Tax-Free Reorganization Treatment. Neither Valley nor
American Union shall intentionally take, fail to take or cause to be taken or
not be taken, any action within its control, whether before or after the
Effective Time, which would disqualify the Merger as a "pooling of interests"
for accounting purposes or as a "reorganization" within the meaning of Section
368(a) of the Code.
5.17. Affiliates.
(a) Promptly, but in any event within two weeks, after the execution and
delivery of this Agreement, (i) American Union shall deliver to Valley (x) a
letter identifying all persons who, to the knowledge of American Union, may be
deemed to be affiliates of American Union under Rule 145 of the 1933 Act,
including without limitation all directors and executive officers of American
Union and (y) a letter identifying all persons who, to the knowledge of American
Union, may be deemed to be affiliates of American Union as that term (affiliate)
is used for purposes of qualifying for "pooling of interests" accounting
treatment; and (ii) Valley shall identify to American Union all persons who, to
the knowledge of Valley, may be deemed affiliates of Valley as that term
(affiliates) is used for purposes of qualifying for "pooling of interests"
accounting treatment.
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(b) Each person who may be deemed an affiliate of American Union (under
either Rule 415 of the 1933 Act or the accounting treatment rules) shall execute
a letter substantially in the form of Exhibit 5.17 hereto agreeing to be bound
by the restrictions of Rule 145, as set forth in Exhibit 5.17 and agreeing to be
bound by the rules which permit the Merger to be treated as a pooling of
interests for accounting purposes. In addition, Valley shall cause its
affiliates (as that term is used for purposes of qualifying for pooling of
interests) to execute a letter within two weeks of the date hereof, in which
such persons agree to be bound by the rules which permit the Merger to be
treated as a pooling of interests for accounting treatment.
5.18. Compliance with the Industrial Site Recovery Act. American Union, at
its sole cost and expense, shall obtain prior to the Effective Time, either:
(a) a Letter of Non-Applicability from the New Jersey Department of
Environmental Protection and Energy ("NJDEPE") stating that none of the
facilities located in New Jersey owned or operated by American Union (each, a
"Facility") is an "industrial establishment," as such term is defined under the
Industrial Site Recovery Act ("ISRA"); (b) a Remediation Agreement issued by the
NJDEPE pursuant to ISRA authorizing the consummation of the transactions
contemplated by this Agreement; or (c) a Negative Declaration approval, Remedial
Action Workplan approval, No Further Action letter or other document or
documents issued by the NJDEPE advising that the requirements of ISRA have been
satisfied with respect to each Facility subject to ISRA. In the event American
Union obtains a Remediation Agreement, American Union will post or have posted
an appropriate Remediation Funding Source or will have obtained the NJDEPE's
approval to self-guaranty any Remediation Funding Source required under any such
Remediation Agreement.
ARTICLE VI
CLOSING CONDITIONS
6.1. Conditions of Each Party's Obligations Under this Agreement. The
respective obligations of each party under this Agreement to consummate the
Merger shall be subject to the satisfaction, or, where permissible under
applicable law, waiver at or prior to the Effective Time of the following
conditions:
(a) Approval of American Union Stockholders; SEC Registration. This
Agreement and the transactions contemplated hereby shall have been approved by
the requisite vote of the stockholders of American Union. The Registration
Statement shall have been declared effective by the SEC and shall not be subject
to a stop order or any threatened stop order, and the issuance of the Valley
Common Stock shall have been qualified in every state where such qualification
is required under the applicable state securities laws. The Valley Common Stock
to be issued in connection with the Merger, shall have been approved for listing
on the NYSE.
(b) Regulatory Filings. All necessary regulatory or governmental approvals
and consents (including without limitation any required approval of the OCC)
required to consummate the transactions contemplated hereby shall have been
obtained without any term or condition which would materially impair the value
of American Union, taken as a whole, to Valley. All conditions required to be
satisfied prior to the Effective Time by the terms of such approvals and
consents shall have been satisfied; and all statutory waiting periods in respect
thereof shall have expired.
(c) Suits and Proceedings. No order, judgment or decree shall be
outstanding against a party hereto or a third party that would have the effect
of preventing completion of the Merger; no suit, action or other proceeding
shall be pending or threatened by any governmental body in which it is sought to
restrain or prohibit the Merger and no suit, action or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit the Merger or obtain other substantial monetary or other
relief against one or more parties hereto in connection with this Agreement and
which Valley or American Union determines in good faith, based upon the advice
of their respective counsel, makes it inadvisable to proceed with the Merger
because any such suit, action or proceeding has a significant potential to be
resolved in such a way as to deprive the party electing not to proceed of any of
the material benefits to it of the Merger.
(d) Tax Free Exchange. Valley and American Union shall have received an
opinion, satisfactory to Valley and American Union, of Pitney, Hardin, Kipp &
Szuch, counsel for Valley, to the effect that the transactions contemplated
hereby will result in a reorganization (as defined in Section 368(a) of the
Code), and accordingly no gain or loss will be recognized for federal income tax
purposes to Valley, American Union, VNB or the Bank or to the shareholders of
American Union who exchange their shares of American Union for Valley Common
Stock (except to the extent that cash is received in lieu of fractional shares
of Valley Common Stock).
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6.2. Conditions to the Obligations of Valley Under this Agreement. The
obligations of Valley under this Agreement shall be further subject to the
satisfaction or waiver, at or prior to the Effective Time, of the following
conditions:
(a) Representations and Warranties; Performance of Obligations of American
Union. The representations and warranties of American Union contained in this
Agreement shall be true and correct in all material respects on the Closing Date
as though made on and as of the Closing Date. American Union shall have
performed in all material respects the agreements, covenants and obligations
necessary to be performed by it prior to the Closing Date. With respect to any
representation or warranty which as of the Closing Date has required a
supplement or amendment to the American Union Disclosure Schedule to render such
representation or warranty true and correct as of the Closing Date, the
representation and warranty shall be deemed true and correct as of the Closing
Date only if (i) the information contained in the supplement or amendment to the
Disclosure Schedule related to events occurring following the execution of this
Agreement and (ii) the facts disclosed in such supplement or amendment would not
either alone, or together with any other supplements or amendments to the
American Union Disclosure Schedule, materially adversely effect the
representation as to which the supplement or amendment relates.
(b) Consents. Valley shall have received the written consents of any person
whose consent to the transactions contemplated hereby is required under the
applicable instrument.
(c) Opinion of Counsel. Valley shall have received an opinion of counsel to
American Union, dated the date of the Closing, in form and substance reasonably
satisfactory to Valley.
(d) Pooling of Interests. The Merger shall be qualified to be treated by
Valley as a pooling-of-interests for accounting purposes.
(e) Certificates. American Union shall have furnished Valley with such
certificates of its officers or others (without personal liability) and such
other documents to evidence fulfillment of the conditions set forth in this
Section 6.2 as Valley may reasonably request.
6.3. Conditions to the Obligations of American Union Under this Agreement.
The obligations of American Union under this Agreement shall be further subject
to the satisfaction or waiver, at or prior to the Effective Time, of the
following conditions:
(a) Representations and Warranties; Performance of Obligations of Valley.
The representations and warranties of Valley contained in this Agreement shall
be true and correct in all material respects on the Closing Date as though made
on and as of the Closing Date. Valley and VNB shall have performed in all
material respects, the agreements, covenants and obligations to be performed by
them prior to the Closing Date. With respect to any representation or warranty
which as of the Closing Date has required a supplement or amendment to the
Valley Disclosure Schedule to render such representation or warranty true and
correct as of the Closing Date, the representation and warranty shall be deemed
true and correct as of the Closing Date only if (i) the information contained in
the supplement or amendment to the Disclosure Schedule related to events
occurring following the execution of this Agreement and (ii) the facts disclosed
in such supplement or amendment would not either alone, or together with any
other supplements or amendments to the Valley Disclosure Schedule, materially
adversely effect the representation as to which the supplement or amendment
relates.
(b) Opinion of Counsel to Valley. American Union shall have received an
opinion of counsel to Valley, dated the date of the Closing, in form and
substance reasonably satisfactory to American Union.
(c) Fairness Opinion. American Union shall have received an opinion from
Capital Consultants of Princeton, Inc. as of the date the Proxy
Statement/Prospectus is mailed to American Union's stockholders, to the effect
that, in its opinion, the consideration to be paid to stockholders of American
Union hereunder is fair to such stockholders.
(d) Certificates. Valley shall have furnished American Union with such
certificates of its officers or others (without personal liability) and such
other documents to evidence fulfillment of the conditions set forth in this
Section 6.3 as American Union may reasonably request.
(e) Indemnity. American Union and its Representatives shall be indemnified
by Valley or VNB, as the case may be, as provided in Section 5.14 hereof.
<PAGE>
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ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1. Termination. This Agreement may be terminated prior to the Effective
Time, whether before or after approval of this Agreement by the stockholders of
American Union:
(a) By mutual written consent of the parties hereto.
(b) By Valley or American Union (i) if the Effective Time shall not have
occurred on or prior to June 30, 1995 or (ii) if a vote of the stockholders of
American Union is taken and such stockholders fail to approve this Agreement at
the meeting (or any adjournment thereof) held for such purpose, unless in each
case the failure of such occurrence shall be due to the failure of the party
seeking to terminate this Agreement to perform or observe its agreements set
forth herein to be performed or observed by such party (or the directors of
American Union, as set forth in Section 5.7) at or before the Effective Time.
(c) By Valley or American Union upon written notice to the other if any
application for regulatory or governmental approval necessary to consummate the
Merger and the other transactions contemplated hereby shall have been denied or
withdrawn at the request or recommendation of the applicable regulatory agency
or governmental authority or by Valley upon written notice to American Union if
any such application is approved with conditions which materially impair the
value of American Union, taken as a whole, to Valley (provided that no term or
condition which is customarily imposed by any regulatory authority in
transactions similar to the transaction contemplated hereby shall be deemed to
materially impair the value of American Union, taken as a whole, to Valley),
unless any such occurrence shall be due to the failure of the party seeking to
terminate this Agreement to perform or observe its agreements set forth herein
to be performed or observed by such party at or before the Effective Date.
