As filed with the Securities and Exchange Commission on October 30, 2000
Registration No. 333-47870
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
to
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.)
1455 Valley Road
Wayne, New Jersey 07470
973-305-8800
------------
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Gerald H. Lipkin, Chairman, President and Chief Executive Officer
Valley National Bancorp
1455 Valley Road
Wayne, New Jersey 07470
973-305-8800
------------
(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. ROBINSON MARKEL, ESQ.
MICHAEL W. ZELENTY, ESQ. Rosenman & Colin LLP
Pitney, Hardin, Kipp & Szuch LLP 575 Madison Avenue
200 Campus Drive New York, New York 10016
Florham Park, New Jersey 07932 (212) 940-8800
(973) 966-6300
<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 as of September 5, 2000 (the "Merger Agreement"), among
Valley National Bancorp ("Valley"), Valley National Bank ("VNB"), Merchants New
York Bancorp, Inc. ("Merchants"), and Merchants's subsidiary, The Merchants Bank
of New York ("TMB") attached as Appendix A to the Joint 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. |_|
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration number of the earlier effective
registration statement for the same offering. |_| ___________
If this form is a post-effective amendment filed pursuant to
Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration number of the earlier effective registration
statement for the same offering. |_| __________
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
==================================== ============== ========================= ============================ ====================
Title of each class of securities Amount to be Proposed maximum Proposed maximum aggregate Amount of
to be registered registered offering price per offering price** registration fee***
unit**
---------------------------------- ------------ ------ -------------------------- -------------------
<S> <C> <C> <C>
Common Stock, no par value 14,331,041 $26.12 $374,326,791 $98,822
Shares*
==================================== ============== ========================= ============================ ====================
</TABLE>
* The number of shares of Valley Common Stock issuable in the Merger in exchange
for shares of Merchants Common Stock, assuming the Exchange Ratio of 0.7634 set
forth in the Merger Agreement, and assuming that all currently outstanding
options to acquire shares of Merchants Common Stock are exercised prior to the
Effective Time of the Merger. 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.
** Estimated solely for the purpose of calculating the registration fee for the
filing of this Registration Statement on Form S-4 (the "S-4") pursuant to Rule
457(f)(1) under the Securities Act based on the Exchange Ratio of 0.7634 and on
the average $19.9375 of the high $20.3125 and low $19.5625 prices reported on
the Nasdaq Stock Market (National Market) ("Nasdaq") for Merchants Common Stock
as of October 11, 2000, a date within five business days prior to the filing of
the S-4.
*** This fee was paid to the Commission on October 12, 2000.
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>
[Merchants Logo]
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
Dear Shareholder:
I want to invite you to attend a special meeting of shareholders of
Merchants New York Bancorp, Inc. The special meeting will be held on Tuesday,
December 5, 2000 at 3:00 p.m. at The Harmonie Club, 4 East 60th Street, New
York, New York 10022. Merchants shareholders of record as of October 26, 2000
are entitled to attend and vote at the meeting.
The purpose of the special meeting is to allow Merchants shareholders
to vote on the proposed merger of Merchants and Valley National Bancorp. The
boards of directors of Merchants and Valley have already unanimously approved
the merger. Merchants' board and management believe the merger is in the best
interests of its shareholders, employees and the bank, which will continue under
its present name as a division of Valley National Bank.
The merger offers important advantages to Merchants shareholders,
including a substantial dividend increase and improved liquidity for their
shares. These and other advantages are described on page 22 under "Merchants'
Reasons for the Merger" in the joint proxy statement-prospectus that accompanies
this letter.
In the merger, Merchants shareholders will receive 0.7634 shares of
Valley common stock for each share of Merchants common stock. Valley common
stock is listed on the New York Stock Exchange under the symbol "VLY". Based on
October 27, 2000 closing prices, 0.7634 shares of Valley common stock had a
value of $20.57. The 0.7634 exchange ratio is subject to the standard
anti-dilution adjustments described in the joint proxy statement-prospectus.
Merchants has received the written opinion of its investment bankers,
CIBC World Markets Corp., that the 0.7634 exchange ratio is fair, from a
financial point of view, to the shareholders of Merchants.
Merchants shareholders will not be taxed on the exchange of Merchants
stock for Valley stock.
When the merger is completed, holders of Merchants stock will own about
14,235,534 shares, or 19.0% of Valley common stock.
The merger cannot be completed unless the shareholders of both
companies approve it. Valley shareholders will be voting on the merger at their
own special meeting.
Your board of directors unanimously recommends that you vote for the
merger. Your vote is very important. A majority of Merchants' outstanding shares
must approve the merger. This means that a share not voted is the same as a
share voted against the merger.
Whether or not you plan to attend the special meeting, please execute
and return the enclosed proxy card in the envelope provided, or submit your
proxy to us by telephone or the Internet as instructed on the enclosed proxy
card. If you sign, date and mail your proxy card without indicating how you want
to vote, your proxy will be counted as a vote in favor of the merger.
Cordially,
Spencer B. Witty
Chairman
Neither the Securities and Exchange Commission, nor any bank regulatory
agency, nor any state securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
This joint proxy statement-prospectus is dated November __, 2000,
and is first being mailed to shareholders on November __, 2000.
<PAGE>
Merchants New York Bancorp, Inc.
275 Madison Avenue
New York, New York 10022
Notice of Special Meeting of Shareholders
to be held on December 5, 2000
Notice is hereby given that a special meeting of stockholders of
Merchants New York Bancorp, Inc. will be held on Tuesday, December 5, 2000, at
3:00 p.m., local time.
The location of the special meeting will be The Harmonie Club, 4 East
60th Street, New York, New York 10022. The special meeting will be held for the
following purposes:
(1) To consider and vote upon an Agreement and Plan of
Merger dated as of September 5, 2000, among Valley
National Bancorp, Valley National Bank, Merchants New
York Bancorp, Inc. and The Merchants Bank of New
York, pursuant to which Merchants New York Bancorp,
Inc. will merge with and into Valley National
Bancorp.
(2) To transact other business that may properly come
before the special meeting or any adjournments or
postponements thereof.
The board of directors has fixed October 26, 2000, as the record date
for the determination of the stockholders entitled to notice of, and to vote at,
the special meeting and any adjournments thereof. Only those Merchants
stockholders of record as of the close of business on that date will be entitled
to vote at the special meeting or any adjournment or postponement thereof.
Approval will require the "FOR" votes of the holders of a majority of all
outstanding shares. For that reason, a share not voted is the same as a share
voted against the merger. The Merchants' board of directors unanimously
recommends that stockholders vote "FOR" approval and adoption of the merger
agreement.
By Order of the Board of Directors,
Spencer B. Witty
Chairman of the Board
James G. Lawrence
President and Chief Executive Officer
Karen L. Deitz
Corporate Secretary
New York, New York
November__, 2000
You are cordially invited to attend this special meeting. It is
important that your shares be represented regardless of the number you own. If
you will be unable to be present at the special meeting or even if you
anticipate that you will attend, please sign and date the enclosed proxy card
and return it in the accompanying envelope without delay or submit your proxy to
us by telephone or the Internet as instructed on the enclosed proxy card. You
will be most welcome at the special meeting and may then vote in person if you
so desire, even though you may have executed and returned the proxy card or
voted by phone or the Internet. Any stockholder who executes a proxy card or
votes by phone or the Internet may revoke their proxy at any time before it is
exercised.
<PAGE>
[Valley Logo]
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
Dear Shareholder:
You are invited to attend a special meeting of shareholders of Valley
National Bancorp. The special meeting will be held on Tuesday, December 5, 2000
at 9:00 a.m. at The Radisson Hotel, 690 Route 46 East, Fairfield, New Jersey.
Valley shareholders of record as of October 26, 2000 are entitled to attend and
vote at the meeting.
The purpose of the special meeting is to allow Valley shareholders to
vote on the proposed merger of Merchants New York Bancorp, Inc. and Valley. The
boards of directors of Merchants and Valley have already unanimously approved
the merger.
In the merger, Merchants shareholders will receive 0.7634 shares of
Valley common stock for each share of Merchants common stock.
Valley has received the written opinion of its investment bankers,
Sandler O'Neill & Partners, L.P. that the 0.7634 exchange ratio is fair to
Valley shareholders from a financial point of view.
When the merger is completed, holders of Merchants stock will own about
14,235,534 million shares, or 19.0% of Valley common stock.
The merger cannot be completed unless the shareholders of both
companies approve it. Merchants shareholders will be voting on the merger at
their own special meeting.
Your board of directors unanimously recommends that you vote for the
merger. Your vote is very important.
Whether or not you plan to attend the special meeting, please execute
and return the enclosed proxy card in the envelope provided, or submit your
proxy to us by telephone or the Internet as instructed on the enclosed proxy
card. If you sign, date and mail your proxy card without indicating how you want
to vote, your proxy will be counted as a vote in favor of the merger.
Cordially,
Gerald H. Lipkin
Chairman, President and CEO
Neither the Securities and Exchange Commission, nor any bank regulatory
agency, nor any state securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
This joint proxy statement-prospectus is dated November __, 2000,
and is first being mailed to shareholders on November __, 2000.
<PAGE>
Valley National Bancorp
1455 Valley Road
Wayne, New Jersey 07470
Notice of Special Meeting of Shareholders
to be held December 5, 2000
To the Shareholders of Valley National Bancorp:
Notice is hereby given that a special meeting of shareholders of Valley
National Bancorp will be held at The Radisson Hotel, 690 Route 46 East,
Fairfield, New Jersey, at 9:00 a.m. on December 5, 2000, for the following
purposes:
(1) To consider and vote upon an Agreement and Plan of
Merger dated as of September 5, 2000, among Valley
National Bancorp, Valley National Bank, Merchants New
York Bancorp, Inc. and The Merchants Bank of New
York, pursuant to which Merchants New York Bancorp,
Inc. will merge with and into Valley National
Bancorp.
(2) To transact other business that may properly come
before the special meeting or any adjournment or
postponement of the special meeting.
Only shareholders of record at the close of business on October 26,
2000 are entitled to receive notice of and to vote at the special meeting or any
adjournments or postponements of the special meeting.
The Valley National Bancorp board of directors unanimously recommends
that shareholders vote "FOR" approval and adoption of the merger agreement.
By Order of the Board of Directors,
Gerald H. Lipkin
Chairman, President and Chief Executive Officer
<PAGE>
TABLE OF CONTENTS
Page
----
QUESTIONS AND ANSWERS
ABOUT THE MERGER............................1
SUMMARY...........................................2
What this Document is About.................2
Vote Required to Approve the Merger.........2
The Merger..................................2
The Companies...............................7
SUMMARY FINANCIAL DATA OF
VALLEY........................................8
SUMMARY FINANCIAL DATA OF
MERCHANTS.....................................9
SUMMARY PRO FORMA FINANCIAL
INFORMATION..................................10
INTRODUCTION ....................................11
FORWARD LOOKING STATEMENTS.......................11
CERTAIN INFORMATION ABOUT
VALLEY.......................................12
General....................................12
Valley National Bank.......................12
Recent Developments........................13
CERTAIN INFORMATION ABOUT
MERCHANTS....................................13
General....................................13
Recent Developments........................14
THE MERCHANTS MEETING............................14
Date, Time and Place.......................14
Purpose....................................14
Board Recommendation.......................14
Record Date; Required Vote.................14
Voting Rights; Proxies.....................15
Solicitation of Proxies....................16
Quorum.....................................16
THE VALLEY MEETING...............................17
Date, Time and Place.......................17
Purpose....................................17
Board Recommendation.......................17
Record Date; Required Vote.................17
Voting Rights; Proxies.....................18
Solicitation of Proxies....................19
Quorum.....................................19
THE PROPOSED MERGER..............................19
General Description........................19
Consideration; Exchange Ratio;
Cash Instead of Fractional Shares.......19
Conversion of Merchants Options............20
Background of and Reasons for the Merger...21
Interests of Certain Persons in the Merger.23
Opinion of Sandler O'Neill & Partners, L.P.25
Opinion of CIBC World Markets Corp.........32
Resale Considerations Regarding
Valley Common Stock.....................39
<PAGE>
Page
----
Conditions to the Merger......................39
Conduct of Business Pending the Merger........40
Stock Option to Valley for
Merchants Shares...........................41
Employee Matters..............................41
Representations, Warranties and Covenants.....41
Regulatory Approvals..........................42
Management and Operations
After the Merger...........................42
Exchange of Certificates......................42
Amendments....................................43
Third Party Beneficiaries.....................43
Terminating the Merger Agreement..............43
Accounting Treatment of the Merger............44
Federal Income Tax Consequences ..............44
No Dissenters' Rights.........................45
COMPARATIVE PER SHARE MARKET PRICE
AND DIVIDEND INFORMATION......................45
PRO FORMA UNAUDITED FINANCIAL
INFORMATION...................................48
DESCRIPTION OF VALLEY
CAPITAL STOCK.................................55
Description of Valley Common Stock............55
"Blank Check" Preferred Stock; Authorized
but Unissued Common Stock..................56
COMPARISON OF THE RIGHTS OF
SHAREHOLDERS OF VALLEY
AND MERCHANTS.................................57
Voting Requirements...........................57
Limits on Business Combinations...............58
Rights of Dissenting Shareholders.............59
Shareholder Written Consent to
Corporate Action...........................59
Special Shareholder Meetings..................59
Dividends ....................................60
By-laws.......................................60
Limitations of Liability of Directors
and Officers...............................60
Consideration of Acquisition Proposals........61
Preferred Stock...............................61
INFORMATION INCORPORATED BY
REFERENCE.....................................62
OTHER MATTERS.......................................63
LEGAL OPINION.......................................63
EXPERTS.............................................63
SUBMISSION OF SHAREHOLDER
PROPOSALS.....................................64
APPENDIX A-Merger Agreement.........................A-1
APPENDIX B-Stock Option Agreement...................B-1
APPENDIX C-CIBC World Markets Fairness
Opinion.......................................C-1
APPENDIX D-Sandler O'Neill Fairness Opinion.........D-1
<PAGE>
HOW TO GET COPIES OF RELATED DOCUMENTS
This document incorporates important business and financial information
about Valley and Merchants that is not included in or delivered with this
document. Valley and Merchants shareholders may receive the information free of
charge by writing or calling the persons listed below. For Valley documents,
make your request to Alan D. Eskow, Corporate Secretary, Valley National
Bancorp, 1455 Valley Road, Wayne, NJ 07474-0558; telephone (973) 305-4003. For
Merchants documents, make your request to Karen Deitz, Corporate Secretary;
Merchants New York Bancorp, Inc., 275 Madison Avenue, New York, NY 10022;
telephone (212) 973-6638. We will respond to your request within one business
day by sending the requested documents by first class mail or other equally
prompt means. To ensure timely delivery of the documents in advance of the
meetings, you should request documents by November 28, 2000.
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: What do I need to do now?
A: Just mail your signed proxy card in the enclosed return envelope. You
may also vote by telephone or the Internet. Whichever method you
choose, please vote as soon as possible, so that your shares can be
counted at your meeting. In order to assure that your vote is counted,
please give us your proxy as instructed on your proxy card, even if you
currently plan to attend a meeting in person. The board of directors of
each of Merchants and Valley recommends that its shareholders vote in
favor of the merger.
Q: What do I do if I want to change my vote?
A: There are three ways to do this:
o Vote again. Just send in a later-dated, signed proxy card to your
company's Secretary or vote again by telephone or the Internet
before your meeting. The later vote automatically supersedes the
earlier one.
o Attend your meeting in person and either ask the Secretary to
return your proxy, or just cast your vote in person; paper ballots
will be distributed to persons attending the meeting. (Note that
simply showing up and taking no further action at the meeting will
not revoke your proxy.)
o Send a notice revoking your proxy to your company's Secretary at
the address under "The Companies" on page 7.
Q: If my shares are held in "street name" by my broker, will my broker
vote my shares for me?
A: If you do not provide your broker with instructions on how to vote your
"street name" shares, your broker will not be permitted to vote them on
the merger. You should therefore be sure to provide your broker with
instructions on how to vote your shares. Please check the voting form
used by your broker to see if it offers telephone or Internet voting.
If you do not give voting instructions to your broker, your "street
name" shares will not be counted as voting for purposes of the merger
vote unless you appear in person at your meeting with a proxy, executed
in your favor, from your broker.
If you are a Merchants shareholder and do not give voting instructions
to your broker, this means that your "street name" shares will, in
effect, be voted against the merger unless you do both of the
following: (1) appear in person at the Merchants meeting with a proxy,
executed in your favor, from your broker, and (2) vote that proxy in
favor of the merger at the meeting.
Q: Should I send in my stock certificates now?
A: No. If the merger is completed, we will send Merchants shareholders
written instructions for exchanging their stock certificates. Valley
shareholders will keep their existing certificates.
Q: When do you expect the merger to be completed?
A: We are working toward completing the merger during the first quarter of
2001, and we currently expect to meet that timetable. In addition to
shareholder approvals, we must also obtain bank regulatory approvals.
Q: Whom should I call with questions about the meetings or the merger?
A: Merchants shareholders may call Merchants' Corporate Secretary, Karen
Deitz, at (212) 973-6638.
Valley shareholders may call Dianne Grenz in Valley's Shareholder
Relations Department at (973) 305-3380.
<PAGE>
SUMMARY
This is a summary of certain information regarding the proposed merger
and the shareholder meetings to vote on the merger. Because this is a summary,
it does not contain all the detailed information contained elsewhere in this
document. We urge you to carefully read the entire document, including the
Appendixes, before deciding how to vote.
What this Document is About
The boards of directors of Merchants New York Bancorp, Inc. and Valley
National Bancorp have approved the merger of Merchants into Valley. The merger
cannot be completed unless both companies' shareholders approve it. The
Merchants and Valley boards have each called a special meeting of their
respective shareholders to vote on the merger. This document is the proxy
statement used by both boards to solicit proxies for those meetings. It is also
the prospectus of Valley regarding the common stock Valley will issue if the
merger is completed.
Vote Required to Approve the Merger
Merchants (see page 15) Merchants has selected the close of business on
October 26, 2000 as the record date for its
meeting. Each of the 18,647,543 shares of
Merchants common stock outstanding on the record
date is entitled to vote at the Merchants meeting.
A majority of the outstanding shares of Merchants
common stock outstanding on the record date must
be cast in favor of the merger for it to be
approved. Because approval by Merchants
shareholders is based on a majority of the
outstanding shares, a Merchants shareholder's
failure to vote, a broker non-vote or an
abstention will have the same effect as a vote
against the merger. The Merchants board of
directors has unanimously approved the merger
agreement and unanimously recommends that
Merchants shareholders vote "FOR" approval and
adoption of the merger agreement.
Valley (see page
17)........ Valley has selected the close of business on
October 26, 2000 as the record date for its
meeting. Each of the 59,972,550 shares of Valley
common stock outstanding on the record date is
entitled to vote at the Valley meeting. A majority
of the votes cast at the Valley meeting, whether
in person or by proxy, must be cast in favor of
the merger for it to be approved. The Valley board
of directors has unanimously approved the merger
agreement and unanimously recommends that Valley
shareholders vote "FOR" approval and adoption of
the merger agreement.
The Merger
The Merger Agreement; the
Closing Date
(see page 19)............. Merchants will merge with Valley, with Valley as
the surviving entity. The merger will be completed
on a date determined by Valley, which must be
within ten business days after all material
conditions to closing have been met, unless Valley
and Merchants agree on a different closing date.
Valley and Merchants currently expect to close
during the first quarter of 2001. The terms of the
proposed merger are set forth in a merger
agreement signed by Valley and Merchants and their
bank subsidiaries. A copy of the merger agreement
is attached as Appendix A to this document and is
incorporated into this document by reference.
Exchange Ratio is 0.7634
shares of Valley common
stock for each Merchants
share (see page 19)....... In the merger, Merchants shareholders will receive
0.7634 shares of Valley common stock for each
share of Merchants common stock. If there is any
stock split, stock dividend or similar transaction
affecting Valley common stock before the closing,
the 0.7634 exchange ratio will be adjusted
appropriately.
No Federal Income Tax on
Shares Received in the
Merger (see page 44)......
Valley's counsel, Pitney, Hardin, Kipp & Szuch
LLP, has delivered its opinion that the merger
will qualify as a tax-free reorganization. This
means that the conversion of Merchants stock into
Valley stock will be tax-free for Valley,
Merchants and the Merchants shareholders.
Merchants shareholders will recognize no taxable
gain or loss until they sell the Valley common
stock that they receive in the merger. The basis
of the Valley common stock received by Merchants
shareholders will be the basis of the Merchants
common stock converted in the merger. The holding
period of the Valley common stock will include the
holding period of the Merchants common stock
converted.
We urge Merchants shareholders to read the more
complete description of the merger's tax
consequences on pages 44 - 45 and to consult their
own tax advisors as to the specific tax
consequences of the merger to them under
applicable laws.
Opinions of Financial
Advisors (see pages 25 and
32)......................... In deciding to approve the merger, each board
considered the opinion of its financial advisor.
Valley received an opinion from Sandler O'Neill &
Partners, L.P. that the exchange ratio in the
merger was fair to Valley shareholders from a
financial point of view as of September 5, 2000.
Merchants received an opinion from CIBC World
Markets Corp. that the exchange ratio in the
merger was fair to Merchants shareholders from a
financial point of view as of September 5, 2000.
These opinions were reaffirmed as of the date of
this joint proxy statement-prospectus, and are
attached as Appendix C and Appendix D. We
encourage you to read these opinions. Neither of
the opinions constitutes a recommendation as to
how any shareholder should vote on the merger. For
information on how Sandler O'Neill arrived at
their opinion, see pages 25- 31. For information
on how CIBC World Markets arrived at its opinion,
see pages 32 - 38.
Share Information and
Market Prices (see page 46) Valley common stock is listed on the New York
Stock Exchange under the symbol "VLY" and
Merchants common stock is traded on the NASDAQ
National Market under the symbol "MBNY". The
following table lists the closing prices of Valley
common stock and Merchants common stock on
September 5, 2000, the last day before we
announced the merger, and on October 27, 2000, a
date shortly before the date of this joint proxy
statement-prospectus. The table also presents the
implied value of one share of Merchants common
stock, computed by multiplying the Valley closing
price on the dates indicated by the 0.7634
exchange ratio. You should obtain current market
quotations for Valley and Merchants common stock.
Because the exchange ratio is fixed and trading
prices fluctuate, Merchants shareholders are not
assured of receiving any specific market value of
Valley common stock.
<TABLE>
<CAPTION>
Implied Value of One
Valley Merchants Share of Merchants
Common Stock Common Stock Common Stock
------------ ------------ ------------
<S> <C> <C> <C>
September 5, 2000...... $ 26.25 $ 17.50 $ 20.04
October 27, 2000....... 26.94 20.25 20.57
</TABLE>
Cash Instead of Fractional
Shares (see page 19)...... Merchants shareholders will not receive fractional
shares of Valley common stock in the merger.
Instead they will receive, without interest, a
cash payment equal to the fractional share
interest they otherwise would have received,
multiplied by the average closing price of
Valley's common stock during the ten trading days
ending on the fifth business day before the
closing. This cash payment will be taxable to
Merchants' shareholders.
No Appraisal Rights for
Shareholders of either
Company (see page 45)..... Under applicable statutory law of New Jersey and
Delaware, the shareholders of Valley and of
Merchants do not have any dissenters' rights to an
appraisal of the value of their shares in
connection with the merger.
Exchanging your
Merchants Stock
Certificates
(see page 42)............. Promptly after the merger occurs, we will send
Merchants shareholders letters of transmittal and
instructions for exchanging their stock
certificates for certificates representing Valley
common stock. Merchants shareholders should not
send in their stock certificates until they
receive instructions from the exchange agent.
Reselling the Stock you
Receive in the Merger (see
page 39).................... The shares of Valley common stock to be issued in
the merger will be registered under the Securities
Act of 1933. Except as noted in the next sentence,
shareholders may freely transfer those shares
after they receive them. Merchants has identified
its directors, executive officers and others who
may be deemed "affiliates" of Merchants, and those
persons have entered into agreements with Valley
restricting their ability to transfer the shares
they will receive in the merger.
Conversion of
Merchants Stock Options
(see page 20)............. In the merger, holders of options to acquire
Merchants common stock will receive options to
purchase Valley common stock. The new options will
have the same terms and conditions as the old
options, except that the number of shares and the
exercise price will be adjusted to reflect the
0.7634 exchange ratio.
Differences in
Shareholders' Rights (see
page 57).................... In the merger, each Merchants shareholder will
become a Valley shareholder. The rights of
Merchants shareholders are currently governed by
Delaware corporate law and Merchants' certificate
of incorporation and by-laws. The rights of Valley
shareholders are governed by New Jersey corporate
law and Valley's certificate of incorporation and
by-laws. The rights of Merchants and Valley
shareholders differ with respect to voting
requirements and various other matters. See pages
57 - 62.
Reasons for the Merger
(see page 21)............... Valley entered into the merger agreement as part
of its ongoing strategy of growth through new
branches and acquisitions of other strong
financial institutions.
Merchants entered into the merger agreement in
order to realize increased value for its
shareholders and to make available to Merchants'
customers the wider range of services that Valley
offers to its customers.
<PAGE>
Financial Interests of
Merchants' Directors and
Officers in the Merger (see
page 23).................... On October 26, 2000, directors and executive
officers of Merchants and their affiliates owned
or had the right to vote 4,511,076 shares or
24.19% of the Merchants common stock. On October
26, 2000, directors and executive officers of
Valley and their affiliates owned or had the right
to vote 5,233,273 shares or 8.7% of the Valley
common stock.
Merchants directors and officers have interests in
the merger as individuals in addition to, or
different from, their interests as shareholders,
such as receiving salaries or other benefits. For
example:
Valley has agreed to appoint Spencer B. Witty,
Robinson Markel and Charles Baum as directors of
Valley when the merger occurs. Each of them is
currently a Merchants director. Valley also has
agreed to appoint Mr. Witty as a director of
Valley National Bank when the merger occurs.
Pursuant to the merger agreement, Valley will
honor the existing employment and pension benefit
agreements between Merchants and its officers and
employees. Valley has entered into employment
agreements with four Merchants officers. Two of
these agreements modify existing employment
agreements. Each of the four employment agreements
is for a term of approximately two years, and
provides for continuation, following the merger,
of the same compensation that is currently being
paid by Merchants, as well as participation in
certain Valley benefit plans. Each agreement also
contains restrictions on competition that become
effective if employment terminates and continue,
in most cases, for two years after that time. In
addition, Valley has entered into an agreement
with one officer providing for a lump-sum
severance payment in case that individual's
employment terminates under certain conditions
following a change in control of Valley.
Valley has agreed to indemnify the directors and
officers of Merchants against certain liabilities
for a six-year period following the merger.
For additional information on the benefits of the
merger to Merchants management, see pages 23-25.
Conditions to the Merger
(see page 39)............... Completion of the merger is contingent on a number
of conditions, including approval of the merger by
Merchants shareholders and Valley shareholders at
their respective meetings.
Regulatory Approvals
(see page 42)............. Completion of the merger is subject to obtaining
all the necessary regulatory approvals, including
those of the Office of the Comptroller of the
Currency and the Board of Governors of the Federal
Reserve System. Approval by bank regulators,
however, does not constitute an endorsement of the
merger or a determination that the terms of the
merger are fair to Merchants shareholders or
Valley shareholders.
We cannot assure you that the necessary regulatory
approvals will be granted or that they will be
granted on a timely basis without conditions
unacceptable to Valley or Merchants.
Terminating the Merger
Agreement (see page 43)..... The merger agreement may be terminated by either
Merchants or Valley if the merger has not occurred
by April 30, 2001. For a more complete description
of this and other termination rights available to
Merchants and Valley, see page 43.
<PAGE>
Amending the Merger
Agreement (see page 43)..... The merger agreement may be amended by Valley and
Merchants at any time before the merger. However,
an amendment which reduces the amount or changes
the form of consideration to be received by
Merchants shareholders cannot be made without
their approval once they have voted to adopt the
merger agreement.
Accounting Treatment of the
Merger
(see page 44)............... Valley expects to account for the merger as a
pooling-of-interests for financial reporting
purposes. One of the conditions to Valley's and
Merchants' obligations to close the merger is that
Valley receive a letter from its independent
public accountants regarding qualification of the
merger for pooling-of-interests accounting.
Merchants has Agreed Not
to Solicit Other
Transactions
(see page 40)............... Merchants has agreed not to encourage, negotiate
with, or provide any information to any person
other than Valley concerning an acquisition
transaction involving Merchants or The Merchants
Bank until the merger is completed or the merger
agreement is terminated. However, Merchants may
take certain of these actions if its board of
directors determines that it should do so. This
determination by the board must be made after the
board consults with counsel, and must be based on
the board's fiduciary duties. This restriction,
along with the option described in the following
paragraph, may deter other potential acquirors of
control of Merchants.
<PAGE>
Merchants has Granted
Valley a Stock Option (see
page 41).................... As a condition to Valley entering into the merger
agreement, Valley required Merchants to grant
Valley a stock option designed to deter other
companies from attempting to acquire control of
Merchants. The option is exercisable only if
certain specific triggering events occur and the
merger does not occur. The option gives Valley the
right to purchase for $16.98 per share up to
4,663,741 shares of Merchants common stock,
representing approximately 19.9% of the Merchants
shares that would be outstanding if the option
were exercised. The option exercise price and the
number of option shares are subject to
anti-dilution adjustment. Also, the exercise price
will be reduced if a triggering event occurs and
the option price at that time is higher than the
average implied value of a share of Merchants
common stock during a prior measurement period.
Valley has no right to vote the shares covered by
the option before its exercise. Valley could
recognize a gain if it exercises the option and
resells the shares it acquires for more than the
exercise price. The option may deter other
potential acquirors of Merchants because it would
probably increase the cost of acquiring all the
shares of Merchants common stock. Valley's
exercise of the option may also make
pooling-of-interests accounting treatment
unavailable to another potential acquiror. The
agreement granting the option is set forth as
Appendix B to this document.
The Companies
Valley (see page 12)........ Valley National Bancorp
1455 Valley Road
Wayne, New Jersey 07470
(973) 305-8800
Valley, a New Jersey corporation, is the bank
holding company for Valley National Bank. Valley
National Bank is a national bank that operates 117
branches located in northern New Jersey. At June
30, 2000, Valley had $6.3 billion in assets.
Merchants (see page 13)..... Merchants New York Bancorp, Inc.
275 Madison Avenue
New York, New York 10022
(212) 973-6600
Merchants, a Delaware corporation, is the bank
holding company for The Merchants Bank of New
York. The Merchants Bank is a New York
state-chartered commercial bank that operates
seven branches located in Manhattan. At June 30,
2000, Merchants had $1.4 billion in assets.
<PAGE>
SUMMARY FINANCIAL DATA OF VALLEY
The following is a summary of certain historical consolidated financial
data for Valley. The data presented for the years 1995 through 1999, and as of
the end of those years, comes from Valley's audited consolidated financial
statements. The data presented as of and for the six months ended June 30, 2000
and 1999 comes from Valley's unaudited consolidated financial statements.
Valley's consolidated financial statements as of December 31, 1999 and 1998, and
for the years 1999, 1998 and 1997, are incorporated by reference in this
document. Valley's unaudited consolidated financial statements as of and for the
six months ended June 30, 2000 and 1999 are also incorporated by reference in
this document. See page 62.
In the opinion of Valley's management, the unaudited data shown below
reflects all adjustments necessary for a fair presentation of that data. All
such adjustments were normal, recurring adjustments. Results for the six months
ended June 30, 2000 do not necessarily indicate the results that you should
expect for any other interim period or for the year as a whole.
Valley's historical earnings per share have been restated to give
retroactive effect to stock dividends and splits.
<PAGE>
<TABLE>
<CAPTION>
At or for the Six
Months Ended June 30, At or for the Years Ended December 31,
------------------------ -------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ---------- -----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Interest income $ 226,879 $ 208,939 $ 427,535 $ 411,293 $ 406,818 $ 386,844 $ 376,827
Interest expense 98,647 81,098 169,177 167,658 172,182 168,595 166,382
----------- ----------- ----------- ------------------------ ----------- -----------
Net interest income 128,232 127,841 258,358 243,635 234,636 218,249 210,445
Provision for loan losses 3,700 3,775 9,120 12,645 13,130 3,956 3,821
----------- ----------- ----------- ------------------------ ----------- -----------
Net interest income after
provision for loan losses 124,532 124,066 249,238 230,990 221,506 214,293 206,624
Non-interest income 24,265 24,522 47,252 45,374 45,194 32,610 27,168
Non-interest expense 68,224 67,501 137,946 144,713 139,246 134,586 121,822
----------- ----------- ----------- ------------------------ ----------- -----------
Income before income taxes 80,573 81,087 158,544 131,651 127,454 112,317 111,970
Income taxes 26,970 29,201 52,220 30,380 37,303 37,757 37,818
----------- ----------- ----------- ------------------------ ----------- -----------
Net income $ 53,603 $ 51,886 $ 106,324 $ 101,271 $ 90,151 $ 74,560 $ 74,152
=========== =========== =========== ======================== =========== ===========
Per Common Share Data:
Earnings per share:
Basic $ 0.88 $ 0.81 $ 1.67 $ 1.57 $ 1.40 $ 1.20 $ 1.17
Diluted 0.87 0.80 1.65 1.55 1.39 1.19 1.17
Book value 8.61 8.88 8.83 9.11 8.36 7.42 7.56
Dividends 0.51 0.48 0.97 0.89 0.77 0.69 0.66
Ratios:
Return on average assets 1.72% 1.74% 1.75% 1.79% 1.60% 1.36% 1.40%
Return on average equity 20.25 17.60 18.35 18.10 17.51 15.47 16.58
Financial Condition Data:
Total assets $6,292,729 $6,110,104 $6,360,394 $ 5,878,969 $5,646,425 $5,631,152 $5,464,416
Investment securities held to
maturity 358,489 335,157 351,501 286,890 207,053 286,469 349,161
Investment securities available
for sale 941,093 1,152,431 1,005,419 1,023,188 1,139,194 1,112,213 1,282,868
Trading account securities -- -- -- 1,592 -- -- --
Loans 4,629,637 4,308,726 4,554,752 4,147,649 3,972,540 3,783,532 3,325,997
Allowance for loan losses 55,150 54,894 55,120 54,641 53,170 52,926 50,433
Deposits 5,018,217 5,045,475 5,051,255 4,970,149 4,852,081 4,985,901 4,863,017
Shareholders' equity 520,565 563,210 553,500 589,600 540,600 496,331 476,986
</TABLE>
<PAGE>
SUMMARY FINANCIAL DATA OF MERCHANTS
The following is a summary of certain selected historical consolidated
financial data for Merchants. The data presented for the years 1995 through
1999, and as of the end of those years, comes from Merchants' audited
consolidated financial statements. The data presented as of and for the six
months ended June 30, 2000 and 1999 comes from Merchants' unaudited consolidated
financial statements. Merchants' consolidated financial statements as of
December 31, 1999 and 1998, and for the years 1999, 1998 and 1997, are
incorporated by reference in this document. Merchants' unaudited consolidated
financial statements as of and for the six months ended June 30, 2000 and 1999
are also incorporated by reference in this document. See page 62.
In the opinion of Merchants' management, the unaudited data shown below
reflects all adjustments necessary for a fair presentation of that data. All
such adjustments were normal, recurring adjustments. Results for the six months
ended June 30, 2000 do not necessarily indicate the results that you should
expect for any other interim period or for the year as a whole.
