As filed with the Securities and Exchange Commission on September 22, 1998
Registration No. 333-__________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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Village Financial Corporation
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(Exact name of Small Business Issuer as specified in charter)
New Jersey 6035 22-3562091
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(State or other jurisdiction (Primary SIC No.) (I.R.S. Employer
of incorporation or Identification No.)
organization)
590 Lawrence Square Boulevard, Lawrenceville, New Jersey 08648
(609) 730-0183
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(Address, including zip code, and telephone number, including area code, of
principal executive offices and principal place of business)
Kenneth J. Stephon, President
Village Financial Corporation
P.O. Box 6554, 590 Lawrence Square Boulevard
Lawrenceville, New Jersey 08648
(609) 730-0183
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(Name, address and telephone number of agent for service)
Please send copies of all communications to:
John J. Spidi, Esq.
Andrew S. White, Esq.
Malizia, Spidi, Sloane & Fisch, P.C.
1301 K Street, N.W., Suite 700 East, Washington, D.C. 20005
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier registration statement for the
same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier registration statement for the
same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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Title of Proposed Proposed Amount
Each Class of Shares Maximum Maximum Aggregate of
Securities to be Offering Price Offering Registration
To Be Registered Registered Per Unit Price(1) Fee
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Common Stock,
$.10 Par Value 610,000 $10.00 $6,100,000 $1,799.50
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(1) Estimated solely for purposes of calculating the registration fee.
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 said Section 8(a),
may determine.
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This Prospectus is subject to completion and is dated September __, 1998
PROSPECTUS
410,000 to 610,000 Shares of Common Stock
Village Financial Corporation
A Proposed Holding Company for Village Bank (In Organization)
590 Lawrence Square Boulevard
Lawrenceville, New Jersey 08648
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Village Financial Corporation is a New Jersey corporation formed in
January 1998 to become the holding company for Village Bank, a proposed
FDIC-insured federal savings bank to be located in Lawrenceville, New Jersey.
Village Financial Corporation will own all of the shares of Village Bank. The
common stock of Village Financial Corporation will be sold only if Village
Financial Corporation and Village Bank receive all required regulatory approvals
and Village Financial Corporation receives orders for at least 410,000 shares of
common stock.
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TERMS OF OFFERING
We are offering for sale a minimum of 410,000 shares and a maximum of
610,000 shares of our common stock to the general public on a "best efforts"
basis. All subscription funds tendered will be deposited in an interest bearing
escrow account with Summit Bank, Princeton, New Jersey (the "Escrow Agent")
pending completion, termination or cancellation of the offering. The offering
will expire on _______ __, 1998. However, we may extend the offering without
further notice to subscribers. See pages ___ to ___, "The Offering and Plan of
Distribution." Our offering of common stock is based on the following terms:
o Price Per Share: $10.00
o Number of Shares
Minimum/Maximum: 410,000 to 610,000
o Underwriting Commissions
and Other Expenses: $70,000*
o Net Proceeds to Village Financial Corporation
Minimum/Maximum: $4,030,000 to $6,030,000
o Net Proceeds Per Share:
Minimum/Maximum: $9.83 to $9.89
* We previously sold 94,850 shares of our common stock for $10.00 per share in a
private placement to pay for our preopening expenses. Pending regulatory
approval or non-objection, the investors in the private placement may receive
warrants, stock options or a split of their shares in recognition of the risk
undertaken by these individuals. We currently anticipate our preopening
organizational expenses to be $383,000, of which an estimated $70,000 is for
the initial public offering relating to legal, accounting, printing and postage
costs. We do not anticipate any underwriting commissions.
Please refer to Risk Factors beginning on page 1 of this Prospectus.
These securities are not deposits or accounts and are not insured or guaranteed
by the Federal Deposit Insurance Corporation ("FDIC") or any other government
agency.
Neither the Securities and Exchange Commission ("SEC"), the Office of Thrift
Supervision ("OTS"), nor any state securities regulator has approved or
disapproved these securities or determined if this Prospectus is accurate or
complete. Any representation to the contrary is a criminal offense.
For information on how to subscribe, call ____________ at (609) ___-____.
The date of this Prospectus is ______, 1998
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The information in this Prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This Prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
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TABLE OF CONTENTS
Page
Questions and Answers About the Stock Offering...............................
Highlights of the Offering...................................................
Summary......................................................................
Risk Factors.................................................................
Use of Proceeds..............................................................
Dividends....................................................................
Market for Common Stock......................................................
Dilution.....................................................................
Capitalization...............................................................
The Offering and Plan of Distribution.......................................
Office Facilities............................................................
Unaudited Pro Forma Financial Information....................................
Management's Discussion and Analysis or Plan of Operation....................
Proposed Business of the Company.............................................
Proposed Business of the Bank................................................
Regulation...................................................................
Management of the Company....................................................
Management of the Bank.......................................................
Security Ownership of Certain Beneficial Owners..............................
Description of Capital Stock.................................................