(d) By Valley if (i) there shall have occurred a material adverse change in
the business, operations, assets, or financial condition of American Union from
that disclosed by American Union on the date of this Agreement, or (ii) there
was a material breach in any representation, warranty, covenant, agreement or
obligation of American Union hereunder.
(e) By American Union, if (i) there shall have occurred a material adverse
change in the business, operations, assets or financial condition of Valley, VNB
or Valley and its Subsidiaries on a consolidated basis from that disclosed by
Valley on the date of this Agreement; or (ii) there was a material breach in any
representation, warranty, covenant, agreement or obligation of Valley hereunder.
(f) By American Union if the Average Closing Price is less than $19.00 per
share. The $19.00 per share amount shall be adjusted for any capital change
after the date hereof, as provided in Section 2.1(a).
(g) By Valley or American Union if any condition to Closing specified under
Article VI hereof applicable to such party cannot reasonably be met after giving
the other party a reasonable opportunity to cure any such condition.
7.2. Effect of Termination. In the event of the termination and abandonment
of this Agreement by either Valley or American Union pursuant to Section 7.1,
this Agreement (except the provisions of Section 5.5(b) hereof) shall forthwith
become void and have no effect, without any liability on the part of any party
or its officers, directors or stockholders. Nothing contained herein, however,
shall relieve any party from any liability for any breach of this Agreement.
7.3. Amendment. This Agreement may be amended by mutual action taken by the
parties hereto at any time before or after adoption of this Agreement by the
stockholders of American Union but, after any such adoption, no amendment shall
be made which reduces or changes the amount or form of the consideration to be
delivered to the shareholders of American Union without the approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of Valley and American Union.
7.4. Extension; Waiver. The parties may, at any time prior to the Effective
Time of the Merger, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto; (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant thereto; or (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of any
party to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party against which the waiver is
sought to be enforced.
<PAGE>
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ARTICLE VIII
MISCELLANEOUS
8.1. Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby (including legal, accounting
and investment banking fees and expenses) shall be borne by the party incurring
such costs and expenses.
8.2. Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or sent by telecopier with confirming copy sent the same day by registered or
certified mail, postage prepaid, as follows:
(a) If to Valley, to:
Valley National Bancorp
1445 Valley Road
Wayne, New Jersey 07474-0558
Attn.: Gerald H. Lipkin
Chairman and Chief Executive Officer
Telecopier No. (201) 305-0024
Copy to:
Pitney, Hardin, Kipp & Szuch
Delivery:
200 Campus Drive
Florham Park, New Jersey 07932
Mail:
P.O. Box 1945
Morristown, New Jersey 07962-1945
Attn.: Ronald H. Janis, Esq.
Telecopier No. (201) 966-1550
(b) If to American Union, to:
American Union Bank
2784 Morris Avenue
Union, New Jersey 07083
Attn.: Alan Turtletaub, Chairman
Telecopier No.: (908) 686-6907
and
Alan Turtletaub, Chairman
The Money Store
2840 Morris Avenue
Union, New Jersey 07083
Copy to:
Sills, Cummis, Zuckerman, Radin,
Tischman, Epstein & Gross, P.A.
One Riverfront Plaza
Newark, New Jersey 07102
Attn.: Steven Radin, Esq., Victor Boyajian, Esq.
Telecopier No.: (201) 643-6500
or such other addresses as shall be furnished in writing by any party, and any
such notice or communications shall be deemed to have been given as of the date
so delivered or telecopied and mailed.
8.3. Parties in Interest. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. No assignment of this Agreement may be made except upon the
written consent of the other parties hereto. No person or entity shall be deemed
a third-party beneficiary under this Agreement, other than the directors and
officers of American Union with respect to Section 5.14 hereof.
8.4. Entire Agreement. This Agreement, which includes the Disclosure
Schedules hereto and the other documents, agreements and instruments executed
and delivered pursuant to or in connection with this Agreement, contains the
entire Agreement between the parties hereto with respect to the transactions
contemplated by this Agreement and supersedes all prior negotiations,
arrangements or understandings, written or oral, with respect thereto, including
the Letter of Intent. The Confidentiality Agreement between the parties dated as
of October 18, 1994 shall survive the execution of this Agreement.
8.5. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
<PAGE>
-21-
8.6. Governing Law. This Agreement shall be governed by the laws of the
State of New Jersey, without giving effect to the principles of conflicts of
laws thereof.
8.7. Descriptive Headings. The descriptive headings of this Agreement are
for convenience only and shall not control or affect the meaning or construction
of any provision of this Agreement.
IN WITNESS WHEREOF, Valley, VNB and American Union have caused this
Agreement to be executed by their duly authorized officers as of the day and
year first above written.
ATTEST: VALLEY NATIONAL BANCORP
By:PETER SOUTHWAY By: GERALD H. LIPKIN
Peter Southway, President Gerald H. Lipkin
Chairman and Chief
Executive Officer
ATTEST: AMERICAN UNION BANK
By:GERALD F. METZHEISER By: ALAN TURTLETAUB
Gerald F. Metzheiser, Alan Turtletaub, Chairman
President
ATTEST: VALLEY NATIONAL BANK
By:PETER SOUTHWAY By: GERALD H. LIPKIN
Peter Southway, President Gerald H. Lipkin,
Chairman and Chief
Executive Officer
<PAGE>
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Schedule 1
ARTICLES OF ASSOCIATION
OF
VALLEY NATIONAL BANK(1)
NAME
FIRST. The title of the Association shall be "Valley National Bank".
MAIN OFFICE
SECOND. The main office of the Association shall be in the City of Passaic,
County of Passaic, State of New Jersey. The general business of the Association
shall be conducted at its main office and its branches.
DIRECTORS
THIRD. The Board of Directors of this Association shall consist of not less
than five nor more than twenty-five directors the exact number to be fixed and
determined from time to time by resolution of a majority of the full Board of
Directors or by resolution of the shareholders at any annual or special meeting
thereof. Each director shall own $1,000 equity interest in this Association or
in a company which has control of the Association. The amount of the equity
interest shall meet this requirement if it conforms to the requirements of 12
U.S.C. 72, as amended on March 31, 1980, or as amended from time to time
thereafter. Any vacancy in the Board of Directors may be filled by action of the
Board of Directors.
ANNUAL MEETING OF SHAREHOLDERS
FOURTH. There shall be an annual meeting of the shareholders, the purpose
of which shall be the election of Directors and the transaction of whatever
other business may be brought before the meeting. The meeting shall be held at
the main office of the Association or any other convenient place as the Board of
Directors may designate, on the date of each year specified therefor in the
By-laws, but if no election is held on that day, it may be held on any
subsequent day according to such lawful rules as may be prescribed by the Board
of Directors.
Nominations for election to the Board of Directors may be made by the Board
of Directors or by any stockholder of any outstanding class of capital stock of
the Association entitled to vote for election of directors.
CAPITAL
FIFTH. The authorized amount of capital stock of this Association shall be
1,957,533(2) shares of common stock of the par value of five dollars ($5.00)
each; but said capital stock may be increased or decreased from time to time, in
accordance with the provisions of the laws of the United States.
No holder of shares of the capital stock of any class of the Association
shall have any pre-emptive or preferential right of subscription to (i) any
shares of any class of stock of the Association, whether now or hereafter
authorized, or (ii) to any obligations convertible into stock of the
Association, or (iii) to any right of subscription to any of the foregoing;
except any of the foregoing rights which the Board of Directors, in its sole
discretion may from time to time determine and at such price as the Board of
Directors may from time to time fix.
The Association, at any time and from time to time, may authorize and issue
debt obligations, whether or not subordinated, without the approval of the
shareholders.
OFFICERS
SIXTH. The Board of Directors shall appoint one of its members President of
this Association, who shall be Chairman of the Board, unless the Board appoints
another director to be the Chairman. The Board of Directors shall have the power
to appoint one or more Vice Presidents; and to appoint a Cashier and such other
officers and employees as may be required to transact the business of this
Association.
The Board of Directors shall have the power to define the duties of the
officers and employees of the Association; to fix the salaries to be paid to
them; to dismiss them; to require bonds from them and to fix the penalty
thereof; to regulate the manner in which any increase of the capital of the
Association shall be made; to manage and administer the business and affairs of
the Association; to make all By-Laws that it may be lawful for them to make; and
generally to do and perform all acts that it may be legal for a Board of
Directors to do and perform.
- --------
(1) Articles of Association of Valley are presently being amended and will
be as herein set forth at the Effective Time.
(2) 2,221,447 shares if merger with RockBank has closed.
<PAGE>
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CHANGE OF MAIN OFFICE; BRANCHES
SEVENTH. The Board of Directors shall have the power, without shareholder
approval, to change the location of the main office to any other authorized
branch location within the limits of the City of Passaic and to establish or
change the location of any branch or branches of the Association. Any change in
the location of the main office to another authorized branch location within the
City of Passaic shall be effected upon written notice to and approval by the
Comptroller of the Currency. Any change in the location of the main office,
except to an authorized branch location within the City of Passaic, shall
require both the approval of the Comptroller of the Currency and the approval of
shareholders owning two-thirds of the stock of the Association and any such
change shall be to a place not more than 30 miles from the city limits of the
City of Passaic.
EXISTENCE
EIGHTH. The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.
SPECIAL MEETINGS OF SHAREHOLDERS; NOTICE OF MEETINGS
NINTH. The Board of Directors of this Association, or any one or more
shareholders owning, in the aggregate, not less than ten percent of the stock of
this Association, may call a special meeting of shareholders at any time. Unless
otherwise provided by the laws of the United States, a notice of the time,
place, and purpose of every annual and special meeting of the shareholders shall
be given by first-class mail, postage prepaid, mailed at least ten days prior to
the date of such meeting to each shareholder of record at his address as shown
upon the books of this Association.