Merchants' historical earnings per share have been restated to give
retroactive effect to stock splits.
<TABLE>
<CAPTION>
At or for the Six
Months Ended June 30, At or for the Years Ended December 31,
------------------------- -------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------- ---------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Interest income $ 51,692 $ 42,681 $ 90,285 $ 86,268 $ 82,820 $ 73,095 $ 69,569
Interest expense 23,028 18,364 39,616 40,873 40,253 33,455 31,907
----------- ----------- ----------- ------------ ----------- ----------- ------------
Net interest income 28,664 24,317 50,669 45,395 42,567 39,640 37,662
Provision for loan losses 1,625 600 1,915 1,425 1,700 2,580 2,080
----------- ----------- ----------- ------------ ----------- ----------- ------------
Net interest income after
provision for loan losses 27,039 23,717 48,754 43,970 40,867 37,060 35,582
Non-interest income 3,601 3,033 6,551 5,448 5,183 5,286 5,154
Non-interest expense 13,648 12,864 26,773 25,384 24,333 22,265 22,732
----------- ----------- ----------- ------------ ----------- ----------- ------------
Income before income taxes 16,992 13,886 28,532 24,034 21,717 20,081 18,004
Income taxes 5,985 4,713 9,515 8,132 7,155 7,410 6,539
----------- ----------- ----------- ------------ ----------- ----------- ------------
Net income $ 11,007 $ 9,173 $ 19,017 $ 15,902 $ 14,562 $ 12,671 $ 11,465
=========== =========== =========== ============ =========== =========== ============
Per Common Share Data:
Earnings per share:
Basic $ 0.59 $ 0.47 $ 0.99 $ 0.82 $ 0.75 $ 0.64 $ 0.58
Diluted 0.58 0.47 0.98 0.81 0.73 0.63 0.57
Book value 5.17 5.60 5.19 5.80 5.49 5.21 5.03
Dividends 0.25 0.20 0.45 0.40 0.38 0.33 0.28
Ratios:
Return on average assets 1.61% 1.44% 1.46% 1.27% 1.23% 1.21% 1.19%
Return on average equity 23.09 16.45 17.32 14.34 13.82 12.53 12.59
Financial Condition Data:
Total assets $1,369,676 $1,264,939 $1,395,313 $1,289,571 $1,235,742 $1,137,799 $ 1,027,191
Investment securities held to
maturity 252,609 211,229 197,988 198,163 215,171 166,908 45,435
Investment securities
available for sale 561,519 599,234 649,932 660,026 541,634 561,601 584,378
Loans 479,456 392,088 437,097 361,763 331,808 297,081 270,904
Allowance for loan losses 10,282 8,556 9,108 7,965 6,167 5,617 6,484
Deposits 927,087 879,871 958,978 934,323 904,087 875,693 792,398
Stockholders' equity 96,688 108,097 99,208 112,978 106,194 103,536 100,155
</TABLE>
<PAGE>
SUMMARY PRO FORMA UNAUDITED FINANCIAL INFORMATION
We present on this page certain unaudited combined condensed financial
information derived from the pro forma unaudited financial information for the
periods and at the dates indicated. The pro forma unaudited combined condensed
financial information gives effect to the proposed merger accounted for as a
pooling-of-interests, as if the merger had been consummated for statement of
income purposes on the first day of the applicable periods and for statement of
financial condition purposes on June 30, 2000. See "Pro Forma Unaudited
Financial Information" on pages 48-55. The summary pro forma unaudited financial
information is based on the historical financial statements of Valley and
Merchants incorporated by reference herein. See page 62. The pro forma unaudited
financial information assumes a 0.7634 exchange ratio. The financial information
also does not reflect one-time merger-related and restructuring charges which
will be incurred in connection with the merger. Valley's and Merchants'
historical earnings per share have been restated to give retroactive effect to
stock dividends and splits.
You should read the summary pro forma financial information in
conjunction with the pro forma unaudited financial information and the related
notes thereto on pages 48-55 and the consolidated financial statements and
related notes incorporated by reference in this document. The pro forma
unaudited financial information does not necessarily indicate the results of
operations which would have been achieved had the merger been completed as of
the beginning of the periods for which that data are presented and should not be
construed as being representative of future periods.
<TABLE>
<CAPTION>
Summary Pro Forma Unaudited Combined Condensed Financial Information
At or for the Six Months
Ended June 30, For the Years Ended December 31,
-------------------------- ----------------------------------------------
2000 1999 1999 1998 1997
------------ ----------- ---------- ---------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net interest income $ 156,896 $ 152,158 $ 309,027 $ 289,030 $ 277,203
Provision for loan losses 5,325 4,375 11,035 14,070 14,830
Net interest income after provision
for loan losses 151,571 147,783 297,992 274,960 262,373
Income before income taxes 97,565 94,973 187,076 155,685 149,171
Net income 64,610 61,059 125,341 117,173 104,713
Earnings per common share:
Basic 0.86 0.77 1.60 1.48 1.32
Diluted 0.85 0.77 1.58 1.46 1.31
Financial Condition Data:
Total assets $ 7,662,405
Total deposits 5,945,304
Total shareholders' equity 617,253
Book value per common share 8.26
</TABLE>
<PAGE>
INTRODUCTION
The boards of directors of Merchants and Valley have approved an
Agreement and Plan of Merger, dated as of September 5, 2000, by and among
Valley, Valley's bank subsidiary, Valley National Bank, Merchants and Merchants'
bank subsidiary, The Merchants Bank of New York. The merger agreement provides
for Merchants to be merged with Valley, with Valley as the surviving
corporation. It also provides for Merchants' bank subsidiary to be merged into
Valley National Bank. The merger cannot be completed unless the shareholders of
both Merchants and Valley approve the merger agreement.
This document serves two purposes. It is the joint proxy statement
being used by the Merchants and Valley boards of directors to solicit proxies
for use at their special meetings called to seek shareholder approval of the
merger agreement. It is also the prospectus of Valley regarding the common stock
Valley will issue to Merchants shareholders if the merger is completed. Thus, we
sometimes refer to this document as the joint proxy statement-prospectus.
This document describes the merger agreement in detail. A copy of the
merger agreement is attached as Appendix A to this document and is incorporated
into this document by reference. We urge you to read this entire document and
the appendixes carefully.
Merchants supplied all information and statements contained or
incorporated by reference in this document about itself and Valley supplied all
information and statements about itself.
You should rely only on the information contained in or incorporated by
reference in this document. You should not rely on any prior filings by Valley
or Merchants relating to the merger that have not been incorporated by reference
in this document, including filings on Form 425, which are superseded by this
document. We have not authorized anyone to provide you with information that is
different.
FORWARD LOOKING STATEMENTS
This document contains and incorporates by reference certain
forward-looking statements regarding the financial condition, results of
operations and business of each of Valley and Merchants. Those statements are
not historical facts and include expressions about Valley's and/or Merchants'
o confidence,
o strategies and expressions about earnings,
o new and existing programs and products,
o relationships,
o opportunities,
o technology, and
o market conditions.
You may identify these statements by looking for
o forward-looking terminology like "expect", "believe" or
"anticipate", or
o expressions of confidence like "strong" or "on-going", or
o similar statements or variations of those terms.
These forward-looking statements involve certain risks and uncertainties. Actual
results may differ materially from the results the forward-looking statements
contemplate because of, among others, the following possibilities:
o Valley does not realize expected cost savings or revenue
enhancements from the merger in the amounts or within the time
frames anticipated;
o deposit attrition, customer loss or revenue loss following the
merger is greater than expected;
o competitive pressure in the banking and financial services
industry increases significantly;
o costs or difficulties related to the integration of the businesses
of Valley and Merchants are greater than expected;
o changes occur in the interest rate environment which reduce the
interest margins of the combined company;
o legislation or regulatory changes adversely affect the businesses
in which Valley and Merchants are engaged;
o adverse changes occur in the securities markets; or
o general economic conditions, either nationally or in the states in
which Valley or Merchants operates, are less favorable than
expected.
We caution you not to place undue reliance on forward-looking
statements. Actual results may differ materially from management expectations.
Neither Valley nor Merchants assumes any obligation for updating its
forward-looking statements at any time.
CERTAIN INFORMATION ABOUT VALLEY
General
Valley, a New Jersey corporation, was organized in 1983 as a holding
company for Valley National Bank. Valley indirectly owns additional subsidiaries
through Valley National Bank. Valley is registered as a bank holding company
with the Board of Governors of the Federal Reserve System under the Bank Holding
Company Act.
As of June 30, 2000, Valley had:
o consolidated assets $6.3 billion
o deposits $5.0 billion
o shareholders' equity $521 million
o loans $4.6 billion
Valley's principal executive offices and telephone number are:
1455 Valley Road
Wayne, New Jersey 07470
(973) 305-8800
Valley National Bank
Valley National Bank, a wholly owned subsidiary of Valley, is a
national banking association chartered in 1927 under the laws of the United
States. Valley National Bank is a member of the Federal Reserve System and the
FDIC insures its deposits. Valley National Bank maintains its principal office
in Wayne, New Jersey and operates 117 branches in northern New Jersey.
Valley National Bank provides a full range of commercial and retail
bank services, including:
o accepting demand, savings and time deposits
o extension of credit, including
consumer loans
real estate loans
Small Business Administration loans
other commercial credits
o full personal and corporate trust services, including
pension services
fiduciary services
Valley National Bank has several wholly owned subsidiaries, including:
o two investment management firms that each provide asset management
services to individuals and corporate retirement plans
o a title insurance agency
o a mortgage servicing company which services loans for others as
well as for Valley National Bank
o an investment company which holds, maintains and manages
investments for Valley National Bank
o a subsidiary which owns and services auto loans
o an Edge Act Corporation that owns a finance company located in
Toronto, Canada.
Recent Developments
On October 18, 2000, Valley reported its nine months ended September
30, 2000 per diluted share earnings of $1.30, an increase of 5.7 percent over
the $1.23 for the nine months ended September 30, 1999. Net income was $80.0
million for the nine months ended September 30, 2000, compared with $79.2
million for the same period in 1999. For the quarter ended September 30, 2000
diluted per share earnings were $0.44, an increase of 2.3 percent over $0.43 for
the third quarter of 1999. Net income was $26.4 million for the third quarter of
2000, compared with $27.3 million for the third quarter of 1999. The quarter
ended September 30, 2000 produced a return on average assets of 1.70 percent and
a return on average equity of 20.35 percent. Valley's efficiency ratio for the
nine months ended September 30, 2000 was 44.62 percent. At September 30, 2000,
Valley's consolidated assets were $6.3 billion, its deposits were $4.9 billion,
its shareholders' equity was $523.6 million, and its loans were $4.6 billion.
CERTAIN INFORMATION ABOUT MERCHANTS
General
Merchants New York Bancorp is a Delaware corporation and was organized
in 1992 as a bank holding company. Merchants' principal operating subsidiary is
The Merchants Bank of New York, which was founded in 1927 as a New York
state-chartered bank and the successor to a private banking corporation
organized in 1881. Merchants Bank is a full service commercial bank servicing
middle market customers in the Manhattan communities in which its seven branches
are located.
As of June 30, 2000, Merchants had:
o consolidated assets $ 1.4 billion
o deposits $ 927 million
o stockholders' equity $ 97 million
o loans $ 479 million
Merchants' principal executive offices and telephone number are:
275 Madison Avenue
New York, NY 10022
(212) 973-6600
Recent Developments
On October 30, 2000, Merchants reported earnings for its third fiscal
quarter and the nine months ended September 30, 2000. Net income for the quarter
rose 16% to $6,384,583, while earnings per fully diluted share were up 21% to
$0.34, compared with $5,500,571 and $0.28 per diluted share in the third quarter
of 1999. For the nine months, net income was up 18.5% to $17,391,784, and
earnings per fully diluted share were up 22.4% to $0.93, compared with the
then-record $14,673,689 and $0.76 per fully diluted share for the first nine
months of 1999. Return on average assets for the third quarter was 1.68%,
compared with 1.53% for the third quarter of 1999. Return on average equity was
23.92%, compared with 17.71% for the third quarter of 1999. For the nine months
ended September 30, 2000, Merchants' efficiency ratio was 40.64%. On September
30, 2000, Merchants' consolidated assets were $1.4 billion, deposits were $956
million, shareholders' equity was $104.3 million and loans were $547.5 million.
THE MERCHANTS MEETING
Date, Time and Place
This document solicits, on behalf of the Merchants board, proxies to be
voted at a special meeting of Merchants shareholders and at any adjournments or
postponements thereof. The Merchants meeting is scheduled to be held:
Tuesday, December 5, 2000
3:00 p.m.
The Harmonie Club
4 East 60th Street
New York, New York 10022
Purpose
At the meeting, Merchants shareholders will consider and vote on:
o approval and adoption of the merger agreement
o any other matters that may properly be brought before the meeting.
Board Recommendation
The Merchants board of directors has unanimously approved the merger
agreement and unanimously recommends a vote FOR approval and adoption of the
merger agreement.
Record Date; Required Vote
The Merchants board has fixed the close of business on October 26, 2000
as the record date for the Merchants meeting. Only holders of record of
Merchants common stock at that time are entitled to get notice of the meeting
and to vote at the meeting. On October 26, 2000, there were 18,647,543 shares of
Merchants common stock outstanding. Each of those shares will be entitled to one
vote on each matter properly submitted to the meeting.
The merger cannot be completed without Merchants shareholder approval.
Approval and adoption of the merger agreement requires the affirmative
vote of a majority of the Merchants shares outstanding on the record date for
the meeting. Each share of Merchants common stock is entitled to one vote on
each matter to be acted upon at the Merchants meeting.
Because the required Merchants shareholder vote is based on the total
number of outstanding shares of Merchants common stock, rather than the number
of shares which are actually voted, a Merchants shareholder's failure to vote, a
broker non-vote or an abstention will have the same effect as a vote against the
merger.
On October 26, 2000, the directors and executive officers of Merchants
as a group beneficially owned or otherwise controlled the voting of 4,511,076
shares of Merchants common stock, representing 24.19% of the issued and
outstanding shares. These figures are calculated without counting shares that
could be acquired by exercising stock options because the shares underlying
those options cannot be voted at the meeting. The Merchants directors and
executive officers have indicated their intention to vote all the shares they
beneficially own, or otherwise control the voting of, FOR the merger agreement.
The matters to be considered at the Merchants meeting are of great
importance to the shareholders of Merchants. Accordingly, we urge you to read
and carefully consider the information presented in this document, and to
complete, date, sign and promptly return the enclosed proxy card in the envelope
provided, or submit your proxy to us by telephone or the Internet as instructed
on the enclosed proxy card.
Voting Rights; Proxies
Each properly submitted proxy will be voted as directed unless it is
revoked prior to the vote. If you send a properly executed proxy card that does
not contain any voting instructions, your shares will be voted FOR approval and
adoption of the merger agreement.
The Merchants board is not aware of any matters that will come before
the meeting other than the vote on the merger. If any other matters come before
the Merchants meeting, the persons named on the enclosed proxy card will have
the discretion to vote on those matters using their best judgment, unless you
specifically withhold that authorization when you complete your proxy card, or
submit your proxy by telephone or the Internet.
We are offering you three alternative ways to vote your shares on the
merger.
To Vote By Mail
You can vote your proxy by mail. If you wish to use this method to
vote, please date, sign, and mail your proxy card in the envelope provided as
soon as possible.
To Vote By Telephone (Touch-Tone Phone Only)
We are also offering telephonic voting on the merger. You will notice a
control number printed on your proxy card. If you wish to vote by telephone, you
must call toll-free 1-800-PROXIES and follow the instructions. If you vote by
telephone, you must have your control number and the proxy card available when
you call.
To Vote By Internet
We are also offering voting by the Internet. If you wish to vote using
the Internet, you can access the web page at "www.voteproxy.com" and follow the
on-screen instructions. If you vote by Internet, you must have your control
number and the proxy card available when you access the web page.
You may revoke any proxy that you give at any time before it is used to
cast your vote. To revoke a proxy, just send in a later-dated, signed proxy card
to Merchants' Corporate Secretary or vote again by telephone or the Internet
before your meeting. You will be able to change your vote as many times as you
wish and the last vote received chronologically will supercede any prior votes.
Please note that if you vote by the Internet, the maximum number of times you
can access the website using any one control number is limited to five times per
day. Alternatively, you can attend the Merchants meeting in person and either
request that the Secretary return your proxy, or just vote in person. If your
shares are held in the name of a bank, broker or other holder of record, you
must obtain a proxy, executed in your favor, from the holder of record, to be
able to vote at the meeting. (Note that simply showing up at the meeting and
taking no further action will not revoke your proxy.) You may also revoke your
proxy by sending a notice of revocation to Merchants' Corporate Secretary, who
will be present at the Merchants meeting and, before that, can be reached at the
following address:
Karen Deitz
Corporate Secretary
Merchants New York Bancorp, Inc.
275 Madison Avenue
New York, New York 10022
Election inspectors appointed for the meeting will tabulate the votes
cast by proxy or in person at the Merchants meeting. The election inspectors
will determine whether a quorum is present. The election inspectors will treat
abstentions and "broker non-votes" as shares that are present for purposes of
determining a quorum, but not voted.
If you are a Merchants shareholder and do not give voting instructions
to your broker, this means that your "street name" shares will, in effect, be
voted against the merger unless you do both of the following: (1) appear in
person at the Merchants meeting with a proxy, executed in your favor, from your
broker, and (2) vote that proxy in favor of the merger at the meeting.
Solicitation of Proxies
In addition to using the mails, the directors, officers and employees
of Merchants may solicit proxies for the Merchants meeting from shareholders in
person or by telephone. These directors, officers and employees will not be
specifically compensated for their services. Merchants may retain a
proxy-soliciting firm to assist it in soliciting proxies. If so, Merchants would
pay the proxy-soliciting firm a fee and reimburse it for certain out-of-pocket
expenses. Merchants also will make arrangements with brokerage firms and other
custodians, nominees and fiduciaries to send proxy materials to their principals
and will reimburse those parties for their expenses in doing so. Merchants will
bear all costs of soliciting proxies for the Merchants meeting, except that
Valley and Merchants will share equally the cost of printing this joint proxy
statement-prospectus.
Quorum
At least a majority of the Merchants common stock issued and
outstanding and entitled to be voted at the Merchants meeting must be present in
person or by proxy to constitute a quorum.
<PAGE>
THE VALLEY MEETING
Date, Time and Place
This document solicits, on behalf of the Valley board, proxies to be
voted at a special meeting of Valley shareholders and at any adjournments or
postponements thereof. The Valley meeting is scheduled to be held:
Tuesday, December 5, 2000
9:00 a.m.
The Radisson Hotel
690 Route 46 East
Fairfield, New Jersey
Purpose
At the meeting, Valley shareholders will consider and vote on:
o approval and adoption of the merger agreement
o any other matters that may properly be brought before the meeting.
Board Recommendation
The Valley board of directors has unanimously approved the merger
agreement and unanimously recommends a vote FOR approval and adoption of the
merger agreement.
Record Date; Required Vote
The Valley board has fixed the close of business on October 26, 2000 as
the record date for the Valley meeting. Only holders of record of Valley common
stock at that time will be entitled to receive notice of and to vote at the
Valley meeting. On October 26, 2000 there were 59,972,550 shares of Valley
common stock outstanding and entitled to vote at the Valley meeting. Each of
those shares will be entitled to one vote on each matter properly submitted to
the meeting.
The merger cannot be completed without Valley shareholder approval. A
majority of the shares of Valley common stock represented and voting at the
Valley meeting, in person or by proxy, must vote affirmatively in order to
approve the merger agreement.
Each share of Valley's common stock is entitled to one vote on each
matter to be acted upon at the Valley meeting. The required Valley shareholder
vote is based on the number of shares which are actually voted, rather than the
total number of outstanding shares of Valley common stock. Thus, if you abstain
from voting or if you do not submit a proxy and don't vote in person at the
Valley meeting, your action will have no effect. Also, broker non-votes will
have no effect.
On October 26, 2000, the directors and executive officers of Valley as
a group beneficially owned approximately 5,233,273 shares of Valley common
stock, representing 8.7% of the issued and outstanding shares. These figures are
calculated without counting shares that could be acquired by exercising stock
options since the shares underlying those options can't be voted at the meeting.
The Valley directors and executive officers have indicated that they intend to
vote all the shares they beneficially own FOR the merger agreement.
We urge you to read and carefully consider the information presented in
this document, and to complete, date, sign and promptly return the enclosed
proxy card in the envelope provided, or submit your proxy to us by telephone or
the Internet as instructed on the enclosed proxy card.
Voting Rights; Proxies
Each properly submitted proxy will be voted as directed unless it is
revoked prior to the vote. If you send a properly executed proxy card that does
not contain any voting instructions, your shares will be voted FOR approval and
adoption of the merger agreement.
The Valley board is not aware of any matters that will come before the
meeting other than the vote on the merger. If any other matters come before the
Valley meeting, the persons named on the enclosed proxy card will have the
discretion to vote on those matters using their best judgment, unless you
specifically withhold that authorization when you complete your proxy card, or
submit your proxy by telephone or the Internet.
We are offering you three alternative ways to vote your shares on the
merger.
To Vote By Mail
You can vote your proxy by mail. If you wish to use this method to
vote, please date, sign, and mail your proxy card in the envelope provided as
soon as possible.
To Vote By Telephone (Touch-Tone Phone Only)
We are also offering telephonic voting on the merger. You will notice a
control number printed on your proxy card. If you wish to vote by telephone, you
must call toll-free 1-800-PROXIES and follow the instructions. If you vote by
telephone, you must have your control number and the proxy card available when
you call.
To Vote By Internet
We are also offering voting by the Internet. If you wish to vote using
the Internet, you can access the web page at "www.voteproxy.com" and follow the
on-screen instructions. If you vote by Internet, you must have your control
number and the proxy card available when you access the web page.
You may revoke any proxy that you give at any time before it is used to
cast your vote. To revoke a proxy, just send in a later-dated, signed proxy card
to Valley's Corporate Secretary or vote again by telephone or the Internet
before your meeting. You will be able to change your vote as many times as you
wish and the last vote received chronologically will supercede any prior votes.
Please note that if you vote by the Internet, the maximum number of times you
can access the website using any one control number is limited to five times per
day. Alternatively, you can attend the Valley meeting in person and either
request that the Secretary return your proxy, or just vote in person. If your
shares are held in the name of a bank, broker or other holder of record, you
must obtain a proxy, executed in your favor, from the holder of record, to be
able to vote at the meeting. (Note that simply showing up at the meeting and
taking no further action will not revoke your proxy.) You may also revoke your
proxy by sending a notice of revocation to Valley's Corporate Secretary, who
will be present at the Valley meeting and, before that, can be reached at the
following address:
Alan D. Eskow
Corporate Secretary
Valley National Bancorp
1455 Valley Road
Wayne, New Jersey 07470
Election inspectors appointed for the meeting will tabulate the votes
cast by proxy or in person at the Valley meeting. The election inspectors will
determine whether or not a quorum is present. The election inspectors will treat
abstentions and "broker non-votes" as shares that are present for purposes of
determining a quorum, but not voted.
If you do not provide your broker with instructions on how to vote your
"street name" shares, your broker will not be permitted to vote them on the
merger. You should therefore be sure to provide your broker with instructions on
how to vote your shares. Please check the voting form used by your broker to see
if it offers telephone or Internet voting.
If you do not give voting instructions to your broker, your "street
name" shares will not be counted as voting for purposes of the merger vote
unless you appear in person at your meeting with a proxy, executed in your
favor, from your broker.
Solicitation of Proxies
In addition to using the mails, the directors, officers and employees
of Valley may solicit proxies for the Valley meeting from shareholders in person
or by telephone. These directors, officers and employees will not be
specifically compensated for their services. Valley may retain a
proxy-soliciting firm to assist it in soliciting proxies. If so, Valley would
pay the proxy-soliciting firm a fee and reimburse it for certain out-of-pocket
expenses. Valley also will make arrangements with brokerage firms and other
custodians, nominees and fiduciaries to send proxy materials to their principals
and will reimburse those parties for their expenses in doing so. Valley will
bear all costs of soliciting proxies for the Valley meeting, except that Valley
and Merchants will share equally the costs of printing this joint proxy
statement-prospectus.
Quorum
At least a majority of the Valley common stock issued and outstanding
and entitled to be voted at the Valley meeting must be present in person or by
proxy to constitute a quorum.
THE PROPOSED MERGER
We have attached a copy of the merger agreement as Appendix A to this
joint proxy statement-prospectus and it is incorporated by reference into this
document. Descriptions of the merger and the merger agreement are qualified in
their entirety by reference to the merger agreement.
General Description
The merger agreement provides for the merger of Merchants with and into
Valley, with Valley as the surviving entity. The merger will be completed on a
date determined by Valley, which must be within ten business days after all
material conditions to closing have been met. The exact date will be set by
notice Valley delivers to Merchants. However, Valley and Merchants may agree on
a different closing date. The parties currently anticipate closing during the
first quarter of 2001. The merger will become effective at the time specified in
certificates of merger which Valley and Merchants will file with the Secretaries
of State of the States of New Jersey and Delaware following the closing. Valley
and Merchants anticipate that the merger will become effective at the close of
business on the closing date. Immediately after the merger is effective, Valley
will merge The Merchants Bank of New York with Valley National Bank, with Valley
National Bank as the surviving entity. The exact closing date and the exact time
the merger will become effective are dependent upon satisfaction of numerous
conditions, some of which are not under Valley's or Merchants' control.
Consideration; Exchange Ratio; Cash Instead of Fractional Shares
When the merger becomes effective, except as noted below, each
outstanding share of Merchants common stock will be converted into the right to
receive 0.7634 shares of Valley common stock. The exchange ratio is subject to
adjustment to take into account any stock split, stock dividend or similar
transaction with respect to Valley common stock between the date of the merger
agreement and the time the merger becomes effective. Certain shares of Merchants
common stock held by Merchants or by Valley or its subsidiaries will be
cancelled in the merger and will not be converted into Valley common stock.
Instead of receiving fractional shares of Valley common stock,
Merchants shareholders will receive, without interest, a cash payment equal to
the fractional share interest to which they would otherwise be entitled
multiplied by the value of Valley common stock. For this purpose, Valley common
stock will be valued at its average closing price during the ten trading days
ending on the fifth business day before the closing. All shares of Valley common
stock to be issued to a Merchants shareholder will be combined to make as many
whole shares as possible before calculating that shareholder's fractional share
interest.
The price of Valley common stock at the time the merger becomes
effective may be higher or lower than the market price
o when the merger agreement was signed,
o when this proxy statement was mailed,
o when the Merchants shareholders meet to vote on the merger
agreement, or
o when Merchants shareholders receive Valley stock certificates from
the exchange agent following the merger.
We urge you to obtain current market quotations for the Valley common stock and
the Merchants common stock.
Conversion of Merchants Options
When the merger becomes effective, each outstanding option to purchase
Merchants common stock granted under the Merchants stock option plan will be
converted into an option to purchase Valley common stock. The terms of the new
option will be determined as follows:
o the right to purchase a share of Merchants common stock under the
old option will be converted into the right to purchase 0.7634 of
a share of Valley common stock under the new option,
o the option exercise price for a share of Valley common stock under
the new option will be the old exercise price divided by the
0.7634 exchange ratio, and
o in all other material respects the new option will be subject to
the same terms and conditions as governed the old option on which
it was based, including the vesting schedule and the length of
time within which the option may be exercised.
Valley has reserved for issuance the number of shares of Valley common
stock necessary to satisfy Valley's obligations under the converted options.
Valley has agreed to register those shares pursuant to the Securities Act as
soon as practicable after the merger becomes effective. As of October 26, 2000,
there were options outstanding for 140,470 shares of Merchants common stock
which would be converted in the merger as described above.
Background of and Reasons for the Merger
Background
In early July 2000, CIBC World Markets, Inc., Merchants' investment
bankers, arranged an introduction between key executives of Merchants and
Valley. In the meetings that followed, it became apparent to both executive
groups that there were many cultural similarities between the two organizations.
Each found that the other recognized the importance of credit quality, treatment
of customers and staff, and shareholder value.
Merchants was aware of the trend toward mergers among banking
institutions, and had received occasional third-party expressions of interest in
a possible business combination, none of which proceeded beyond the early
discussion stage. In the course of the discussions with Valley, however, it soon
became apparent that the parties could negotiate a merger that would result in
Merchants becoming an important part of a larger, stronger banking institution
serving customers in the New York - New Jersey region, while at the same time
enhancing the interests of Merchants shareholders and employees. The merger
offered Valley the opportunity to expand into the New York area.
On August 8, key executives of Valley and Merchants met and discussed
the terms on which a merger between the two companies might be possible.
On August 15, Valley's board of directors met and considered the
advisability of a merger with Merchants, with an exchange ratio of 0.7634, the
grant of a stock option by Merchants to Valley in connection with the merger
agreement, and other substantive terms. The Valley board approved the basic
terms of the transaction, directed its chairman to negotiate a merger agreement
and related documents with Merchants. The board authorized a committee composed
of its directors who also serve as directors of Valley National Bank to review
and approve the merger agreement and other documents upon their completion
consistent with the terms presented to the full board.
On August 16 and again on August 18, key executives of the two
companies met and discussed the basic terms of a possible merger, including the
proposed 0.7634 exchange ratio. Based on those discussions, the executives
determined that the two companies should proceed with drafting and negotiating
the appropriate agreements, conducting due diligence, seeking fairness opinions
from financial advisors and submitting the matter to the Merchants board of
directors and the Valley board committee for their consideration and approval.
Over the next two weeks, several activities were conducted
simultaneously. Each party sent a team of investigators to the other's sites to
conduct extensive due diligence investigations. The first drafts of the merger
agreement, the stock option agreement and related documents were prepared by
legal counsel to Valley. These were reviewed by executive officers of both
parties and by Merchants' counsel, after which the proposed final merger
agreement, stock option agreement and other documents were prepared and
circulated for review in advance of the meetings to consider the agreements.
During this same two-week period, Sandler O'Neill and CIBC World Markets
researched and prepared their reports.
A special meeting of the Merchants board was held on August 30. At the
meeting, CIBC World Markets presented its report and delivered its opinion to
the effect that the proposed merger was fair to Merchants shareholders. Legal
counsel to Merchants presented an oral summary of the merger agreement, the
stock option agreement and the related documents. The directors voted
unanimously to approve the merger agreement and the stock option agreement,
subject to finalization of documents consistent with the terms presented to the
board.
A special meeting of the Valley board committee, in conjunction with a
meeting of the Valley National Bank board of directors, was held on September 5.
At the meeting, Sandler O'Neill presented its report and delivered its opinion
to the effect that the proposed merger was fair to Valley's shareholders. The
directors voted unanimously to approve the merger agreement and the stock option
agreement, pursuant to its authorization from the full board of Valley.
On the afternoon of September 5, 2000, Valley and Merchants signed and
delivered the merger agreement and the stock option agreement. A public
announcement of the merger was made the following morning.
Valley's Reasons for the Merger
Valley has an ongoing strategy of highly focused growth within Northern
New Jersey and the contiguous local market through new branches and acquisitions
of other strong financial institutions. Valley's goal in acquisitions is to
price transactions so that they are accretive to Valley's per share earnings
during the first year of combined operations.
Valley entered into the merger agreement with Merchants to further
implement this strategy. The Merchants Bank is a traditional commercial bank
with a culture focused on strong asset quality, customer service and earnings,
making it similar to Valley's business model. All seven of Merchants' offices
are located in Manhattan, approximately 15 miles from Wayne, and most of its
customers are within 45 minutes of Valley's headquarters. Valley expects that
the proximity of Merchants' offices and customers will allow Valley to continue
to operate as a super community bank following the merger.
Over the years, Merchants has developed a strong following among small-
to medium-sized companies that want to maintain their banking relationship with
senior management and the decision makers in the bank. This closely follows
Valley's approach to lending. Valley expects this acquisition to generate
sufficient cost savings to make it accretive to earnings during the first year.
Additionally, since Merchants does not focus on consumer banking, a major
strength at Valley, Valley views this as an opportunity to enhance Merchants'
revenue stream and a significant growth opportunity.
Recommendations of the Valley Board of Directors
The Valley Board believes that the merger is fair to, and in the best
interests of, Valley and its shareholders. Accordingly, the Board unanimously
approved the merger agreement and merger and recommends that Valley shareholders
vote FOR the approval and adoption of the merger agreement and merger.
The Valley board of directors unanimously recommends that all
shareholders of Valley vote FOR the approval of the merger agreement and the
merger.
Merchants' Reasons for the Merger
The merger offers a combination of opportunities to Merchants
shareholders. These include a substantial increase in dividends, greater
liquidity for their shares, and the opportunity to participate as shareholders
in a larger banking organization offering an expanded variety of services to its
customers.
Merchants has had a successful track record as an independent
commercial bank located in the heart of New York City. However, it faces
competition from much larger banks that serve the same area. Because its
resources are limited by its size, Merchants' ability to offer larger loans to
its present as well as potential clients is limited, which in turn limits
revenue growth. In addition, offering products such as commercial and
residential real estate lending, asset management, trust and insurance services
and state-of-the art online computer banking all involve substantial costs for
added personnel and capital equipment. Lacking these services puts Merchants at
a competitive disadvantage with larger banks that offer them.
In addition, Merchants common stock has traded at low volume levels.
This has meant that large volume purchases and sales have had the potential to
cause excessively large changes in the share price.
The merger with Valley offers solutions to these problems. The greater
resources available to the combination of the two banks will substantially
increase the maximum loan size that can be offered to customers and potential
customers of Merchants.
The merger will allow Merchants to make types of loans that it has not
traditionally offered to its customers, including larger commercial real estate
loans, residential mortgage loans and home equity loans, taking advantage of
Valley's experience and expertise in these areas.
Valley offers asset management, trust and insurance services as well as
state-of-the-art online banking for consumers, including automated teller
machines (ATMs), all of which will be offered to Merchants' customers as soon as
the merger is completed.
The merger also will allow Merchants to make types of loans that it has
not traditionally offered to its customers, such as residential mortgages and
home equity loans. Merchants has historically referred applications for these
types of loans to other banks. The merger will allow Merchants to take advantage
of Valley's experience in these areas and service customer requirements for
these types of loans.
Valley common stock, which is listed on the New York Stock Exchange,
enjoys a significantly higher trading volume, which should result in increased
liquidity for holders of Merchants common stock after the merger.
Valley common stock currently pays a substantially higher dividend than
Merchants. Merchants' most recent dividend was 12.5(cent) quarterly, or 50(cent)
annually. The most recent Valley dividend was 26(cent) quarterly, or $1.04
annually. Multiplying the Valley dividend by the .7634 exchange ratio gives a
quarterly dividend of 19.8(cent) quarterly or 79.4(cent) annually. This
represents almost a 60% dividend increase.
The ability to structure the merger as a tax-free exchange is also a
significant benefit to many Merchants stockholders. The merger offers holders
the opportunity to obtain the advantages offered by becoming shareholders of
Valley without, at the same time, having to pay income tax on accumulated
capital gains on their Merchants shares.
Finally, the merger will preserve the Merchants name. The bank will
operate as "The Merchants Bank of New York - a Division of Valley National
Bank."
Recommendations of the Merchants Board of Directors
The Merchants Board believes that the merger is fair to, and in the
best interests of, Merchants and its shareholders. Accordingly, the Board
unanimously approved the merger agreement and merger.