Legal Matters................................................................
Experts......................................................................
Index to Financial Statements................................................
Subscription Agreement.......................................................A-1
This document contains forward-looking statements which involve risks
and uncertainties. Village Financial Corporation's actual results may differ
significantly from the results discussed in the forward- looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed in "Risk Factors" beginning on page 1 of this document.
You should rely only on the information contained in this document or
that we have referred you to. We have not authorized anyone to provide you with
information that is different. The affairs of Village Financial Corporation may
have changed since the dates referred to in this document.
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[MAP PAGE]
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QUESTIONS AND ANSWERS ABOUT THE STOCK OFFERING
Q: How do I purchase the stock?
A: You must complete and return the stock order form to us together with
your payment no later than 5:00 p.m., New Jersey Time, _________, 1998.
Q: How much stock may I purchase?
A: The minimum purchase is 100 shares (or $1,000). The maximum purchase is
50,000 shares (or $500,000).
Q. Will the stock be traded on a market?
A. It is anticipated that the stock will be traded in the over-the-counter
market and reported on the OTC Bulletin Board. However it is not
assured or guaranteed that the stock will be traded on the OTC Bulletin
Board or on any market.
Q: What particular factors should I consider when deciding whether to buy
the stock?
A: Before you decide to purchase shares, you should read the Risk Factors
section on pages 1-5 of this document.
Q: Who can help answer any other questions I may have about the stock
offering?
A: In order to make an informed investment decision, you should read this
entire document. In addition, you may contact:
Kenneth J. Stephon, President
Village Financial Corporation
P.O. Box 6554
Lawrenceville, New Jersey 08648
(609) 730-0183
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(i)
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HIGHLIGHTS OF THE OFFERING
This Summary highlights selected information from this document and may not
contain all the information that is important to you as a prospective investor.
To understand the stock offering fully, please read the entire document. An
investment in the Common Stock involves significant risks and should be
undertaken as a long-term investment only after careful evaluation of the Risk
Factors beginning on page 1.
Strategy
Our primary market area is currently serviced almost entirely by large,
regional financial institutions headquartered outside of the area. Village Bank
is being formed to provide the area with a locally managed and operated
financial institution with the policies and decisions of the bank being made by
people known to the customers.
In a market dominated by large, regional and statewide banks and their
branches, we intend to offer the community an alternative. Village Bank will be
a highly personalized, community-oriented financial institution delivering
service that we believe only comes from responsive local decision-making.
The elements of this strategy include:
o Accessibility to the bank's President, officers and directors,
whether during or after business hours.
o Flexibility in loan and business decisions to account for local
community and customer needs.
o Investment of depositors funds back into the community.
o Involvement in the community affairs of our primary market area.
o Competitive products and pricing on a wide array of financial
services.
o Responsiveness to customer needs supported by an experienced and
service-oriented staff.
Community Ownership
Our organizers believe that our primary market area, Lawrence Township
and Pennington Borough, New Jersey, is in need of a locally-headquartered
financial institution dedicated to the needs of its community. As a locally
operated financial institution, we will be able to more quickly recognize the
needs of the local residents and businesses, versus out-of-state and out-of-area
financial institutions. We anticipate implementing services, deposit and credit
programs intended to fulfill the financial needs of our primary market area. See
pages ____ to ____, "Proposed Business of the Bank."
New Operation
We are a new entity without any operating history. However, as a newly
established financial institution, we intend to structure loans and savings
accounts with flexibility to react to changes in the interest rate environment
of today's economy. See page ___, "Risk Factors - Lack of Operating History" and
see pages ___ to ___, "Proposed Business of the Bank."
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Management
Kenneth J. Stephon will serve as our President, Chief Executive
Officer, Chief Financial Officer and a director. Mr. Stephon is the former
President, Chief Executive Officer, Chief Financial Officer and a director of
CloverBank, Pennsauken, New Jersey. The board of directors includes local
business persons and professionals with diverse backgrounds, familiar with the
communities of central Mercer County. Members of the board of directors are
involved in local civic and non-profit organizations. See pages ___ to ___,
"Management of the Company" and pages ___ to ___, "Management of the Bank."
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SUMMARY
This summary highlights selected information from this document and may
not contain all the information that is important to you. To understand the
stock offering fully, you should read carefully this entire document, including
the financial statements and the notes to the financial statements of Village
Financial Corporation. References in this document to "we," "us" and "our" refer
to Village Financial Corporation. In certain instances where appropriate, "we,"
"us" or "our" refers collectively to Village Financial Corporation and Village
Bank. References in this document to "Village" or the "Company" refer to Village
Financial Corporation. References in this documents to the "Bank" refer to
Village Bank.