INDEMNIFICATION
TENTH. Any person, his heirs, executors or administrators, shall be
indemnified or reimbursed by the Association for any liability and/or expenses
incurred in connection with any action, suit or proceeding, civil or criminal,
to which he or they shall be involved or threatened to be involved, as a party,
or otherwise, by reason of his being or having been a director, officer, or
employee of the Association or of any firm, corporation, or organization which
he served in any such capacity at the request of the Association to the fullest
extent permitted under the New Jersey Business Corporation Act, as amended from
time to time, or any successor statute, including amounts paid in settlement, in
settlement of judgments or as fines and/or penalties; provided, however, that no
person shall be so indemnified or reimbursed for expenses, penalties or other
payments incurred in administrative proceeding or action instituted by an
appropriate bank regulatory agency which results in a final order assessing
civil money penalties or requiring affirmative action by an individual or
individuals in the form of payment to the Association.
The Association shall advance to any such person entitled to
indemnification the amount of expenses incurred by such person in connection
with any action, suit or proceeding to the fullest extent permitted by the New
Jersey Business Corporation Act.
The foregoing right of indemnification shall not be exclusive of other
rights to which such person, his heirs, executors or administrators, may be
entitled as a matter of law.
The Association may, upon the affirmative vote of a majority of its Board
of Directors, purchase insurance for the purpose of indemnifying its directors,
officers and other employees to the extent that such coverage is allowed by the
New Jersey Business Corporation Act. Such insurance shall not include coverage
for civil money penalties assessed by a bank regulatory agency against any bank
directors, officer, or employee but may include insurance for the directors',
officers' and employees' legal fees incurred in connection with such an
assessment.
Such insurance may, but need not, be for the benefit of all directors,
officers or employees of the Association.
AMENDMENTS
ELEVENTH. These Articles of Association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this Association, unless the vote of the holders of a
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount.
TWELFTH. A director or officer of the Association shall not be personally
liable to the Association or its shareholders for damages for breach of any duty
owed to the Association or its shareholders except that such provision shall not
relieve a director or officer from liability from any breach of duty based upon
an act or omission (i) in breach of such person's duty of loyalty to the
Association or its shareholders, (ii) not in good faith or involving a knowing
violation of law, or (iii) resulting in receipt by such person of an improper
personal benefit.
<PAGE>
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EXHIBIT 5.17
FORM OF AMERICAN UNION AFFILIATE LETTER
November _____, 1994
Valley National Bancorp
1445 Valley Road
Wayne, NJ 07470
Gentlemen:
I am delivering this letter to you in connection with the proposed merger
(the "Merger") of American Union Bank, a New Jersey chartered commercial banking
corporation (the "Company") with and into Valley National Bank, a national
banking association, pursuant to the Agreement and Plan of Merger dated November
9, 1994 (the "Agreement") among the Company, Valley National Bancorp ("Valley"),
and Valley National Bank. I currently own shares of the Company's common stock,
par value $5.00 per share ("American Union Common Stock"). As a result of the
Merger, I will receive shares of Valley's common stock, no par value ("Valley
Common Stock") in exchange for my American Union Common Stock.
I have been advised that as of the date of this letter I may be deemed to
be an "affiliate" of the Company, as the term "affiliate" is defined for
purposes of paragraphs (c) and (d) of Rule 145 of the rules and regulations
promulgated under the Securities Act of 1933, as amended (the "1933 Act") by the
Securities and Exchange Commission ("SEC") and as the term "affiliate" is used
for purposes of the SEC's rules and regulations applicable to the determination
of whether a merger can be accounted for as a "pooling of interests" as
specified in the SEC's Accounting Series Release 135, as amended by Staff
Accounting Bulletins Nos. 65 and 76 ("ASR 135").
I represent to and agree with Valley that:
A. Transfer Review Restrictions. During the period beginning on the date
hereof and ending 30 days prior to the consummation of the Merger, I shall not
sell, transfer or otherwise dispose of ("transfer") any American Union Common
Stock owned by me, and I shall not permit any relative who shares my home, or
any person or entity who or which I control, from transferring any American
Union Common Stock owned by such person or entity, without notifying Valley in
advance of the proposed transfer and giving Valley a reasonable opportunity to
review the transfer before it is consummated. Valley, if advised to do so by its
independent public accountants, may instruct me not to make or permit the
transfer because it may interfere with the "pooling of interests" treatment of
the Merger. I shall abide by any such instructions.
B. Transfer Restrictions During Merger Consummation Period. I shall not
transfer any American Union Common Stock owned by me, and I shall not permit any
relative who shares my home, or any person or entity who or which I control, to
transfer any American Union Common Stock owned by such person or entity during
the period beginning 30 days prior to the consummation of the Merger and ending
immediately after financial results covering at least 30 days of post-Merger
combined operations have been published by Valley by means of the filing of a
Form 10-Q or Form 8-K under the Securities Exchange Act of 1934, as amended, the
issuance of a quarterly earnings report, or any other public issuance which
satisfies the requirements of ASR 135. For purposes of this paragraph only,
"American Union Common Stock" includes Valley Common Stock into which my
American Union Common Stock is converted.
C. Compliance with Rule 145. I have been advised that the issuance of
Valley Common Stock to me pursuant to the Merger will be registered with the SEC
under the 1933 Act on a Registration Statement on Form S-4. However, I have also
been advised that, since I may be deemed to be an affiliate of the Company at
the time the Merger is submitted for a vote of the Company's stockholders, any
transfer by me of Valley Common Stock is restricted under Rule 145 promulgated
by the SEC under the 1933 Act. I may not transfer Valley Common Stock unless (i)
such transfer is made in conformity with the volume and other limitations of
Rule 145 promulgated by the SEC under the 1933 Act, (ii) in the opinion of
Valley's counsel or counsel reasonably acceptable to Valley, such transfer is
otherwise exempt from registration under the 1933 Act or (iii) such transfer is
registered under the 1933 Act.
<PAGE>
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D. Stop Transfer Instructions; Legend on Certificates. I also understand
that stop transfer instructions will be given to Valley's transfer agents with
respect to the Valley Common Stock and that there will be placed on the
certificates of the Valley Common Stock issued to me, or any substitutions
therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE
SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED NOVEMBER 9, 1994, BETWEEN
THE REGISTERED HOLDER HEREOF AND VALLEY NATIONAL BANCORP, A COPY OF WHICH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF VALLEY NATIONAL BANCORP."
E. Consultation with Counsel. I have carefully read this letter and the
Agreement and discussed the requirements of such documents and other applicable
limitations upon my ability to transfer Valley Common Stock to the extent I felt
necessary with my counsel or counsel for the Company.
Execution of this letter is not an admission on my part that I am an
"affiliate" of the Company as described in the second paragraph of this letter,
or a waiver of any rights I may have to object to any claim that I am such an
affiliate on or after the date of this letter. This letter shall terminate
concurrently with any termination of the Agreement in accordance with its terms.
Very truly yours,
_____________________________
Name:
Accepted this _____ day of
November, 1994 by
VALLEY NATIONAL BANCORP
By:_________________________
<PAGE>
APPENDIX B
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Agreement") dated November 9, 1994, is by and
between Valley National Bancorp, a New Jersey corporation and registered bank
holding company ("Valley"), and American Union Bank, a New Jersey banking
corporation ("American").
BACKGROUND
1. Valley, American and Valley National Bank (the "Bank"), a wholly-owned
subsidiary of Valley, as of the date hereof, have executed an Agreement and Plan
of Merger (the "Merger Agreement") pursuant to which Valley will acquire
American through a merger of American with and into the Bank (the "Merger").
2. As an inducement to Valley and the Bank to enter into the Merger
Agreement and in consideration for such entry, American desires to grant to
Valley an option to purchase authorized but unissued shares of common stock of
American in an amount and on the terms and conditions hereinafter set forth.
AGREEMENT
In consideration of the foregoing and the mutual covenants and agreements
set forth herein and in the Merger Agreement, Valley and American, intending to
be legally bound hereby, agree:
1. Grant of Option. American hereby grants to Valley the option (the
"Option") to purchase 180,000 shares (as the same may be adjusted pursuant
hereto, the "Option Shares") of American common stock, $5.00 par value (the
"Common Stock"), at a price of $10.00 per share (as the same may be adjusted
pursuant hereto, the "Option Price"), on the terms and conditions set forth
herein.
2. Exercise of Option. This Option shall not be exercisable until the
occurrence of a Triggering Event (as such term is hereinafter defined). Upon or
after the occurrence of a Triggering Event (as such term is hereinafter
defined), Valley may exercise the Option, in whole or in part, at any time or
from time to time, subject to and in accordance with the terms hereof.
The term "Triggering Event" means the occurrence of any of the following
events:
A person or group (as such terms are defined in the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the rules and regulations
thereunder) other than Valley or an affiliate of Valley:
a. acquires beneficial ownership (as such term is defined in Rule 13d-3 as
promulgated under the Exchange Act) of at least 20% of the then outstanding
shares of Common Stock;
b. enters into a letter of intent or an agreement, whether oral or written,
with American pursuant to which such person or any affiliate of such person
would (i) merge or consolidate, or enter into any similar transaction with
American, (ii) acquire all or a significant portion of the assets or liabilities
of American, or (iii) acquire beneficial ownership of securities representing,
or the right to acquire beneficial ownership or to vote securities representing
20% or more of the then outstanding shares of Common Stock;
c. makes a filing with any bank or thrift regulatory authorities or
publicly announces a bona fide proposal (a "Proposal") for (i) any merger,
consolidation or acquisition of all or a significant portion of all the assets
or liabilities of American or any other business combination involving American,
or (ii) a transaction involving the transfer of beneficial ownership of
securities representing, or the right to acquire beneficial ownership or to vote
securities representing, 20% or more of the outstanding shares of Common Stock,
and thereafter, if such Proposal has not been Publicly Withdrawn (as such term
is hereinafter defined) at least 15 days prior to the meeting of stockholders of
American called to vote on the Merger and American' stockholders fail to approve
the Merger by the vote required by applicable law at the meeting of stockholders
called for such purpose;
d. makes a bona fide Proposal and thereafter, but before such Proposal has
been Publicly Withdrawn, American willfully takes any action in any manner which
would materially interfere with its desire or ability to enter into a definitive
Merger Agreement or its ability to consummate the Merger or materially reduce
the value of the transaction to Valley; or
<PAGE>
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e. which is the holder of more than 5% of the Common Stock solicits proxies
in opposition to approval of the Merger.