The Merchants board of directors unanimously recommends that all
shareholders of Merchants vote for the approval and adoption of the merger
agreement and the merger.
Interests of Certain Persons in the Merger
In considering the recommendation of the Merchants Board regarding the
merger, Merchants shareholders should know that certain directors and officers
of Merchants have interests in the merger in addition to their interests as
shareholders of Merchants. These additional interests are described below, to
the extent they are material and are known to Merchants. The Merchants Board was
aware of these interests and considered them, among other matters, in approving
the merger agreement:
Board Membership; New Division. Valley has agreed to appoint Spencer B.
Witty, Robinson Markel and Charles Baum as directors of Valley when the merger
occurs. Each of them is currently a Merchants director. Valley has also agreed
to appoint Mr. Witty as a director of Valley National Bank when the merger
occurs. Valley National Bank will operate the former branches of Merchants as
The Merchants Bank of New York - a Division of Valley National Bank. All current
Merchants directors who do not become directors of Valley following the merger
will be invited to serve as advisory directors for the new division.
Stock Benefits. When the merger becomes effective, each outstanding
option granted under the Merchants Employee Stock Plan will be converted into an
option to purchase Valley common stock having the same terms and conditions as
the old options, except that the number of shares and exercise price will be
adjusted to reflect the 0.7634 exchange ratio.
Employment Agreements with Executive Officers. Valley has entered into
employment and non-competition agreements with four Merchants executives.
Spencer B. Witty will serve as Vice Chairman of Valley and Valley National Bank
and as Chairman of the Merchants Division, James G. Lawrence as an Executive
Vice President of Valley National Bank and President of the Merchants Division,
William J. Cardew as a First Senior Vice-President of Valley National Bank and
Vice Chairman of the Merchants Division, and Eric W. Gould, as a First Senior
Vice President of Valley National Bank. Messrs. Lawrence and Cardew have
existing employment agreements with Merchants which will be modified as
described below. Messrs. Witty and Gould do not presently have employment
agreements with Merchants.
The employment agreements take effect when the merger is completed. Mr.
Witty's and Mr. Cardew's employment periods continue until May 1, 2003, Mr.
Gould's for two years after the merger is completed, and Mr. Lawrence's until he
reaches age 65. Each agreement provides for continuation of current compensation
being paid by Merchants (including salary and bonus payments), and provides that
the executive will be eligible to participate in Valley's annual incentive plan
for executives. Mr. Witty's agreement also provides for him to receive medical
and hospital insurance and use of an office after his employment with Valley
ends.
Each employment agreement contains restrictions on competition by the
executive when his employment ends. The restrictions continue for two years
after the termination of employment, unless employment ends for any reason
(other than termination for cause) within six months after a change in control
of Valley, in which case the non-competition provisions do not apply. Also,
commencing April 30, 2003, Mr. Gould's post-employment restriction is reduced
from two years to one year.
Mr. Lawrence has also signed a change-in-control agreement with Valley.
This agreement becomes effective upon completion of the merger and continues for
an initial term of three years or until the end of the contract period described
below, whichever is later. The initial term is automatically extended for an
additional year on September 5 of each year (so that the initial term is always
three years), but is subject to early termination on notice from the chief
executive officer of Valley National Bank. An early termination notice can be
given at any time, but only if no change in control has occurred. An early
termination notice, if given, would end the change-in-control agreement nine
months after the date of the notice or on September 5, 2003, whichever comes
later.
If Valley undergoes a change in control while Mr. Lawrence's
change-in-control agreement remains in effect, and while he remains employed
under his employment agreement, the employment terms of his employment agreement
are superseded by equivalent terms of the change-in-control agreement. These
include a provision for his continued employment, during the contract period
defined in the agreement, as Executive Vice President of Valley National Bank,
at the same base salary, bonuses at least equal to the average annual bonus paid
to him over the most recent three years, and participation in fringe benefit
plans. These terms also include special payments if Mr. Lawrence resigns under
certain conditions or is discharged without cause during the contract period, as
explained below.
The contract period defined in the change-in-control agreement begins
on the day before a change in control of Valley takes place, and ends three
years later, or when Mr. Lawrence attains age 65, or when he dies, whichever
happens first. If, during the contract period, Mr. Lawrence resigns for a "good
reason" as defined in the change-in-control agreement, or is terminated without
cause, he is entitled to an immediate lump-sum payment equal to three times his
base salary, and to continuation of medical benefit coverage for the remainder
of the contract period. These benefits may be cut back if the total amount of
payments and other benefits to Mr. Lawrence would otherwise exceed limits
contained in Section 280G of the Internal Revenue Code, making payments to Mr.
Lawrence nondeductible by the company.
"Good reason" for Mr. Lawrence's resignation defined in the
change-in-control agreement includes: downgrading of his duties and
responsibilities, reduction of his base compensation, failure to receive annual
compensation reviews, discontinuation of his participation in any bonus plan,
relocation of his office to a place more than 25 miles away from its prior
location, reduction or elimination of his benefits under various fringe benefit
plans, and the inability of Valley to obtain the agreement of its successor to
be bound by the change-in-control agreement.
Piggyback Registration Rights. In the letter agreement delivered by Mr.
Witty as someone who may be deemed an "affiliate" of Merchants, Valley has
agreed to provide Mr. Witty with "piggyback" registration rights if Valley
registers a secondary offering for the account of another person during the
one-year period after the merger is completed. This benefit was provided to Mr.
Witty because, as the beneficial owner of over one percent of Valley common
stock following the merger, he will not have the same ability as other Merchants
affiliates to sell his shares of Valley under the "dribble out" provisions of
Rule 144 under the Securities Act.
Share Ownership. As of October 26, 2000, the directors and executive
officers of Merchants as a group beneficially owned or otherwise controlled the
voting of approximately 24.19% of the issued and outstanding shares of Merchants
common stock. The directors of Merchants have indicated their intention to vote
in favor of the merger agreement.
Indemnification; Directors and Officers. The merger agreement requires
Valley to indemnify, for a period of six years after the merger takes effect,
each director and officer of Merchants or its subsidiary bank to the extent
permitted under applicable law and its certificate or articles of incorporation
and by-laws.
Opinion of Sandler O'Neill & Partners, L.P.
By letter agreement dated as of August 21, 2000, Valley retained
Sandler O'Neill & Partners, L.P. as an independent financial advisor in
connection with Valley's consideration of a possible business combination with
Merchants. Sandler O'Neill is a nationally recognized investment banking firm
whose principal business specialty is financial institutions. In the ordinary
course of their investment banking business, Sandler O'Neill is regularly
engaged in the valuation of financial institutions and their securities in
connection with mergers and acquisitions and other corporate transactions.
Sandler O'Neill did not act as Valley's financial advisor in connection with its
consideration of the merger or in connection with the negotiation of the merger
agreement.
At Valley's request, representatives of Sandler O'Neill attended the
September 5, 2000 meeting of the Valley National Bank board and the Valley board
committee, at which the merger agreement was considered and approved. At the
meeting, Sandler O'Neill delivered their oral opinion, subsequently confirmed to
the Valley board of directors in writing, that, as of such date, the exchange
ratio was fair to Valley shareholders from a financial point of view. Sandler
O'Neill has also delivered to the Valley board a written opinion dated the date
of this joint proxy statement-prospectus that is substantially identical to the
September 5, 2000 opinion. The full text of Sandler O'Neill's opinion is
attached as Appendix D to this document and is incorporated by reference into
this description. The opinion outlines the procedures followed, assumptions
made, matters considered and qualifications and limitations on the review
undertaken by Sandler O'Neill in rendering their opinion. This description is
qualified in its entirety by reference to the opinion. Valley shareholders are
urged to carefully read the opinion in connection with their consideration of
the proposed merger.
Sandler O'Neill's opinion was directed to the Valley board and was
provided to the board of directors for its information in considering the
merger. The opinion is directed only to the fairness of the exchange ratio to
Valley shareholders from a financial point of view. It does not address the
underlying business decision of Valley to engage in the merger or any other
aspect of the merger and is not a recommendation to any Valley shareholder as to
how such shareholder should vote at the special meeting with respect to the
merger or any other related matter.
In rendering their September 5, 2000 opinion, Sandler O'Neill performed
a variety of financial analyses. The following is a summary of the material
analyses performed by Sandler O'Neill, but is not a complete description of all
the analyses underlying Sandler O'Neill's opinion. The preparation of a fairness
opinion is a complex process involving subjective judgments as to the most
appropriate and relevant methods of financial analysis and the application of
those methods to the particular circumstances. The process, therefore, is not
necessarily susceptible to a partial analysis or summary description. Sandler
O'Neill believes that their analyses must be considered as a whole and that
selecting only certain factors and analyses, or attempting to ascribe relative
weights to some or all factors and analyses, could create an incomplete view of
the evaluation process underlying their opinion. Also, no company included in
Sandler O'Neill's comparative analyses described below is identical to Valley or
Merchants and no transaction is identical to the merger. Accordingly, an
analysis of comparable companies or transactions involves complex considerations
and judgments concerning differences in financial and operating characteristics
of the companies and other factors that could affect the public trading values
or merger transaction values, as the case may be, of Valley or Merchants and the
companies to which they are being compared.
The earnings projections for Valley and Merchants relied upon by
Sandler O'Neill in their analyses were reviewed with management and were based
upon published IBES consensus earnings estimates for 2000 and 2001 for Valley
and upon internal projections for the years ending December 31, 2000 and
December 31, 2001 for Merchants. The earnings projections furnished to Sandler
O'Neill were prepared by the senior management of Merchants for internal
purposes only and not with a view towards public disclosure. Those projections,
as well as the other earnings estimates relied upon by Sandler O'Neill in their
analyses, were based on numerous variables and assumptions which are inherently
uncertain and accordingly, actual results could vary materially from those set
forth in such projections.
In performing their analyses, Sandler O'Neill also made numerous
assumptions with respect to industry performance, business and economic
conditions and various other matters, many of which cannot be predicted and are
beyond the control of Valley, Merchants or Sandler O'Neill. Sandler O'Neill
prepared their analyses solely for purposes of rendering their opinion and
provided such analyses to the Valley board at the September 5, 2000 meeting. The
analyses performed by Sandler O'Neill are not necessarily indicative of actual
values or future results, which may be significantly more or less favorable than
suggested by such analyses. Estimates on the values of companies do not purport
to be appraisals or necessarily reflect the prices at which companies or their
securities may actually be sold. Such estimates are inherently subject to
uncertainty and actual values may be materially different. Accordingly, Sandler
O'Neill's analyses do not necessarily reflect the value of Valley common stock
or Merchants common stock or the prices at which Valley common stock or
Merchants common stock may be sold at any time.
Summary of Proposal. Sandler O'Neill reviewed the financial terms of
the proposed transaction. Based on the closing price of Valley's common stock on
September 1, 2000 of $26.3125 and an exchange ratio of 0.7634, Sandler O'Neill
calculated an implied transaction value per share of Valley common stock of
$20.09. The implied aggregate transaction value was approximately $378.2
million, based upon 18,828,555 fully diluted shares of Merchants common stock
outstanding, which was determined using the treasury stock method at the implied
value of $20.09. Based upon the implied transaction value and Merchants' June
30, 2000 financial information, Sandler O'Neill calculated the following ratios:
Implied value/Book value 3.88x
Implied value/Tangible book value 3.90x
Implied value/Last Twelve Months EPS 18.10x
For purposes of Sandler O'Neill's analyses, earnings per share were based on
fully diluted earnings per share. Sandler O'Neill noted that the implied
transaction value represented an 18.8% premium over the September 1, 2000
closing price of Merchants common stock of $17.00.
Stock Trading History. Sandler O'Neill reviewed the history of the
reported trading prices and volume of Valley common stock and Merchants common
stock, and the relationship between the movements in the prices of each of the
stocks to movements in certain stock indices, including the Standard & Poor's
500 Index, the Nasdaq Bank Index and the median performance of a composite group
of publicly traded regional commercial banks selected by Sandler O'Neill. During
the one year period ended September 1, 2000, the Valley common stock
outperformed the Nasdaq Bank Index and the composite group to which it was
compared and underperformed the S&P Index. During the one year period ended
September 1, 2000 Merchants common stock outperformed the composite group to
which it was compared and underperformed the Nasdaq Bank Index and the S&P
Index.
<TABLE>
<CAPTION>
Beginning Index Value Ending Index Value
August 31, 1999 September 1, 2000
------------------------- ----------------------
<S> <C> <C>
Merchants 100.00% 94.28%
Merchants Composite Group 100.00% 79.60%
Valley 100.00% 106.26%
Valley Composite Group 100.00% 99.11%
Nasdaq Bank Index 100.00% 96.09%
S&P 500 100.00% 115.15%
</TABLE>
Comparable Company Analysis. Sandler O'Neill used publicly available
information to compare selected financial and market trading information for
Merchants and two groups of commercial banks selected by Sandler O'Neill, a
Mid-Atlantic group and a High Performing group.
The Mid-Atlantic group consisted of Merchants and the following 18
publicly traded regional commercial banks:
United National Bancorp NBT Bancorp, Inc.
BT Financial Corp. Sun Bancorp, Inc.
Community Bank System, Inc. Harleysville National Corp.
U.S.B. Holding Co. F&M Bancorp
Sandy Spring Bancorp, Inc. Main Street Bancorp, Inc.
Commercial Bank of New York Yardville National Bancorp
USBANCORP, Inc. Tompkins Trustco, Inc.
Sterling Bancorp Financial Institutions, Inc.
Patriot Bank Corp. Univest Corp. of Pennsylvania
The High Performing group consisted of Merchants and the following 13
publicly traded commercial banks, which had a return on average equity of
greater than 16% (based on last twelve months' earnings) and a price-to-tangible
book value of greater than 180%:
United National Bancorp Cathay Bancorp, Inc.
CVB Financial Corp. Sterling Bancshares, Inc.
Irwin Financial Corp. Community Bank System, Inc.
GBC Bancorp U.S.B. Holding Co.
Sandy Spring Bancorp, Inc. Frontier Financial Corp.
Midwest Banc Holdings, Inc. CCBT Financial Cos.
First Busey Corp.
The analysis compared publicly available financial information for
Merchants and the median data for each of the Mid-Atlantic group and the High
Performing group as of and for each of the years ended December 31, 1995 through
1999 and as of and for the twelve months ended June 30, 2000. The table below
sets forth the comparative data as of and for the twelve months ended June 30,
2000.
<TABLE>
<CAPTION>
High
Mid-Atlantic Performing
Merchants Group Group
---------------- ----------------- -----------------
<S> <C> <C> <C>
Total assets $1,369,676 $1,544,874 $1,851,161
Tangible equity/total assets 7.04% 5.72% 6.53 %
Intangible assets/total equity 0.30% 5.94% 5.23 %
Net loans/total assets 34.25% 57.19% 57.59 %
Gross loans/total deposits 51.72% 83.29% 75.22 %
Total borrowings/total assets 22.79% 18.44% 18.25 %
Non-performing assets/total assets 0.07% .27% .24 %
Loan loss reserves/gross loans 2.14% 1.13% 1.27 %
Net interest margin 4.49% 4.15% 4.48 %
Non-interest income/average assets .52% .79% .96 %
Fees/revenues 11.43% 19.21% 19.09 %
Non-interest expense/average assets 2.03% 2.76% 2.82 %
Efficiency ratio 42.17% 56.33% 52.16 %
Return on average assets 1.54% 1.11% 1.40 %
Return on average equity 20.50% 14.90% 19.90 %
Price/tangible book value per share 330.10% 173.91% 249.45 %
Price/earnings per share 15.32x 11.13x 11.44 x
Dividend yield 2.94% 3.76% 2.67 %
Dividend payout ratio 45.05% 40.56% 32.35 %
</TABLE>
Analysis of Selected Merger Transactions. Sandler O'Neill reviewed
certain transactions announced from January 1, 2000 to September 1, 2000
involving publicly traded commercial banks as acquired institutions with
transaction values between $100 and $500 million. Sandler O'Neill reviewed nine
transactions announced nationwide and two transactions announced in the
Mid-Atlantic region. Sandler O'Neill reviewed the multiples of transaction value
to last four quarters' earnings, transaction value to book value, transaction
value to tangible book value, and premium to market and computed high, low, mean
and median multiples and premiums for the respective groups of transactions.
Sandler O'Neill also analyzed certain relative pricing multiples for the same
groups of transactions. The relative multiples were determined by dividing the
absolute transaction multiples by the relevant trading multiples of the buyers.
Sandler O'Neill then calculated current relative implied price/earnings and
price/book multiples by applying the relative multiples to Valley's trading
multiples at close on September 1, 2000 of 15.2x last earnings for the twelve
months ended June 30, 2000 and 305.6% of June 30, 2000 book value. These
multiples were applied to Merchants' financial information as of and for the
quarter ended June 30, 2000. As illustrated in the following table, Sandler
O'Neill derived an imputed range of values per share of Merchants common stock
of $12.54 to $24.34 based upon the median multiples for nationwide transactions
and $12.56 to $24.00 based upon the median multiples for Mid-Atlantic
transactions. As calculated by Sandler O'Neill, the implied transaction value
per share of Merchants common stock in the merger was $20.09.
<TABLE>
<CAPTION>
Nationwide Mid-Atlantic
----------------------------- -----------------------------
Median Implied Median Implied
Multiple Value Multiple Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Deal price/LTM EPS 16.54x $18.08 18.02x $19.69
Relative Price/LTM EPS 18.14x $19.83 19.62x $21.45
Deal price/Book value 2.43x $12.54 2.43x $12.56
Relative Price/Book value 3.46x $17.88 3.46x $17.88
Premium to Market 43.19% $24.34 41.19% $24.00
</TABLE>
Discounted Dividend Stream and Terminal Value Analysis. Sandler O'Neill
also performed an analysis which estimated the future stream of after-tax
dividends of Merchants through December 31, 2003 under various circumstances,
assuming Merchants' current dividend payout ratio and that Merchants performed
in accordance with the earnings forecasts reviewed with management. To
approximate the terminal value of Merchants common stock at December 31, 2003,
Sandler O'Neill applied price/earnings multiples ranging from 11x to 21x and
applied multiples of tangible book value ranging from 200% to 450%. The dividend
income streams and terminal values were then discounted to present values using
different assumptions regarding required rates of return of holders or
prospective buyers of Merchants common stock. As illustrated in the following
table, this analysis indicated an imputed range of values per share of Merchants
common stock of $12.62 to $26.73 when applying the price/earnings multiples and
$11.61 to $28.38 when applying multiples of tangible book value. As calculated
by Sandler O'Neill, the implied transaction value per share of Valley common
stock in the merger was $20.09, which was within the range of values as
calculated above.
<TABLE>
<CAPTION>
Price/Earnings Tangible Book Value
Multiples Multiples
------------------------- ------------------------
Discount Rate 11x 21x 2.0x 4.5x
----------------- ------- ------- ------ -------
<S> <C> <C> <C> <C>
9 % $15.04 $26.73 $13.82 $28.38
11 14.17 25.14 13.03 26.69
13 13.36 23.67 12.29 25.13
15 12.62 22.32 11.61 23.68
</TABLE>
In connection with their analysis, Sandler O'Neill considered and
discussed with the Valley board of directors how the present value analysis
would be affected by changes in the underlying assumptions, including variations
with respect to the growth rate of assets, net interest spread, non-interest
income, non-interest expenses and dividend payout ratio. Sandler O'Neill noted
that the discounted dividend stream and terminal value analysis is a widely used
valuation methodology, but the results of such methodology are highly dependent
upon the numerous assumptions that must be made, and the results thereof are not
necessarily indicative of actual values or future results.
Pro Forma Merger Analysis. Sandler O'Neill analyzed certain potential
pro forma effects of the merger based upon the exchange ratio of 0.7634 to
Valley's June 30, 2000 tangible book value per share and projected December 31,
2000 earnings per share and dividend. From a Valley shareholder's perspective,
as compared to the projected stand-alone performance of Valley, the merger would
be accretive to Valley's projected earnings per share for the year ending
December 31, 2001, but dilutive to Valley's tangible book value per share as of
the year ended December 31, 2001. The actual results achieved by Valley and
Merchants may vary from projected results and the variations may be material.
Contribution Analysis. Sandler O'Neill reviewed the relative
contributions to be made by Valley and Merchants to the combined institution
based on data at and for the quarter ended June 30, 2000. The percentage of pro
forma shares owned was determined using a fixed exchange ratio of 0.7634 and a
Valley stock price of $26.3125. This analysis indicated that the implied
contributions to the combined entity were as follows:
<TABLE>
<CAPTION>
Valley Merchants
--------- ------------
<S> <C> <C>
Total assets 82.12% 17.88%
Total net loans 90.70 9.30
Goodwill 94.74 5.26
Total deposits 84.41 15.59
Total borrowings 69.36 30.64
Tangible equity 84.24 15.76
Total equity 84.34 15.66
GAAP net income for the twelve
months ended June 30, 2000 83.82 16.18
Percentage of pro forma
shares owned 80.99 19.01
</TABLE>
In connection with rendering their September 5, 2000 opinion, Sandler
O'Neill reviewed, among other things:
o the merger agreement and certain exhibits and schedules thereto
o the stock option agreement dated September 5, 2000, between Valley
and Merchants
o certain publicly available financial statements and other
historical financial information of Valley that they deemed
relevant
o certain publicly available financial statements and other
historical financial information of Merchants that they deemed
relevant
o consensus earnings per share estimates for Valley for the years
ending December 31, 2000 and December 31, 2001 published by IBES
and the views of senior management of Valley, based on certain
limited discussions with certain members of senior management,
regarding Valley's business, financial condition, results of
operations and future prospects
o certain internal financial analyses and forecasts of Merchants
prepared by and/or reviewed with management of Merchants and the
views of senior management of Merchants, based on limited
discussions with a representative of senior management, regarding
Merchants' business, financial condition, results of operations
and future prospects
o the pro forma impact of the merger on Valley
o the publicly reported historical price and trading activity for
Valley's and Merchants' common stock, including a comparison of
certain financial and stock market information for Valley and
Merchants with similar publicly available information for certain
other companies the securities of which are publicly traded
o the financial terms of recent business combinations in the
commercial banking industry, to the extent publicly available
o the current market environment generally and the banking
environment in particular; and
o such other information, financial studies, analyses and
investigations and financial, economic and market criteria as they
considered relevant.
In connection with rendering their opinion included as Appendix D to
this document, Sandler O'Neill confirmed the appropriateness of their reliance
on the analyses used to render their September 5, 2000 opinion by performing
procedures to update certain of such analyses and by reviewing the assumptions
upon which such analyses were based and the other factors considered in
rendering their opinion.
In performing their reviews and analyses, Sandler O'Neill relied upon
the accuracy and completeness of all the financial information and other
information that was available to them from public sources, that was provided to
them by Valley or Merchants or that was otherwise reviewed by them and they
assumed such accuracy and completeness for purposes of rendering their opinion.
Sandler O'Neill was not asked to and did not undertake an independent
verification of any such information and they do not assume any responsibility
or liability for the accuracy or completeness of any of such information.
Sandler O'Neill did not make an independent evaluation or appraisal of the
assets, the collateral securing assets or the liabilities, contingent or
otherwise, of Valley or Merchants or any of their respective subsidiaries, or
the collectibility of any such assets, nor were they furnished with any such
evaluations or appraisals. Sandler O'Neill is not an expert in the evaluation of
allowances for loan losses and they have not made an independent evaluation of
the adequacy of the allowance for loan losses of Valley or Merchants, nor have
they reviewed any individual credit files relating to Valley or Merchants. With
Valley's consent, Sandler O'Neill have assumed that the respective aggregate
allowances for loan losses for both Valley and Merchants are adequate to cover
such losses and will be adequate on a pro forma basis for the combined entity.
In addition, Sandler O'Neill have not conducted any physical inspection of the
properties or facilities of Valley or Merchants. Sandler O'Neill are not an
accounting firm and they have relied, with Valley's consent, on the reports of
the independent accountants of Valley and Merchants for the accuracy and
completeness of the financial statements furnished to them. With respect to the
published earnings per share estimates of Valley and to all financial
projections prepared by and/or reviewed with Merchants' management used by
Sandler O'Neill in their analyses, Sandler O'Neill assumed that they reflected
the best currently available estimates and judgments of the respective
managements of the respective future financial performances of Valley and
Merchants and that such performances will be achieved. Sandler O'Neill expressed
no opinion as to such financial projections or the assumptions on which they
were based.
Sandler O'Neill's opinion was necessarily based upon market, economic
and other conditions as they existed on, and could be evaluated as of, the date
of their opinion. Sandler O'Neill assumed, in all respects material to their
analysis, that all of the representations and warranties contained in the merger
agreement and all related agreements are true and correct, that each party to
such agreements will perform all of the covenants required to be performed by
such party under such agreements and that the conditions precedent in the merger
agreement are not waived. Sandler O'Neill also assumed, with Valley's consent,
that there has been no material change in Valley's or Merchants' assets,
financial condition, results of operations, business or prospects since the date
of the last publicly filed financial statements available to them, that Valley
and Merchants will remain as going concerns for all periods relevant to their
analyses, and that the merger will be accounted for as a pooling-of-interests
and will qualify as a tax-free reorganization for Federal income tax purposes.
Valley has agreed to pay Sandler O'Neill a fee of $350,000 for
rendering their fairness opinion, of which $250,000 has been paid and the
balance will be paid when the merger is closed. Valley has also agreed to
reimburse Sandler O'Neill for their reasonable out-of-pocket expenses incurred
in connection with its engagement and to indemnify Sandler O'Neill and their
affiliates and their respective partners, directors, officers, employees,
agents, and controlling persons against certain expenses and liabilities,
including liabilities under securities laws.
Sandler O'Neill has in the past provided certain other investment
banking services to Valley and has received compensation for such services. In
the ordinary course of their business as a broker-dealer, Sandler O'Neill may
also purchase securities from and sell securities to Valley and Merchants and
may actively trade the equity or debt securities of Valley and Merchants for
their own account and for the accounts of customers and, accordingly, may at any
time hold a long or short position in such securities.
Opinion of CIBC World Markets Corp.
CIBC World Markets Corp. was retained by Merchants as its financial
advisor in connection with the merger. CIBC World Markets is an internationally
recognized investment banking firm and was selected by Merchants based on CIBC
World Markets' qualifications, experience, expertise and reputation and because
of its familiarity with Merchants. As part of its investment banking business,
CIBC World Markets is regularly engaged in the valuation of businesses and
securities in connection with mergers and acquisitions, underwritings,
competitive biddings, secondary distributions of securities, private placements
and valuations for other purposes.
In connection with CIBC World Markets' engagement, the Merchants board
requested that CIBC World Markets evaluate the fairness, from a financial point
of view, of the exchange ratio of 0.7634 pursuant to the merger agreement to the
shareholders of Merchants. On August 30, 2000, CIBC World Markets rendered to
the Merchants board its oral opinion to the effect that, as of such date and
subject to certain assumptions, limitations and other matters stated therein,
the exchange ratio was fair, from a financial point of view, to the shareholders
of Merchants. CIBC World Markets subsequently confirmed its oral opinion of
August 30, 2000, by delivery of a written opinion dated September 5, 2000. CIBC
World Markets has reconfirmed its August 30, 2000 opinion by delivery to the
Merchants board a written opinion dated the date of this joint proxy
statement-prospectus that is substantially identical to the August 30, 2000
opinion.
A copy of CIBC World Markets' opinion dated the date of this proxy
statement-prospectus, which sets forth, among other things, assumptions made,
procedures followed, matters considered and limitations on the review
undertaken, is attached to this document as Appendix C and is incorporated
herein by reference. Merchants shareholders are urged to read this CIBC World
Markets opinion in its entirety. The CIBC World Markets opinion is directed to
the Merchants board and addresses only the fairness, from a financial point of
view, of the exchange ratio to Merchants, does not address any other aspect of
the merger or any related transaction and does not constitute an opinion or a
recommendation as to how any Merchants shareholder should vote at the Merchants
meeting. The summary of the CIBC World Markets opinion set forth herein is
qualified in its entirety by reference to the full text of such opinion.
In arriving at its opinion, CIBC World Markets has reviewed, among other things:
o the merger agreement
o the stock option agreement
o the merger agreement and plan of merger between Valley National
Bank and The Merchants Bank of New York set forth in Exhibit A to
the merger agreement
o audited consolidated financial statements and management's
discussion and analysis of the financial condition and results of
operation for each of Valley and Merchants for the three fiscal
years ended December 31, 1999, 1998 and 1997
o unaudited consolidated financial statements for each of Valley and
Merchants for the six months ended June 30, 2000 and 1999
o certain other publicly available business and financial
information relating to Valley and Merchants
o certain internal financial analyses, budgets, projections and
forecasts for Valley and Merchants, including estimates as to the
future cost savings expected to be achieved as a result of the
merger, prepared by and reviewed with the management of Valley and
Merchants
o the views of senior management of Valley and Merchants of the past
and current business operations, results thereof, financial
condition and future prospects of their respective companies
o a comparison of certain financial information for Valley and
Merchants with similar information for certain other companies
considered comparable to Valley and Merchants
o the financial terms of certain recent business combinations in the
banking industry
o the pro forma effect of the merger on Valley and Merchants based
on certain assumptions provided by Valley and Merchants
o the current market environment generally and the banking
environment in particular; and
o such other information, financial studies, analyses and
investigations and financial, economic and market criteria as CIBC
World Markets considered appropriate in the circumstances.
In preparing its opinion, CIBC World Markets relied upon and assumed,
without independent verification or investigation, the accuracy and completeness
of all of the financial and other information provided to it by Merchants,
Valley and their respective employees, representatives and affiliates. With
respect to forecasts of future financial condition and operating results of
Merchants and Valley, CIBC World Markets assumed at the direction of Merchants'
and Valley's respective management, without independent verification or
investigation, that such forecasts were reasonably prepared on bases reflecting
the best available information, estimates and judgement of Merchants, Valley and
their respective management. CIBC World Markets have neither made nor obtained
any independent evaluations or appraisals of the assets or the liabilities of
Merchants, Valley or their respective affiliated entities. CIBC World Markets
are not experts in the evaluation of allowance for loan losses or liabilities
(contingent or otherwise) and CIBC World Markets have neither made independent
evaluation of the adequacy of the allowance for loan losses of Valley nor
reviewed any individual loan credit files. CIBC World Markets are not expressing
any opinion as to the underlying valuation, future performance or long term
viability of Valley following the merger, or the price at which Valley common
stock will trade subsequent to the merger. CIBC World Markets has not been asked
to consider, and its opinion does not address, the relative merits of the merger
as compared to any alternative business strategies that might exist for
Merchants or the effect of any other transaction in which Merchants might
engage. CIBC World Markets' opinion is necessarily based on the information
available to it and general economic, financial and stock market conditions and
circumstances as they existed and could be evaluated by CIBC World Markets on
the date of its opinion. It should be understood that, although subsequent
developments may affect its opinion, CIBC World Markets does not have any
obligation to update, revise or reaffirm the opinion.
In addition, CIBC World Markets assumed, based on the advice of Valley,
that the merger will be accounted for as a pooling of interests under generally
accepted accounting principles.
The following is a summary of the material analyses performed by CIBC
World Markets, which CIBC World Markets presented and reviewed with the
Merchants board of directors on August 30, 2000, in connection with its oral
opinion as of that date. It does not purport to be a complete description of the
analyses performed by CIBC World Markets.
Transaction Overview. CIBC World Markets reviewed the terms of the
merger and related transactions. CIBC World Markets noted that the exchange
ratio of 0.7634 had an implied value of $20.09 per share of Merchants common
stock, based on the August 25, 2000 closing price of Valley's common stock on
the New York Stock Exchange of $26.31 per share. CIBC World Markets further
noted that this represented an implied value for the transaction of $377.1
million.
Comparable Companies Analysis: CIBC World Markets compared certain
financial information of Merchants with publicly available information of a
group of bank holding companies with assets between $1 billion and $2 billion
and based in the Northeast region of the United States, is comprised of
Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York,
Pennsylvania, Rhode Island, and Vermont. The Northeast banks consisted of:
o Arrow Financial Corp. o CCBT Financial Companies, Inc.
o Commercial Bank of New York o Community Bank System, Inc.
o Community Banks, Inc. o Financial Institutions, Inc.
o Harleysville National Corp. o Independent Bank Corp.
o Main Street Bancorp, Inc. o Omega Financial Corp.
o Patriot Bank Corp. o Sterling Bancorp
o Sterling Financial Corp. o Suffolk Bancorp
o Tompkins Trustco, Inc. o U.S.B. Holding Co., Inc.
o USBANCORP, Inc. o Washington Trust Bancorp, Inc.
o Yardville National Bancorp
Financial data were as of or for the twelve months ended June 30, 2000.
All multiples were based on closing stock prices on August 25, 2000.
The table below compares selected financial data for Merchants with the
corresponding median data of the Northeast banks.
<TABLE>
<CAPTION>
Merchants Northeast Banks
--------- ---------------
<S> <C> <C>
Price/Last Twelve Months EPS 15.3x 10.7x
Price/2000 Estimated EPS 13.6x 9.8x
Price/2001 Estimated EPS 12.4x 8.8x
Price/Book Value Per Share 329.1% 158.1%
Price/Tangible Book Value Per Share 330.0% 179.8%
Dividend Yield 2.94% 3.38%
Equity/Assets 7.06% 6.88%
Tier 1 Leverage Ratio 7.37% 7.77%
Last Twelve Months Return on Average Assets 1.54% 1.29%
Last Twelve Months Return on Average Equity 20.50% 15.79%
Net Interest Margin 4.49% 4.26%
Efficiency Ratio 42.17% 56.75%
Nonperforming Assets/Loans & Other Real Estate Owned 0.20% 0.43%
Reserves/Nonperforming Assets 1,055.6% 314.5%
</TABLE>
CIBC World Markets' analysis showed that on a comparable companies
basis, the resulting transaction multiples for Merchants were superior to that
of the comparable companies when based on last twelve month and projected
earnings, book value and tangible book value, and on deposits. Based on the
median multiples, the comparable companies analysis indicated a per share price
in the reference range of $8.14 to $12.28 per share. CIBC World Markets noted
that the implied per share value of the merger of $20.09 exceeded this reference
range.
Merchants (June 30, 2000)
Last Twelve Months EPS $1.11
2000 Estimated EPS $1.25
2001 Estimated EPS $1.37
Book Value $96.7 million
Tangible Book Value $96.4 million
Total Deposits $927.1 million
Fully Diluted Shares Outstanding 18,772,142
<TABLE>
<CAPTION>
Imputed
Northeast Total Imputed Valuation
Banks Median Valuation Per Share
------------ --------- ---------
<S> <C> <C> <C>
Price/Last Twelve Months EPS 10.7x $223.2 million $11.89
Price/2000 Estimated EPS 9.8x $230.5 million $12.28
Price/2001 Estimated EPS 8.8x $227.0 million $12.09
Price/Book Value Per Share 158.1% $152.8 million $8.14
Price/Tangible Book Value Per Share 179.8% $173.3 million $9.23
Price/Total Deposits 16.51% $153.0 million $8.15
</TABLE>
Additionally, CIBC World Markets performed a premiums paid analysis,
which compares the deal price premiums of other acquisition transactions in the
banking industry. CIBC World Markets looked at banks with assets between $1
billion and $5 billion, based in (1) the Northeast region, and (2) the United
States.
For acquisitions of banks based in the Northeast region, the
acquisition transactions reviewed resulted in a median range for one-day,
five-day and two-week premiums of 35.23%, 39.23% and 37.61%, respectively.