The term "Triggering Event" also means the taking of any direct or indirect
action by American or any of its directors, officers or agents to invite,
encourage or solicit any proposal which has as its purpose a tender offer for
the shares of the Common Stock, a merger, consolidation, plan of exchange, plan
of acquisition or reorganization of American, or a sale of shares of the Common
Stock or any significant portion of American's assets or liabilities.
The term "significant portion" means 25% of the assets or liabilities of
American.
"Publicly Withdrawn", for purposes of clauses (c) and (d) above, shall mean
an unconditional bona fide withdrawal of the Proposal coupled with a public
announcement of no further interest in pursuing such Proposal or in acquiring
any controlling influence over American or in soliciting or inducing any other
person (other than Valley or any affiliate) to do so.
Notwithstanding the foregoing, the Option may not be exercised at any time
(i) in the absence of any required governmental or regulatory approval or
consent necessary for American to issue the Option Shares or Valley to exercise
the Option or prior to the expiration or termination of any waiting period
required by law, or (ii) so long as any injunction or other order, decree or
ruling issued by any federal or state court of competent jurisdiction is in
effect which prohibits the sale or delivery of the Option Shares.
American shall notify Valley promptly in writing of the occurrence of any
Triggering Event known to it, it being understood that the giving of such notice
by American shall not be a condition to the right of Valley to exercise the
Option. American will not take any action which would have the effect of
preventing or disabling American from delivering the Option Shares to Valley
upon exercise of the Option or otherwise performing its obligations under this
Agreement.
In the event Valley wishes to exercise the Option, Valley shall send a
written notice to American (the date of which is hereinafter referred to as the
"Notice Date") specifying the total number of Option Shares it wishes to
purchase and a place and date for the closing of such a purchase (a "Closing");
provided, however, that a Closing shall not occur prior to two days after the
later of receipt of any necessary regulatory approvals and the expiration of any
legally required notice or waiting period, if any.
Promptly following the Notice Date, American shall mail to its shareholders
who have preemptive rights with respect to the Common Stock a notice, in form
and substance approved by Valley (the "Shareholder Notice"), which shall afford
each such shareholder the right to purchase such shareholder's pro rata share of
the Option Shares at a per share purchase price equal to the lesser of the
Option Price or the book value per share of Common Stock as of the then most
recent fiscal year end of American. Such right to purchase Option Shares shall
be in full satisfaction of each American shareholder's preemptive rights. The
Closing shall be delayed for such time as is reasonably necessary to arrange for
mailing the Shareholder Notice and to permit the American shareholders an
opportunity to exercise such right to purchase Option Shares. The number of
Option Shares available for purchase by Valley pursuant to the Option
automatically shall be reduced by the aggregate number of shares purchased by
the American shareholders in exercise of the above-described rights.
3. Payment and Delivery of Certificates. At any Closing hereunder (a)
Valley will make payment to American of the aggregate price for the Option
Shares so purchased by wire transfer of immediately available funds to an
account designated by American, (b) American will deliver to Valley a stock
certificate or certificates representing the number of Option Shares so
purchased, free and clear of all liens, claims, charges and encumbrances of any
kind or nature whatsoever created by or through American, registered in the name
of Valley or its designee, in such denominations as were specified by Valley in
its notice of exercise and bearing a legend as set forth below and (c) Valley
shall pay any transfer or other taxes required by reason of the issuance of the
Option Shares so purchased.
Unless a registration statement is filed and declared effective under
Section 4 hereof, a legend will be placed on each stock certificate evidencing
Option Shares issued pursuant to this Agreement, which legend will read
substantially as follows:
The shares of stock evidenced by this certificate have not been
registered for sale under the Securities Act of 1933 (the "1933 Act").
These shares may not be sold, transferred or otherwise disposed of unless a
registration statement with respect to the sale of such shares has been
filed under the 1933 Act and declared effective or, in the opinion of
counsel reasonably acceptable to American Union Bank, said transfer would
be exempt from registration under the provisions of the 1933 Act and the
regulations promulgated thereunder.
<PAGE>
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4. Registration Rights. Upon or after the occurrence of a Triggering Event
and upon receipt of a written request from Valley, American shall prepare and
file a registration statement with the Securities and Exchange Commission,
covering the Option and such number of Option Shares as Valley shall specify in
its request, and American shall use its best efforts to cause such registration
statement to be declared effective in order to permit the sale or other
disposition of the Option and the Option Shares, provided that Valley shall in
no event have the right to have more than one such registration statement become
effective.
In connection with such filing, American shall use its best efforts to
cause to be delivered to Valley such certificates, opinions, accountant's
letters and other documents as Valley shall reasonably request and as are
customarily provided in connection with registrations of securities under the
Securities Act of 1933, as amended. All expenses incurred by American in
complying with the provisions of this Section 4, including without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for American and blue sky fees and expenses shall be paid by American.
Underwriting discounts and commissions to brokers and dealers relating to the
Option Shares, fees and disbursements of counsel to Valley and any other
expenses incurred by Valley in connection with such registration shall be borne
by Valley. In connection with such filing, American shall indemnify and hold
harmless Valley against any losses, claims, damages or liabilities, joint or
several, to which Valley may become subject, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any preliminary or final registration statement or any amendment or
supplement thereto, or arise out of a material fact required to be stated
therein or necessary to make the statements therein not misleading; and American
will reimburse Valley for any legal or other expense reasonably incurred by
Valley in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that American will not be liable
in any case to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue statement of
omission or alleged omission made in such preliminary or final registration
statement or such amendment or supplement thereto in reliance upon and in
conformity with written information furnished by or on behalf of Valley
specifically for use in the preparation thereof. Valley will indemnify and hold
harmless American to the same extent as set forth in the immediately preceding
sentence but only with reference to written information specifically furnished
by or on behalf of Valley for use in the preparation of such preliminary or
final registration statement or such amendment or supplement thereto; and Valley
will reimburse American for any legal or other expense reasonably incurred by
American in connection with investigating or defending any such loss, claim,
damage, liability or action.
5. Adjustment Upon Changes in Capitalization. In the event of any change in
the Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, conversions, exchanges of shares or the like,
then the number and kind of Option Shares and the Option Price shall be
appropriately adjusted.
In the event any capital reorganization or reclassification of the Common
Stock, or any consolidation, merger or similar transaction of American with
another entity, or in the event any sale of all or substantially all of the
assets of American shall be effected in such a way that the holders of Common
Stock shall be entitled to receive stock, securities or assets with respect to
or in exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provisions
(in form reasonably satisfactory to the holder hereof) shall be made whereby the
holder hereof shall thereafter have the right to purchase and receive upon the
basis and upon the terms and conditions specified herein and in lieu of the
Common Stock immediately theretofore purchasable and receivable upon exercise of
the rights represented by this Option, such shares of stock, securities or
assets as may be issued or payable with respect to or in exchange for the number
of shares of Common Stock immediately theretofore purchasable and receivable
upon exercise of the rights represented by this Option had such reorganization,
reclassification, consolidation, merger or sale not taken place; provided,
however, that if such transaction results in the holders of Common Stock
receiving only cash, the holder hereof shall be paid the difference between the
Option Price and such cash consideration without the need to exercise the
Option.
6. Filings, Consents and Compliance with Law. Each of Valley and American
will use its best efforts to make all filings with, and to obtain consents of,
all third parties and governmental authorities necessary to the consummation of
the transactions contemplated by this Agreement.
Exercise of the Option herein provided shall be subject to compliance with
all applicable laws including, in the event Valley is the holder hereof,
approval of the Board of Governors of the Federal Reserve System. American
agrees to cooperate with and furnish to the holder hereof such information and
documents as may be reasonably required to secure such approvals.
<PAGE>
-4-
7. Representations and Warranties of American. American hereby represents
and warrants to Valley as follows:
a. Due Authorization. American has full corporate power and authority to
execute, deliver and perform this Agreement and all corporate action necessary
for execution, delivery and performance of this Agreement has been duly taken by
American.
b. Authorized Shares. American has taken and, as long as the Option is
outstanding, will take all necessary corporate action to authorize and reserve
for issuance all shares of Common Stock that may be issued pursuant to any
exercise of the Option.
c. No Conflicts. Neither the execution and delivery of this Agreement nor
consummation of the transactions contemplated hereby (assuming all appropriate
regulatory approvals) will violate or result in any violation or default of or
be in conflict with or constitute a default under any term of the certificate of
incorporation or by-laws of American or any agreement, instrument, judgment,
decree, statute, rule or order applicable to American.
8. Specific Performance. The parties hereto acknowledge that damages would
be an inadequate remedy for a breach of this Agreement and that the obligations
of the parties hereto shall be specifically enforceable. Notwithstanding the
foregoing, Valley shall have the right to seek money damages against American
for a breach of this Agreement.
9. Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
other prior agreements and understandings, both written and oral, among the
parties or any of them with respect to the subject matter hereof.
10. Assignment or Transfer. Valley may not sell, assign or otherwise
transfer its rights and obligations hereunder, in whole or in part, to any
person or group of persons other than to an affiliate of Valley, except upon or
after the occurrence of a Triggering Event. Valley represents that it is
acquiring the Option for Valley's own account and not with a view to or for sale
in connection with any distribution of the Option or the Option Shares. Valley
is aware that presently neither the Option nor the Option Shares are being
offered by a registration statement filed with, and declared effective by, the
Securities and Exchange Commission, but instead are being offered in reliance
upon the exemption from the registration requirements pursuant to Section 4(2)
of the Securities Act of 1933, as amended. Valley shall have the right to assign
this Agreement to any party it selects after the occurrence of a Triggering
Event.
11. Amendment of Agreement. By mutual consent of the parties hereto, this
Agreement may be amended in writing at any time, for the purpose of facilitating
performance hereunder or to comply with any applicable regulation of any
governmental authority or any applicable order of any court or for any other
purpose.
12. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
13. Notices. All notices, requests, consents and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered personally, by express service, cable, telegram
or telex, or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties as follows:
If to Valley:
Valley National Bancorp
1445 Valley Road
Wayne, New Jersey 07470
Attn.: Gerald H. Lipkin
Chairman and Chief Executive Officer
With a copy to:
Pitney, Hardin, Kipp & Szuch
200 Campus Drive
Florham Park, New Jersey 07932-0950
P.O. Box 1945
Morristown, New Jersey 07962-1945
Attn.: Ronald H. Janis, Esq.
<PAGE>
-5-
If to American:
American Union Bank
2784 Morris Avenue
Union, New Jersey 07083
Attn.: Alan Turtletaub,
Chairman
With a copy to:
Sills, Cummis, Zuckerman, Radin,
Tischman, Epstein & Gross, P.A.
One Riverfront Plaza
Newark, New Jersey 07102
Attn.: Steven Radin, Esq.
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey.
15. Captions. The captions in the Agreement are inserted for convenience
and reference purposes, and shall not limit or otherwise affect any of the terms
or provisions hereof.
16. Waivers and Extensions. The parties hereto may, by mutual consent,
extend the time for performance of any of the obligations or acts of either
party hereto. Each party may waive (i) compliance with any of the covenants of
the other party contained in this Agreement and/or (ii) the other party's
performance of any of its obligations set forth in this Agreement.
17. Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement, except
as provided in Section 10 permitting Valley to assign its rights and obligations
hereunder.
18. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
19. Termination. This Agreement shall terminate upon either the termination
of the Merger Agreement as provided therein or the consummation of the
transactions contemplated by the Merger Agreement; provided, however, that if
termination of the Merger Agreement occurs after the occurrence of a Triggering
Event, this Agreement shall not terminate until the later of 12 months following
the date of the termination of the Merger Agreement or the consummation of any
proposed transactions which constitute the Triggering Event.
IN WITNESS WHEREOF, each of the parties hereto, pursuant to resolutions
adopted by its Board of Directors, has caused this Agreement to be executed by
its duly authorized officer, all as of the day and year first above written.
ATTEST: AMERICAN UNION BANK
GERALD F. METZHEISER By: ALAN TURTLETAUB
President Alan Turtletaub,
Chairman
ATTEST: VALLEY NATIONAL BANCORP
PETER SOUTHWAY By: GERALD H. LIPKIN
President Gerald H. Lipkin,
Chairman & Chief
Executive Officer
<PAGE>
APPENDIX C
Capital Consultants of Princeton, Inc.
1000 Herrontown Road
Princeton, N.J. 08540
609-921-3293
December __, 1994
Board of Directors
American Union Bank
2784 Morris Avenue
Union, New Jersey 07083
Members of the Board:
American Union Bank, ("AMERICAN") has entered into an Agreement and Plan of
Merger dated November 9, 1994 ("AGREEMENT") with Valley National Bancorp
("VALLEY") and Valley National Bank ("VNB") which provides for the merger of
AMERICAN with and into VNB ("MERGER").
If the MERGER is approved and consummated, subject to the provisions of
AGREEMENT, each share of AMERICAN Common Stock issued and outstanding (excluding
any dissenting shares) shall be converted at the Effective Time into the right
to receive 0.50 shares ("EXCHANGE RATIO") of common stock, no par value, of
VALLEY.
In lieu of the issuance of applicable fractional shares, VALLEY will make a cash
payment in the amount equal to the value of such fractional share interest,
determined by multiplying such holder's fractional interest by the Average
Closing Price (as defined in the AGREEMENT) of Valley Common Stock.
You have requested our opinion as to whether the consideration to be offered in
the MERGER is fair, from a financial point of view, to the shareholders of
AMERICAN.
Capital Consultants of Princeton, Inc, as a customary part of its investment
banking business, is engaged in the valuation of commercial banking and thrift
institutions and their securities in connection with mergers and acquisitions,
private placements and valuations for estate, corporate and other purposes.
In arriving at our opinion, we have reviewed and analyzed, among other things:
(i) the Agreement; (ii) the Registration Statement on Form S-4 of Valley of
which the Proxy Statement/Prospectus is a part; (iii) publicly available
information relating to Valley and American including, for Valley, annual
reports to stockholders and annual reports on Form 10-K filed with the
Securities and Exchange Commission ("COMMISSION") for the years ended December
31, 1991
<PAGE>
December __, 1994
Page Two
through 1993 and the quarterly reports to stockholders and quarterly reports on
Form 10-Q filed with the COMMISSION for the periods ended March 31, June 30 and
September 30, 1994, and for American, annual reports to stockholders for the
years ended December 31, 1991 through 1993 and quarterly reports of Consolidated
Conditions and Income as filed with the Federal Deposit Insurance Corporation
for the periods ended March 31, June 30 and September 30, 1994; (iv) certain
historical operating and financial information provided to Capital Consultants
by the managements of American and Valley; (v) historical and current market
data for the American Common Stock and the Valley Common Stock; (vi) the
publicly available financial data and stock market performance data of publicly
traded banking and thrift institutions which Capital Consultants deemed
generally comparable to American and Valley; (vii) the nature and terms of
recent acquisitions and merger transactions involving banking institutions and
bank and thrift holding companies that Capital Consultants considered reasonably
similar to American and Valley in financial character, operating character,
historical performance, geographic market and economy; and (viii) such other
studies, analyses, inquiries and reports as Capital Consultants deemed
appropriate. In addition, we conducted meetings with members of senior
management of American and Valley for purposes of reviewing the foregoing and
the future prospects of American and Valley. We evaluated the pro forma
ownership of the Valley Common Stock by American's stockholders, relative to the
pro forma contribution of American's assets, deposits, equity and earnings to
the pro forma resulting company in the MERGER. We also took into account our
experience in other transactions, as well as our knowledge of the banking and
thrift industries and its experience in securities valuations.
While we have taken care in our investigation and analysis, we have relied upon
and assumed the accuracy, completeness and fairness of the financial and other
information provided to us or publicly available, and have not attempted to
verify same. We have not made or obtained any independent evaluations or
appraisals of the assets or liabilities of AMERICAN or VALLEY.
In conducting our analysis and arriving at our opinion, we have considered such
financial and other factors as we have deemed appropriate in the circumstances.
In rendering our opinion, we have assumed that in the course of obtaining the
necessary regulatory approvals for the proposed MERGER, no conditions will be
imposed that will have a material adverse effect on the contemplated benefits of
the MERGER. Our opinion is necessarily based upon market, economic and other
conditions as they exist and can be evaluated as of the date of this letter.
<PAGE>
December __, 1994
Page Three
Based upon and subject to the foregoing, it is our opinion as investment bankers
that the consideration to be paid in the MERGER is fair, from a financial point
of view, to the shareholders of AMERICAN.
Very truly yours,
Capital Consultants of Princeton, Inc.
<PAGE>
APPENDIX D
SUBSECTIONS (b), (c) and (d) of SECTION 215a of TITLE 12 of the U.S. CODE,
"MERGER OF NATIONAL BANKS OR STATE BANKS INTO NATIONAL BANKS"
(b) Dissenting Shareholders
If a merger shall be voted for at the called meetings by the necessary
majorities of the shareholders of each association or State bank participating
in the plan of merger, and thereafter the merger shall be approved by the
Comptroller of the Currency, any shareholder of any association or State bank to
be merged into the receiving association who has voted against such merger at
the meeting of the association or bank of which he is a stockholder, or has
given notice in writing at or prior to such meeting to the presiding officer
that he dissents from the plan of merger, shall be entitled to receive the value
of the shares so held by him when such merger shall be approved by the
Comptroller of the Currency upon written request made to the receiving
association at any time before thirty days after the date of consummation of the
merger, accompanied by the surrender of his stock certificates.
(c) Valuation of shares
The value of the shares of any dissenting shareholder shall be ascertained,
as of the effective date of the merger, by an appraisal made by a committee of
three persons, composed of (1) one selected by the vote of the holders of the
majority of the stock, the owners of which are entitled to payment in cash; (2)
one selected by the directors of the receiving association; and (3) one selected
by the two so selected. The valuation agreed upon by any two of the three
appraisers shall govern. If the value so fixed shall not be satisfactory to any
dissenting shareholder who has requested payment, that shareholder may, within
five days after being notified of the appraised value of his shares, appeal to
the Comptroller of the Currency, who shall cause a reappraisal to be made which
shall be final and binding as to the value of the shares of the appellant.