Applying the median five-day premium paid of 39.23% to the comparable companies
analysis indicates a median per share price in the reference range of $11.34 to
$17.10 per share. CIBC World Markets noted that the implied per share value of
the merger of $20.09 exceeded this reference range.
Imputed
Valuation
Per Share Five-Day Premium
--------- ----------------
Price/Last Twelve Months EPS $11.89 $16.55
Price/2000 Estimated EPS $12.28 $17.10
Price/2001 Estimated EPS $12.09 $16.83
Price/Book Value Per Share $8.14 $11.34
Price/Tangible Book Value Per Share $9.23 $12.86
Price/Total Deposits $8.15 $11.35
Precedent Transactions Analysis: CIBC World Markets reviewed a number
of mergers and acquisitions transactions in the banking industry since January
1, 2000. CIBC World Markets looked at banks with assets between $1 billion and
$5 billion, based in (1) the Northeast region, and (2) the United States. CIBC
World Markets analysis showed that on a precedent transactions basis, the
resulting transaction multiples for Merchants fall within the listed multiples
for precedent transactions in the Northeast region and exceeded that of the
United States based on last twelve month earnings, book value, tangible book
value, deposits and core deposits.
Based on the median multiples, the Northeast region precedent
transactions analysis indicates a per share price in the reference range of
$12.45 to $24.93 per share. CIBC World Markets noted that the implied per share
value of the merger of $20.09 was in the high end of this reference range.
Northeast Transactions
--------------------------------------
Median Multiple Implied Value
----------------- -----------------
Deal Price/Book Value 2.6x $13.31
Deal Price/Tangible Book Value 3.0x $15.18
Deal Price/Last Twelve Months EPS 22.5x $24.93
Deal Price/Deposits 28.30% $13.97
Franchise Premium/Core Deposits 20.74% $12.45
Based on the median multiples, the United States precedent transactions
analysis indicates a per share price in the reference range of $10.48 to $18.16
per share. CIBC World Markets noted that the implied per share value of the
merger of $20.09 exceeded this reference range.
United States Transactions
-------------------------------------
Median Multiple Implied Value
----------------- ----------------
Deal Price/Book Value 2.2x $11.19
Deal Price/Tangible Book Value 2.0x $10.48
Deal Price/Last Twelve Months EPS 16.4x $18.16
Deal Price/Deposits 23.14% $11.43
Franchise Premium/Core Deposits 16.34% $10.90
Discounted Cash Flow Analysis: CIBC World Markets also performed a
discounted cash flow analysis, applying discount rates of 10% to 13% and
terminal multiples of 10x to 12x terminal year free cash flow. Based on the
above range of discount rate and terminal multiples, the discounted cash flow
valuation indicates a reference range of $15.63 to $19.54 per share. CIBC World
Markets noted that the implied per share value of the merger of $20.09 exceeded
this reference range.
Terminal Value As a Multiple Of 2003 Free Cash Flows
------------------------------------------------------------
Discount Rate 10.00x 11.00x 12.00x
---------------- --------- --------- ---------
10.00% $ 17.02 $ 18.28 $ 19.54
11.00% $ 16.54 $ 17.76 $ 18.98
12.00% $ 16.07 $ 17.26 $ 18.44
13.00% $ 15.63 $ 16.78 $ 17.92
Earnings Projections for Merchants: The earnings projections for
Merchants used in the comparable companies analysis, the precedent transaction
analysis and the discounted cash flow analysis described above were prepared by
Merchants' management with the assistance of CIBC World Markets. The net income
of Merchants for the year 2000 was estimated by looking at the performance of
the first six months of year 2000 (year to date ending 6/30/00) as well as the
relative performance of the first half of 1999 (from 1/01/99 - 6/30/99) as
compared to the second half of 1999 (7/01/99 - 12/31/99). The net income for
2001, 2002 and 2003 was estimated by looking at the historical annualized
interest rates on interest bearing assets/liabilities and then making
assumptions as to future interest rates for year 2001, 2002 and 2003. Merchants'
management with the assistance of CIBC World Markets also looked at the
historical growth rates on interest related items and non-interest related
expenses and then made assumptions on the future growth rates for these items
for year 2001, 2002 and 2003. With these assumptions, the projected net income
for Merchants was as follows:
Year Projected Net Income
---- --------------------
2000 $23.4 million
2001 $25.7 million
2002 $28.4 million
2003 $31.4 million
Possible Range of Transaction Value Analysis: CIBC World Markets looked
at the possible range of transaction value based on the exchange ratio of
0.7634. CIBC World Markets took Valley's stock price at its 52 week high and
low, median, average and closing price on August 25, 2000 and applied the
exchange ratio of 0.7634.
<PAGE>
<TABLE>
<CAPTION>
Implied Transaction
Price per Total Implied
Closing Price Share of Merchants Transaction Value
------------- ------------------ -----------------
<S> <C> <C> <C>
Valley's 52 Week High $26.67 $20.36 $382.2 million
Valley's 52 Week Low $20.60 $15.73 $295.3 million
Valley's 52 Week Median $24.52 $18.72 $351.4 million
Valley's 52 Week Average $24.51 $18.71 $351.2 million
Valley's Price on 8/25/00 $26.31 $20.09 $377.1 million
</TABLE>
Historical Contribution Analysis: CIBC World Markets reviewed and
compared the relative pro forma contribution of Merchants and Valley to the
combined company based on selected historical balance sheet and income statement
data from 1995 to June 30, 2000. Without giving effect to any merger related
charges, cost savings or revenue enhancements expected to be achieved as a
result of the merger, the following table indicates what Merchants and Valley
would have contributed on a pro forma basis to the combined company.
<TABLE>
<CAPTION>
First
Half
Merchants 2000 1999 1998 1997 1996 1995
--------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Securities Available for Sale 37.4% 39.3% 39.2% 33.2% 36.2% 33.0%
Total Loans 9.4 8.8 8.1 8.1 7.9 8.2
Reserves 15.7 14.2 12.7 11.3 10.9 12.8
Total Assets 17.9 18.0 18.0 18.0 16.8 15.8
Total Deposits 15.6 16.0 15.8 15.7 14.9 14.0
Total Equity 15.7 15.2 16.1 16.4 17.3 17.4
Net Interest Income 18.3 16.4 15.7 15.4 15.4 15.2
Non Interest Income 12.9 12.8 11.0 10.7 14.2 16.5
Net Income 17.0 15.2 13.6 13.9 14.5 13.4
First
Half
Valley 2000 1999 1998 1997 1996 1995
------ ----- ---- ---- ---- ---- ----
Securities Available for Sale 62.6% 60.7% 60.8% 66.8% 63.8% 67.0%
Total Loans 90.6 91.2 91.9 91.9 92.1 91.8
Reserves 84.3 85.8 87.3 88.7 89.1 87.2
Total Assets 82.1 82.0 82.0 82.0 83.2 84.2
Total Deposits 84.4 84.0 84.2 84.3 85.2 86.0
Total Equity 84.3 84.8 83.9 83.6 82.7 82.6
Net Interest Income 81.7 83.6 84.3 84.6 84.6 84.8
Non Interest Income 87.1 87.2 89.0 89.3 85.8 83.5
Net Income 83.0 84.8 86.4 86.1 85.5 86.6
</TABLE>
Pro Forma Merger Analysis: Based upon the implied value per share of
the merger of $20.09 for Merchants, CIBC World Markets analyzed certain
potential pro forma effects of the merger on the projected 2000 earnings per
share of Merchants and Valley. Based on projections of Merchants and Valley,
including estimated charges associated with the merger and neglecting any
projected cost savings, the analysis indicated that the merger would be dilutive
to holders of Valley common stock but accretive to holders of Merchants common
stock in 2000.
As described above, the CIBC World Markets opinion and the information
provided by CIBC World Markets to the Merchants board were among a number of
factors taken into consideration by the Merchants board in making its
determination to enter into the merger agreement. Consequently, the CIBC World
Markets opinion and the analyses summarized above should not be regarded as
determinative of the views of the entire Merchants board or the management of
Merchants.
For the services of CIBC World Markets as financial advisor to
Merchants in connection with the merger, pursuant to an engagement letter dated
July 1, 2000, Merchants has agreed to pay CIBC World Markets an engagement fee
of $50,000 and a fairness opinion fee of $350,000. If the merger is completed,
Merchants has agreed to pay CIBC World Markets a transaction fee equal to 0.60%
of the transaction value, less a credit for the engagement fee and fairness
opinion fee. The transaction fee is presently estimated to be approximately $2.3
million, based on an assumed transaction value of $377 million. The actual
transaction value will be determined by multiplying the average closing price
for Valley common stock during the 20-day period prior to closing by the number
of shares to be issued to Merchants shareholders plus the number to be issued on
exercise of outstanding Merchants employee stock options. The transaction fee is
payable in cash on the closing date of the merger. Merchants has also agreed to
reimburse CIBC World Markets for its reasonable out-of-pocket expenses,
including the reasonable fees and disbursements of its counsel, and to indemnify
CIBC World Markets against certain liabilities, including certain liabilities
arising under the federal securities laws.
Merchants has not paid fees to CIBC World Markets in the last two
years, excluding fees related to the merger.
CIBC World Markets has performed investment banking and other services
for Merchants in the past and has been compensated for such services. In the
ordinary course of its business, CIBC World Markets and its affiliates may
actively trade securities of Merchants and Valley for their own account and for
the accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
The summary set forth above describes the material analyses that CIBC
World Markets performed and presented to the Merchants board on August 30, 2000
in connection with rendering the CIBC World Markets opinion as of such date, and
does not purport to be a complete description of such analyses. The preparation
of a fairness opinion is a complex process involving various determinations as
to the most appropriate and relevant methods of financial analysis and the
applications of these methods to the particular circumstances being evaluated,
and therefore is not readily susceptible to summary description. In arriving at
its opinion, CIBC World Markets made qualitative judgements as to the
significance and relevance of each analysis and the factors considered by it.
Accordingly, CIBC World Markets believes that its analyses must be considered as
a whole and that selecting a portion of its analyses without considering all
factors and analyses would create an incomplete view of the analyses and
processes underlying its opinion. In its analyses, CIBC World Markets relied
upon numerous assumptions made by Merchants and Valley with respect to industry
performance, general business and economic conditions, and other matters, many
of which are beyond the control of Merchants and Valley. No company or
transaction used as a comparison in the analyses is identical to Merchants or
Valley or the merger, nor is an evaluation of the results of such analyses
entirely mathematical; rather, such analyses involve complex considerations and
judgements concerning financial and operating characteristics and other factors
that could affect the acquisition, public trading or other values of the
companies' business segments or transactions being analyzed. Additionally,
estimates of the value of the businesses or securities do not purport to be
appraisals or necessarily reflective of the prices at which businesses or
securities actually may be sold. Because such estimates are inherently subject
to uncertainty, being based upon numerous factors or events beyond the control
of Merchants and Valley, none of Merchants, Valley, CIBC World Markets or any
other person assumes responsibility if future results or actual values are
materially different from these forecasts or assumptions.
Resale Considerations Regarding 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. These
registered shares will be freely transferable, except for shares received by
persons, including directors and executive officers of Merchants, who may be
deemed to be "affiliates" of Merchants under Rule 145 promulgated under the
Securities Act. An "affiliate" of an issuer is generally a person who "controls"
the issuer. Directors, executive officers and 10% shareholders may be deemed to
control the issuer. Affiliates may not sell their shares of Valley common stock
acquired in the merger, except pursuant to an effective registration statement
under the Securities Act, or in compliance with Rule 145 or another applicable
exemption from the registration requirements of the Securities Act.
Persons who may be deemed "affiliates" of Merchants have delivered
letters to Valley in which they have agreed to certain restrictions on their
ability to transfer, whether by sale or otherwise, any Merchants common stock
owned by them and any Valley common stock acquired by them in the merger. Valley
required these restrictions in order to comply with the accounting rules
governing a pooling-of-interests, and to comply with Rule 145 under the
Securities Act. These persons have agreed not to transfer the shares during a
period which begins 30 days before the merger is completed and ends when Valley
publishes financial results covering at least 30 days of post-merger combined
operations of Valley and Merchants. Those persons also have agreed not to
transfer their shares before that restricted period without giving Valley
advance notice and an opportunity to object if the transfer would interfere with
pooling-of-interests accounting for the merger. These persons also have 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 these persons in the
merger will bear a legend stating that the shares are restricted in accordance
with the letter signed by them and may not be transferred except in compliance
with such restrictions. In Mr. Witty's letter agreement, Valley has agreed to
provide him with "piggyback" registration rights if Valley registers a secondary
offering for the account of another person during the one-year period after the
merger is completed.
Persons who may be deemed "affiliates" of Valley also have delivered
letters to Valley 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 Merchants.
Conditions to the Merger
The obligation of each party to complete the merger is subject to
satisfaction or waiver of certain conditions, including:
o approval of the merger agreement by the shareholders of Merchants
and Valley;
o receipt of all necessary consents, approvals and authorizations
from government authorities;
o absence of any litigation that would restrain or prohibit the
consummation of the merger;
o receipt of a letter from Valley's independent accountants
regarding qualification of the merger for pooling-of-interests
accounting treatment; and
o receipt of an opinion of Pitney, Hardin, Kipp & Szuch LLP at
closing regarding the tax-free nature of the merger. If this
condition is waived, i.e., if the merger is not necessarily
tax-free but Valley and Merchants wish to consummate it anyway,
Merchants will resolicit its shareholders' vote on the merger.
The obligation of Valley to complete the merger is also conditioned on,
among other things:
o continued accuracy in all material respects of the representations
and warranties of Merchants contained in the merger agreement; and
o performance by Merchants, in all material respects, of its
obligations under the merger agreement.
The obligation of Merchants to complete the merger is also conditioned
on, among other things:
o continued accuracy in all material respects of the representations
and warranties of Valley contained in the merger agreement; and
o performance by Valley, in all material respects, of its
obligations under the merger agreement.
Conduct of Business Pending the Merger
The merger agreement requires Merchants to conduct its business until
the merger takes effect only in the ordinary course of business and consistent
with prudent business practices, except as permitted under the merger agreement
or with the written consent of Valley. Under the merger agreement, Merchants has
agreed not to take certain actions without the prior written consent of Valley
or unless permitted by the merger agreement, including, among other things, the
following:
o change any provision of its charter, bylaws or similar governing
documents;
o issue new stock, grant an option, or declare, set aside or pay any
dividend other than Merchants' regular quarterly cash dividends of
$0.125 per share;
o grant anyone severance or termination pay (other than pursuant to
existing company policies) or enter into or amend any employment
agreement;
o adopt any new employee benefit plan, or award any increase in
compensation or benefits;
o file any applications or make any contracts regarding branching or
site location or relocation;
o agree to acquire any business or entity (other than to foreclose
on collateral for a defaulted loan);
o make any material change in its accounting methods or practices
not required by generally accepted accounting principles; and
o take any action that would cause any of its representations or
warranties in the merger agreement to be materially untrue or
incorrect at the time the merger becomes effective.
Under the merger agreement, Merchants cannot encourage or solicit or
hold discussions or negotiations with, or provide any information to, anyone
other than Valley concerning any (1) merger, (2) sale of stock, (3) sale of
substantial assets or liabilities outside the ordinary course of business or (4)
similar transactions. However, Merchants may enter into discussions or
negotiations or provide any information in connection with an unsolicited
possible transaction of this sort if the Merchants board, after consulting with
counsel, determines in the exercise of its fiduciary responsibilities that it
should take such actions. Merchants has agreed to promptly communicate to Valley
the terms of any proposal it may receive with respect to any such acquisition
transaction. This restriction, along with the option described in the following
section, may deter other potential acquirors of Merchants.
Stock Option to Valley for Merchants Shares
As a condition to Valley entering into the merger agreement, Valley
required that Merchants grant Valley a stock option designed to deter other
companies from attempting to acquire control of Merchants. The option is
exercisable only if certain specific triggering events occur and the merger does
not occur. The option gives Valley the right to purchase for $16.98 per share up
to 4,663,741 shares of Merchants common stock, representing approximately 19.9%
of the Merchants shares that would be outstanding if the option were exercised.
The option exercise price and the number of option shares are subject to
anti-dilution adjustment. Also, the exercise price will be reduced if a
triggering event occurs and the option price at that time is higher than the
average implied value of a share of Merchants common stock during a prior
measurement period. Valley has no right to vote the shares covered by the option
before its exercise.
Valley could recognize a gain if it exercises the option and resells
the shares it acquires for more than the exercise price. The option may deter
other potential acquirors of Merchants because it would probably increase the
cost of acquiring all the shares of Merchants common stock. Valley's exercise of
the option may also make pooling-of-interests accounting treatment unavailable
to another potential acquiror. The agreement granting the option is set forth as
Appendix B to this document.
Employee Matters
After the merger is completed, Valley will honor Merchants' existing
employment agreements with executive officers, modified as described on page 22
under "Employment Agreements with Executive Officers." Valley intends, to the
extent practical, to continue the employment of all officers and employees of
The Merchants Bank, at or near the same location, with the same or equivalent
salary and benefits. Any Merchants employee whose employment is discontinued by
Valley, other than for cause, within one year of the merger will receive a
severance payment of one week's pay for each full year of service to Merchants,
with a minimum of four weeks' and a maximum of 26 weeks' severance.
Representations, Warranties and Covenants
The merger agreement contains customary mutual representations and
warranties, as well as covenants, relating to, among other things:
o corporate organization and similar corporate matters;
o authorization, execution and enforceability of the merger
agreement;
o the accuracy of information contained in each party's filings with
the SEC;
o the accuracy of information supplied by each party in creating
this document;
o compliance with applicable laws;
o the absence of material litigation;
o certain bank regulatory matters;
o the absence of certain material changes or events since June 30,
2000; and
o the adequacy of loan loss reserves.
Regulatory Approvals
Consummation of the Valley-Merchants merger and the merger of The
Merchants Bank of New York into Valley National Bank requires the approval of
the Office of the Comptroller of the Currency. OCC approval does not constitute
an endorsement of the merger or a determination by the OCC that the terms of the
merger are fair to the shareholders of Merchants or Valley. Valley filed an
application for OCC approval on October 30, 2000. Valley also corresponded with
the Federal Reserve Board on October 30, 2000 to obtain confirmation from the
Federal Reserve Board that it will waive its approval requirement to complete
the merger based upon the OCC approval. A waiver letter or an approval from the
Federal Reserve Board is also necessary before the merger can be completed.
While Valley and Merchants anticipate receiving the necessary regulatory
approvals, we can give no assurance that they will be granted, or that they will
be granted on a timely basis without conditions unacceptable to Valley or
Merchants.
Management and Operations After the Merger
As a result of the merger, Merchants will be merged into Valley, with
Valley as the surviving entity. Immediately following the merger, Merchants Bank
will be merged into Valley National Bank, with Valley National Bank as the
surviving entity. Valley National Bank will continue to operate as a
wholly-owned subsidiary of Valley.
Valley has agreed to appoint Spencer B. Witty, Robinson Markel and
Charles Baum as directors of Valley when the merger occurs. Each of them is
currently a Merchants director. Valley has also agreed to appoint Mr. Witty as a
director of Valley National Bank when the merger occurs.
Valley National Bank will operate the former branches of Merchants as
The Merchants Bank of New York - a Division of Valley National Bank. All current
Merchants directors who do not become directors of Valley following the merger
will be invited to serve as advisory directors for the new division.
Exchange of Certificates
When the merger takes effect, no one will have any further rights as a
Merchants shareholder. Certificates that represented shares of Merchants common
stock automatically will represent the shares of Valley common stock based on
the exchange ratio.
Promptly after the merger takes effect, Valley's exchange agent will
send written instructions and a letter of transmittal to each Merchants
shareholder, indicating how to exchange Merchants stock certificates for the
Valley stock certificates. Merchants shareholders should not send in their stock
certificates until they receive instructions from the exchange agent.
Each share of Valley common stock issued in exchange for Merchants
common stock will be deemed to have been issued at the time the merger becomes
effective. Thus, Merchants 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 any date on or
after the time the merger becomes effective. However, no dividend or other
distribution will actually be paid with respect to any shares of Valley common
stock until the certificates formerly representing shares of Merchants common
stock have been surrendered, at which time Valley will pay any accrued dividends
and other distributions on such shares without interest.
Merchants shareholders, promptly after they surrender their Merchants
stock certificates to the exchange agent, will receive a certificate
representing the full number of shares of Valley common stock into which their
shares of Merchants common stock have been converted together with a check for
the amount of the fractional share interest, if any.
Amendments
Valley and Merchants may amend the merger agreement by mutual written
consent at any time prior to the merger. However, an amendment which reduces the
amount or changes the form of consideration to be received by Merchants
shareholders cannot be made without their approval once they have voted to adopt
the merger agreement.
Third Party Beneficiaries
No person other than Merchants, Valley or their respective subsidiary
banks has the right to enforce any provision of the merger agreement, except
that the directors and officers of Merchants and The Merchants Bank of New York
can enforce the obligation of Valley and Valley National Bank to indemnify them
for a period of six years following the merger as set forth in the merger
agreement.
Terminating the Merger Agreement
Merchants and Valley may terminate the merger agreement at any time by
mutual consent.
Either Merchants or Valley may terminate the merger agreement for
certain reasons, including the following:
o the merger has not been completed by April 30, 2001;
o Merchants or Valley shareholders fail to approve the merger
agreement at their meetings; or
o a regulatory approval needed to complete the merger has been
denied or withdrawn.
Valley may terminate the merger agreement if:
o there has been a material adverse change in Merchants' business,
operations, assets or financial condition from that disclosed by
Merchants on the date of the merger agreement;
o Merchants materially breaches the merger agreement; or
o a regulatory approval needed to complete the merger is given with
conditions which materially impair the value of Merchants to
Valley.
Merchants may terminate the merger agreement if:
o there has been a material adverse change in Valley's business,
operations, assets or financial condition from that disclosed by
Valley on the date of the merger agreement; or
o Valley materially breaches the merger agreement.
Upon a termination of the merger agreement, the merger and other
transactions contemplated by the merger agreement will be abandoned without
further action by any party and each party will bear its own expenses.
Accounting Treatment of the Merger
Valley expects to account for the merger under the pooling-of-interests
method of accounting in accordance with generally accepted accounting
principles. Each party's obligation to consummate the merger is conditioned upon
Valley's receiving a letter from its independent public accountants that the
merger qualifies for such accounting treatment.
Under pooling-of-interests accounting treatment, as of the time the
merger becomes effective the assets and liabilities of Merchants would be added
to those of Valley at their recorded book values and the stockholders' equity
accounts of Valley and Merchants would be combined on Valley's consolidated
balance sheet. On a pooling-of-interests accounting basis, income and other
financial statements of Valley issued after the merger is completed would be
restated retroactively to reflect the consolidated combined financial position
and results of operations of Valley and Merchants as if the merger had taken
place before the periods covered by such financial statements. The pro forma
financial information contained in this joint proxy statement-prospectus has
been prepared using the pooling-of-interests accounting method to account for
the merger. See "Pro Forma Financial Information" beginning on page 48.
Both the pooling-of-interests and purchase methods of accounting are
acceptable methods of recording business combinations. However, they are not
alternative choices in accounting for the same transaction. If all the criteria
for recording a transaction as a pooling are met, the transaction must be so
recorded. The method of accounting for a business combination can have a
significant effect on the reported earnings and financial condition of a
company.
Federal Income Tax Consequences
The following is a discussion of the material Federal income tax
consequences of the merger. The discussion may not apply to special situations,
such as those of any Merchants shareholders:
o who received Valley common stock upon the exercise of employee
stock options or otherwise as compensation,
o that hold Merchants common stock as part of a "straddle" or
"conversion transaction", or
o that are insurance companies, securities dealers, financial
institutions or foreign persons.
This discussion does not address any aspects of state, local or foreign
taxation. It is based upon laws, regulations, rulings and decisions now in
effect and on proposed regulations, all of which are subject to change by
legislation, administrative action or judicial decision, and the changes could
have retroactive effects. No ruling has been or will be requested from the
Internal Revenue Service on any tax matter relating to the tax consequences of
the merger.
The following disclosure summarizes the opinion of Pitney, Hardin, Kipp
& Szuch LLP, counsel to Valley, addressed to Valley and Merchants and dated the
date of this joint proxy statement-prospectus. Assuming the merger is completed
in the manner described in this document, for Federal income tax purposes, and
as described in this opinion:
o The merger will be treated as a reorganization qualifying under
the provisions of Section 368 of the Internal Revenue Code of
1986, as amended.
o Merchants will not recognize any gain or loss.
o Merchants shareholders will not recognize any gain or loss upon
the exchange in the merger of shares of Merchants common stock
solely for Valley common stock, except with respect to cash
received instead of a fractional share interest in Valley common
stock.
o The basis of Valley common stock received in the merger by
Merchants shareholders will be the same as the basis of the shares
of Merchants common stock that they surrendered in exchange
therefor.
o The holding period of Valley common stock will include the holding
period during which the shares of Merchants common stock
surrendered in exchange were held by the Merchants shareholder,
provided those shares of Merchants common stock were held as
capital assets.
o Cash received by a holder of Merchants common stock instead of a
fractional share interest in Valley common stock will be treated
as received in exchange for such fractional share interest. If the
fractional share would have constituted a capital asset in the
hands of that holder, the holder generally should recognize a
capital gain or loss equal to the amount of cash received, less
the portion of the adjusted tax basis in Merchants common stock
allocable to the fractional share interest.
This opinion has been filed as an exhibit to the registration statement
that registers the Valley common stock to be issued in the merger. The opinion
is based in part on assumptions set forth in the opinion and facts specified in
letters of representation received by counsel from each of Valley and Merchants.
Consummation of the merger is conditioned, among other things, on
receipt by each of Valley and Merchants of an opinion of Pitney, Hardin, Kipp &
Szuch LLP, dated the closing date of the merger, to the same effect. If this
condition is waived, i.e., if the merger is not necessarily tax-free but Valley
and Merchants wish to consummate it anyway, Merchants will resolicit its
shareholders' vote on the merger.
The opinions of Pitney, Hardin, Kipp & Szuch LLP summarized above are
or will be based in part on assumptions set forth in the opinions and on
representations of facts contained in certificates of officers of Merchants and
Valley.
Because certain tax consequences of the merger may vary depending upon
the particular circumstances of each holder of Merchants common stock and other
factors, each Merchants shareholder is urged to consult his or her own tax
advisor to determine the particular tax consequences to the shareholder of the
merger, including the application and effect of state and local income and other
tax laws.
No Dissenters' Rights
Under applicable statutory law of New Jersey and Delaware, neither
Valley nor Merchants shareholders have dissenters' rights of appraisal in
connection with the merger.
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
On the following page we set forth the earnings per share, period-end
book value per share and cash dividends per share for the common stock of Valley
and Merchants for the periods noted. The data is presented on an historical and
pro forma basis, as well as pro forma equivalent per share data for Merchants.
The historical per share data was derived from the financial statements of
Valley and Merchants that are incorporated by reference herein. The pro forma
combined share data have been derived after giving effect to the Merchants
merger as if it occurred at the beginning of the period presented using the
pooling-of-interests method of accounting. The historical per share data for
both Valley and Merchants has been restated to retroactively reflect the effect
of stock dividends and stock splits. See "Pro Forma Financial Information" on
pages 46-52; "Summary Financial Data of Valley" on page 8 and "Summary Financial
Data of Merchants" on page 9. The pro forma information is not necessarily
indicative of the results of operations which would have been achieved had the
merger been consummated as of the beginning of the periods for which data are
presented and should not be construed as being representative of future periods.
We have computed the pro forma equivalent per Merchants share by
multiplying the pro forma combined per share data (giving effect to the
Merchants merger) by the 0.7634 exchange ratio.
The dividend per share data shown below do not necessarily indicate the
dividends that you should expect for any future period. The amount of future
dividends payable by Valley, if any, is at the discretion of Valley's board of
directors. When declaring dividends, the directors normally consider Valley's
and Valley National Bank'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 on
Valley common stock, including the Valley common stock issued in the merger for
Merchants common stock, equal to its historical cash dividends per share
declared on Valley common stock.
<TABLE>
<CAPTION>
Pro Forma
Historical Historical Pro Forma Equivalent per
Valley Merchants Combined Merchants Share
----------------------------------------------------------
<S> <C> <C> <C> <C>
Six Months Ended June 30, 2000
Earnings Per Share
Basic $ 0.88 $ 0.59 $ 0.86 $ 0.66
Diluted 0.87 0.58 0.85 0.65
Period-End Book Value Per Share 8.61 5.17 8.26 6.31
Cash Dividends Per Share 0.51 0.25 0.51 0.39
Year Ended December 31, 1999
Earnings Per Share
Basic $ 1.67 $ 0.99 $ 1.60 $ 1.22
Diluted 1.65 0.98 1.58 1.21
Period-End Book Value Per Share 8.83 5.19 8.45 6.45
Cash Dividends Per Share 0.97 0.45 0.97 0.74
Year Ended December 31, 1998
Earnings Per Share
Basic $ 1.57 $ 0.82 $ 1.48 $ 1.13
Diluted 1.55 0.81 1.46 1.11
Period-End Book Value Per Share 9.11 5.80 8.83 6.74
Cash Dividends Per Share 0.89 0.40 0.89 0.68
Year Ended December 31, 1997
Earnings Per Share
Basic $ 1.40 $ 0.75 $ 1.32 $1.01
Diluted 1.39 0.73 1.31 1.00
Period-End Book Value Per Share 8.36 5.49 8.14 6.21
Cash Dividends Per Share 0.77 0.38 0.77 0.59
</TABLE>
<PAGE>
The first table below presents, for the periods indicated, the
high and low closing prices per share of Valley common stock and Merchants
common stock. The prices of Valley common stock and Merchants common stock have
been restated to give retroactive effect to stock dividends and stock splits.
The second table presents information concerning the closing price of Valley
common stock and of Merchants common stock on September 5, 2000, the last
business day before the merger agreement was announced, and on October 27, 2000,
a date shortly before the date of this proxy statement. The second table also
presents the implied value of one share of Merchants common stock, computed by
multiplying the closing price of Valley common stock on the dates indicated by
the 0.7634 exchange ratio. Valley common stock is listed on the New York Stock
Exchange under the symbol "VLY" and Merchants common stock is traded on the
NASDAQ National Market under the symbol "MBNY". We urge you to obtain current
market quotations for Valley common stock and Merchants common stock. Because
the exchange ratio is fixed and trading prices fluctuate, Merchants shareholders
are not assured of receiving any specific market value of Valley common stock.
The price of Valley common stock when the merger becomes effective may be higher
or lower than its price when the merger agreement was signed, when this proxy
statement was mailed or when Valley or Merchants shareholders meet to vote on
the merger.
<PAGE>
<TABLE>
<CAPTION>
Closing Price Closing Price
Valley Merchants
Common Stock Common Stock
----------------------- -----------------------
High Low High Low
--------- -------- -------- ---------
<S> <C> <C> <C> <C>
1998:
First Quarter............................................. $30.57 $ 25.58 $ 21.75 $17.63
Second Quarter............................................ 30.93 26.30 21.63 18.50
Third Quarter............................................. 32.20 23.70 18.69 16.06
Fourth Quarter............................................ 27.15 22.79 19.25 15.50
1999:
First Quarter............................................. $26.59 $ 22.68 $ 18.25 $16.13
Second Quarter............................................ 27.92 22.45 17.63 16.50
Third Quarter............................................. 27.86 23.51 19.06 16.81
Fourth Quarter............................................ 26.67 22.98 19.19 16.88
2000:
First Quarter............................................. $25.66 $ 20.59 $ 17.00 $16.25
Second Quarter............................................ 26.67 24.25 17.25 16.38
Third Quarter............................................. 27.50 23.75 20.69 16.94
Fourth Quarter (through October 27, 2000)................. 28.91 26.25 21.50 19.38
</TABLE>
<TABLE>
<CAPTION>
Implied Value of
Closing Price Closing Price One Share of
Valley Merchants Merchants Common
Date Common Stock Common Stock Stock
----------------------- ---------------------- -------------------
<S> <C> <C> <C>
September 5, 2000..................... $ 26.25 $ 17.50 $ 20.04
October 27, 2000...................... 26.94 20.25 20.57
</TABLE>
<PAGE>
PRO FORMA UNAUDITED FINANCIAL INFORMATION
Presented on the following page is a pro forma unaudited combined
statement of condition of Valley and Merchants at June 30, 2000, giving effect
to the merger as if it had been consummated at such date. Also presented on the
following pages are the pro forma unaudited combined condensed statements of
income assuming the merger was consummated as of the beginning of the six-month
periods ended June 30, 2000 and 1999, and for the years ended December 31, 1999,
1998 and 1997. The pro forma unaudited financial information is based on the
historical financial statements of Valley and Merchants 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
unaudited combined condensed financial statements.
The pro forma unaudited financial information has been prepared by
Valley's management based upon the historical financial statements and related
notes thereto of Valley and Merchants, which are incorporated herein by
reference. The pro forma unaudited financial information should be read in
conjunction with those historical financial statements and notes. The pro forma
unaudited financial information does not give effect to any anticipated cost
savings or merger-related expenses and restructuring charges in connection with
the merger.
The pro forma unaudited financial data is not necessarily indicative of
the actual financial results that would have occurred had the merger been
consummated as of the beginning of the periods for which the data is presented
and should not be construed as being representative of future periods.