(d) Application to shareholders of merging associations; appraisal by
Comptroller; expenses of receiving association; sale and resale of
shares; State appraisal and merger law
If, within ninety days from the date of consummation of the merger, for any
reason one or more of the appraisers is not selected as herein provided, or the
appraisers fail to determine the value of such shares, the Comptroller of the
Currency shall upon written request of any interested party cause an appraisal
to be made which shall be final and binding on all parties. The expenses of the
Comptroller of the Currency in making the reappraisal or the appraisal, as the
case may be, shall be paid by the receiving association. The value of the shares
ascertained shall be promptly paid to the dissenting shareholders by the
receiving association. The shares of stock of the receiving association which
would have been delivered to such dissenting shareholders had they not requested
payment shall be sold by the receiving association at an advertised public
auction, and the receiving association shall have the right to purchase any of
such shares at such public auction, if it is the highest bidder therefor, for
the purpose of reselling such shares within thirty days thereafter to such
person or persons and at such price not less than par as its board of directors
by resolution may determine. If the shares are sold at public auction at a price
greater than the amount paid to the dissenting shareholders, the excess in such
sale price shall be paid to such dissenting shareholders. The appraisal of such
shares of stock in any State bank shall be determined in the manner prescribed
by the law of the State in such cases, rather than as provided in this section,
if such provision is made in the State law; and no such merger shall be in
contravention of the law of the State under which such bank is incorporated. The
provisions of this subsection shall apply only to shareholders of (and stock
owned by them in) a bank or association being merged into the receiving
association.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Indemnification. Article VI of the certificate of incorporation of Valley
National Bancorp provides that the corporation shall indemnify its present and
former officers, directors, employees, and agents and persons serving at its
request against expenses, including attorney's fees, judgments, fines or amounts
paid in settlement, incurred in connection with any pending or threatened civil
or criminal proceeding to the full extent permitted by the New Jersey Business
Corporation Act. The Article also provides that such indemnification shall not
exclude any other rights to indemnification to which a person may otherwise be
entitled, and authorizes the corporation to purchase insurance on behalf of any
of the persons enumerated against any liability whether or not the corporation
would have the power to indemnify him under the provisions of Article VI.
The New Jersey Business Corporation Act empowers a corporation to indemnify
a corporate agent against his expenses and liabilities incurred in connection
with any proceeding (other than a derivative lawsuit) involving the corporate
agent by reason of his being or having been a corporate agent if (a) the agent
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and (b) with respect to any
criminal proceeding, the corporate agent had no reasonable cause to believe his
conduct was unlawful. For purposes of the Act, the term "corporate agent"
includes any present or former director, officer, employee or agent of the
corporation, and a person serving as a "corporate agent" at the request of the
corporation for any other enterprise.
With respect to any derivative action, the corporation is empowered to
indemnify a corporate agent against his expenses (but not his liabilities)
incurred in connection with any proceeding involving the corporate agent by
reason of his being or having been a corporate agent if the agent acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation. However, only the court in which the proceeding
was brought can empower a corporation to indemnify a corporate agent against
expenses with respect to any claim, issue or matter as to which the agent was
adjudged liable for negligence or misconduct.
The corporation may indemnify a corporate agent in a specific case if a
determination is made by any of the following that the applicable standard of
conduct was met: (i) the Board of Directors, or a committee thereof, acting by a
majority vote of a quorum consisting of disinterested directors; (ii) by
independent legal counsel, if there is not a quorum of disinterested directors
or if the disinterested quorum empowers counsel to make the determination; or
(iii) by the shareholders.
A corporate agent is entitled to mandatory indemnification to the extent
that the agent is successful on the merits or otherwise in any proceeding, or in
defense of any claim, issue or matter in the proceeding. If a corporation fails
or refuses to indemnify a corporate agent, whether the indemnification is
permissive or mandatory, the agent may apply to a court to grant him the
requested indemnification. In advance of the final disposition of a proceeding,
the corporation may pay an agent's
II-1
<PAGE>
expenses if the agent agrees to repay the expenses unless it is ultimately
determined he is entitled to indemnification.
Exculpation. Article VIII of the certificate of incorporation of Valley
National Bancorp provides:
A director or officer of the Corporation shall not be personally
liable to the Corporation or its shareholders for damages for breach of any
duty owed to the Corporation or its shareholders, except that this
provision shall not relieve a director or officer from liability for any
breach of duty based upon an act or omission (i) in breach of such person's
duty of loyalty to the Corporation or its shareholders, (ii) not in good
faith or involving a knowing violation of law, or (iii) resulting in
receipt by such person of an improper personal benefit. If the New Jersey
Business Corporation Act is amended after approval by the shareholders of
this provision to authorize corporate action further eliminating or
limiting the personal liability of directors or officers, then the
liability of a director and/or officer of the Corporation shall be
eliminated or limited to the fullest extent permitted by the New Jersey
Business Corporation Act as so amended.
Any repeal or modification of the foregoing paragraph by the
shareholders of the Corporation or otherwise shall not adversely affect any
right or protection of a director or officer of the Corporation existing at
the time of such repeal or modification.
The New Jersey Business Corporation Act, as it affects exculpation, has not been
changed since the adoption of this provision by Valley National Bancorp in 1987.
II-2
<PAGE>
Item 21.
A. Exhibits
Exhibit No. Description
- ----------- -----------
2(a)* Agreement and Plan of Merger, dated November 9, 1994, by and among
Valley National Bancorp, Valley National Bank and American Union
Bank, included as Appendix A to the Proxy Statement/Prospectus.
2(b)* Stock Option Agreement, dated November 9, 1994, by and among Valley
National Bancorp and American Union Bank, included as Appendix B to
the Proxy Statement/Prospectus.
5 Opinion of Pitney, Hardin, Kipp & Szuch as to the legality of the
securities to be registered.
8 Opinion of Pitney, Hardin, Kipp & Szuch as to certain tax
consequences of the Merger.
10(a)** "Employment Agreements" dated June 6, 1986 between Valley National
Bancorp, Valley National Bank and Gerald H. Lipkin and Sam P.
Pinyuh, are hereby incorporated by reference from the Registrant's
Form 10-K Annual Report for the fiscal period ending December 31,
1992.
10(b)** "The Valley National Bancorp Long-Term Stock Incentive Plan" dated
January 18, 1994, is hereby incorporated by reference from the
Registrant's Notice of Annual Meeting of Shareholders and Proxy
dated March 1, 1994.
10(c)** "Warrant Agreement" by and between Valley National Bancorp and
Valley National Bank, Trust Department governing the terms of
450,000 warrants to purchase Valley National Bancorp common stock
dated as of December 31, 1990, is hereby incorporated by reference
from the Registrant's Form 10-K Annual Report for the fiscal
period ending December 31, 1990.
10(d)** Amendment to "Employment Agreements" between Valley National
Bancorp, Valley National Bank and Gerald H. Lipkin and Sam P.
Pinyuh dated December 10, 1991, is hereby incorporated by reference
from the Registrant's Form 10-K Annual Report for the fiscal period
ending December 31, 1991.
10(e)** "Employment Agreement" dated December 10, 1991 between Valley
National Bancorp, Valley National Bank and Peter Southway, is
hereby incorporated by reference from the Registrant's Form 10-K
Annual Report for the fiscal period ending December 31, 1991.
II-3
<PAGE>
10(f)** "Severance Agreements" dated August 17, 1994 between Valley
National Bancorp, Valley National Bank, and Gerald H. Lipkin,
Peter Southway, and Sam P. Pinyuh, is hereby incorporated by
reference from the Registrant's Registration Statement of Form S-4
filed on October 4, 1994 in connection with the merger of the
Registrant with Rock Financial Corporation.
10(g)** Amended and Restated Agreement and Plan of Merger, dated as of
August 26, 1994, by and among Valley National Bancorp, Valley
National Bank, Rock Financial Corporation and Rock Bank, is hereby
incorporated by reference from the Registrant's Registration
Statement on Form S-4 (No. 33-55765) filed with the Commission on
October 4, 1994, in which it was included as Appendix A to the
Proxy Statement/Prospectus.
10(h)** Stock Option Agreement, dated July 5, 1994, by and between Valley
National Bancorp and Rock Financial Corporation, is hereby
incorporated by reference from the Registrant's Registration
Statement on Form S-4 (No. 33-55765) filed with the Commission on
October 4, 1994, in which it was included as Appendix B to the
Proxy Statement/Prospectus.
23(a) Consent of KPMG Peat Marwick LLP with respect to Valley National
Bancorp
23(b) Consent of KPMG Peat Marwick LLP with respect to American Union
Bank.
23(c)* Consent of Pitney, Hardin, Kipp & Szuch (included in Exhibits 5
and 8 hereto).
23(d) Consent of Capital Consultants of Princeton, Inc.
99(a) Form of Proxy Card to be utilized by the Board of Directors of
American Union Bank.
___________________________________
* Included elsewhere in this registration statement.
** Incorporated by Reference from other filed documents, as
indicated.
C. Report, Opinion or Appraisals
Form of Fairness Opinion of Capital Consultants of Princeton, Inc. is
included as Appendix C to Proxy Statement/Prospectus.
II-4
<PAGE>
Item 22. Undertakings
1. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
2. The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
3. The registrant undertakes that every prospectus (i) that is filed pursuant to
paragraph 2 immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a) (3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
4. Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
5. The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
6. Subject to appropriate interpretation, the undersigned registrant hereby
undertakes to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it
becomes effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-4 and has duly caused this registration
statement or amendment thereto to be signed on its behalf by the undersigned,
thereunto duly authorized, in the Town of Wayne, State of New Jersey, on the
20th day of December, 1994.
VALLEY NATIONAL BANCORP
By:GERALD H. LIPKIN
------------------------------------
Gerald H. Lipkin,
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
GERALD H. LIPKIN Chairman of the Board December 20, 1994
- --------------------------- and Director (Chief
Gerald H. Lipkin Executive Officer)
PETER SOUTHWAY President and Chief December 20, 1994
- -------------------------- Operating Officer
Peter Southway (Principal Financial
Officer) and Director
ALAN D. ESKOW Corporate Secretary and December 20, 1994
- ------------------------- Senior Vice President
Alan D. Eskow (Principal Accounting
Officer)
ANDREW ABRAMSON Director December 20, 1994
- -------------------------
Andrew Abramson
PAMELA BRONANDER Director December 20, 1994
- -------------------------
Pamela Bronander
JOSEPH COCCIA, JR. Director December 20, 1994
- -------------------------
Joseph Coccia, Jr.
II-6
<PAGE>
Signature Title Date
--------- ----- ----
AUSTIN C. DRUKKER Director December 20, 1994
- -------------------------
Austin C. Drukker
THOMAS P. INFUSINO Director December 20, 1994
- --------------------------
Thomas P. Infusino
GERALD KORDE Director December 20, 1994
- --------------------------
Gerald Korde
ROBERT L. MARCALUS Director December 20, 1994
- --------------------------
Robert L. Marcalus
Director December 20, 1994
- --------------------------
Robert E. McEntee
SAM P. PINYUH Director December 20, 1994
- --------------------------
Sam P. Pinyuh
RUBIN RABINOWITZ Director December 20, 1994
- --------------------------
Rubin Rabinowitz
ROBERT RACHESKY Director December 20, 1994
- --------------------------
Robert Rachesky
BARNETT RUKIN Director December 20, 1994
- --------------------------
Barnett Rukin
RICHARD F. TICE Director December 20, 1994
- --------------------------
Richard F. Tice
LEONARD VORCHEIMER Director December 20, 1994
- --------------------------
Leonard Vorcheimer
JOSEPH L. VOZZA Director December 20, 1994
- --------------------------
Joseph L. Vozza
II-7
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
A. 2(a)* Agreement and Plan of Merger, dated November 9, 1994, by and
among Valley National Bancorp, Valley National Bank and
American Union Bank, included as Appendix A to the Proxy
Statement/Prospectus.
2(b)* Stock Option Agreement, dated November 9, 1994, by and among
Valley National Bancorp and American Union Bank, included as
Appendix B to the Proxy Statement/Prospectus.
5 Opinion of Pitney, Hardin, Kipp & Szuch as to the legality of
the securities to be registered.
8 Opinion of Pitney, Hardin, Kipp & Szuch as to certain tax
consequences of the Merger.
10(a)** "Employment Agreements" dated June 6, 1986 between Valley
National Bancorp, Valley National Bank and Gerald H. Lipkin
and Sam P. Pinyuh, are hereby incorporated by reference from
the Registrant's Form 10-K Annual Report for the fiscal
period ending December 31, 1992.
10(b)** "The Valley National Bancorp Long-Term Stock Incentive Plan"
dated January 18, 1994, is hereby incorporated by reference
from the Registrant's Notice of Annual Meeting of Shareholders
and Proxy dated March 1, 1994.
10(c)** "Warrant Agreement" by and between Valley National Bancorp and
Valley National Bank, Trust Department governing the terms of
450,000 warrants to purchase Valley National Bancorp common
stock dated as of December 31, 1990, is hereby incorporated by
reference from the Registrant's Form 10-K Annual Report for
the fiscal period ending December 31, 1990.
10(d)** Amendment to "Employment Agreements" between Valley National
Bancorp, Valley National Bank and Gerald H. Lipkin and Sam P.
Pinyuh dated December 10, 1991, is hereby incorporated by
reference from the Registrant's Form 10-K Annual Report for
the fiscal period ending December 31, 1991.
10(e)** "Employment Agreement" dated December 10, 1991 between Valley
National Bancorp, Valley National Bank and Peter Southway, is
hereby incorporated by reference from the Registrant's Form
10-K Annual Report for the fiscal period ending December 31,
1991.
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Exhibit No. Description
- ----------- -----------
10(f)** "Severance Agreements" dated August 17, 1994 between Valley
National Bancorp, Valley National Bank and Gerald H. Lipkin,
Peter Southway, and Sam P. Pinyuh, is hereby incorporated by
reference from the Registrant's Registration Statement of Form
S-4 filed on October 4, 1994 in connection with the merger of
the Registrant with Rock Financial Corporation.
10(g)** Amended and Restated Agreement and Plan of Merger, dated as of
August 26, 1994, by and among Valley National Bancorp, Valley
National Bank, Rock Financial Corporation and Rock Bank, is
hereby incorporated by reference from the Registrant's
Registration Statement on Form S-4 (No. 33-55765) filed with
the Commission on October 4, 1994, in which it was included as
Appendix A to the Proxy Statement/Prospectus.
10(h)** Stock Option Agreement, dated July 5, 1994, by and between
Valley National Bancorp and Rock Financial Corporation, is
hereby incorporated by reference from the Registrant's
Registration Statement on Form S-4 (No. 33-55765) filed with
the Commission on October 4, 1994, in which it was included as
Appendix B to the Proxy Statement/Prospectus.
23(a) Consent of KPMG Peat Marwick LLP with respect to Valley
National Bancorp
23(b) Consent of KPMG Peat Marwick LLP with respect to American
Union Bank.
23(c)* Consent of Pitney, Hardin, Kipp & Szuch (included in Exhibits
5 and 8 hereto).
23(d) Consent of Capital Consultants of Princeton, Inc.
99(a) Form of Proxy Card to be utilized by the Board of Directors
of American Union Bank.
C. Form of Fairness Opinion of Capital Consultants of Princeton,
Inc. is included as Appendix C to Proxy Statement/Prospectus.
___________________________________
* Included elsewhere in this registration statement.
** Incorporated by Reference from other filed documents, as
indicated.
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EXHIBIT 5
PITNEY, HARDIN, KIPP & SZUCH
MAIL P.O. BOX 1945
MORRISTOWN, NEW JERSEY 07962-1945
December 20, 1994
Valley National Bancorp
1445 Valley Road
Wayne, New Jersey 07470
Attn: Mr. Gerald H. Lipkin, Chairman
and Chief Executive Officer
Re: Merger of American Union Bank
into Valley National Bank
We have represented Valley National Bancorp ("Valley"), a New Jersey
corporation which is a registered bank holding company, and Valley National Bank
("VNB"), a federally chartered commercial banking corporation which is a wholly
owned subsidiary of Valley, in connection with the proposed merger of American
Union Bank ("American Union"), a New Jersey chartered commercial banking
corporation, into VNB (the "Merger"). The Merger shall be effected pursuant to
the provisions of an Agreement and Plan of Merger dated as of November 9, 1994
by and among Valley, VNB and American Union (the "Merger Agreement").
We have examined the Registration Statement on Form S-4 (the "Registration
Statement") to be filed by Valley with the Securities and Exchange Commission in
connection with the registration under the Securities Act of 1933, as amended
(the "Act"), of shares of common stock of Valley, no par value (the "Shares") to
be issued pursuant to the Merger Agreement.
We have also examined originals, or copies certified or otherwise
identified to our satisfaction, of the Merger Agreement, the Restated
Certificate of Incorporation and By-laws of Valley, as currently in effect, and
relevant resolutions of the Board of Directors of Valley; and we have examined
such other documents as we deemed necessary in order to express the opinion
hereinafter set forth. In our examination of such documents and records, we have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, and conformity with the originals of all documents
submitted to us as copies.
Based on the foregoing, it is our opinion that when, as and if the
Registration Statement shall have become effective pursuant to the provisions of
the Act, and the Shares shall have been duly issued and delivered in the manner
contemplated by the Merger Agreement and the Registration Statement, including
the Prospectus relating to the Shares (the "Prospectus"), the Shares will be
legally issued, fully paid and non-assessable.
The foregoing opinion is limited to the federal laws of the United States
and the laws of the State of New Jersey, and we are expressing no opinion as to
the effect of the laws of any other jurisdiction.
We consent to use of this opinion as an Exhibit to the Registration
Statement and to the reference to this firm under the heading "Legal Opinion" in
the Prospectus.
Very truly yours,
PITNEY, HARDIN, KIPP & SZUCH
EXHIBIT 8
PITNEY, HARDIN, KIPP & SZUCH
MAIL P.O. BOX 1945
MORRISTOWN, NEW JERSEY 07962-1945
December 20, 1994
Valley National Bancorp
1445 Valley Road
Wayne, New Jersey 07470
Attn: Mr. Gerald H. Lipkin, Chairman
and Chief Executive Officer
American Union Bank
2784 Morris Avenue
Union, New Jersey 07083
Attn: Gerald F. Metzheiser, President
and Chief Executive Officer
Re: Merger of American Union Bank
into Valley National Bank
We have represented Valley National Bancorp ("Valley"), a New Jersey
corporation which is a registered bank holding company, and Valley National Bank
("VNB"), a federally chartered commercial banking corporation which a wholly
owned subsidiary of Valley, in connection with the proposed merger of American
Union Bank ("American Union"), a New Jersey chartered commercial banking
corporation, into VNB (the "Merger"). The Merger shall be effected pursuant to
the provisions of an Agreement and Plan of Merger dated as of November 9, 1994
by and among Valley, VNB and American Union (the "Merger Agreement").
In connection with such representation, we have reviewed the Registration
Statement (Form S-4) filed with the Securities Exchange Commission pertaining to
the Merger (the "Registration Statement") and, in our opinion, the information
included in the section of the Registration Statement captioned "Federal Income
Tax Consequences" accurately describes the material federal income tax
consequences of the Merger. In addition, annexed hereto is a form of opinion of
this firm regarding federal income tax matters applicable to the Merger (the
"Closing Tax Opinion"), the delivery of which is a condition precedent to the
consummation of the Merger pursuant to the Merger Agreement. At this time, we
expect to deliver such opinion at the closing of the Merger.
We hereby consent to our being designated as an expert in the Registration
Statement with respect to the federal income tax consequences of the Merger and
to the inclusion of this letter as an exhibit to the Registration Statement.
Very truly yours,
PITNEY, HARDIN, KIPP & SZUCH
<PAGE>
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[Effective Date of Merger]
Valley National Bancorp
1445 Valley Road
Wayne, New Jersey 07470
Attn: Mr. Gerald H. Lipkin, Chairman
and Chief Executive Officer
American Union Bank
2784 Morris Avenue
Union, New Jersey 07083
Attn: Gerald F. Metzheiser, President
and Chief Executive Officer
Re: Merger of American Union Bank
into Valley National Bank
We have represented Valley National Bancorp ("Valley"), a New Jersey
corporation which is a registered bank holding company, and Valley National Bank
("VNB"), a federally chartered commercial banking corporation which a wholly
owned subsidiary of Valley, in connection with the proposed merger of American
Union Bank ("American Union"), a New Jersey chartered commercial banking
corporation, into VNB (the "Merger"). The Merger shall be effected pursuant to
the provisions of an Agreement and Plan of Merger dated as of November 9, 1994
by and among Valley, VNB and American Union (the "Merger Agreement"). This
opinion is delivered pursuant to Section 6.1(d) of the Merger Agreement.