<PAGE>
<TABLE>
<CAPTION>
Pro forma Unaudited Combined Condensed Statement of Condition
As of June 30, 2000
Valley and
Valley Merchants Pro Forma Merchants
Historical Historical Adjustments Combined
----------------- ----------------- ------------------ -----------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 165,344 $ 43,800 $ -- $ 209,144
Federal funds sold 37,000 -- -- 37,000
Investment securities held to maturity 358,489 252,609 (235,559) 375,539
Investment securities available for sale 941,093 561,519 235,559 1,738,171
Loans 4,629,637 479,456 -- 5,109,093
Allowance for loan losses (55,150) (10,282) -- (65,432)
Other assets 216,316 42,574 -- 258,890
-------------- -------------- -------------- -------------
Total assets $ 6,292,729 $ 1,369,676 $ -- $ 7,662,405
============== ============== ============== =============
LIABILITIES
Deposits $ 5,018,217 $ 927,087 $ -- $ 5,945,304
Borrowings 706,555 312,096 -- 1,018,651
Other liabilities 47,392 33,805 -- 81,197
-------------- -------------- -------------- -------------
Total liabilities 5,772,164 1,272,988 -- 7,045,152
-------------- -------------- -------------- -------------
SHAREHOLDERS' EQUITY
Preferred stock -- -- -- --
Common stock 25,956 20 6,123 32,099
Surplus 325,688 23,879 (25,459) 324,108
Retained earnings 193,534 100,579 -- 294,113
Accumulated other comprehensive loss (18,703) (8,454) -- (27,157)
Treasury stock (5,041) (19,336) 19,336 (5,041)
Unallocated common stock held by employee benefit
plan (869) -- -- (869)
-------------- -------------- -------------- -------------
Total shareholders' equity 520,565 96,688 -- 617,253
-------------- -------------- -------------- -------------
Total liabilities and shareholders' equity $ 6,292,729 $ 1,369,676 $ -- $ 7,662,405
============== ============== ============== =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pro forma Unaudited Combined Condensed Statements of Income
For the Six Months Ended June 30, 2000
Valley and
Valley Merchants Pro Forma Merchants
Historical Historical Adjustments Combined
----------- ------------ ------------- ------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income $ 226,879 $ 51,692 $ -- $ 278,571
Interest expense 98,647 23,028 -- 121,675
------------ ---------- ---------- ------------
Net interest income 128,232 28,664 -- 156,896
Provision for loan losses 3,700 1,625 -- 5,325
------------ ---------- ---------- ------------
Net interest income after provision for loan
losses 124,532 27,039 -- 151,571
Non-interest income 24,265 3,601 -- 27,866
Non-interest expense 68,224 13,648 -- 81,872
------------ ---------- ---------- ------------
Income before income taxes 80,573 16,992 -- 97,565
Income taxes 26,970 5,985 -- 32,955
------------ ---------- ---------- ------------
Net income $ 53,603 $ 11,007 $ -- $ 64,610
============ ========== ========== ============
Earnings per share:
Basic $ 0.88 $ 0.59 $ -- $ 0.86
Diluted 0.87 0.58 -- 0.85
Weighted average number of shares outstanding:
Basic 61,206,797 18,770,580 -- 75,536,258
Diluted 61,779,558 18,832,672 -- 76,156,420
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pro forma Unaudited Combined Condensed Statements of Income
For the Six Months Ended June 30, 1999
Valley and
Valley Merchants Pro Forma Merchants
Historical Historical Adjustments Combined
------------ ------------ -------------- ------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income $ 208,939 $ 42,681 $ -- $ 251,620
Interest expense 81,098 18,364 -- 99,462
------------ ---------- ---------- ------------
Net interest income 127,841 24,317 -- 152,158
Provision for loan losses 3,775 600 -- 4,375
------------ ---------- ---------- ------------
Net interest income after provision
for loan losses 124,066 23,717 -- 147,783
Non-interest income 24,522 3,033 -- 27,555
Non-interest expense 67,501 12,864 -- 80,365
------------ ---------- ---------- ------------
Income before income taxes 81,087 13,886 -- 94,973
Income taxes 29,201 4,713 -- 33,914
------------ ---------- ---------- ------------
Net income $ 51,886 $ 9,173 $ -- $ 61,059
============ ========== ========== ============
Earnings per share:
Basic $ 0.81 $ 0.47 $ -- $ 0.77
Diluted 0.80 0.47 -- 0.77
Weighted average number of shares outstanding:
Basic 64,243,687 19,333,306 -- 79,002,733
Diluted 64,905,541 19,491,570 -- 79,785,406
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pro forma Unaudited Combined Condensed Statements of Income
For the Year Ended December 31, 1999
Valley and
Valley Merchants Pro Forma Merchants
Historical Historical Adjustments Combined
------------ ------------ -------------- -----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income $ 427,535 $ 90,285 $ -- $ 517,820
Interest expense 169,177 39,616 -- 208,793
------------ ---------- ----------- -----------
Net interest income 258,358 50,669 -- 309,027
Provision for loan losses 9,120 1,915 -- 11,035
------------ ---------- ----------- -----------
Net interest income after provision
for loan losses 249,238 48,754 -- 297,992
Non-interest income 47,252 6,551 -- 53,803
Non-interest expense 137,946 26,773 -- 164,719
------------ ---------- ----------- -----------
Income before income taxes 158,544 28,532 -- 187,076
Income taxes 52,220 9,515 -- 61,735
------------ ---------- ----------- -----------
Net income $ 106,324 $ 19,017 $ -- $ 125,341
============ ========== =========== ===========
Earnings per share:
Basic $ 1.67 $ 0.99 $ -- $ 1.60
Diluted 1.65 0.98 -- 1.58
Weighted average number of shares outstanding:
Basic 63,732,045 19,292,940 -- 78,460,275
Diluted 64,370,957 19,428,251 -- 79,202,484
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pro forma Unaudited Combined Condensed Statements of Income
For the Year Ended December 31, 1998
Valley and
Valley Merchants Pro Forma Merchants
Historical Historical Adjustments Combined
------------ ------------ ------------- ------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income $ 411,293 $ 86,268 $ -- $ 497,561
Interest expense 167,658 40,873 -- 208,531
------------ ---------- ---------- ------------
Net interest income 243,635 45,395 -- 289,030
Provision for loan losses 12,645 1,425 -- 14,070
------------ ---------- ---------- ------------
Net interest income after provision
for loan losses 230,990 43,970 -- 274,960
Non-interest income 45,374 5,448 -- 50,822
Non-interest expense 144,713 25,384 -- 170,097
------------ ---------- ---------- ------------
Income before income taxes 131,651 24,034 -- 155,685
Income taxes 30,380 8,132 -- 38,512
------------ ---------- ---------- ------------
Net income $ 101,271 $ 15,902 $ -- $ 117,173
============ ========== ========== ============
Earnings per share:
Basic $ 1.57 $ 0.82 $ -- $ 1.48
Diluted 1.55 0.81 -- 1.46
Weighted average number of shares outstanding:
Basic 64,428,341 19,423,062 -- 79,255,907
Diluted 65,294,355 19,714,962 -- 80,344,757
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pro forma Unaudited Combined Condensed Statements of Income
For the Year Ended December 31, 1997
Valley and
Valley Merchants Pro Forma Merchants
Historical Historical Adjustments Combined
------------- ------------ -------------- ------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income $ 406,818 $ 82,820 $ -- $ 489,638
Interest expense 172,182 40,253 -- 212,435
------------ ---------- ---------- ------------
Net interest income 234,636 42,567 -- 277,203
Provision for loan losses 13,130 1,700 -- 14,830
------------ ---------- ---------- ------------
Net interest income after provision
for loan losses 221,506 40,867 -- 262,373
Non-interest income 45,194 5,183 -- 50,377
Non-interest expense 139,246 24,333 -- 163,579
------------ ---------- ---------- ------------
Income before income taxes 127,454 21,717 -- 149,171
Income taxes 37,303 7,155 -- 44,458
------------ ---------- ---------- ------------
Net income $ 90,151 $ 14,562 $ -- $ 104,713
============ ========== ========== ============
Earnings per share:
Basic $ 1.40 $ 0.75 $ -- $ 1.32
Diluted 1.39 0.73 -- 1.31
Weighted average number of shares outstanding:
Basic 64,329,417 19,587,826 -- 79,282,763
Diluted 64,903,173 19,914,380 -- 80,105,811
</TABLE>
<PAGE>
Notes to Pro Forma Unaudited Financial Information
(1) The pro forma unaudited information presented is not necessarily
indicative of the results of operations or the combined financial
position that would have resulted had the merger been consummated at
the beginning of the periods indicated, nor is it necessarily
indicative of the results of operations in future periods or the future
financial position of the combined entities.
(2) It is assumed that the merger will be accounted for on a
pooling-of-interests accounting basis, and accordingly, the related pro
forma adjustments herein reflect, where applicable, an exchange ratio
of 0.7634 common shares of Valley for each of the 18,714,180 shares of
Merchants common stock which were outstanding at June 30, 2000.
(3) The pro forma unaudited financial information does not give effect to
any anticipated cost savings or merger-related expenses and
restructuring charges in connection with the merger. Management
estimates merger-related charges to approximate $4.7 million, net of
tax. This charge is primarily for investment banker fees and
personnel-related charges. At the time the merger agreement was entered
into, management estimated cost savings of 15-20% of Merchants'
non-interest expense, or between $2.4 million and $3.2 million, net of
tax, which estimate has not been updated. These estimates of
merger-related charges and cost savings are forward-looking statements,
upon which the reader should not place undue reliance. See
"Forward-Looking Statements" on page 11.
(4) In summary, the pro forma unaudited financial information was adjusted
for the merger by the (i) addition of 14,286,405 common shares of
Valley with a stated value of $0.43 per share amounting to $6,143,154
and (ii) elimination of 19,978,664 common shares of Merchants common
stock with a par value of $0.001 per share amounting to $19,979 and
(iii) elimination of 1,264,484 shares of Merchants treasury stock
amounting to $19,335,924. The pro forma unaudited information was
adjusted for the elimination of $19,336,000.
(5) Earnings per share data has been computed based on the combined
historical net income applicable to common shareholders of Valley using
historical weighted average common shares outstanding of Valley common
stock for the given period and the common stock to be issued in
connection with the merger.
(6) The historical earnings per share and weighted average number of shares
outstanding of Valley and Merchants have been restated to give
retroactive effect to stock dividends and stock splits.
(7) Investment securities held to maturity totaling approximately
$235,559,000 are anticipated to be transferred to investment securities
available for sale to conform with Valley's investment objectives.
<PAGE>
Description of Valley Capital Stock
The authorized capital stock of Valley presently consists of
108,527,344 shares of common stock and 30,000,000 shares of preferred stock. As
of September 30, 2000, 59,939,472 shares of Valley common stock and no shares of
preferred stock were issued and outstanding.
Description of 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. Funds for the payment of
dividends by Valley must come primarily from the earnings of Valley's bank
subsidiary. Thus, as a practical matter, any restrictions on the ability of
Valley National Bank to pay dividends will act as restrictions on the amount of
funds available for payment of dividends by Valley.
As a national banking association, Valley National Bank is subject to
limitations on the amount of dividends it may pay to Valley, the bank's only
shareholder. Prior OCC approval is required to the extent the total dividends to
be declared by Valley National Bank in any calendar year exceeds net profits for
that year combined with the bank's retained net profits from the preceding two
calendar years, less any transfers to capital surplus. Under this limitation,
Valley National Bank could declare dividends in 2000 without prior approval of
the OCC of up to $13.3 million plus an amount equal to Valley National Bank's
net profits for 2000 to the date of such dividend declaration.
Valley is also subject to Federal Reserve Board policies that 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 Federal Reserve Board would most likely seek to prohibit any
dividend payment that 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' meetings 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. Valley common stock is not redeemable at the option of the issuer
or the holders thereof.
Other Matters
American Stock Transfer and Trust Company is presently both the
transfer agent and the registrar for Valley common stock. Valley common stock is
traded on the New York Stock Exchange, and is registered with the SEC under
Section 12(b) of the Exchange Act.
"Blank Check" Preferred Stock; Authorized but Unissued Common Stock
The preferred stock that is authorized by Valley's certificate of incorporation
is typically referred to as "blank check" preferred stock. This term refers to
stock for which the rights and restrictions are determined by the board of
directors of a corporation. Valley's certificate of incorporation authorizes the
Valley board of directors to issue new shares of Valley common stock or
preferred stock without further shareholder action.
Valley's certificate of incorporation gives the board of directors
authority at any time to:
o divide the authorized but unissued shares of preferred stock into
series;
o determine the designations, number of shares, relative rights,
preferences and limitations of any series of preferred stock;
o increase the number of shares of any preferred series; and
o decrease the number of shares in a preferred series, but not to a
number less than the number of shares outstanding.
The issuance of additional common or preferred stock may be viewed as
having adverse effects upon the holders of common stock. Holders of Valley's
common stock will not have preemptive rights with respect to any newly issued
stock. The Valley board could adversely affect the voting power of holders of
Valley stock by issuing shares of preferred stock with certain voting,
conversion and/or redemption rights. In the event of a proposed merger, tender
offer or other attempt to gain control of Valley that the board of directors
does not believe to be in the best interests of its shareholders, the board
could issue additional preferred stock which could make any such takeover
attempt more difficult to complete. Blank check preferred stock may also be used
in connection with the issuance of a shareholder rights plan, sometimes called a
poison pill. The board of directors of Valley has not approved any plan to issue
any preferred stock for this or any other purpose. The Valley board of directors
does not intend to issue any preferred stock except on terms that the board
deems to be in the best interests of Valley and its shareholders.
COMPARISON OF THE RIGHTS OF SHAREHOLDERS OF
VALLEY AND MERCHANTS
At the completion of the merger, Merchants shareholders automatically
will become shareholders of Valley. Their rights as shareholders will be
determined by Valley's certificate of incorporation and bylaws, and by New
Jersey corporate law, instead of by Merchants' certificate of incorporation and
bylaws and Delaware corporate law. The following is a summary of the material
differences in the rights of shareholders of Merchants and of Valley.
This summary is not complete and is qualified in its entirety by
reference to the New Jersey Business Corporation Act and the Delaware General
Corporation Law, each of which may change from time to time, and the respective
certificates of incorporation and by-laws of Valley and Merchants. The New
Jersey Business Corporation Act refers to holders of stock as "shareholders,"
while the Delaware General Corporation Law uses the term "stockholders." We have
chosen to use "shareholder" throughout this document, except where referring
specifically to provisions of Delaware law. The certificate of incorporation and
by-laws of Valley also may be changed before or after the merger.
Voting Requirements
Under New Jersey corporate law, the affirmative vote of a majority of
the votes cast by shareholders entitled to vote on the matter is required to
approve:
o an amendment to the certificate of incorporation,
o the voluntary dissolution of the corporation,
o the sale or other disposition of all or substantially all of the
corporation's assets outside the ordinary course of business, or
o the merger or consolidation of the corporation with another
corporation.
However, under Delaware corporate law, the affirmative vote of a
majority of the outstanding stock entitled to vote on the matter is required to
approve those same matters.
New Jersey corporate law allows a corporation to specify a greater vote
requirement for any of these matters. Delaware corporate law allows a
corporation to specify a greater or lesser vote requirement for any of these
matters, as long as the required affirmative vote is not decreased below a
majority of the outstanding stock entitled to vote on the matter. Neither
Valley's nor Merchant's certificate of incorporation presently contains any
provision specifying a different vote than is specified under their state's
corporate law for the matters listed above.
Limits on Business Combinations
The New Jersey Shareholders Protection Act limits 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 New Jersey Shareholders Protection Act 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 interested
shareholder's stock acquisition date. After the five-year period expires, the
prohibition on certain business combinations continues unless:
o the combination is approved by the affirmative vote of
two-thirds of the voting stock not beneficially owned by the
interested shareholder,
o the combination is approved by the board prior to the
interested shareholder's stock acquisition date, or
o certain fair price provisions are satisfied.
Section 203 of the Delaware General Corporation Law prohibits business
combinations, including mergers, sales and leases of assets, issuances of
securities and similar transactions, by a corporation or its subsidiary with an
interested stockholder, which is someone who beneficially owns 15% or more of a
corporation's voting stock, for three years after the person becomes an
interested stockholder. The business combination is permitted if:
o before the person became an interested stockholder, the board
of directors of the corporation approved the person becoming
an interested stockholder or approved the business combination
transaction,
o upon completion of the transaction in which the person became
an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding
when the transaction commenced, excluding from that
calculation shares held by persons who are both officers and
directors of the corporation and shares held by specified
employee benefit plans,
o after the person becomes an interested stockholder, the
business combination is approved by the board of directors and
also by holders of at least two-thirds of the outstanding
voting stock not owned by the interested stockholder, or
o the transaction is one of certain business combinations that
are proposed after the corporation has received another
acquisition proposal that has been approved or not opposed by
a majority of the board of directors, as specified in the
Delaware General Corporation Law.
The merger is not governed by Section 203 because the Merchants board
approved the merger agreement and the stock option agreement before they were
executed.
Rights of Dissenting 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
by statute. No statutory rights of appraisal exist with respect to a merger or
consolidation, however, where (1) the stock of the New Jersey corporation is
listed on a national securities exchange, (2) the stock of the New Jersey
corporation is held of record by not less than 1,000 holders, or (3) the
consideration to be received pursuant to the merger or consolidation 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.
Shareholders of a Delaware 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
by statute. No statutory rights of appraisal exist with respect to a merger or
consolidation, however, where the stock of the Delaware corporation is (1)
listed on a national securities exchange or designated as a Nasdaq national
market security, or (2) held of record by more than 2,000 shareholders, so long
as the shareholders receive in exchange for their shares only (1) stock or
depository receipts of the surviving or resulting corporation, or (2) stock or
depository receipts of another corporation which will be listed on a national
securities exchange, designated as a Nasdaq national market security or held of
record by more than 2,000 shareholders. The exceptions from the Delaware
statutory right of appraisal apply to the Merchants common stock since the
Valley common stock to be received in the merger is presently listed on the New
York Stock Exchange.
Shareholder Written Consent to Corporate Action
Unless the certificate of incorporation provides otherwise (and
Valley's certificate of incorporation is currently silent on this issue), New
Jersey corporate law permits any action that can be taken at a shareholders'
meeting, 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 the action at a
shareholders' meeting 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
New Jersey corporate law, a shareholder vote on a plan of merger or
consolidation may be effected only:
o at a shareholders' meeting,
o by unanimous written consent of all shareholders entitled to
vote on the issue with advance notice to any other
shareholders not entitled to vote, or
o by 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.
Merchants' certificate of incorporation does not permit its
shareholders to take any actions by written consent in lieu of a meeting.
Special Shareholder Meetings
Under New Jersey corporate law, special meetings of the shareholders
may be called by the president or the board, or by such other officers,
directors, or shareholders as may be provided in the by-laws. Further, upon the
application of the holder or holders of not less than 10% of all the shares
entitled to vote at a meeting, the Superior Court, for good cause shown, may
order a special meeting of the shareholders.
Valley's by-laws provide that a special meeting of the shareholders may
be called by the chairman, chief executive officer, the president, or a majority
of the board of directors.
Under Delaware corporate law, special meetings of the shareholders may
be called by the board of directors or by such person or persons as may be
authorized by the certificate of incorporation or by the bylaws.
Merchants' by-laws provide that a special meeting of shareholders,
other than a special meeting for the election of directors, may be called at any
time by the board, the president, or the secretary. Special meetings of the
shareholders can also be called by the board upon the written request of the
holders of record of a majority of the outstanding shares of Merchants entitled
to vote at the meeting requested to be called.
Dividends
New Jersey corporate law 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 or would be unable to pay its debts in the ordinary
course of business as they come due as a result of paying the dividend. Valley's
certificate of incorporation does not presently contain any restriction on
Valley's ability to pay dividends. Funds for the payment of dividends by Valley
must come primarily from the earnings of Valley's bank subsidiary. Thus, as a
practical matter, any restrictions on the ability of Valley National Bank to pay
dividends act as restrictions on the amount of funds available for the payment
of dividends by Valley.
Delaware corporate law generally limits dividends by Merchants to an
amount equal to the excess of the net assets of Merchants (the amount by which
total assets exceed total liabilities) over its stated capital, or if there is
no such excess, to its net profits for the current and/or immediately preceding
fiscal year. Merchants' certificate of incorporation does not presently contain
any restriction on Merchants' ability to pay dividends. Funds for the payment of
dividends by Merchants must come primarily from the earnings of Merchants' bank
subsidiary. Thus, as a practical matter, any restrictions on the ability of
Merchants Bank to pay dividends act as restrictions on the amount of funds
available for the payment of dividends by Merchants.
By-laws
Under New Jersey corporate law, either the board of directors or the
shareholders of a New Jersey corporation has the power to adopt, amend, or
repeal the corporation's by-laws, unless the certificate of incorporation limits
the exercise of that power to the shareholders. Valley's certificate of
incorporation presently has no such limitation.
Under Delaware corporate law, either the board of directors or the
shareholders of a Delaware corporation have the power to adopt, amend, or repeal
the corporation's by-laws, unless the certificate of incorporation limits the
exercise of that power to the board of directors. Merchants' certificate of
incorporation presently has no such limitation.
Limitations of Liability of Directors and Officers
Under New Jersey corporate law, a New Jersey corporation may include in
its certificate of incorporation a provision that would eliminate or limit
directors' or officers' liability to the corporation or to its shareholders, for
monetary damages for breaches of their fiduciary duty of care. However, a
director or officer cannot be relieved from liability or otherwise indemnified
for any breach of duty based upon an act or omission:
o in breach of the person's duty of loyalty to the corporation
or its shareholders,
o not in good faith or involving a knowing violation of law, or
o resulting in the person's receipt of an improper personal
benefit.
Valley's certificate of incorporation contains provisions that limit
its directors' and officers' liability to the full extent permitted by New
Jersey law.
Under Delaware corporate law, a Delaware corporation may include in its
certificate of incorporation a provision which would, subject to the limitations
described below, eliminate or limit directors' liability (but not an officers'
liability) to the corporation or its shareholders, for monetary damages for
breaches of their fiduciary duty of care. A director cannot be relieved from
liability or otherwise indemnified for any breach of duty based upon an act or
omission:
o in breach of the director's duty of loyalty,
o not in good faith or involving intentional misconduct or
knowing violation of law,
o which constitutes willful or negligent conduct in paying
dividends or repurchasing stock out of other than lawfully
available funds, or
o resulting in the person's receipt of an improper personal
benefit.
Merchants' certificate of incorporation contains provisions which limit
its directors' liability to the full extent permitted by Delaware law.
Consideration of Acquisition Proposals
New Jersey corporate law provides that in determining whether a
proposal or offer to acquire a corporation is in the best interest of the
corporation, the board may, in addition to considering the effects of any action
on shareholders, consider any of the following:
o the effects of the proposed action on the corporation's
employees, suppliers, creditors and customers,
o the effects on the community in which the corporation
operates, and
o the long-term as well as short-term interests of the
corporation and its shareholders, including the possibility
that those interests may be served best by the continued
independence of the corporation.
The statute further provides that if, based on those factors, the board
determines that any such offer is not in the best interest of the corporation,
it may reject the offer. These provisions may make it more difficult for a
shareholder to challenge the Valley board's rejection of, and may facilitate the
board's rejection of, an offer to acquire Valley.
There are no comparable provisions in Delaware corporate law and Merchants'
certificate of incorporation is silent on this issue.
Preferred Stock
Under both New Jersey and Delaware law, if the Company's certificate of
incorporation so provides, the board of directors without shareholder approval
may issue preferred stock with the terms set by the board.
Valley's certificate of incorporation contains "blank check preferred
stock" provisions which authorize Valley's board of directors to issue shares of
authorized but unissued preferred stock without shareholder approval. The
issuance of the additional common or preferred stock may be viewed as having
adverse effects upon the holders of common stock. Holders of Valley's common
stock will not have preemptive rights with respect to the preferred stock. The
issuance of the preferred stock could result in an increase in the number of
shares of common stock outstanding, thereby diluting percentage ownership of
existing shareholders. The issuance of preferred stock could possibly dilute
book value per share and/or earnings per share.
The authorization or issuance of blank check preferred stock may be
viewed as being an "anti-takeover" device. In the event of a proposed merger,
tender offer or other attempt to gain control of Valley that Valley's board of
directors does not believe to be in the best interests of Valley or its
shareholders, Valley's board of directors could issue additional preferred stock
which could make any such takeover attempt more difficult to complete. Blank
check preferred stock may also be used in connection with the issuance of a
shareholder rights plan, sometimes called a poison pill.
Merchants' certificate of incorporation does not presently contain such
a provision.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by Valley (Commission File No. 1-11277)
with the SEC are hereby incorporated in this joint proxy statement-prospectus:
o Annual Report on Form 10-K for the year ended December 31,
1999
o Quarterly Reports on Form 10-Q for the quarters ended March
31, 2000 and June 30, 2000
o Current Reports on Form 8-K filed with the SEC on April 7,
2000, May 31, 2000, July 7, 2000, September 21, 2000 and
October 20, 2000.
o The description of Valley common stock set forth in Valley's
Registration Statement on Form 8-A, and any amendment or
report filed for the purpose of updating such description.
The following documents filed by Merchants (Commission File No.
000-22058) with the SEC are hereby incorporated in this joint proxy
statement-prospectus:
o Annual Report on Form 10-K for the year ended December 31,
1999
o Quarterly Reports on Form 10-Q for the quarters ended March
31, 2000 and June 30, 2000
o Current Reports on Form 8-K filed with the SEC on September
19, 2000 and October 30, 2000.
o The description of Merchants common stock set forth in
Merchants' Registration Statement on Form S-4 filed on March
20, 1992 by Merchants 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 or Merchants pursuant to Sections 13(a),
13(c), 14, or 15(d) of the Exchange Act after the date of this document but
before the earlier of
o the date of the Merchants meeting,
o the date of the Valley meeting, or
o the termination of the merger agreement,
are hereby incorporated by reference into this document and shall be deemed a
part of this document from the date they are filed.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this joint proxy
statement-prospectus to the extent that a statement contained herein or in any
subsequently filed document which is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this joint proxy statement-prospectus.
The public may read and copy any documents Valley or Merchants files
with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, DC 20549. The public may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also
maintains an Internet site that contains reports, proxy and information
statements, and other information about Valley and Merchants at
http://www.sec.gov.
You should rely only on the information contained in or incorporated by
reference in this document. You should not rely on any prior filings by Valley
or Merchants relating to the merger that have not been incorporated by reference
in this document, including filings on Form 425, which are superseded by this
document. We have not authorized anyone to provide you with information that is
different.
OTHER MATTERS
As of the date of this joint proxy statement-prospectus, the Merchants
board of directors knows of no other matters to be presented for action by the
shareholders at the Merchants meeting. If any other matters are properly
presented, however, it is the intention of the persons named in the enclosed
proxy to vote in accordance with their best judgment on such matters.
As of the date of this joint proxy statement-prospectus, the Valley
board of directors knows of no other matters to be presented for action by the
shareholders at the Valley meeting. If any other matters are properly presented,
however, it is the intention of the persons named in the enclosed proxy to vote
in accordance with their best judgment on such matters.
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 LLP, counsel to Valley.
EXPERTS
The consolidated financial statements of Merchants New York Bancorp,
Inc. and its subsidiaries as of December 31, 1999 and 1998, and for each of the
years in the three-year period ended December 31, 1999, have been incorporated
by reference into this joint proxy statement-prospectus in reliance upon the
report of KPMG LLP, independent certified public accountants, incorporated by
reference in Merchants' Annual Report on Form 10-K for year ended December 31,
1999, which is incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
The consolidated financial statements of Valley as of December 31, 1999
and 1998 and for each of the years in the three-year period ended December 31,
1999, have been incorporated by reference in this joint proxy
statement-prospectus and in the registration statement in reliance upon the
report of KPMG LLP, independent certified public accountants, which is
incorporated by reference herein, and upon the authority of such firm as experts
in accounting and auditing.
Representatives of KPMG LLP will be present at the Merchants meeting
and at the Valley meeting. They will be given an opportunity to make a statement
if they desire to do so and will be available to respond to appropriate
questions from shareholders present at the meetings.
SUBMISSION OF SHAREHOLDER PROPOSALS
Merchants. Merchants intends to hold an annual meeting of Merchants
shareholders in 2001 only if the merger is not completed. Any shareholder who
wishes to submit a proposal for that meeting, if held, should submit the
proposal to Merchants by November 29, 2000.
Valley. New Jersey corporate law requires that the notice of a
shareholders meeting (for either a regular or special meeting) specify the
purpose or purposes of the meeting. Thus, any substantive proposal, including
shareholder proposals, must be referred to in Valley's notice of shareholders
meeting in order for the proposal to be properly considered at a meeting of
Valley.
Proposals of shareholders which are eligible under the rules of the SEC
to be included in Valley's year 2001 proxy material must be received by the
Secretary of Valley no later than November 3, 2000.
If Valley changes its 2001 annual meeting date to a date more than 30
days from the date of its 2000 annual meeting, then the deadline referred to in
the preceding paragraph will be changed to a reasonable time before Valley
begins to print and mail its proxy materials. If Valley changes the date of its
2001 annual meeting in a manner that alters the deadline, Valley will so state
under Item 5 of the first quarterly report on Form 10-Q it files with the SEC
after the date change, or will notify its shareholders by another reasonable
method.
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of September 5,
2000 (this "Agreement"), is among Valley National Bancorp, a New Jersey
corporation and registered bank holding company ("Valley"), Valley National
Bank, a national banking association ("VNB"), Merchants New York Bancorp, Inc.,
a Delaware corporation and registered bank holding company ("Merchants") and The
Merchants Bank of New York, a New York state-chartered commercial bank (the
"Bank").
RECITALS
Valley desires to acquire Merchants and Merchants' Board of
Directors has determined, based upon the terms and conditions hereinafter set
forth, that the acquisition is in the best interests of Merchants and its
stockholders. The acquisition will be accomplished by merging Merchants into
Valley with Valley as the surviving corporation and, at the same time, merging
the Bank into VNB with VNB as the surviving bank, and Merchants stockholders
receiving the consideration hereinafter set forth. The Boards of Directors of
Merchants, Valley, the Bank and VNB have duly adopted and approved this
Agreement and the respective Boards of Directors of Valley and Merchants each
has directed that it be submitted to its stockholders for approval.
As a condition precedent to entering into this Agreement,
Valley has required that Merchants grant it an option to purchase certain
authorized but unissued shares of Merchants common stock and, as a consequence,
Valley and Merchants have entered into a Stock Option Agreement, dated the date
hereof (the "Valley Stock Option").
NOW, THEREFORE, intending to be legally bound, 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), Merchants shall be
merged with and into Valley (the "Merger") in accordance with the Delaware
General Corporation Law (the "DGCL") and the New Jersey Business Corporation Act
("NJBCA") and Valley shall be the surviving corporation (the "Surviving
Corporation"). Immediately following the Effective Time, the Bank shall be
merged with and into VNB as provided in Section 1.7 hereof.
1.2. Effect of the Merger. At the Effective Time, the
Surviving Corporation shall be considered the same business and corporate entity
as each of Valley and Merchants and thereupon and thereafter, all the property,
rights, privileges, powers and franchises of each of Valley and Merchants shall
vest in the Surviving Corporation and the Surviving Corporation shall be subject
to and be deemed to have assumed all of the debts, liabilities, obligations and
duties of each of Valley and Merchants and shall have succeeded to all of each
of their relationships, as fully and to the same extent as if such property,
rights, privileges, powers, franchises, debts, liabilities, obligations, duties
and relationships had been originally acquired, incurred or entered into by the
Surviving Corporation. In addition, any reference to either of Valley or
Merchants in any contract or document, whether executed or taking effect before
or after the Effective Time, shall be considered a reference to the Surviving
Corporation if not inconsistent with the other provisions of the contract or
document; and any pending action or other judicial proceeding to which either of
Valley or Merchants is a party shall not be deemed to have abated or to have
discontinued by reason of the Merger, but may be prosecuted to final judgment,
order or decree in the same manner as if the Merger had not occurred; or the
Surviving Corporation may be substituted as a party to such action or
proceeding, and any judgment, order or decree may be rendered for or against it
that might have been rendered for or against either of Valley or Merchants if
the Merger had not occurred.
1.3. Certificate of Incorporation. The certificate of
incorporation of Valley as it exists immediately prior to the Effective Time
shall not be amended by the Merger, but shall continue as the certificate of
incorporation of the Surviving Corporation until otherwise amended as provided
by law.
1.4. Bylaws. The bylaws of Valley as they exist immediately
prior to the Effective Date shall continue as the by-laws of the Surviving
Corporation until otherwise amended as provided by law.
1.5. Directors and Officers. The directors and officers of
Valley as of the Effective Time shall continue as the directors and officers of
the Surviving Corporation, with the addition provided for in Section 5.20
hereof.
1.6 Closing Date, Closing and Effective Time. Unless a
different date, time and/or place are agreed to by the parties hereto, the
closing of the Merger (the "Closing") shall take place at 10:00 a.m., at the
offices of Valley, 1455 Valley Road, Wayne, New Jersey, on a date (the "Closing
Date") which shall be within ten business 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 all 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), with the exact date
determined by Valley upon written notice to Merchants (the "Closing Notice").
Simultaneous with or immediately following the Closing, Valley and Merchants
shall cause to be filed certificates of merger, in form and substance
satisfactory to Valley and Merchants, with the Secretary of State of the State
of New Jersey (the "New Jersey Certificate of Merger") and with the Secretary of
State of the State of Delaware (the "Delaware Certificate of Merger"). The New
Jersey Certificate of Merger and the Delaware Certificate of Merger shall
specify as the "Effective Time" of the Merger a date and time following the
Closing agreed to by Valley and Merchants (which date and time the parties
currently anticipate will be the close of business on the Closing Date). In the
event the parties fail to specify the date and time in the merger certificates,
the Merger shall become effective upon (and the "Effective Time" shall be) the
later of the filing of the New Jersey Certificate of Merger and the Delaware
Certificate of Merger.
1.7. The Bank Merger. Immediately following the Effective
Time, the Bank shall be merged with and into VNB (the "Bank Merger") in
accordance with the provisions of the National Bank Act and, to the extent
applicable, New York Banking Law (the "NY Banking Law") and the regulations of
the New York Department of Banking (the "Department"), and VNB shall be the
surviving bank (the "Surviving Bank"). Upon the consummation of the Bank Merger,
the separate existence of the Bank shall cease and the Surviving Bank shall be
considered the same business and corporate entity as each of the Bank and VNB
and all of the property, rights, privileges, powers and franchises of each of
the Bank and VNB shall vest in the Surviving Bank and the Surviving Bank shall
be deemed to have assumed all of the debts, liabilities, obligations and duties
of each of the Bank 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. Upon the consummation of the Bank Merger, the articles of
association and bylaws of VNB shall become the articles of association and
bylaws of the Surviving Bank, the officers and employees of VNB and the officers
and employees of the Bank shall be the officers and employees of the Surviving
Bank with such additions as officers as the Board of Directors of VNB shall
determine, and the directors of VNB shall be the directors of the Surviving
Bank, with, in the case of directors, the additions provided for in Section 5.20
hereof. In connection with the execution of this Agreement, the Bank and VNB
shall execute and deliver a separate merger agreement (the "Bank Merger
Agreement") in substantially the form of Exhibit A, annexed hereto, for delivery
to the Office of the Comptroller of the Currency ("OCC") and the Department for
approval of the Bank Merger.
ARTICLE II
CONVERSION OF MERCHANTS COMMON STOCK AND OPTIONS
Each share of common stock, $.001 par value per share, of
Merchants ("Merchants Common Stock"), issued and outstanding immediately prior
to the Effective Time, and each option to purchase shares of Merchants Common
Stock validly issued pursuant to the Merchants Employee Stock Option Plan (the
"Merchants Employee Option Plan") and outstanding immediately prior to the
Effective Time (each a "Merchants Option" and collectively, the "Merchants
Options") shall, by virtue of the Merger and without any action on the part of
the holder thereof, be converted or cancelled at the Effective Time in
accordance with this Article II.
2.1 Conversion of Merchants Common Stock; Exchange Ratio; Cash
in Lieu of Fractional Shares. Each share of Merchants Common Stock issued and
outstanding immediately prior to the Effective Time, other than shares to be
cancelled pursuant to Section 2.4 hereof, shall be converted into the right to
receive .7634 (the "Exchange Ratio") shares of Common Stock, no par value, of
Valley ("Valley Common Stock"), subject to adjustment as set forth in Section
2.6 below. No fractional shares of Valley Common Stock will be issued, and in
lieu thereof, each holder of Merchants Common Stock who would otherwise be
entitled to a fractional interest will receive an amount in cash determined by
multiplying such fractional interest by the Average Pre-Closing Price of Valley
Common Stock. "Average Pre-Closing Price of Valley Common Stock" means the
average of the Closing Prices of Valley Common Stock for the ten consecutive
full trading days in which such shares are quoted on the New York Stock Exchange
(the "NYSE") ending with (and including) the Determination Date. "Closing Price"
of Valley Common Stock means the daily closing sales price of such stock as
reported on the NYSE (as reported in The Wall Street Journal or, if not reported
thereby, another authoritative source as chosen by Valley). "Determination Date"
means the date five business days prior to the Closing.
2.2. Exchange of Shares.
(a) Merchants and Valley hereby appoint American
Stock Transfer and Trust Company as the exchange agent (the "Exchange Agent")
for purposes of effecting the conversion of Merchants Common Stock and Merchants
Options. 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 Merchants Common Stock (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 hereof.
(b) Upon surrender of Certificates 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 Certificates the consideration as provided in Section 2.1
hereof and the Certificates so surrendered shall be canceled. 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 Certificates 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 shall be deemed stockholders 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.)
(c) After the Effective Time, there shall be no
transfers on the stock transfer books of Merchants of the shares of Merchants
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 canceled and exchanged for the consideration as provided in Section 2.1
hereof.
(d) If payment of the consideration pursuant to
Section 2.1 hereof is to be made in a name other than that in which the
Certificates surrendered in exchange therefor is registered, it shall be a
condition of such payment that the Certificates 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 Certificates surrendered, or required for any other reason, or shall
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not payable.
(e) With respect to each outstanding Merchants Option
Valley shall, after the Effective Time, distribute to the Optionee an amendment
to the option grant evidencing the conversion of the grant to an option to
purchase Valley Common Stock in accordance with Section 2.7 hereof.
2.3. No Dissenters' Rights. Consistent with the provisions of
the DGCL, no stockholder of Merchants shall have appraisal rights with respect
to the Merger.
2.4. Cancelled Shares. Each share of Merchants Common Stock
(i) which is held by Merchants as treasury stock or (ii) which is held by the
Bank or any other direct or indirect subsidiary of the Bank (except as trustee
or in a fiduciary capacity) or (iii) which is held by Valley, shall be canceled
and retired at the Effective Time.
2.5. Valley Shares. The shares of Valley Common Stock
outstanding at the Effective Time shall not be affected by the Merger, but along
with the additional shares of Valley Common Stock to be issued as provided in
Section 2.1 hereof, shall become the outstanding common stock of the Surviving
Corporation.
2.6 Anti-Dilution Adjustments. The Exchange Ratio and the
Average Pre-Closing Price of Valley Common Stock 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 Time.
2.7. Merchants Stock Options. At the Effective Time, each
outstanding Merchants Option granted to an eligible individual (an "Optionee")
under the Merchants Employee Option Plan shall be converted into an option to
purchase Valley Common Stock (a "Stock Option"), wherein (x) the right to
purchase shares of Merchants Common Stock pursuant to the Merchants Option shall
be converted into the right to purchase that same number of shares of Valley
Common Stock multiplied by the Exchange Ratio, (y) the option exercise price per
share of Valley Common Stock shall be the previous option exercise price per
share of Merchants Common Stock divided by the Exchange Ratio and (z) in all
other material respects the option shall be subject to the same terms and
conditions as governed the Merchants Option on which it was based, including the
length of time within which the option may be exercised and for any options
which are "incentive stock options" (as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), the adjustments shall be and are
intended to be effected in a manner which is consistent with Section 424(a) of
the Code. Shares of Valley Common Stock issuable upon exercise of Stock Options
shall be covered by an effective registration statement on Form S-8, and Valley
shall file a registration statement on Form S-8 covering such shares as soon as
practicable after the Effective Time.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MERCHANTS
References herein to "Merchants 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
Merchants to Valley or will be delivered pursuant to Section 5.11(a) by
Merchants to Valley. Disclosure of an item in one section of the Merchants
Disclosure Schedule will be considered disclosure for purposes of all sections
thereof, except where this Agreement specifies that the item must be referenced
in a particular section of the Merchants Disclosure Schedule. Merchants hereby
represents and warrants to Valley as follows:
3.1. Corporate Organization.
(a) Merchants is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Merchants 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 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 or qualified
would not have a material adverse effect on the business, operations, assets or
financial condition of Merchants on a consolidated basis. Merchants is
registered as a bank holding company under the Bank Holding Company Act of 1956,
as amended (the "BHCA").
(b) All of the Subsidiaries of Merchants are listed
in the Merchants Disclosure Schedule. The term "Subsidiary", when used in this
Agreement with respect to Merchants, means any corporation, joint venture,
association, partnership, trust or other entity in which Merchants has, directly
or indirectly at least a 50% interest or acts as a general partner. Each
Subsidiary of Merchants is duly organized, validly existing and in good standing
under the laws of its state of incorporation. The Bank is a commercial bank
chartered under the laws of the State of New York whose deposits are insured by
Bank Insurance Fund ("BIF") of the Federal Deposit Insurance Corporation
("FDIC") to the fullest extent permitted by law. Each Subsidiary of Merchants
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 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 or qualified would not have a
material adverse effect on the business, operations, assets or financial
condition of Merchants and its Subsidiaries on a consolidated basis. The
Merchants Disclosure Schedule sets forth true and complete copies of the
Certificates of Incorporation or Charter, as the case may be, and Bylaws of
Merchants and each Merchants Subsidiary as in effect on the date hereof. Except
as set forth in the Merchants Disclosure Schedule, Merchants 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 (i) residential real estate acquired through foreclosure or
deed in lieu of foreclosure in each individual instance with a fair market value
less than $500,000 and (ii) real estate used for its banking premises.
3.2. Capitalization.
The authorized capital stock of Merchants consists of
40,000,000 shares of Merchants Common Stock. As of the date hereof, there were
19,978,664 shares of Merchants Common Stock issued and outstanding, and
1,333,176 shares issued and held in the treasury. As of the date hereof, there
were 127,162 shares of Merchants Common Stock issuable upon exercise of
outstanding Merchants Options (the "Option Shares") granted to directors,
officers and employees of Merchants or the Bank pursuant to the Merchants
Employee Option Plan. The Merchants Disclosure Schedule sets forth (i) all
options which may be exercised for issuance of Merchants Common Stock and the
terms upon which the options may be exercised, and (ii) true and complete copies
of each of the Merchants Employee Option Plan and a specimen of each form of
agreement pursuant to which any outstanding stock option was granted, including
a list of each outstanding stock option issued pursuant thereto. All issued and
outstanding shares of Merchants Common Stock, and all issued and outstanding
shares of capital stock of each Merchants Subsidiary, have been duly authorized
and validly issued, are fully paid, and nonassessable. The authorized capital
stock of the Bank consists of 4,729,546 shares of common stock, $1.40 par value.
As of the date hereof, there were 2,482,172 shares of Bank common stock
outstanding. All of the outstanding shares of capital stock of each Merchants
Subsidiary are owned by Merchants and are free and clear of any liens,
encumbrances, charges, restrictions or rights of third parties. Except for the
Merchants Options and the Valley Stock Option, neither Merchants nor any
Merchants Subsidiary 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 Merchants or
any Merchants Subsidiary 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 purchase or 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 Merchants, and subject
to the parties obtaining all necessary regulatory approvals, Merchants and the
Bank 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 each of Merchants and the Bank. The
execution and delivery of the Bank Merger Agreement has been duly and validly
approved by the Board of Directors of the Bank. Except for the approvals
described in paragraph (b) below, no other corporate proceedings on the part of
Merchants or the Bank are necessary to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by
Merchants and the Bank, and constitutes valid and binding obligations of
Merchants and the Bank, enforceable against Merchants and the Bank in accordance
with its terms.
(b) Neither the execution and delivery of this
Agreement by Merchants and the Bank, nor the consummation by Merchants and the
Bank of the transactions contemplated hereby in accordance with the terms
hereof, or compliance by Merchants and the Bank with any of the terms or
provisions hereof, will (i) violate any provision of Merchants' or the Bank's
Certificates of Incorporation 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 Merchants or the Bank or any of their respective properties or
assets, or (iii) except as set forth in the Merchants 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 respective properties or
assets of Merchants or the Bank 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 Merchants or the
Bank is a party, or by which either or both of them or any of their respective
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
Merchants and its Subsidiaries on a consolidated basis, and which will not
prevent or delay the consummation of the transactions contemplated hereby.
Except for consents and approvals of or filings or registrations with or notices
to the OCC, the Department, the Board of Governors of the Federal Reserve System
("FRB"), the Securities and Exchange Commission ("SEC"), applicable state
securities bureaus or commissions, the Delaware Secretary of State and the
stockholders of Merchants, 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 Merchants or the Bank in connection with (x) the
execution and delivery by Merchants and the Bank of this Agreement and (y) the
consummation by Merchants and the Bank of the transactions contemplated hereby
and (z) the execution and delivery by the Bank of the Bank Merger Agreement and
the consummation by the Bank of the transactions contemplated thereby.
3.4. Financial Statements.
(a) Merchants' Annual Reports on Form 10-K filed with
the SEC under the Securities and Exchange Act of 1934, as amended (the "1934
Act") and available on the SEC's EDGAR system set forth the consolidated
statements of condition of Merchants as of December 31, 1999, 1998 and 1997, and
the related consolidated statements of income, stockholders' equity and cash
flows for the periods ended December 31 in each of the three years 1997 through
1999, in each case accompanied by the audit report of KPMG LLP, independent
public accountants with respect to Merchants, and Merchants' Quarterly Reports
on Form 10-Q filed with the SEC under the 1934 Act and available on the SEC's
EDGAR system set forth the unaudited consolidated statements of condition of
Merchants as of June 30, 2000 and related unaudited consolidated statements of
income, changes in stockholders' equity and cash flows for the six months then
ended (collectively, the "Merchants Financial Statements"). The Merchants
Financial Statements (including the related notes) have been prepared in
accordance with generally accepted accounting principles ("GAAP") consistently
applied during the periods involved, and fairly present the consolidated
financial condition of Merchants as of the respective dates set forth therein,
and the related consolidated statements of income, stockholders' equity and cash
flows fairly present the results of the consolidated operations, stockholders'
equity and cash flows of Merchants for the respective periods set forth therein.
(b) The books and records of Merchants and its
Subsidiaries 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 Merchants Financial Statements (including the notes
thereto), as of June 30, 2000 neither Merchants nor any of its Subsidiaries had
any liabilities, whether absolute, accrued, contingent or otherwise material to
the business, operations, assets or financial condition of Merchants or any of
its Subsidiaries. Since June 30, 2000 and to the date hereof, neither Merchants
nor any of its Subsidiaries have incurred any material liabilities except in the
ordinary course of business and consistent with prudent banking practice, except
as specifically contemplated by this Agreement.
3.5. Brokerage Fees; Financial Advisor; Fairness Opinion.
Other than CIBC World Markets Corp. (the "Broker"), neither Merchants nor any of
its Subsidiaries 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. Copies of Merchants' agreements with the Broker are set forth in the
Merchants Disclosure Schedule. The Broker has delivered to Merchants its written
opinion with respect to the fairness, from a financial point of view, of the
Exchange Ratio to the shareholders of Merchants in the Merger. Other than
pursuant to the agreement with Broker, 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 Merchants or any of its Subsidiaries.
3.6. Absence of Certain Changes or Events.
(a) There has not been any material adverse change in
the business, operations, assets or financial condition of Merchants and its
Subsidiaries on a consolidated basis since June 30, 2000 and to Merchants'
knowledge, no facts or conditions exist which Merchants believes will cause or
is likely to cause such a material adverse change in the future.
(b) Except as set forth in the Merchants Disclosure
Schedule, neither Merchants nor any of its Subsidiaries has taken or permitted
any of the actions set forth in Section 5.2 hereof between June 30, 2000 and the
date hereof and Merchants and the Merchants Subsidiaries have conducted their
business only in the ordinary course, consistent with past practice.
3.7. Legal Proceedings. Except as disclosed in the Merchants
Disclosure Schedule, neither Merchants nor any of its Subsidiaries is a party to
any, and there are no pending or, to Merchants' knowledge, threatened, legal,
administrative, arbitral or other proceedings, claims, actions or governmental
investigations of any nature against Merchants or any of its Subsidiaries.
Except as disclosed in the Merchants Disclosure Schedule, neither Merchants nor
any of its Subsidiaries is a party to any order, judgment or decree entered
against Merchants or any Merchants Subsidiary in any lawsuit or proceeding.
3.8. Taxes and Tax Returns.
(a) Merchants and each Merchants Subsidiary have duly
filed (and until the Effective Time will so file) all returns, declarations,
reports, information returns and statements ("Returns") required to be filed by
them in respect of any federal, state and local taxes (including withholding
taxes, penalties or other payments required) and except as set forth in the
Merchants Disclosure Schedule, each has duly paid (and until the Effective Time
will so pay) all such taxes shown as due on such returns, other than taxes or
other charges which are being contested in good faith (and disclosed to Valley
in writing). Merchants and each Merchants Subsidiary have established (and until
the Effective Time will establish) on their books and records reserves for the
payment of all federal, state and local taxes not yet due and payable, but
incurred in respect of Merchants or any Merchants Subsidiary through such date,
which reserves are adequate for such purposes. To the knowledge of Merchants,
except as set forth in the Merchants Disclosure Schedule, the federal income tax
returns of Merchants and its Subsidiaries 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. To
the knowledge of Merchants, except as set forth in the Merchants Disclosure
Schedule, the applicable state income and local tax returns of Merchants and its
Subsidiaries 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 knowledge of Merchants, there are no audits or
other administrative or court proceedings presently pending nor any other
disputes pending, or claims asserted for, taxes or assessments upon Merchants or
any of its Subsidiaries, nor except as set forth in the Merchants Disclosure
Schedule, has Merchants or any of its Subsidiaries given any currently
outstanding waivers or comparable consents regarding the application of the
statute of limitations with respect to any taxes or Returns.
(b) Except as set forth in the Merchants Disclosure
Schedule, neither Merchants nor any of its Subsidiaries (i) has requested any
extension of time within which to file any tax Return which Return has not since
been filed, (ii) is a party to any agreement providing for the allocation or
sharing of taxes, (iii) is required to include in income any adjustment pursuant
to Section 481(a) of the Code, by reason of a voluntary change in accounting
method initiated by Merchants or any Merchants Subsidiary (nor does Merchants
have any knowledge that the IRS has proposed any such adjustment or change of
accounting method) or (iv) has filed a consent pursuant to Section 341(f) of the
Code or agreed to have Section 341(f)(2) of the Code apply.
3.9. Employee Benefit Plans.
(a) Except as disclosed in the Merchants Disclosure
Schedule, neither Merchants nor any of its Subsidiaries maintains or contributes
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") (the
"Merchants Pension Plans"), "employee welfare benefit plan", within the meaning
of Section 3(1) of ERISA (the "Merchants Welfare Plans"), stock option plan,
stock purchase plan, deferred compensation plan, severance plan, bonus plan,
employment agreement or other similar plan, program or arrangement. Neither
Merchants nor any of its Subsidiaries has, since September 2, 1974, contributed
to any "Multiemployer Plan", within the meaning of Sections 3(37) and 4001(a)(3)
of ERISA.
(b) Merchants has delivered to Valley in the
Merchants Disclosure Schedule a complete and accurate copy of each of the
following with respect to each of the Merchants Pension Plans and Merchants
Welfare Plans: (i) plan document, summary plan description, and summary of
material modifications (if not available, a detailed description of the
foregoing); (ii) trust agreement or insurance contract, if any; (iii) most
recent IRS determination letter, if any; (iv) most recent actuarial report, if
any; and (v) most recent annual report on Form 5500, if any.
(c) The present value of all accrued benefits both
vested and non-vested under each of the Merchants Pension Plans subject to Title
IV of ERISA, based upon the actuarial assumptions used for purposes of the most
recent actuarial valuation prepared by such Merchants Pension Plan's actuary,
did not exceed the then current value of the assets of such plans allocable to
such accrued benefits. To the best of Merchants' knowledge, the actuarial
assumptions then utilized for such plans were reasonable and appropriate as of
the last valuation date and reflect then current market conditions.
(d) During the last six years, the Pension Benefit
Guaranty Corporation (the "PBGC") has not asserted any claim for liability
against Merchants or any of its Subsidiaries which has not been paid in full.
(e) All premiums (and interest charges and penalties
for late payment, if applicable) due to the PBGC with respect to each Merchants
Pension Plan have been paid. All contributions required to be made to each
Merchants Pension Plan under the terms thereof, ERISA or other applicable law
have been timely made, and all amounts properly accrued to date as liabilities
of Merchants and its Subsidiaries which have not been paid have been properly
recorded on the books of Merchants and its Subsidiaries.
(f) Except as disclosed on the Merchants Disclosure
Schedule, each of the Merchants Pension Plans, the Merchants Welfare Plans and
each other plan and arrangement identified on the Merchants Disclosure Schedule
has been operated in compliance in all material respects with the applicable
provisions of ERISA, the Code, all regulations, rulings and announcements
promulgated or issued thereunder, and all other applicable governmental laws and
regulations. Furthermore, the IRS has issued a favorable determination letter,
which takes into account the Tax Reform Act of 1986 and subsequent legislation,
with respect to each of the Merchants Pension Plans and Merchants is not aware
of any fact or circumstance which would disqualify any such plan, that could not
be retroactively corrected (in accordance with the procedures of the IRS).
(g) To the knowledge of Merchants, no non-exempt
prohibited transaction, within the meaning of Section 4975 of the Code or
Section 406 of ERISA, has occurred with respect to any of the Merchants Welfare
Plans or Merchants Pension Plans.
(h) No Merchants Pension Plan or any trust created
thereunder has been terminated, nor have there been any "reportable events",
within the meaning of Section 4034(b) of ERISA, with respect to any of the
Merchants Pension Plans.
(i) No "accumulated funding deficiency", within the
meaning of Section 412 of the Code, has been incurred with respect to any of the
Merchants Pension Plans.
(j) There are no pending, or, to the knowledge of
Merchants, threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any of the Merchants Pension Plans or the
Merchants Welfare Plans, any trusts related thereto or any other plan or
arrangement identified in the Merchants Disclosure Schedule.
(k) Except as disclosed in the Merchants Disclosure
Schedule, no Merchants Pension or Welfare Plan provides medical or death
benefits (whether or not insured) beyond an employee's retirement or other
termination of service, other than (i) coverage mandated by law, or (ii) death
benefits under any Merchants Pension Plan.
(l) Except with respect to customary health, life and
disability benefits or as disclosed in the Merchants Disclosure Schedule, there
are no unfunded benefits obligations which are not accounted for by reserves
shown on the Merchants Financial Statements and established under GAAP, or
otherwise noted on such financial statements.
(m) Except as disclosed in the Merchants Disclosure
Schedule, with respect to each Merchants Pension and Welfare Plan that is funded
wholly or partially through an insurance policy, there will be no liability of
Merchants or any Merchants Subsidiary as of the Effective Time under any such
insurance policy or ancillary agreement with respect to such insurance policy in
the nature of a retroactive rate adjustment, loss sharing arrangement or other
actual or contingent liability arising wholly or partially out of events
occurring prior to or at the Effective Time.
(n) Except as may hereafter be expressly agreed to by
Valley in writing or as disclosed on the Merchants Disclosure Schedule, the
consummation of the transactions contemplated by this Agreement will not (i)
entitle any current or former employee of Merchants or any Merchants Subsidiary
to severance pay, unemployment compensation or any similar payment, or (ii)
accelerate the time of payment, accelerate the vesting, or increase the amount,
of any compensation or benefits due to any current employee or former employee
under any Merchants Pension Plan or Merchants Welfare Plan.
(o) Except for the Merchants Pension Plans and the
Merchants Welfare Plans, and except as set forth on the Merchants Disclosure
Schedule, Merchants has no deferred compensation agreements, understandings or
obligations for payments or benefits to any current or former director, officer
or employee of Merchants or any Merchants Subsidiary or any predecessor of any
thereof. The Merchants Disclosure Schedule sets forth (or lists, if previously
delivered to Valley with respect to such items and any supplemental retirement
plan or arrangement): (i) true and complete copies of the deferred compensation
agreements, understandings or obligations with respect to each such current or
former director, officer or employee, and (ii) the most recent actuarial or
other calculation of the present value of such payments or benefits.
(p) Except as set forth in the Merchants Disclosure
Schedule, Merchants does not maintain or otherwise pay for life insurance
policies (other than group term life policies on employees) with respect to any
director, officer or employee. The Merchants Disclosure Schedule lists each such
insurance policy and any agreement with a party other than the insurer with
respect to the payment, funding or assignment of such policy. To the best of
Merchants' knowledge, neither Merchants nor any Merchants Pension Plan or
Merchants Welfare Plan owns any individual or group insurance policies issued by
an insurer which has been found to be insolvent or is in rehabilitation pursuant
to a state proceeding.
(q) Except as set forth in the Merchants Disclosure
Schedule, Merchants does not maintain any retirement plan for directors. The
Merchants Disclosure Schedule sets forth the complete documentation and
actuarial evaluation of any such plan.
3.10. Reports.
(a) The Merchants Disclosure Schedule lists, and as
to item (i) below Merchants has previously delivered or made available to Valley
a complete copy of, each (i) final registration statement, prospectus, annual,
quarterly or special report and definitive proxy statement filed by Merchants
since January 1, 1997 pursuant to the Securities Act of 1933, as amended (the
"1933 Act"), or the 1934 Act and (ii) communication (other than general
advertising materials, press releases and dividend checks) mailed by Merchants
to its shareholders as a class since January 1, 1997.
(b) Since January 1, 1997 (i) Merchants has filed all
reports that it was required to file with the SEC under the 1934 Act, and (ii)
Merchants and the Bank each has duly filed all material forms, reports and
documents which they were required to file with each agency charged with
regulating any aspect of their business, in each case in form which was correct
in all material respects, and, subject to permission from such regulatory
authorities, Merchants promptly will deliver or make available to Valley
accurate and complete copies of such reports. As of their respective dates, each
such form, report, or document referred to in either of clauses (i) or (ii)
above, and each final registration statement, prospectus, annual, quarterly or
special report, definitive proxy statement or communication referred to in
either of clauses (i) or (ii) of paragraph (a) above, as of its date, complied
in all material respects with all applicable statutes, rules and regulations 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 information contained in any such document
as of a later date shall be deemed to modify information as of an earlier date.
(c) The Merchants Disclosure Schedule lists the dates
of all examinations of Merchants or the Bank conducted by the FRB or either the
Department or the FDIC since January 1, 1997 and the dates of any responses
thereto submitted by Merchants or the Bank.
3.11. Merchants and Bank Information. The information relating
to Merchants, the Bank and the Merchants Subsidiaries, this Agreement and the
transactions contemplated hereby to be contained in the Joint Proxy
Statement-Prospectus (as defined in Section 5.6(a) hereof) to be delivered to
stockholders of Merchants and stockholders of Valley in connection with their
approval of the Merger, as of the date the Joint Proxy Statement-Prospectus is
mailed to stockholders of Merchants and Valley, and up to and including the date
of the meetings of stockholders to which such Joint 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 Joint Proxy
Statement-Prospectus shall comply as to form in all material respects with the
provisions of the 1934 Act and the rules and regulations promulgated thereunder.
3.12. Compliance with Applicable Law.
(a) Except as set forth in the Merchants Disclosure
Schedule, each of Merchants and the Merchants Subsidiaries holds all 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 Merchants or any of its Subsidiaries, including, without limitation,
consumer, community and fair lending laws (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
Merchants and its Subsidiaries on a consolidated basis) and Merchants has not
received notice of violation of, and does not know of any violations of, any of
the above.
(b) Without limiting the foregoing, to its knowledge
(i) the Bank has complied in all material respects with the Community
Reinvestment Act ("CRA") and (ii) no person or group would object to the
consummation of this Merger due to the CRA performance of or rating of the Bank.
Except as listed on the Merchants Disclosure Schedule to the knowledge of the
Bank, no person or group has adversely commented upon the Bank's CRA
performance.
3.13. Certain Contracts.
(a) Except as disclosed in the Merchants Disclosure
Schedule under this Section, Section 3.5 or Section 3.9, (i) neither Merchants
nor any Merchants Subsidiary is a party to or bound by any contract or
understanding (whether written or oral) with respect to the employment or
termination of any present or former officers, employees, directors or
consultants and (ii) the consummation of the transactions contemplated by this
Agreement will not (either alone or upon the occurrence of any additional acts
or events) result in any payment (whether of severance pay or otherwise)
becoming due from Merchants or any Merchants Subsidiary to any officer,
employee, director or consultant thereof. The Merchants Disclosure Schedule sets
forth true and correct copies of all employment agreements or termination
agreements with officers, employees, directors, or consultants to which
Merchants or any Merchants Subsidiary is a party.
(b) Except as disclosed in the Merchants Disclosure
Schedule and except for loan commitments, loan agreements and loan instruments
entered into or issued in the ordinary course of business, (i) as of the date of
this Agreement, neither Merchants nor any Merchants Subsidiary is a party to or
bound by any commitment, agreement or other instrument which is material to the
business, operations, assets or financial condition of Merchants and the
Merchants Subsidiaries taken as a whole, (ii) no commitment, agreement or other
instrument to which Merchants or any Merchants Subsidiary is a party or by which
any of them is bound limits the freedom of Merchants or any Merchants Subsidiary
to compete in any line of business or with any person, and (iii) neither
Merchants nor any Merchants Subsidiary is a party to any collective bargaining
agreement.
(c) Except as disclosed in the Merchants Disclosure
Schedule, neither Merchants nor any Merchants Subsidiary or, to the best
knowledge of Merchants, any other party thereto, is in default in any material
respect under any material lease, contract, mortgage, promissory note, deed of
trust, loan or other commitment (except those under which Bank is or will be the
creditor) or arrangement.
3.14. Properties and Insurance.
(a) Merchants 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 Merchants'
consolidated balance sheet as of June 30, 2000, 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 June 30, 2000),
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 Merchants and its Subsidiaries
taken as a whole and (iv) with respect to owned real property, title
imperfections noted in title reports delivered to Valley prior to the date
hereof. Merchants and its Subsidiaries as lessees have the right under valid and
subsisting leases to occupy, use, possess and control all property leased by
them in all material respects as presently occupied, used, possessed and
controlled by them. The Merchants Disclosure Schedule lists all leases pursuant
to which Merchants or any Merchants Subsidiary occupies any real property and
for each such lease lists annual base rentals, annual add-ons for taxes,
maintenance and the like, the annual increases to the end of the lease, the
expiration date and any option terms.
(b) The Merchants Disclosure Schedule lists all
policies of insurance covering business operations and all insurable properties
and assets of Merchants and its Subsidiaries showing all risks insured against,
in each case under valid, binding and enforceable policies or bonds, with such
amounts and such deductibles as are specified. As of the date hereof, neither
Merchants nor any of its Subsidiaries has received any notice of cancellation or
notice of a material amendment of any such insurance policy or bond or is in
default under such policy or bond, 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 Merchants and its
Subsidiaries contain records that are accurate in all material respects of all
meetings and other corporate action held of their respective stockholders and
Boards of Directors (including committees of their respective Boards of
Directors).
3.16. Environmental Matters. Except as set forth in the
Merchants Disclosure Schedule:
(a) Neither Merchants nor any Merchants Subsidiary
has received any written notice, citation, claim, assessment, proposed
assessment or demand for abatement alleging that Merchants or such Merchants
Subsidiary (either directly or as a trustee or fiduciary, 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 cleanup of any condition resulting from the
violation of any law, ordinance or other governmental regulation regarding
environmental matters, which correction or cleanup would be material to the
business, operations, assets or financial condition of Merchants and the
Merchants Subsidiaries taken as a whole. Merchants has no knowledge that any
toxic or hazardous substances or materials have been emitted, generated,
disposed of or stored on any real property owned or leased by Merchants or any
Merchants Subsidiary, as OREO or otherwise, or owned or controlled by Merchants
or any Merchants Subsidiary as a trustee or fiduciary (collectively,
"Properties"), in any manner that violates or, after the lapse of time will
violate, any presently existing federal, state or local law or regulation
governing or pertaining to such substances and materials.
(b) Merchants has no knowledge that any of the
Properties has been operated in any manner in the three years prior to the date
of this Agreement that violated any applicable federal, state or local law or
regulation governing or pertaining to toxic or hazardous substances and
materials, the violation of which would have a material adverse effect on the
business, operations, assets or financial condition of Merchants and the
Merchants Subsidiaries taken as a whole.
(c) To the knowledge of Merchants, except as set
forth in the Merchants Disclosure Schedule, there are no underground storage
tanks on, in or under any of the Properties and no underground storage tanks
have been closed or removed from any of the Properties while the property was
owned, operated or controlled by Merchants or any Merchants Subsidiary.
3.17. Reserves. As of the date hereof, the reserve for loan
and lease losses in the Merchants Financial Statements is adequate based upon
past loan loss experiences and potential losses in the current portfolio to
cover all known or anticipated loan losses.
3.18. No Excess Parachute Payments. No officer, director,
employee or agent (or former officer, director, employee or agent) of Merchants
or any Merchants Subsidiary is entitled now, or will or may be entitled to as a
consequence of this Agreement, the Merger or the Bank Merger, to any payment or
benefit from Merchants, a Merchants Subsidiary, Valley or VNB which if paid or
provided would constitute an "excess parachute payment", as defined in Section
280G of the Code or regulations promulgated thereunder.
3.19. Agreements with Bank Regulators. Neither Merchants nor
any Merchants Subsidiary is a party to any agreement or memorandum of
understanding with, or a party to any commitment letter, board resolution
submitted to a regulatory authority or similar undertaking to, or is subject to
any order or directive by, or is a recipient of any extraordinary supervisory
letter from, any court, governmental authority or other regulatory or
administrative agency or commission, domestic or foreign ("Governmental Entity")
which restricts materially the conduct of its business, or in any manner relates
to its capital adequacy, its credit or reserve policies or its management,
except for those the existence of which has been disclosed in writing to Valley
by Merchants prior to the date of this Agreement, nor has Merchants been advised
by any Governmental Entity that it is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
decree, agreement, memorandum of understanding, extraordinary supervisory
letter, commitment letter or similar submission, except as disclosed in writing
to Valley by Merchants prior to the date of this Agreement. Neither Merchants
nor any Merchants Subsidiary is required by Section 32 of the Federal Deposit
Insurance Act to give prior notice to a Federal banking agency of the proposed
addition of an individual to its board of directors or the employment of an
individual as a senior executive officer, except as disclosed in writing to
Valley by Merchants prior to the date of this Agreement.
3.20. Disclosure. 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 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 Merchants or will be delivered pursuant to Section 5.11(a) by Valley
to Merchants. Disclosure of an item in one section of the Valley Disclosure
Schedule will be considered disclosure for purposes of all sections thereof,
except where this Agreement specifies that the item must be referenced in a
particular section of the Valley Disclosure Schedule. Valley hereby represents
and warrants to Merchants 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 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 or qualified
would not have a material adverse effect on the business, operations, assets or
financial condition of Valley and its Subsidiaries (as defined below) on a
consolidated basis. Valley is registered as a bank holding company under the
BHCA.
(b) All 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 BIF 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 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 or qualified would not have a material adverse effect on the
business, operations, assets or financial condition of Valley and its
Subsidiaries on a consolidated basis.
4.2. Capitalization. The authorized capital stock of Valley
consists solely of 108,527,344 shares of Valley Common Stock and 30,000,000
shares of preferred stock, no par value per share (the "Valley Preferred
Stock"), which may be divided into classes and into series within any class as
determined by the Board of Directors. As of June 30, 2000, there were 60,433,231
shares of Valley Common Stock issued and outstanding net of treasury stock, and
182,746 treasury shares and no shares of Preferred Stock outstanding. Since June
30, 2000, to and including the date of this Agreement, no additional shares of
Valley Common Stock have been issued except in connection with the consummation
of the acquisition of Hallmark Capital Management, Inc. on July 6, 2000 and
exercises of options granted under the Long-Term Stock Incentive Plan of Valley
(the "Valley Option Plan") or grants under the Valley Option Plan or grants or
options under any option or stock plan assumed by Valley in connection with any
other acquisition (the "Acquired Stock Plans"). As of June 30, 2000, except for:
(a) 1,878,545 shares of Valley Common Stock issuable upon exercise of
outstanding stock options and stock appreciation rights granted pursuant to the
Valley Option Plan or the Acquired Stock Plans, and (b) 16,452 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 as listed in the Valley
Disclosure Schedule. Except for the options and stock appreciation rights
referred to above under the Valley Option Plan, 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.
4.3. Authority; No Violation.
(a) Subject to the approval of this Agreement and the
transactions contemplated hereby by the stockholders of Valley, 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. Valley has a sufficient number of authorized but unissued shares
of Valley Common Stock to pay the consideration for the Merger set forth in
Article II of this Agreement. 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 each of Valley and VNB. The
execution and delivery of the Bank Merger Agreement has been duly and validly
approved by the Board of Directors of VNB. Except for the approvals described in
paragraph (b) below, 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 or Bylaws of Valley or the
Articles of Association or Bylaws of 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 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 Department, the FRB, the New Jersey Secretary of State, the SEC,
or applicable state securities bureaus or commissions and the stockholders of
Valley, 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, (b) the consummation by Valley of the Merger and the other
transactions contemplated hereby and (c) the execution and delivery by VNB of
the Bank Merger Agreement and the consummation by VNB of the Bank Merger and
other transactions contemplated thereby.
4.4. Financial Statements.
(a) Valley's Annual Reports on Form 10-K filed with
the SEC under the 1934 Act and available on the SEC's EDGAR system set forth the
consolidated statements of condition of Valley as of December 31, 1999, 1998 and
1997, and the related consolidated statements of income, stockholders' equity
and cash flows for the periods ended December 31 in each of the three years 1997
through 1999, in each case accompanied by the audit report of KPMG LLP,
independent public accountants with respect to Valley, and Valley's Quarterly
Reports on Form 10-Q filed with the SEC under the 1934 Act and available on the
SEC's EDGAR system set forth the unaudited consolidated statements of condition
of Valley as of June 30, 2000 and related unaudited consolidated statements of
income, changes in stockholders' equity and cash flows for the six months then
ended (collectively, the "Valley Financial Statements"). The Valley Financial
Statements (including the related notes), have been prepared in accordance with
GAAP consistently applied during the periods involved, and fairly present the
consolidated financial position of Valley 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 for the respective
fiscal periods set forth therein.
(b) The books and records of Valley and its
subsidiaries 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 June 30, 2000 neither Valley nor any of its Subsidiaries had or
has, as the case may be, any material obligation or liability, whether absolute,
accrued, contingent or otherwise, material to the business, operations, assets
or financial condition of Valley or any of its Subsidiaries. Since June 30,
2000, neither Valley nor any of its Subsidiaries have incurred any material
liabilities, except in the ordinary course of business and consistent with
prudent banking practice, except as specifically contemplated by this Agreement.
4.5. Brokerage Fees; Financial Advisor; Fairness Opinion.
Except for fees to be paid to MG Advisors, Inc., 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. Sandler
O'Neill & Partners, L.P. has delivered to Valley its written opinion with
respect to the fairness from a financial point of view, of the Exchange Ratio to
the shareholders of Valley in the Merger.
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 June
30, 2000 and to 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
and its Subsidiaries, this Agreement and the transactions contemplated hereby to
be contained in the Registration Statement and Joint Proxy Statement-Prospectus
(as defined in Section 5.6(a) hereof), as of the date of the mailing of the
Joint Proxy Statement-Prospectus to stockholders of Merchants and Valley, and up
to and including the date of the meetings of stockholders to which such Joint
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 Registration Statement shall comply as to form in all material
respects with the provisions of the 1933 Act, the 1934 Act and the rules and
regulations promulgated thereunder.