Capitalized terms used herein not otherwise defined shall have the meanings
ascribed to such terms in the Merger Agreement.
Pursuant to the Merger Agreement, at the Effective Time the Merger shall be
effected by the merger of American Union into VNB, pursuant to federal and New
Jersey state law, with VNB surviving.
Pursuant to the Merger Agreement, at the Effective Time, each outstanding
share of American Union Common Stock (other than Dissenting Shares) shall be
converted into the right to receive 0.50 (the "Exchange Ratio") shares of Valley
Common Stock, subject to adjustment as set forth in the Merger Agreement. No
fractional shares of Valley Common Stock shall be issued, and in lieu thereof,
any holder of American Union Common Stock who otherwise would be entitled to
receive a fractional interest will receive an amount in cash determined by
multiplying such fractional interest by the Average Closing Price of Valley
Common Stock.
In addition to the foregoing facts, on the date hereof, you have delivered
certificates in which you have made the following additional representations in
regard to the Merger and have authorized us to rely on such representations in
expressing the within opinions:
1. The fair market value of the Valley Common Stock received by each
American Union shareholder in connection with the Merger will be approximately
equal to the fair market value of the American Union Common Stock surrendered in
the exchange.
2. To the best knowledge of the management of American Union, there is no
plan or intention on the part of the shareholders of American Union on the date
hereof to sell, exchange or otherwise dispose of a number of shares of Valley
Common Stock received in the Merger that would reduce such American Union
shareholders' ownership of Valley Common Stock to a number of shares having a
value, as of the date of the Merger, of less than 51 percent of the value of all
of the formerly outstanding American Union Common Stock as of the same date. For
purposes of this representation, shares of American Union Common Stock
surrendered by dissenters or exchanged for cash in lieu of fractional shares of
Valley Common Stock will be treated as outstanding American Union Common Stock
on the date of the Merger. American Union has considered, in making this
representation, any shares of American Union Common Stock that have been sold,
redeemed or otherwise disposed of by shareholders who own 5 percent or more of
American Union Common Stock, or by shareholders who are officers or directors of
American Union, after the announcement of the Merger and prior to the Effective
Time to the extent the management of American Union has knowledge on the date
hereof of any such sales, redemptions or dispositions.
3. Following the Merger, Valley has no present intention to issue
additional shares of its stock that would result in the present shareholders of
Valley losing control of Valley within the meaning of Section 368(c) of the
Internal Revenue Code of 1986, as amended (the "Code"). (Hereafter, "Section"
references shall be references to Sections of the Code.).
4. None of the compensation received by any shareholder-employees of
American Union will be separate consideration for, or allocable to, any of their
shares of American Union Common Stock.
5. Valley has no plan or intention to redeem or otherwise reacquire any of
its stock issued in the Merger.
<PAGE>
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6. The payment of cash in lieu of fractional shares of Valley Common Stock
is solely for the purpose of avoiding the expense and inconvenience to Valley of
issuing fractional shares of Valley Common Stock and does not represent
separately bargained-for consideration.
7. Following the Merger, Valley and VNB will continue the historic business
of American Union or use a significant portion of American Union's business
assets in the business of VNB.
8. There is no intercorporate indebtedness existing between Valley and
American Union, or between VNB and American Union, that was issued, acquired, or
will be settled at a discount.
9. No parties to the Merger are investment companies as defined in Sections
368(a)(2)(F)(iii) and (iv).
10. American Union is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A).
11. Valley and VNB have no plan or intention to liquidate VNB or merge VNB
with and into another entity, or sell or otherwise dispose of any of the assets
of American Union acquired in the Merger, except for dispositions made in the
ordinary course of business, or transfers described in Section 368(a)(2)(c).
12. The liabilities of American Union assumed by VNB and the liabilities to
which the transferred assets of American Union are subject were incurred by
American Union in the ordinary course of its business and are associated with
the assets to be transferred.
13. The fair market value of the aggregate assets of American Union
transferred to VNB in the Merger will equal or exceed the sum of the liabilities
assumed by VNB plus the amount of liabilities, if any, to which the transferred
assets are subject.
14. American Union and the shareholders of American Union will pay their
respective expenses, if any, incurred in connection with the Merger.
15. There is no larger integrated transaction of which the Merger
constitutes only one step.
As counsel to Valley and VNB, we have examined the Merger Agreement and
copies of ancillary agreements, certificates, instruments and documents
pertaining to the Merger delivered by the parties thereto. In such examination,
we have assumed the genuineness of all signatures and the authenticity of all
documents submitted to us. As to any facts material to our opinions expressed
herein, we have relied on representations of the parties to the Merger without
undertaking to verify the same by independent investigation. The within opinions
are based on our analysis of the Code, Treasury Regulations promulgated
thereunder, and relevant interpretive authorities as in effect on the date
hereof.
Based on the foregoing, we are of the opinion that:
1. The Merger qualifies as a "reorganization" within the meaning of Section
368(a)(1)(A). VNB and American Union each are a "party to a reorganization"
within the meaning of Section 368(b)(2).
2. No gain or loss will be recognized by VNB or American Union in
connection with the Merger. Sections 361(a) and 1032.
3. No gain or loss will be recognized by the shareholders of American Union
whose American Union Common Stock is converted solely into Valley Common Stock
in connection with the Merger. Section 354(a).
4. American Union shareholders receiving cash in lieu of fractional shares
of Valley Common Stock will be treated as if such fractional shares had been
received from Valley and then subsequently redeemed by Valley. The cash received
by the American Union shareholders in lieu of fractional shares will be treated
as having been received as full payment in exchange for the fractional shares
deemed to have been redeemed as provided in Section 302(a). Rev. Rul. 66-365,
1966-2 C.B. 116, Rev. Proc. 77-41, 1977-2 C.B. 574. Accordingly, such
shareholders will recognize gain or loss on the receipt of such cash measured by
the difference between the amount of such cash and the respective adjusted basis
of such shareholders in their fractional shares of Valley Common Stock
considered to have been redeemed.
5. The basis of any Valley Common Stock received by a shareholder of
American Union in connection with the Merger shall equal the adjusted basis of
the shareholder's American Union Common Stock converted in the transaction,
reduced by the amount of cash received, if any, on the conversion, and increased
by the amount of gain recognized, if any, on the conversion (whether
characterized as dividend or capital gain income).
6. The holding period of the Valley Common Stock received by the
shareholders of American Union in connection with the Merger will include the
period during which their American Union Common Stock converted in the
transaction was held, provided such stock was held as a capital asset on the
date of the Merger. Section 1223(1).
Very truly yours,
EXHIBIT 23(a)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Valley National Bancorp
We consent to the use of our report incorporated herein by reference and to the
reference to our Firm under the heading "Experts" in the Proxy Statement/
Prospectus.
Our report refers to a change in accounting for income taxes.
KPMG PEAT MARWICK LLP
Short Hills, New Jersey
December 19, 1994
EXHIBIT 23(b)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
American Union Bank
We consent to the inclusion of our report dated February 3, 1994, except as
to notes 1(j) and 15, which are as of April 28, 1994, with respect to the
statements of condition of American Union Bank as of December 31, 1993 and 1992,
and the related statements of operations, stockholders' equity and cash flows
for each of the years in the three-year period ended December 31, 1993, which
report appears in the Proxy Statement/Prospectus, and we consent to the
reference to our Firm under the heading "Experts" in the Proxy Statement/
Prospectus.
Our report refers to a change in accounting for income taxes as of January 1,
1993.
KPMG PEAT MARWICK LLP
Short Hills, New Jersey
December 19, 1994
EXHIBIT 23(d)
December 20, 1994
To Whom It May Concern:
We hereby consent to the use of our opinion letter attached as Appendix C and to
the reference to our firm under the heading "Opinion of American's Financial
Advisor" in the Registration Statement filed by Valley National Bancorp, with
the Securities and Exchange Commission in connection with the proposed merger of
American Union Bank with and into Valley National Bank, Valley National
Bancorp's wholly-owned subsidiary.
Very truly yours,
CAPITAL CONSULTANTS OF PRINCETON, INC.
EXHIBIT 99(a)
AMERICAN UNION BANK
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
Solicited on Behalf of the Board of Directors
The undersigned hereby appoints [_____________________], with full power of
substitution, to vote all of the shares of AMERICAN UNION BANK outstanding in
the undersigned's name at the Special Meeting of Shareholders of American Union
Bank ("American"), to be held at 2840 Morris Avenue, 3rd Floor, Union, New
Jersey on [_______________], 1995, at [_________] a.m., and at any adjournment
thereof. The undersigned hereby revokes any and all proxies heretofore given
with respect to such meeting.
This proxy will be voted as specified below. If no choice is specified, the
proxy will be voted FOR approval of the Agreement and Plan of Merger by and
among American, Valley National Bancorp and Valley National Bank.
The Board of Directors recommends a vote FOR approval of the Agreement and
Plan of Merger by and among American, Valley National Bancorp and Valley
National Bank.
1. Approval of the Agreement and Plan of Merger by and among American,
Valley National Bancorp and Valley National Bank.
___
/__/ FOR
___
/__/ AGAINST
___
/__/ ABSTAIN
2. In their discretion, upon other matters as may properly come before the
meeting.
Dated: _____________, 199__.
--------------------------------
Signature
--------------------------------
Signature
(Please sign exactly as your name
appears. When signing as an
executor, administrator, guardian,
trustee or attorney, please give
your title as such. If signer is a
corporation, please sign the full
corporate name and then an
authorized officer should sign his
name and print his name and title
below his signature. If the shares
are held in joint name, all joint
owners should sign.)
PLEASE DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE.