4.8. Capital Adequacy. As of the date of this Agreement Valley
has, and 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. As of the date hereof, Valley has
available and reserved shares of Valley Common Stock sufficient for issuance
pursuant to the Merger and upon the exercise of Stock Options subsequent
thereto. The Valley Common Stock to be issued hereunder pursuant to the Merger,
and upon exercise of the Stock Options, when so issued, will be duly authorized
and validly issued, fully paid, nonassessable, free of preemptive rights and
free and clear of all liens, encumbrances or restrictions created by or through
Valley, with no personal liability attaching to the ownership thereof. The
Valley Common Stock to be issued hereunder pursuant to the Merger, and upon
exercise of the Stock Options, when so issued, will be registered under the 1933
Act and issued in accordance with all applicable state and federal laws, rules
and regulations, and will be approved or listed for trading on the NYSE.
4.10. Legal Proceedings. Except as disclosed in the Valley
Disclosure Schedule, neither Valley nor its Subsidiaries is a party to any, and
there are no pending or, to 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
effect on the business, operations, assets or financial condition of Valley and
its Subsidiaries on a consolidated basis.
4.11. Taxes and Tax Returns.
(a) Valley and each Valley Subsidiary have duly filed
(and until the Effective Time will so file) all Returns required to be filed by
them in respect of any federal, state and local taxes (including withholding
taxes, penalties or other payments required) and except as set forth in the
Valley Disclosure Schedule, each has duly paid (and until the Effective Time
will so pay) all such taxes shown as due on such returns, other than taxes or
other charges which are being contested in good faith (and disclosed to
Merchants in writing). Valley and each Valley Subsidiary have established (and
until the Effective Time will establish) on their books and records reserves for
the payment of all federal, state and local taxes not yet due and payable, but
incurred in respect of Valley or any Valley Subsidiary through such date, which
reserves are adequate for such purposes. To the knowledge of Valley, except as
set forth in the Valley Disclosure Schedule, the federal income tax returns of
Valley and its Subsidiaries have been examined by 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. To the knowledge of Valley, except as set forth
in the Valley Disclosure Schedule, the applicable state income and local tax
returns of Valley and its Subsidiaries 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 knowledge of
Valley, there are no audits or other administrative or court proceedings
presently pending nor any other disputes pending, or claims asserted for, taxes
or assessments upon Valley or any of its Subsidiaries, nor except as set forth
in the Valley Disclosure Schedule, has Valley or any of its Subsidiaries given
any currently outstanding waivers or comparable consents regarding the
application of the statute of limitations with respect to any taxes or Returns.
(b) Except as set forth in the Valley Disclosure
Schedule, neither Valley nor any of its Subsidiaries (i) has requested any
extension of time within which to file any tax Return which Return has not since
been filed, (ii) is a party to any agreement providing for the allocation or
sharing of taxes, (iii) is required to include in income any adjustment pursuant
to Section 481(a) of the Code, by reason of a voluntary change in accounting
method initiated by Valley or any Valley Subsidiary (nor does Valley have any
knowledge that the IRS has proposed any such adjustment or change of accounting
method) or (iv) has filed a consent pursuant to Section 341(f) of the Code or
agreed to have Section 341(f)(2) of the Code apply.
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) Valley has delivered to Merchants in the Valley
Disclosure Schedule a complete and accurate copy of each of the summary plan
description with respect to each of the Valley Pension Plans and Valley Welfare
Plans.
(c) The present value of all accrued benefits both
vested and non-vested under each of the Valley Pension Plans subject to Title IV
of ERISA, based upon the actuarial assumptions used for purposes of the most
recent actuarial valuation prepared by such Valley Pension Plan's actuary, did
not exceed the then current value of the assets of such plans allocable to such
accrued benefits. To the best of Valley's knowledge, the actuarial assumptions
then utilized for such plans were reasonable and appropriate as of the last
valuation date and reflect then current market conditions.
(d) During the last six years, the PBGC has not
asserted any claim for liability against Valley or any of its Subsidiaries which
has not been paid in full.
(e) All premiums (and interest charges and penalties
for late payment, if applicable) due to the PBGC with respect to each Valley
Pension Plan have been paid. All contributions required to be made to each
Valley Pension Plan under the terms thereof, ERISA or other applicable law have
been timely made, and all amounts properly accrued to date as liabilities of
Valley and its Subsidiaries which have not been paid have been properly recorded
on the books of Valley and its Subsidiaries.
(f) Except as disclosed on the Valley Disclosure
Schedule, each of the Valley Pension Plans and the Valley Welfare Plans has been
operated in compliance in all material respects with the applicable provisions
of ERISA, the Code, all regulations, rulings and announcements promulgated or
issued thereunder, and all other applicable governmental laws and regulations.
Furthermore, the IRS has issued a favorable determination letter, which takes
into account the Tax Reform Act of 1986 and subsequent legislation, with respect
to each of the Valley Pension Plans and Valley is not aware of any fact or
circumstance which would disqualify any such plan, that could not be
retroactively corrected (in accordance with the procedures of the IRS).
(g) To the knowledge of Valley, no non-exempt
prohibited transaction, within the meaning of Section 4975 of the Code or
Section 406 of ERISA, has occurred with respect to any of the Valley Welfare
Plans or Valley Pension Plans.
(h) No Valley Pension Plan or any trust created
thereunder has been terminated, nor have there been any "reportable events",
within the meaning of Section 4034(b) of ERISA, with respect to any of the
Valley Pension Plans.
(i) No "accumulated funding deficiency", within the
meaning of Section 412 of the Code, has been incurred with respect to any of the
Valley Pension Plans.
(j) There are no pending, or, to the knowledge of
Valley, threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any of the Valley Pension Plans or the
Valley Welfare Plans, any trusts related thereto or any other plan or
arrangement identified in the Valley Disclosure Schedule.
(k) Except as set forth in the Valley Disclosure
Schedule, Valley does not maintain any retirement plan for directors.
(l) Except with respect to customary health, life and
disability benefits or as disclosed on the Valley Disclosure Schedule, there are
no unfunded benefit obligations which are not accounted for by reserves shown on
the financial statements of Valley and established under GAAP or otherwise noted
on such financial statements.
4.13. Reports.
(a) Each communication mailed by Valley to its
stockholders since January 1, 1997, and each annual, quarterly or special
report, proxy statement or communication, 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. The Valley Disclosure Schedule lists all SEC
1933 Act filings by Valley that currently are subject to review.
(b) Valley and VNB have, since January 1, 1997, duly
filed with the OCC and, where applicable, the FDIC, and the FRB in correct form
in all material respects the monthly, quarterly and annual reports required to
be filed under applicable laws and regulations, and Valley, upon written request
from Merchants, promptly will deliver or make available to Merchants accurate
and complete copies of such reports. The Valley Disclosure Schedule lists the
dates of all examinations of Valley or VNB conducted by either the OCC, the FRB
or the FDIC since January 1, 1997.
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 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 Valley has not received notice of violations of, and does not know of any
violations of, any of the above. Without limiting the foregoing, to its
knowledge (i) VNB has complied in all material respects with the CRA and (ii) no
person or group would object to the consummation of the Merger due to the CRA
performance or rating of VNB. To the knowledge of Valley, except as listed on
the Valley Disclosure Schedule, no person or group has adversely commented upon
VNB's CRA performance.
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 June 30, 2000, 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 June 30, 2000),
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 Valley and its subsidiaries taken
as a whole and (iv) with respect to owned real property, title imperfections
which are noted in the most recent title reports with respect to such property.
Valley and its Subsidiaries as lessees have the right under valid and subsisting
leases to occupy, use, possess and control all property leased by them in all
material respects 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, in each case under valid, binding and
enforceable policies or bonds, 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,
neither Valley nor any of its Subsidiaries has received any notice of
cancellation or notice of a material amendment of any such insurance policy or
bond or is in default under such policy or bond, 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 records that are accurate in all material respects of all
meetings and other corporate action held of their respective stockholders and
Boards of Directors (including committees of their respective Boards of
Directors).
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 reserve for loan
and lease losses in the Valley Financial Statements is, to Valley's knowledge,
adequate based upon past loan loss experiences and potential losses in the
current portfolio to cover all known or anticipated loan losses.
4.19. Agreements with Bank Regulators. Neither Valley nor any
Valley Subsidiary is a party to any agreement or memorandum of understanding
with, or a party to any commitment letter, board resolution submitted to a
regulatory authority or similar undertaking to, or is subject to any order or
directive by, or is a recipient of any extraordinary supervisory letter from,
any Governmental Entity which restricts materially the conduct of its business,
or in any manner relates to its capital adequacy, its credit or reserve policies
or its management, nor has Valley been advised by any Governmental Entity that
it is contemplating issuing or requesting (or is considering the appropriateness
of issuing or requesting) any such order, decree, agreement, memorandum of
understanding, extraordinary supervisory letter, commitment letter or similar
submission, except as disclosed in writing to Merchants by Valley prior to the
date of this Agreement. Neither VNB nor any Valley Subsidiary is required by
Section 32 of the Federal Deposit Insurance Act to give prior notice to a
Federal banking agency of the proposed addition of an individual to its board of
directors or the employment of an individual as a senior executive officer,
except as disclosed in writing to Merchants by Valley prior to the date of this
Agreement.
4.20. Disclosures. 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 Merchants. During the period
from the date of this Agreement to the Effective Time, Merchants shall, and
shall cause each of its Subsidiaries to, conduct its respective 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. Merchants also shall
use its best efforts to (i) preserve its business organization and that of each
Merchants Subsidiary intact, (ii) keep available to itself the present services
of its employees and those of its Subsidiaries, provided that neither Merchants
nor any of its Subsidiaries shall be required to take any unreasonable or
extraordinary act or any action which would conflict with any other term of this
Agreement, and (iii) preserve for itself and Valley the goodwill of its
customers and those of its Subsidiaries and others with whom business
relationships exist.
5.2. Negative Covenants and Dividend Covenants.
(a) Merchants 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, nor will it permit any of
its Subsidiaries to:
(i) change any provision of its Certificate of
Incorporation or Bylaws or any similar governing documents;
(ii) except for the issuance of Merchants Common
Stock pursuant to the present terms of the outstanding Merchants
Options and the Valley Stock Option and as disclosed in the Merchants
Disclosure Schedule, change the number of shares of its authorized or
issued common or Preferred 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
Merchants or any Merchants Subsidiary or any securities convertible
into shares of such stock, or split, combine or reclassify any shares
of its capital stock, or redeem or otherwise acquire any shares of such
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, other than its regular
quarterly dividend of $0.125;
(iii) grant any severance or termination pay (other
than pursuant to policies of Merchants in effect on the date hereof and
disclosed in the Merchants 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 for increases in compensation to officers (other than those
entering into the Non-Competition Agreements referenced in Section
5.15) and employees in the usual and ordinary course of business, not
to exceed 5%;
(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 in excess of
$100,000 other than pursuant to binding commitments existing on the
date hereof and expenditures necessary to maintain existing assets in
good repair and expenditures described in business plans or budgets
previously furnished to Valley, except as set forth in Section 5.2 of
the Merchants Disclosure Schedule;
(vi) file any applications or make any contract with
respect to branching or site location or relocation;
(vii) agree to acquire in any manner whatsoever
(other than to foreclose on collateral for a defaulted loan) any
business or entity;
(viii) make any material change in its accounting
methods or practices, other than changes required in accordance with
GAAP;
(ix) take any action that would result in any of the
representations and warranties contained in Article III of this
Agreement not being true and correct in any material respect at the
Effective Time or that would cause any of its conditions to Closing not
to be satisfied; or
(x) agree to do any of the foregoing.
(b) Valley agrees that from the date hereof to the
Effective Time, except as otherwise approved by Merchants in writing or as
permitted or required by this Agreement, it will not, nor will it permit any of
its Subsidiaries to:
(i) take any action that is intended or may
reasonably be expected to result in any of its representations and
warranties set forth in Article IV of this Agreement not being true and
correct in any material respect at the Effective Time or that would
cause any of its conditions to Closing not to be satisfied;
(ii) consolidate with or merge with any other person
or entity in which Valley is not the surviving entity, or convey,
transfer or lease its properties and assets substantially as an
entirety to any person or entity unless such person or entity shall
expressly assume the obligations of Valley under this Agreement; or
(iii) authorize or enter into any agreement or
commitment to do any of the foregoing.
5.3. No Solicitation. So long as this Agreement remains in
effect, neither Merchants nor the Bank shall, 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 Merchants
or the Bank (an "Acquisition Transaction"). Notwithstanding the foregoing,
Merchants may enter into discussions or negotiations or provide information in
connection with an unsolicited possible Acquisition Transaction if the Board of
Directors of Merchants, after consulting with counsel, determines in the
exercise of its fiduciary responsibilities that such discussions or negotiations
should be commenced or such information should be furnished. Merchants shall
promptly communicate to Valley the terms of any proposal, whether written or
oral, which it may receive in respect of any such Acquisition Transaction and
the fact that it is having discussions or negotiations with a third party about
an Acquisition Transaction.
5.4. Current Information. During the period from the date of
this Agreement to the Effective Time, Merchants will cause one or more of its
designated representatives to confer on a monthly or more frequent basis with
representatives of Valley regarding Merchants' business, operations, properties,
assets and financial condition and matters relating to the completion of the
transactions contemplated herein. Without limiting the foregoing, Merchants will
send to Valley a monthly list of each new loan or extension of credit, and each
renewal of an existing loan or extension of credit, in excess of $250,000, made
during such month, and provide Valley with a copy of the loan offering for any
such loan, extension of credit, or renewal upon request. 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 and prior to the Effective Time, Merchants will
deliver to Valley the Bank's call reports filed with the Department and FDIC and
Merchants' quarterly reports on Form 10-Q as filed with the SEC under the 1934
Act, and Valley will deliver to Merchants Valley's quarterly reports on Form
10-Q, as filed with the SEC under the 1934 Act, and VNB's call reports filed
with the OCC and the FDIC. As soon as reasonably available, but in no event more
than 90 days after the end of each fiscal year ending after the date of this
Agreement and prior to the Effective Time, Merchants will deliver to Valley and
Valley will deliver to Merchants their respective Annual Reports, in each case
as filed on Form 10-K with the SEC under the 1934 Act.
5.5. Access to Properties and Records; Confidentiality.
(a) Merchants and the Bank shall permit Valley and
its representatives, and Valley and VNB shall permit Merchants and its
representatives, accompanied by an officer of the respective party, reasonable
access to their respective properties, and shall disclose and make available to
Valley and its representatives or Merchants 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 Merchants 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. Merchants acknowledges that Valley may be involved in
discussions concerning potential acquisitions of other banks and
financial-related institutions and Valley shall not be obligated to disclose
such information to Merchants except as such information is publicly disclosed
by Valley.
(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 advisors 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 use its best efforts to keep confidential all such
information, and shall not directly or indirectly use such information for any
competitive or other commercial purposes. In the event that the Merger
contemplated hereby is abandoned, all documents, notes and other writings
prepared by a party hereto or its advisors based on information furnished by the
other party 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; (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.
(c) Without limiting the rights provided under
Section 5.5(a), each of Valley and Merchants, for a period of 45 calendar days
following the date of this Agreement, shall have the right to conduct a full and
complete acquisition audit and to perform such due diligence as it deems
appropriate, using its own officers and employees or third parties, for purposes
of determining whether there is a material breach of any representation or
warranty hereunder or a material adverse change in the business or financial
condition of the other party. Such acquisition audit or due diligence shall not
be limited or restricted by virtue of any audit or due diligence performed
before the date hereof or for any other reason, but shall not unduly interfere
with the business of the other party.
5.6. Regulatory Matters.
(a) For the purposes of holding the Shareholders
Meetings (as referred to in Section 5.7 hereof), and qualifying under applicable
federal and state securities laws the Valley Common Stock to be issued to
Merchants shareholders in connection with the Merger, the parties hereto shall
cooperate in the preparation and filing by Valley with the SEC of a Registration
Statement including a joint proxy statement and prospectus satisfying all
applicable requirements of applicable state and federal laws, including 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 Merchants and Valley to their respective shareholders together with any and
all amendments or supplements thereto, being herein referred to as the "Joint
Proxy Statement-Prospectus" and the various documents to be filed by Valley
under the 1933 Act with the SEC to register the Valley Common Stock for sale,
including the Joint Proxy Statement-Prospectus, are referred to herein as the
"Registration Statement").
(b) Valley shall furnish Merchants with such
information concerning Valley and its Subsidiaries (including, without
limitation, information regarding other transactions which Valley is required to
disclose) as is necessary in order to cause the Joint Proxy
Statement-Prospectus, insofar as it relates to such corporations, to comply with
Section 5.6(a) hereof. Valley agrees promptly to advise Merchants if at any time
prior to the Shareholders' Meetings any information provided by Valley in the
Joint Proxy Statement-Prospectus becomes incorrect or incomplete in any material
respect and promptly to provide Merchants with the information needed to correct
such inaccuracy or omission. Valley shall promptly furnish Merchants with such
supplemental information as may be necessary in order to cause the Joint Proxy
Statement-Prospectus, insofar as it relates to Valley and the Valley
Subsidiaries, to comply with Section 5.6(a) after the mailing thereof to the
parties' respective shareholders.
(c) Merchants shall furnish Valley with such
information concerning Merchants as is necessary in order to cause the Joint
Proxy Statement-Prospectus, insofar as it relates to Merchants, to comply with
Section 5.6(a) hereof. Merchants agrees promptly to advise Valley if at any time
prior to the Shareholders' Meetings, any information provided by Merchants in
the Joint Proxy Statement-Prospectus becomes incorrect or incomplete in any
material respect and promptly to provide Valley with the information needed to
correct such inaccuracy or omission. Merchants shall promptly furnish Valley
with such supplemental information as may be necessary in order to cause the
Joint Proxy Statement-Prospectus, insofar as it relates to Merchants and the
Bank to comply with Section 5.6(a) after the mailing thereof to the parties'
respective shareholders.
(d) Valley shall as promptly as practicable 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 such stock under applicable state securities
laws at the earliest practicable date. Merchants shall promptly furnish Valley
with such information regarding the Merchants shareholders as Valley requires to
enable it to determine what filings are required hereunder. Merchants authorizes
Valley to utilize in such filings the information concerning Merchants and the
Bank provided to Valley in connection with, or contained in, the Joint Proxy
Statement-Prospectus. Valley shall furnish Merchants' counsel with copies of all
such filings and keep Merchants advised of the status thereof. Valley and
Merchants shall as promptly as practicable file the Registration Statement
containing the Joint Proxy Statement-Prospectus with the SEC, and each of Valley
and Merchants shall promptly notify the other of all communications, oral or
written, with the SEC concerning the Registration Statement and the Joint Proxy
Statement-Prospectus.
(e) Valley shall cause the Valley Common Stock
issuable pursuant to the Merger to be listed on the NYSE at the Effective Time.
Valley shall cause the Valley Common Stock which shall be issuable pursuant to
exercise of Stock Options to be accepted for listing on the NYSE when issued.
(f) The parties hereto will cooperate with each other
and use their reasonable 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 Entities
necessary to consummate the transactions contemplated by this Agreement as soon
as possible, including, without limitation, those required by the OCC, the FRB,
the Department, and the FDIC. Without limiting the foregoing, the parties shall
use reasonable business efforts to file for approval or waiver by the
appropriate bank regulatory agencies within 40 days after the date hereof. The
parties shall each have the right to review in advance (and shall do so
promptly) all filings with, including all information relating to the other, as
the case may be, and any of their respective subsidiaries, which appears in any
filing made with, or written material submitted to, any third party or
Governmental Entity in connection with the transactions contemplated by this
Agreement.
(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 Entity in respect of the transactions contemplated hereby.
(h) Merchants acknowledges that Valley is in or may
be in the process of acquiring other banks and financial-related institutions
and that in connection with such acquisitions, information concerning Merchants
may be required to be included in the registration statements, if any, for the
sale of securities of Valley or in SEC reports in connection with such
acquisitions. Merchants agrees to provide Valley with any information,
certificates, documents or other materials about Merchants as are reasonably
necessary to be included in such other SEC reports or registration statements,
including registration statements which may be filed by Valley prior to the
Effective Time. Merchants shall use its reasonable efforts to cause its
attorneys and accountants to provide Valley and any underwriters for Valley with
any consents, comfort letters, opinion letters, reports or information which are
necessary to complete the registration statements and applications for any such
acquisition or issuance of securities. Valley shall reimburse Merchants for
reasonable expenses thus incurred by Merchants should this transaction be
terminated for any reason. Valley shall not file with the SEC any registration
statement or amendment thereto or supplement thereof containing information
regarding Merchants unless Merchants shall have consented in writing to such
filing, which consent shall not be unreasonably delayed or withheld.
(i) Between the date of this Agreement and the
Effective Time, Merchants shall cooperate with Valley to reasonably conform
Merchants' policies and procedures regarding applicable regulatory matters, to
those of Valley as Valley may reasonably identify to Merchants from time to
time.
5.7. Approval of Shareholders.
(a) Merchants will (i) take all steps necessary duly
to call, give notice of, convene and hold a meeting of the shareholders of
Merchants (the "Merchants Shareholders Meeting") for the purpose of securing the
approval of shareholders of this Agreement, (ii) subject to the qualification
set forth in Section 5.3 hereof and the right not to make a recommendation or to
withdraw a recommendation if Merchants' Board of Directors, after consulting
with counsel, determines in the exercise of its fiduciary duties that such
recommendation should not be made or should be withdrawn, recommend to the
shareholders of Merchants the approval of this Agreement and the transactions
contemplated hereby and use its reasonable best efforts to obtain, as promptly
as practicable, such approval, and (iii) cooperate and consult with Valley with
respect to each of the foregoing matters. The directors of Merchants in their
capacity as shareholders have agreed, by signing a certificate to that effect,
to vote in favor of the Agreement.
(b) Valley will (i) take all steps necessary duly to
call, give notice of, convene and hold a meeting of the shareholders of Valley
(the "Valley Shareholders Meeting") for the purpose of securing the approval of
shareholders of this Agreement, (ii) recommend to the shareholders of Valley,
subject to any fiduciary duties it determines it may have after consulting with
counsel, the approval of this Agreement and the transactions contemplated hereby
and use its reasonable best efforts to obtain, as promptly as practicable, such
approval, and (iii) cooperate and consult with Merchants with respect to each of
the foregoing matters.
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 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. Valley and Merchants will cooperate to take the necessary actions to cure
appropriate tainted treasury shares so that the Merger meets the treasury stock
condition for pooling-of-interests accounting. Valley shall determine whether it
or Merchants or both shall take such action. 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, distribution and filing with governmental
agencies as required under applicable law, 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.
5.10. Failure to Fulfill Conditions. In the event that Valley
or Merchants determines that a material condition to its obligation to
consummate the transactions contemplated hereby cannot be fulfilled on or prior
to April 30, 2001 (the "Cutoff Date") 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, Merchants and Valley will
promptly inform the other of any facts applicable to Merchants or Valley,
respectively, or their respective directors or officers, 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. If the disclosure contained in any such supplement (i) relates to
events occurring before execution of this Agreement or (ii) alone or together
with other supplements or amendments materially adversely affects the
representation to which the amendment or supplement relates, the party receiving
the amendment or supplement may determine not to accept it as a modification of
the relevant representation. Notice of such determination, if made, shall be
given by the receiving party to the other party not later than 15 days after it
received the disclosure in question. If such notice is not timely given, or if
the disclosure in question did not contain any matter of the nature specified in
clause (i) or (ii) of the second preceding sentence, the relevant representation
shall be deemed modified by the disclosure in the amendment or supplement with
the same effect as though that disclosure had been included in the relevant
Disclosure Schedule as furnished prior to execution of this Agreement.
5.12 Transaction Expenses of Merchants.
(a) For planning purposes, Merchants shall, within 30
days from the date hereof, provide Valley with its estimated budget of
transaction-related expenses reasonably anticipated to be payable by Merchants
in connection with this transaction based on facts and circumstances currently
known, including the fees and expenses of counsel, accountants, investment
bankers and other professionals. Merchants shall promptly notify Valley if or
when it determines that it will expect to exceed its budget. Prior to signing
this Agreement, Merchants has disclosed to Valley the method by which the fees
of its investment bankers and counsel in connection with this transaction are to
be determined, and has disclosed to Valley the fees of its counsel in connection
with this transaction through a recent date.
(b) Promptly, but in any event within 30 days, after
the execution of this Agreement, Merchants shall ask all of its attorneys and
other professionals to render current and correct invoices for all unbilled time
and disbursements. Merchants shall accrue and/or pay all of such amounts as soon
as possible.
(c) Merchants shall cause its professionals to render
monthly invoices within 30 days after the end of each month. Merchants shall
notify Valley monthly of all out-of-pocket expenses which Merchants has incurred
in connection with this transaction.
(d) Valley, in reasonable consultation with
Merchants, shall make all arrangements with respect to the printing and mailing
of the Joint Proxy Statement-Prospectus.
5.13. Closing. The parties hereto shall cooperate and use
reasonable efforts to try to cause the Effective Time to occur between January
15 and January 31, 2001.
5.14. Indemnification. After the Effective Time, to the extent
permitted by applicable law and/or the Certificate of Incorporation or Articles
of Association, Valley agrees that it will, or will cause VNB to, provide to the
directors and officers of Merchants and the Bank indemnification with respect to
acts or omissions occurring prior to 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 and/or
the Certificate of Incorporation or Articles of Association, Valley or VNB (as
applicable) shall advance expenses in connection with the foregoing
indemnification.
5.15. Employment Matters and Other Post-Closing Items.
(a) Following consummation of the Merger, Valley will
honor the existing written employment and pension benefit agreements with
officers and employees of Merchants and the Bank that exist on the date hereof,
which are included in Section 5.15(a) of the Merchants Disclosure Schedule (as
the same are modified by those agreements between Valley and each of Spencer B.
Witty, James G. Lawrence, William J. Cardew and Eric W. Gould (the
"Non-Competition Agreements") entered into on the date hereof).
(b) Valley intends, to the extent practical, to
continue the employment of all officers and employees of the Bank, at or near
the same location, with the same or equivalent salary and benefits.
(c) Following the consummation of the Merger and for
one year thereafter, VNB shall, to the extent not duplicative of other severance
benefits, pay one week of severance for each year of service completed while
employed by Merchants and/or the Bank, with a maximum benefit of 26 weeks and a
minimum of four (4) weeks.
(d) Before or following consummation of the Merger,
Valley will decide whether to continue each of the Bank and/or Merchants'
pension and welfare plans for the benefit of employees of the Bank and
Merchants, or to have such employees become covered under a Valley Pension and
Welfare Plan. If Valley decides to cover Bank and Merchants employees under a
Valley Pension and Welfare Plan, such employees will receive credit for prior
years of service with the Bank and/or Merchants for purposes of determining
eligibility to participate, and vesting, if applicable (but not for the accrual
of benefits under Valley's pension plan). No prior existing condition limitation
shall be imposed with respect to any medical coverage plan as a result of the
Merger and Merchants and Bank employees shall get credit for any deductibles
already paid under existing plans for the year in which the Merger occurs.
(e) Merchants and the Bank may continue to administer
such bonus programs and arrangements as are disclosed pursuant to this Agreement
through the Effective Time, provided that bonuses shall be paid only to the
extent they have been previously accrued and their payment will not cause
Merchants' earnings to fall below budgeted amounts.
(f) Valley shall create a New York advisory board and
following the Closing the directors of Merchants who are not on the Valley Board
of Directors shall be invited to become members of the advisory board, along
with other prominent customers and associates of Merchants selected by Valley.
(g) Valley shall honor the existing director
retirement plan of Merchants contained in the Merchants Disclosure Schedule.
(h) After the Closing, Valley shall operate the
branches of Bank using the name of the Bank and noting that it is a division of
VNB.
(i) Valley and Merchants shall cooperate with each
other before the Closing to designate those Merchants officers who after the
Closing will receive three year cliff vesting stock options and restricted stock
under the Valley Option Plan and other benefits appropriate to retain the
officers of Merchants.
5.16. Pooling and Tax-Free Reorganization Treatment. Neither
Valley nor Merchants shall intentionally take, fail to take or cause to be taken
or not taken, any action within its control, 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. Merchants Option Plan. From and after the Effective
Time, each Merchants Option which is converted to an option to purchase Valley
Common Stock under Section 2.1(b) shall be administered, operated and
interpreted by a committee comprised of members of the Board of Directors of
Valley appointed by the Board of Directors of Valley. Valley shall reserve for
issuance the number of shares of Valley Common Stock necessary to satisfy
Valley's obligations. Valley shall also register, if not previously registered
pursuant to the 1933 Act, the shares authorized for issuance under the Merchants
Options so converted.
5.18. Affiliates.
(a) Promptly, but in any event within 14 days, after
the execution and delivery of this Agreement, (i) Merchants shall deliver to
Valley (x) a letter identifying all persons who, to the knowledge of Merchants,
may be deemed to be affiliates of Merchants under Rule 145 of the 1933 Act,
including without limitation all directors and executive officers of Merchants
and (y) a letter identifying all persons who, to the knowledge of Merchants, may
be deemed to be affiliates of Merchants as that term (affiliate) is used for
purposes of qualifying for pooling-of-interests accounting treatment; and (ii)
Valley shall identify to Merchants 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.
(b) Merchants shall cause each director of Merchants
to, and Merchants shall use its best efforts to cause each executive officer of
Merchants and each other person who may be deemed an affiliate of Merchants
(under either Rule 145 of the 1933 Act or the accounting treatment rules) to,
execute and deliver to Valley within 14 days after the execution and delivery of
this Agreement, a letter substantially in the form of Exhibit 5.18 hereto
agreeing to be bound by the restrictions of Rule 145 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 each director and executive
officer of Valley to, and Valley shall use its best efforts to cause each other
person who may be deemed an affiliate of Valley (as that term is used for
purposes of qualifying for pooling of interests) to, execute and deliver to
Valley within 14 days after the execution and delivery of this Agreement, a
letter substantially in the form of Exhibit 5.18.1 hereto 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.
5.19. Bank Policies and Bank Mergers. Notwithstanding that
Merchants believes that it has established all reserves and taken all provisions
for possible loan losses required by GAAP and applicable laws, rules and
regulations, Merchants recognizes that Valley may have adopted different loan,
accrual and reserve policies (including loan classifications and levels of
reserves for possible loan losses). From and after the date of this Agreement to
the Effective Time and in order to formulate the plan of integration for the
Bank Mergers, Merchants and Valley shall consult and cooperate with each other
with respect to (i) conforming to the extent appropriate, based upon such
consultation, Merchants' loan, accrual and reserve policies and Merchants' other
policies and procedures regarding applicable regulatory matters, including
without limitation Federal Reserve, the Bank Secrecy Act and FDIC matters, to
those policies of Valley as Valley may reasonably identify to Merchants from
time to time, (ii) new extensions of credit by the Bank where the aggregate
exposure exceeds $5,000,000, and (iii) conforming, based upon such consultation,
the composition of the investment portfolio and overall asset/liability
management position of Merchants and the Bank to the extent appropriate;
provided that any required change in Merchants' practices in connection with the
matters described in clause (i) or (iii) above need not be effected (A) more
than five days prior to the Effective Time and (B) unless and until all
necessary regulatory, governmental and shareholder approvals and consents have
been received, all statutory waiting periods in respect thereof have expired,
Valley agrees in writing that all conditions precedent to the Closing have
occurred (other than the delivery of certificates, opinions and other
instruments and documents to be delivered at the Closing), and Valley has
provided the Closing Notice. No accrual or reserve made by Merchants or any
Merchants Subsidiary pursuant to this subsection, or any litigation or
regulatory proceeding arising out of any such accrual or reserve, shall
constitute or be deemed to be a breach or violation of any representation,
warranty, covenant, condition or other provision of this Agreement or to
constitute a termination event within the meaning of Section 7.1(d) or Section
7.1(f) hereof.
5.20. New Valley Directors. As of the Effective Time, Valley
shall cause its Board of Directors and the VNB Board of Directors to take action
to appoint Spencer B. Witty, Robinson Markel and Charles Baum to the Board of
Directors of Valley and Spencer B. Witty to the Board of Directors of VNB,
respectively, at the Effective Time.
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 Stockholders; SEC Registration. This
Agreement and the transactions contemplated hereby shall have been approved by
the requisite vote of the stockholders of Merchants and the stockholders of
Valley. 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, including
Valley Common Stock to be issued for the Merchants Options, shall have been
approved for listing on the New York Stock Exchange.
(b) Regulatory Filings. All necessary regulatory or
governmental approvals and consents (including without limitation any required
approval of the OCC and any approval or waiver required by the FRB) required to
consummate the transactions contemplated hereby shall have been obtained without
any term or condition which would materially impair the value of Merchants and
the Bank, 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. Both VNB and the Bank shall have taken all necessary action to
consummate the Bank Merger immediately after the Effective Time.
(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 or the Bank 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 or
the Bank 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 the Bank Merger or obtain other substantial monetary or other
relief against one or more parties hereto in connection with this Agreement and
which Valley or Merchants 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 or the Bank Merger.
(d) Tax Free Exchange. Valley and Merchants shall
have received an opinion, satisfactory to Valley and Merchants, of Pitney,
Hardin, Kipp & Szuch LLP, 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, Merchants, VNB or the Bank or to the
stockholders of Merchants who exchange their shares of Merchants for Valley
Common Stock (except to the extent that cash is received in lieu of fractional
shares of Valley Common Stock).
(e) Pooling of Interests. The Merger shall be
qualified to be treated by Valley as a pooling-of-interests for accounting
purposes and Valley shall have received a letter from KPMG LLP to the effect
that based upon a review of this Agreement and the facts and circumstances known
to it, the Merger shall be qualified to be treated by Valley as a
pooling-of-interests for accounting purposes.
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 Merchants and Bank. The representations and warranties of
Merchants 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.
Merchants 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 been the subject of a supplement or amendment to the Merchants
Disclosure Schedule, that representation or warranty shall be deemed modified by
the disclosure contained in such supplement or amendment only under the
circumstances set forth in Section 5.11.
(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 Merchants, dated the date of the Closing, in form and
substance reasonably satisfactory to Valley, covering the matters set forth on
Schedule 6.2 hereto and any other matters reasonably requested by Valley.
(d) Fairness Opinion. Valley shall have received from
Sandler O'Neill & Partners, L.P. an updated opinion as of the date of the Joint
Proxy Statement-Prospectus with respect to the fairness from a financial point
of view of the Exchange Ratio to the stockholders of Valley in the Merger.
(e) Non-Competition Agreements. All of the directors
or officers of Merchants identified in Section 5.15(a) as having executed the
Non-Competition Agreements shall continue to be employed by Merchants (unless
their employment was terminated due to death or disability) and none of them
shall have notified either Merchants or Valley of his intention to voluntarily
terminate his employment with Valley following the Closing.
(f) Certificates. Merchants shall have furnished
Valley with such certificates of its officers or 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 Merchants Under this
Agreement. The obligations of Merchants 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 shall have performed
in all material respects, the agreements, covenants and obligations to be
performed by it prior to the Closing Date. With respect to any representation or
warranty which as of the Closing Date has been the subject of a supplement or
amendment to the Valley Disclosure Schedule, that representation or warranty
shall be deemed modified by the disclosure contained in such supplement or
amendment only under the circumstances set forth in Section 5.11.
(b) Opinion of Counsel to Valley. Merchants shall
have received an opinion of counsel to Valley, dated the date of the Closing, in
form and substance reasonably satisfactory to Merchants, covering the matters
set forth on Schedule 6.3 hereto and any other matter reasonably requested by
Merchants.
(c) Fairness Opinion. Merchants shall have received
an updated opinion from CIBC World Markets Corp., as of the date of the Joint
Proxy Statement-Prospectus with respect to the fairness, from a financial point
of view, of the Exchange Ratio to the shareholders of Merchants in the Merger.
(d) Certificates. Valley shall have furnished
Merchants with such certificates of its officers or others and such other
documents to evidence fulfillment of the conditions set forth in this Section
6.3 as Merchants may reasonably request.
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 Merchants, based upon any of the following:
(a) By mutual written consent of the parties hereto.
(b) By Valley or Merchants (i) if the Effective Time
shall not have occurred on or prior to the Cutoff Date or (ii) if a vote of the
stockholders of Merchants or Valley is taken and the stockholders of either
company 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, in the case of Merchants, to be performed or
observed by the directors of Merchants) at or before the Effective Time.
(c) By Valley or Merchants 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
Merchants if any such application is approved with conditions which materially
impair the value of Merchants and the Bank, taken as a whole, to Valley.
(d) By Valley if (i) there shall have occurred a
material adverse change in the business, operations, assets, or financial
condition of Merchants or the Bank, taken as a whole, from that disclosed by
Merchants on the date of this Agreement; or (ii) there was a material breach in
any representation, warranty, covenant, agreement or obligation of Merchants
hereunder.
(e) By Merchants, if (i) there shall have occurred a
material adverse change in the business, operations, assets or financial
condition of Valley or VNB 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 Valley or Merchants if any condition to
Closing specified under Article VI hereof applicable to such party cannot
reasonably be met on or before the Cutoff Date 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 Merchants pursuant to
Section 7.1, this Agreement shall forthwith become void and have no effect,
without any liability on the part of any party or its officers, directors or
stockholders, except that Sections 5.5(b) and 8.1 hereof shall have continuing
effect as set forth therein. Nothing contained herein, however, shall relieve
any party from any liability for any willful 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 Merchants 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 stockholders of Merchants without the
approval of such stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of Valley and Merchants.
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.
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, except that the cost of printing and mailing
the Joint Proxy Statement-Prospectus shall be borne equally by the parties
hereto if the transaction is terminated.
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
1455 Valley Road
Wayne, New Jersey 07470
Attn.: Gerald H. Lipkin
Chairman and Chief Executive Officer
Telecopier No. (973) 305-0024
Copy to:
--------
Pitney, Hardin, Kipp & Szuch LLP
Attn.: Ronald H. Janis, Esq.
Delivery:
---------
200 Campus Drive
Florham Park, New Jersey 07932
Mail:
----
P.O. Box 1945
Morristown, New Jersey 07962-1945
Telecopier No. (973) 966-1550
(b) If to Merchants, to:
Merchants New York Bancorp, Inc.
275 Madison Avenue
New York, New York 10022
Attn.: William J. Cardew,
Vice Chairman and Chief Financial Officer
Telecopier No. (212) 973-6663
Copy to:
--------
Rosenman & Colin LLP
Attn.: Robinson Markel, Esq.
575 Madison Avenue
New York, New York 10022-2585
Telecopier No. (212) 940-8776
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 Valley, Merchants, the Bank and VNB, and their
respective successors. Nothing in this Agreement is intended to confer,
expressly or by implication, upon any other person any rights or remedies under
or by reason of this Agreement, except for the rights conferred upon indemnitees
pursuant to Section 5.14 hereof.
8.4. Entire Agreement. This Agreement, 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 among 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. If any
provision of this Agreement is found invalid, it shall be considered deleted and
shall not invalidate the remaining provisions.
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.
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.
8.8. Survival. All representations, warranties and, except to
the extent specifically provided otherwise herein, agreements and covenants,
other than those agreements and covenants set forth in Sections 5.14 and Section
5.16 which shall survive the Merger, shall terminate as of the Effective Time.
8.9. Knowledge. Representations made herein which are
qualified by the phrase to the knowledge of Merchants, to the best of Merchants'
knowledge or similar phrases refer as of the date hereof to the best knowledge
of the Chairman of the Board, the President and Chief Executive Officer, the
Vice Chairman and Chief Operating Officer, and the Senior Vice President and
Treasurer of Merchants and thereafter refer to the best knowledge of any senior
officer of Merchants or any Merchants subsidiary. Representations made herein
which are qualified by the phrase to the knowledge of Valley, to the best of
Valley's knowledge or similar phrases refer as of the date hereof to the best
knowledge of the President and Chief Executive Officer, the Executive Vice
President/Legal and the Chief Financial Officer of Valley and thereafter refer
to the best knowledge of any senior officer of Valley or any Valley subsidiary.
IN WITNESS WHEREOF, Valley, VNB, the Bank and Merchants have
caused this Agreement to be executed by their duly authorized officers as of the
day and year first above written.
<TABLE>
<CAPTION>
ATTEST: VALLEY NATIONAL BANCORP
<S> <C>
ALAN D. ESKOW By: GERALD H. LIPKIN
-------------------------------- --------------------------------------------
Alan D. Eskow, Senior Vice President Gerald H. Lipkin
Chairman, President and Chief Executive Officer
ATTEST: MERCHANTS NEW YORK BANCORP, INC.
ERIC W. GOULD By: SPENCER B. WITTY
-------------------------------- --------------------------------------------
Eric W. Gould, Senior Vice President Spencer B. Witty
Chairman of the Board
and
By: JAMES G. LAWRENCE
-----------------------------------------------
James G. Lawrence
President and Chief Executive Officer
ATTEST: VALLEY NATIONAL BANK
ALAN D. ESKOW By: GERALD H. LIPKIN
-------------------------------- --------------------------------------------
Alan D. Eskow, Senior Vice President Gerald H. Lipkin, Chairman, President
and Chief Executive Officer
ATTEST: THE MERCHANTS BANK OF NEW YORK
ERIC W. GOULD By: SPENCER B. WITTY
-------------------------------- --------------------------------------------
Eric W. Gould, Senior Vice President Spencer B. Witty
Chairman of the Board
and
By: JAMES G. LAWRENCE
-----------------------------------------------
James G. Lawrence
President and Chief Executive Officer
</TABLE>
<PAGE>
APPENDIX B
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Agreement") dated as of
September 5, 2000, is by and between Valley National Bancorp, a New Jersey
corporation and registered bank holding company ("Valley"), and Merchants New
York Bancorp, Inc., a Delaware corporation and registered bank holding company
("Merchants").
BACKGROUND
WHEREAS, Valley and Merchants, as of the date hereof, are
prepared to execute a definitive agreement and plan of merger (the "Merger
Agreement") pursuant to which Merchants will be merged with and into Valley (the
"Merger"); and
WHEREAS, Valley has advised Merchants that it will not execute
the Merger Agreement unless Merchants executes this Agreement; and
WHEREAS, the Board of Directors of Merchants has determined
that the Merger Agreement provides substantial benefits to the shareholders of
Merchants; and
WHEREAS, as an inducement to Valley to enter into the Merger
Agreement and in consideration for such entry, Merchants desires to grant to
Valley an option to purchase authorized but unissued shares of common stock of
Merchants 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 Merchants,
intending to be legally bound hereby, agree:
1. Grant of Option. Merchants hereby grants to Valley an option to purchase
4,663,741 shares of common stock, $0.001 par value per share, of Merchants (the
"Common Stock") at a price of $16.98 per share (as the same may be reduced in
accordance with Section 5b hereof, the "Option Price"), on the terms and
conditions set forth herein (the "Option").
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 the terms and conditions set forth herein and the termination
provisions of Section 19 of this Agreement.
The term "Triggering Event" means the occurrence of any of the
following events:
a. 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
"third party") acquires beneficial ownership (as such term is defined in Rule
13d-3 as promulgated under the Exchange Act) of at least 10% of the then
outstanding shares of Common Stock, provided, however, that the continuing
ownership by a person or group which as of the date hereof owns more than 10% of
the outstanding Common Stock shall not constitute a Triggering Event; or
b. A third party enters into a letter of intent or an
agreement, whether oral or written, with Merchants pursuant to which such third
party or any affiliate of such third party would (i) merge or consolidate, or
enter into any similar transaction, with Merchants, (ii) acquire all or a
significant portion of the assets or liabilities of Merchants, or (iii) acquire
beneficial ownership of securities representing, or the right to acquire
beneficial ownership or to vote securities representing, 10% or more of the then
outstanding shares of Common Stock; or
c. A third party makes a filing with any bank, thrift or
financial holding company regulatory authorities with respect to or publicly
announces a bona fide proposal (a "Proposal") for (i) any merger with,
consolidation with or acquisition of all or a significant portion of all the
assets or liabilities of, Merchants or any other business combination involving
Merchants, 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, 10% or more of the outstanding shares of Common
Stock, and in either case 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 Merchants called to vote on the Merger and Merchants'
stockholders fail to approve the Merger by the vote required by applicable law
at the meeting of stockholders called for such purpose; or
d. A third party makes a bona fide Proposal and
thereafter, but before such Proposal has been Publicly Withdrawn, Merchants
willfully or intentionally takes any action in any manner which would materially
interfere with its ability to consummate the Merger or materially reduce the
value of the transaction to Valley; or
e. After the execution of this Agreement, Merchants or any
of its directors, senior executive officers, investment bankers or other person
with actual or apparent authority to speak for the Board of Directors, willfully
or intentionally takes any material direct or indirect action inviting,
encouraging or soliciting any proposal (other than from Valley or an affiliate
of Valley) which has as its purpose a tender offer for the shares of Common
Stock, a merger, consolidation, plan of exchange, plan of acquisition or
reorganization of Merchants, or a sale of a significant number of shares of
Common Stock or any significant portion of its assets or liabilities.
The term "significant portion" means 10% of the assets or
liabilities of Merchants. The term "significant number" means 10% of the
outstanding shares of Common Stock.
Solely for purposes of Section 5b hereof, the date of a
"Triggering Event" under clause (a) above is the date the third party first
acquires beneficial ownership of at least 10% of the then outstanding shares of
Common Stock; the date of a "Triggering Event" under clause (b) above is the
date of entry into the letter of intent or agreement; the date of a "Triggering
Event" under clause (c) above is the earlier of the date of the filing (if any)
with a bank, thrift or financial holding company regulatory authority with
respect to the Proposal or the date of public announcement of the Proposal; the
date of a "Triggering Event" under clause (d) above is the date the third party
first makes the Proposal; and the date of a "Triggering Event" under clause (e)
above is the first date on which a material direct or indirect action referred
to therein is taken.
"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 Merchants 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 (including any filing, approval or consent required under
the rules and regulations of any securities exchange or the National Association
of Securities Dealers, Inc.) necessary for Merchants to issue the shares of
Common Stock covered by the Option (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.
Merchants 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 Merchants shall not be a condition to the right of
Valley to exercise the Option. Merchants will not take any action which would
have the effect of preventing or disabling Merchants from delivering the Option
Shares to Valley upon exercise of the Option or otherwise performing its
obligations under this Agreement, except to the extent required by applicable
securities and banking laws and regulations.
In the event Valley wishes to exercise the Option, Valley
shall send a written notice to Merchants (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 between two and ten business days
inclusive from the Notice 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.
3. Payment and Delivery of Certificates. At any Closing hereunder (a) Valley
will make payment to Merchants of the aggregate price for the Option Shares so
purchased by wire transfer of immediately available funds to an account
designated by Merchants; (b) Merchants 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 Merchants, registered in the
name of Valley or its designee, in such denominations as were specified by
Valley in its notice of exercise and, if necessary, 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.
If required under applicable federal securities laws as
determined by Merchants' counsel, 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 Merchants, said transfer
would be exempt from registration under the provisions of the 1933 Act
and the regulations promulgated thereunder.
No such legend shall be required if a registration statement is filed and
declared effective under Section 4 hereof.
4. Registration Rights. Upon or after the occurrence of a Triggering Event and
upon receipt of a written request from Valley, Merchants shall, if necessary for
the resale of the Option or the Option Shares by Valley, prepare and file a
registration statement with the Securities and Exchange Commission and any state
securities bureau covering the Option and such number of Option Shares as Valley
shall specify in its request, and Merchants 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, and provided further that Merchants shall not be
required to prepare and file any such registration statement in connection with
any proposed sale with respect to which counsel to Merchants delivers to
Merchants and to Valley (which is reasonably acceptable to Valley) its opinion
to the effect that no such filing is required under applicable laws and
regulations with respect to such sale or disposition or any subsequent sale or
disposition; provided further, however, that Merchants may delay any
registration of Option Shares above for a period not exceeding 90 days in the
event that Merchants shall in good faith determine that any such registration
would adversely effect an on-going offering of securities by Merchants for cash.
Valley shall provide all information reasonable requested by Merchants for
inclusion in any registration statement to be filed hereunder.
In connection with such filing, Merchants 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 Merchants 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 Merchants and blue sky fees and expenses shall be paid by Merchants.
Underwriting discounts and commissions to brokers and dealers relating to the
Option or 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, Merchants 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
Merchants 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 Merchants 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 or 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 with respect to information
about the selling stockholders or the plan of distribution. Valley will
indemnify and hold harmless Merchants 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 with respect to information about the selling stockholders or the plan
of distribution; and Valley will reimburse Merchants for any legal or other
expense reasonably incurred by Merchants in connection with investigating or
defending any such loss, claim, damage, liability or action. Notwithstanding
anything to the contrary herein, no indemnifying party shall be liable for any
settlement effected without its prior written consent.
5. Adjustments.
a. Adjustments 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
Merchants with another entity, or any sale of all or substantially all of the
assets of Merchants, 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.
b. Adjustments Based Upon Changes in Market Price. If, on the date of
the first occurrence of any Triggering Event under Section 2, the Average Merger
Consideration Equivalent is less than the Option Price, then the Option Price
automatically shall be reduced to the amount of the Discounted Average Merger
Consideration Equivalent. As used herein, the "Merger Consideration Equivalent"
on any trading day means the Closing Price of Valley Common Stock on such day
multiplied by the Exchange Ratio (with "Closing Price," "Valley Common Stock"
and "Exchange Ratio" all having the meanings assigned to them in the Merger
Agreement). The "Average Merger Consideration Equivalent" means the average of
the Merger Consideration Equivalents during the Measurement Period. The
"Discounted Average Merger Consideration Equivalent" means the Average Merger
Consideration Equivalent minus $3.06. The "Measurement Period" shall be
determined as follows: (a) If there is at least one but less than ten trading
days between the date of the Merger Agreement and the date of the Triggering
Event (calculated in this paragraph by excluding both the date of the Merger
Agreement and the date of the Triggering Event), then the "Measurement Period"
is the entire period between the date of the Merger Agreement and the date of
the Triggering Event. (b) If there are at least ten but not more than 60 trading
days between the date of the Merger Agreement and the date of the Triggering
Event, then the "Measurement Period" is the ten consecutive trading day period
falling between the date of the Merger Agreement and the date of the Triggering
Event which produces the lowest Average Merger Consideration Equivalent. (c) If
there are more than 60 trading days between the date of the Merger Agreement and
the date of the Triggering Event, then the "Measurement Period" is the ten
consecutive trading day period falling during the 60 trading day period ending
with the last trading day prior to the date of the Triggering Event which
produces the lowest Average Merger Consideration Equivalent. If the Exchange
Ratio is adjusted during or after the Measurement Period, the Average Merger
Consideration Equivalent shall be calculated or adjusted appropriately to
reflect the adjustment in the Exchange Ratio.
6. Filings and Consents. Each of Valley and Merchants will use its reasonable
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, but not limited to, in the event
Valley is the holder hereof, approval of the Board of Governors of the Federal
Reserve System, the Federal Deposit Insurance Corporation, the New York
Department of Banking or the Securities and Exchange Commission, and Merchants
agrees to cooperate with and furnish to the holder hereof such information and
documents as may be reasonably required to secure such approvals.
7. Representations and Warranties of Merchants. Merchants hereby represents and
warrants to Valley as follows:
a. Due Authorization. Merchants 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 Merchants.
b. Authorized Shares. Merchants 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 Bylaws of Merchants or any agreement,
instrument, judgment, decree or order applicable to Merchants.
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 Merchants 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, until 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 neither
the Option nor the Option Shares is the subject of a registration statement
filed with, and declared effective by, the Securities and Exchange Commission
pursuant to Section 5 of the Securities Act, but instead each is being offered
in reliance upon the exemption from the registration requirement provided by
Section 4(2) thereof and the representations and warranties made by Valley in
connection therewith. After the occurrence of a Triggering Event, Valley may
sell, assign, pledge, or otherwise transfer its rights and obligations
hereunder, in whole or in part, to any person, subject to compliance with
applicable law.
11. Amendment of Agreement. Upon 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, or delivered by overnight delivery service, or
by registered or certified mail (postage prepaid, return receipt requested) to
the respective parties as follows:
If to Valley:
Valley National Bancorp
1455 Valley Road
Wayne, New Jersey 07470
Attention: Gerald H. Lipkin
Chairman, President and
Chief Executive Officer
With a copy to:
Pitney, Hardin, Kipp & Szuch LLP
200 Campus Drive
Florham Park, New Jersey 07932-0950
Attention: Ronald H. Janis, Esq.
Michael W. Zelenty, Esq.
If to Merchants:
Merchants New York Bancorp, Inc.
275 Madison Avenue
New York, New York 10022
Attention: William J. Cardew
Vice Chairman and Chief
Financial Officer
With a copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022-2585
Attention: Robinson Markel, 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 (a) compliance with any of the covenants of the
other party contained in this Agreement and/or (b) 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.
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 (as
defined in Section 2 hereof), this Agreement shall not terminate until the later
of 18 months following the date of the termination of the Merger Agreement or
the consummation of any proposed transactions which constitute the Triggering
Event; provided further, that if the holder has given notice of exercise of the
option and the exercise is awaiting any necessary regulatory approval after the
holder has acted reasonably to obtain such approval this Agreement shall not
terminate until the approvals have been granted and reasonable time to
consummate has elapsed, or the approvals are denied.
IN WITNESS WHEREOF, each of the parties hereto, pursuant to
resolutions adopted by its Board of Directors, has caused this Stock Option
Agreement to be executed by its duly authorized officer, all as of the day and
year first above written.
VALLEY NATIONAL BANCORP
By: GERALD H. LIPKIN
----------------------------------------
Gerald H. Lipkin, Chairman, President
Chief Executive Officer
MERCHANTS NEW YORK BANCORP, INC.
By: JAMES G. LAWRENCE
----------------------------------------
James G. Lawrence, President and
Chief Executive Officer
<PAGE>
APPENDIX C
OPINION OF CIBC WORLD MARKETS CORP.
________, 2000
The Board of Directors
Merchants New York Bancorp, Inc.
275 Madison Avenue
New York, New York 10016
Members of the Board:
You have asked CIBC World Markets Corp. ("CIBC World Markets") to render a
written opinion ("Fairness Opinion") to the Board of Directors as to the
fairness to the stockholders of Merchants New York Bancorp, Inc. ("Merchants"),
from a financial point of view, of the Exchange Ratio pursuant to the Agreement
and Plan of Merger dated as of September 5, 2000 by and between Valley National
Bancorp, Inc. ("Valley") and Merchants (the "Agreement"). The Agreement provides
for, among other things, a transaction whereby Merchants will be merged with and
into Valley, with Valley as the surviving corporation (the "Merger"). Each
outstanding share of Merchants common stock will be converted into the right to
receive 0.7634 shares of common stock of Valley (the "Exchange Ratio").
In arriving at our Fairness Opinion we:
(a) reviewed the Agreement, dated September 5, 2000;
(b) reviewed the Stock Option Agreement, dated September 5, 2000;
(c) reviewed the audited financial statements and management's' discussion
and analysis of the financial condition and results of operations of
Merchants and Valley for the fiscal years ended December 31, 1999,
1998, and 1997;
(d) reviewed the unaudited financial statements for Merchants and Valley
for the six months ended June 30, 2000 and 1999;
(e) reviewed certain other publicly available business and financial
information relating to Merchants and Valley;
(f) reviewed certain internal financial analyses, budgets, projections and
forecasts for Merchants and Valley, including estimates as to the
future cost savings expected to be achieved as a result of the Merger,
prepared by and reviewed with the management of Merchants and Valley;
(g) held discussions with the senior management of Merchants and Valley of
the past and current business operations, results thereof, financial
condition and future prospects of their respective companies;
(h) performed a comparison of certain financial information for Merchants
and Valley with similar information for certain other companies
considered comparable to Merchants and Valley;
(i) compared the financial terms of the transaction with certain recent
business combinations in the banking industry;
(j) reviewed the pro forma effect of the transaction on Merchants and
Valley based on certain assumptions provided by Merchants and Valley;
(k) reviewed the current market environment generally and the banking
environment in particular; and
(l) reviewed such other information, financial studies, analyses and
investigations and financial, economic and market criteria as we
considered appropriate in the circumstances.
In rendering our Fairness Opinion we relied upon and assumed, without
independent verification or investigation, the accuracy and completeness of all
of the financial and other information provided to us by Merchants, Valley and
their respective employees, representatives and affiliates. With respect to
forecasts of future financial condition and operating results of Merchants and
Valley provided to us, we assumed at the direction of Merchants' and Valley's
respective management, without independent verification or investigation, that
such forecasts were reasonably prepared on bases reflecting the best available
information, estimates and judgement of Merchants, Valley and their respective
management. We have neither made nor obtained any independent evaluations or
appraisals of the assets or the liabilities of Merchants, Valley or their
respective affiliated entities. We are not experts in the evaluation of
allowance for loan losses or liabilities (contingent or otherwise) and we have
neither made an independent evaluation of the adequacy of the allowance for loan
losses of Valley nor reviewed any individual loan credit files. We are not
expressing any opinion as to the underlying valuation, future performance or
long term viability of Valley following the Merger, or the price at which Valley
common stock will trade subsequent to the Merger. We have not been asked to
consider, and our opinion does not address, the relative merits of the Merger as
compared to any alternative business strategies that might exist for Merchants
or the effect of any other transaction in which Merchants might engage. Our
opinion is necessarily based on the information available to us and general
economic, financial and stock market conditions and circumstances as they exist
and can be evaluated by us on the date hereof. It should be understood that,
although subsequent developments may affect this opinion, we do not have any
obligation to update, revise or reaffirm the opinion.
As part of our investment banking business, we are regularly engaged in
valuations of businesses and securities in connection with acquisitions and
mergers, underwritings, secondary distributions of securities, private
placements and valuations for other purposes.
We acted as financial advisor to Merchants in connection with the Merger and to
the Board of Directors of Merchants in rendering this opinion and will receive a
fee for our services. CIBC World Markets has performed investment banking and
other services for Merchants in the past and has been compensated for such
services. In the ordinary course of its business, CIBC World Markets and its
affiliates may actively trade securities of Merchants and Valley for their own
account and for the accounts of customers and, accordingly, may at any time hold
a long or short position in such securities.
Based upon and subject to the foregoing, and such other factors as we deem
relevant, it is our opinion that, as of the date hereof, the Exchange Ratio
pursuant to the Agreement is fair to the stockholders of Merchants from a
financial point of view. This Fairness Opinion is for the exclusive use of the
Board of Directors of Merchants. Neither this Fairness Opinion nor the services
provided by CIBC World Markets in connection herewith may be publicly disclosed
or referred to in any manner by Merchants without the prior written approval by
CIBC World Markets. CIBC World Markets consents to the inclusion of this opinion
in its entirety and any reference to this opinion in any prospectus, proxy
statement or solicitation/recommendation statement required to be distributed to
the Company's stockholders in connection with the Merger.
Very truly yours,
<PAGE>
APPENDIX D
OPINION OF SANDLER O'NEILL AND PARTNERS, L.P.
_________________, 2000
Board of Directors
Valley National Bancorp
1455 Valley Road
Wayne, NJ 07474
Ladies and Gentlemen:
Valley National Bancorp ("Valley") and Merchants New York Bancorp, Inc.
("Merchants") have entered into an Agreement and Plan of Merger, dated as of
September 5, 2000 (the "Agreement"), pursuant to which Merchants will be merged
with and into Valley (the "Merger"). Upon consummation of the Merger, each share
of Merchants common stock, par value $.001 per share, issued and outstanding
immediately prior to the Merger (the "Merchants Shares"), other than certain
shares specified in the Agreement, will be converted into the right to receive
0.7634 shares (the "Exchange Ratio") of Valley common stock, no par value. The
terms and conditions of the Merger are more fully set forth in the Agreement.
You have requested our opinion as to the fairness, from a financial point of
view, of the Exchange Ratio to the holders of shares of Valley common stock.
Sandler O'Neill & Partners, L.P., as part of its investment banking
business, is regularly engaged in the valuation of financial institutions and
their securities in connection with mergers and acquisitions and other corporate
transactions. In connection with this opinion, we have reviewed, among other
things: (i) the Agreement and certain exhibits and schedules thereto; (ii) the
Stock Option Agreement, dated as of September 5, 2000, by and between Valley and
Merchants; (iii) certain publicly available financial statements and other
historical financial information of Valley that we deemed relevant; (iv) certain
publicly available financial statements and other historical financial
information of Merchants that we deemed relevant; (v) consensus earnings per
share estimates for Valley for the years ending December 31, 2000 and 2001
published by I/B/E/S and the views of senior management of Valley, based on
limited discussions with certain members of senior management, regarding
Valley's past and current business, financial condition, results of operations
and future prospects; (vi) certain internal financial analyses and forecasts of
Merchants prepared by and/or reviewed with management of Merchants and the views
of senior management of Merchants, based on limited discussions with a
representative of senior management of Merchants, regarding Merchants' past and
current business, financial condition, results of operations and future
prospects; (vii) the pro forma impact of the Merger on Valley; (viii) the
publicly reported historical price and trading activity for Valley's and
Merchants' common stock, including a comparison of certain financial and stock
market information for Valley and Merchants with similar publicly available
information for certain other companies the securities of which are publicly
traded; (ix) the financial terms of recent business combinations in the
commercial banking industry, to the extent publicly available; (x) the current
market environment generally and the banking environment in particular; and (xi)
such other information, financial studies, analyses and investigations and
financial, economic and market criteria as we considered relevant. We did not
act as Valley's financial advisor in connection with the negotiation of the
Exchange Ratio or the Agreement.
In performing our review, we have relied upon the accuracy and
completeness of all of the financial and other information that was available to
us from public sources, that was provided to us by Valley or Merchants or their
respective representatives or that was otherwise reviewed by us and have assumed
such accuracy and completeness for purposes of rendering this opinion. We have
not been asked to and have not undertaken an independent verification of any of
such information and we do not assume any responsibility or liability for the
accuracy or completeness thereof. We did not make an independent evaluation or
appraisal of the specific assets, the collateral securing assets or the
liabilities (contingent or otherwise) of Valley or Merchants or any of their
subsidiaries, or the collectibility of any such assets, nor have we been
furnished with any such evaluations or appraisals. We did not make an
independent evaluation of the adequacy of the allowance for loan losses of
Valley or Merchants nor have we reviewed any individual credit files relating to
Valley or Merchants. We have assumed that the respective aggregate allowances
for loan losses for both Valley and Merchants are adequate to cover such losses
and will be adequate on a pro forma basis for the combined entity. We are not
accountants and have relied upon the reports of the independent accountants for
each of Valley and Merchants for the accuracy and completeness of the financial
statements furnished to us. With respect to the financial projections and
earnings estimates prepared by and/or reviewed with the respective managements
of Valley and Merchants, we have assumed that they have been reasonably prepared
and that they reflect the best currently available estimates and judgments of
the respective managements of the respective future financial performances of
Valley and Merchants and that such performances will be achieved, and we express
no opinion as to such financial projections or estimates or the assumptions on
which they are based. We have also assumed that there has been no material
change in Valley's or Merchants' assets, financial condition, results of
operations, business or prospects since the date of the most recent financial
statements made available to us. We have assumed in all respects material to our
analysis that Valley and Merchants will remain as going concerns for all periods
relevant to our analyses, that all of the representations and warranties
contained in the Agreement and all related agreements are true and correct, that
each party to such agreements will perform all of the covenants required to be
performed by such party under such agreements, that the conditions precedent in
the Agreement are not waived and that the Merger will be accounted for as a
pooling of interests and will qualify as a tax-free reorganization for federal
income tax purposes.
Our opinion is necessarily based on financial, economic, market and
other conditions as in effect on, and the information made available to us as
of, the date hereof. Events occurring after the date hereof could materially
affect this opinion. We have not undertaken to update, revise, reaffirm or
withdraw this opinion or otherwise comment upon events occurring after the date
hereof. We are expressing no opinion herein as to what the value of Valley
common stock will be when issued to Merchants' shareholders pursuant to the
Agreement or the prices at which Valley's or Merchants' common stock will trade
at any time.
We have been retained by you to render this opinion and will receive a
fee for our services. In the ordinary course of our business as a broker-dealer,
we may purchase securities from and sell securities to Valley and Merchants. We
may also actively trade the debt and equity securities of Valley and Merchants
for our own account and for the accounts of our customers and, accordingly, may
at any time hold a long or short position in such securities.
Our opinion is directed to the Board of Directors of Valley in
connection with its consideration of the Merger and does not constitute a
recommendation to any shareholder of Valley as to how such shareholder should
vote at any meeting of shareholders called to consider and vote upon the Merger.
Our opinion is not to be quoted or referred to, in whole or in part, in a
registration statement, prospectus, proxy statement or in any other document,
nor shall this opinion be used for any other purposes, without Sandler O'Neill's
prior written consent, provided, however, that we hereby consent to the
inclusion of this opinion as an appendix to Valley's and Merchant's Joint Proxy
Statement/Prospectus dated the date hereof and to the references to this opinion
therein.
Based upon and subject to the foregoing, it is our opinion, as of the
date hereof, that the Exchange Ratio is fair, from a financial point of view, to
the holders of shares of Valley common stock.
Very truly yours,
<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 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.
<PAGE>
INDEX TO EXHIBITS
Item 21.
A. Exhibits
------------
Exhibit No. Description
----------- -----------
2(a)* Agreement and Plan of Merger dated as of September 5,
2000 (the "Merger Agreement"), among Valley National
Bancorp ("Valley"), Valley National Bank ("VNB"),
Merchants New York Bancorp, Inc. ("Merchants"), and
Merchants's subsidiary, The Merchants Bank of New
York ("TMB") which is attached as Appendix A to the
Joint Proxy Statement-Prospectus.
2(b)* Stock Option Agreement, dated as of September 5,
2000, by and between Valley and Merchants, which is
attached as Appendix B to the Joint Proxy
Statement-Prospectus.
5 Opinion of Pitney, Hardin, Kipp & Szuch LLP as to the
legality of the securities to be registered.
8 Opinion of Pitney, Hardin, Kipp & Szuch LLP as to the
tax consequences of the Merger.
23.1** Consent of KPMG LLP with respect to Valley.
23.2** Consent of KPMG LLP with respect to Merchants.
23.3 Consent of Pitney, Hardin, Kipp & Szuch LLP (included
in Exhibits 5 and 8 hereto).
23.4 Consent of CIBC World Markets Corp. ("CIBC").
23.5 Consent of Sandler O'Neill & Partners L.P.
("Sandler").
24.1 Powers of Attorney
99.1** Form of Proxy Card to be utilized by the Board of
Directors of Merchants.
99.2** Form of Proxy Card to be utilized by the Board of
Directors of Valley
----------------------
* Included elsewhere in this registration statement.
** Filed with the Commission on October 12, 2000.
B. Financial Schedules
All financial statement schedules have been omitted because they are
not applicable or the required information is included in the financial
statements or notes thereto or incorporated by reference therein.
C. Report, Opinion or Appraisals
The form of Fairness Opinion of CIBC is included as Appendix C to the
Joint Proxy Statement-Prospectus and the form of Fairness Opinion of Sandler is
included as Appendix D to the Joint Proxy Statement-Prospectus.
<PAGE>
Item 22. Undertakings
1. The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(b) 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.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the Township of Wayne,
State of New Jersey, on the 30th day of October, 2000.
VALLEY NATIONAL BANCORP
By:GERALD H. LIPKIN
-----------------------------------------------
Gerald H. Lipkin,
Chairman, President 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.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
GERALD H. LIPKIN Chairman, President and Chief Executive October 30, 2000
--------------------------------------------
Gerald H. Lipkin Officer and Director
PETER SOUTHWAY Vice Chairman (Principal Financial October 30, 2000
--------------------------------------------
Peter Southway Officer) and Director
ALAN D. ESKOW Corporate Secretary, Senior Vice October 30, 2000
--------------------------------------------
Alan D. Eskow President and Controller
(Principal Accounting Officer)
Director October _, 2000
--------------------------------------------
Andrew B. Abramson
Director October _, 2000
--------------------------------------------
Pamela Bronander
JOSEPH COCCIA, JR.* Director October 30, 2000
--------------------------------------------
Joseph Coccia, Jr.
Director October _, 2000
--------------------------------------------
Harold P. Cook, III
AUSTIN C. DRUKKER* Director October 30, 2000
--------------------------------------------
Austin C. Drukker
GRAHAM O. JONES* Director October 30, 2000
--------------------------------------------
Graham O. Jones
Director October _, 2000
--------------------------------------------
Walter H. Jones, III
GERALD KORDE* Director October 30, 2000
--------------------------------------------
Gerald Korde
Director October _, 2000
--------------------------------------------
Joleen Martin
ROBERT E. McENTEE* Director October 30, 2000
--------------------------------------------
Robert E. McEntee
Director October _, 2000
--------------------------------------------
Richard S. Miller
ROBERT RACHESKY* Director October 30, 2000
--------------------------------------------
Robert Rachesky
Director October _, 2000
--------------------------------------------
Barnett Rukin
Director October _, 2000
--------------------------------------------
Richard F. Tice
LEONARD VORCHEIMER* Director October 30, 2000
--------------------------------------------
Leonard Vorcheimer
JOSEPH L. VOZZA* Director October 30, 2000
--------------------------------------------
Joseph L. Vozza
</TABLE>
ALAN D. ESKOW
* By: ________________________________
Alan D. Eskow
Attorney-in-Fact
<PAGE>
INDEX TO EXHIBITS
A. Exhibits
------------
Exhibit No. Description
----------- -----------
2(a)* Agreement and Plan of Merger dated as of September 5,
2000 (the "Merger Agreement"), among Valley National
Bancorp ("Valley"), Valley National Bank ("VNB"),
Merchants New York Bancorp, Inc. ("Merchants"), and
Merchants's subsidiary, The Merchants Bank of New
York ("TMB") which is attached as Appendix A to the
Joint Proxy Statement-Prospectus.
2(b)* Stock Option Agreement, dated as of September 5,
2000, by and between Valley and Merchants, which is
attached as Appendix B to the Joint Proxy
Statement-Prospectus.
5 Opinion of Pitney, Hardin, Kipp & Szuch LLP as to the
legality of the securities to be registered.
8 Opinion of Pitney, Hardin, Kipp & Szuch LLP as to the
tax consequences of the Merger.
23.1** Consent of KPMG LLP with respect to Valley.
23.2** Consent of KPMG LLP with respect to Merchants.
23.3 Consent of Pitney, Hardin, Kipp & Szuch LLP (included
in Exhibits 5 and 8 hereto).
23.4 Consent of CIBC World Markets Corp. ("CIBC").
23.5 Consent of Sandler O'Neill & Partners L.P.
("Sandler").
24.1 Powers of Attorney
99.1** Form of Proxy Card to be utilized by the Board of
Directors of Merchants.
99.2** Form of Proxy Card to be utilized by the Board of
Directors of Valley
----------------------
* Included elsewhere in this registration statement.
** Filed with the Commission on October 12, 2000.