The Company and the Bank
Village Financial Corporation
590 Lawrence Square Boulevard
Lawrenceville, New Jersey 08648
(609) 730-0183
Village Financial Corporation is not an operating company and we have
not engaged in any significant business to date. Our company was formed in
January 1998 as a New Jersey-chartered corporation to be the holding company for
Village Bank, a federal savings bank in the process of organizing. The holding
company structure will provide greater flexibility in terms of operations,
expansion and diversification. Our office is currently located at 23 Route 31
North, Suite A22, Pennington, New Jersey 08534. Our mailing address is P.O. Box
6554, Lawrenceville, New Jersey 08648. Our telephone number is (609) 730-0183.
After the opening of the bank, our main office is expected to be located at 590
Lawrence Square Boulevard, Lawrenceville, New Jersey 08648.
See pages ___ to ____, "Proposed Business of the Company."
Village Bank
590 Lawrence Square Boulevard
Lawrenceville, New Jersey 08648
(609) 730-0183
The principal business of Village Bank will be to accept various types
of transaction and savings deposits from the general public and to make
mortgage, consumer, small business and other loans. Our main office is expected
to be located at 590 Lawrence Square Boulevard, Lawrenceville, New Jersey,
presently a vacant branch office of a regional commercial bank. We intend to
operate a limited service facility within the Pennington Point complex, which
includes the Pennington Point adult community, in Pennington, New Jersey. See
pages ____ to ____, "Proposed Business of the Bank."
Organizers
The organizers consist of the initial board of directors of the
Company, Kenneth J. Stephon, William C. Hart, William V. R. Fogler, Paul J.
Russo, Jonathan R. Sachs and George M. Taber. See pages ____ to ____,
"Management of the Bank". The organizers and certain other initial investors
previously purchased 94,850 shares of common stock at $10.00 per share for
long-term investment in a private placement to fund preopening expenses. The
initial board of directors plans to subscribe for an additional 21,000 shares in
the offering. The organizers reserve the right to purchase additional shares
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(iv)
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in the offering. The remaining shares are being offered to the public on a first
come, first served basis. However, we may refuse to accept any subscription in
whole or in part for any reason. All potential investors in the common stock in
the offering will have the opportunity to purchase the stock at the same price
and on the same terms. The initial investors in our common stock, including our
organizers, may receive warrants, stock options or a split of the shares of
stock they purchased in the private placement. However, no investor will receive
any warrants or stock options with the shares purchased in this offering.
Although you may, in the future, receive a split of the shares of our common
stock purchased in this offering, we have no plans to declare a stock split
other than for those shares purchased in the private placement. See pages ____
to ____, "Management's Discussion and Analysis or Plan of Operation"; pages ____
to ____, "Management of the Company"; and pages ____ to ____, "The Offering and
Plan of Distribution."
Office Facilities
We entered into a Lease Agreement in September, 1998 with the owner of
590 Lawrence Square Boulevard, Lawrenceville, New Jersey. We also entered into a
lease agreement for space in the Pennington Point complex in order to operate a
limited service facility. See pages ___ to ___, "Proposed Business of the Bank"
and see pages ___ to___, "Office Facilities."
Conditions of the Offering
We will terminate the offering, no shares of common stock will be
issued, and no subscription proceeds will be released from escrow to us, unless
the following conditions are met on or before _______ __, 1998 (or such later
date if we extend the offering):
o We have accepted subscriptions and payment in full for the
minimum number of shares and
o Our organizers have made provisions for satisfying any regulatory
or other conditions that must be satisfied before Village Bank
may commence banking operations. See page ____, "The Offering and
Plan of Distribution - Conditions of the Offering and Release of
Funds."
You may not receive interest on your subscription funds, if the
offering expenses are in excess of the amounts to be covered by the proceeds of
the private placement. However, if we hold the funds in excess of 90 days, the
funds will be promptly returned to the subscriber with any interest earned.
Subscription proceeds for shares subscribed for will be promptly
deposited in an interest-earning escrow account with Summit Bank as escrow agent
under the terms of an escrow agreement pending the satisfaction of the
conditions set forth above or the termination of the offering. Upon satisfaction
of the conditions set forth above, all subscription funds held in escrow,
including any interest earned, shall be released to us for our immediate use.
See pages ___ to ___, "The Offering and Plan of Distribution."
The Offering
The offering consists of a minimum of 410,000 shares and a maximum of
610,000 shares of Common Stock at $10.00 per share. In the offering, there is a
minimum purchase requirement of 100 shares and a maximum purchase limitation of
50,000 shares per subscriber including all affiliates of the subscriber. The
offering will terminate on _______ __, 1998. However, we may extend the offering
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without notifying you. If the offering is not completed by _______ __, 199_, all
subscription funds will be promptly refunded. See pages ___ to ___, "The
Offering and Plan of Distribution."
Private Placement for Preopening Expenses
Our organizers and certain other initial investors previously purchased
in a private placement an aggregate of 94,850 shares of the Company's Common
Stock at a price of $10.00 per share for a total of $948,500. The amount
received, and accrued interest thereon, from the private placement has been, and
will continue to be, used to pay our offering, organizational and preopening
expenses. Subscriptions for the offering are to be placed in escrow pending the
completion of the offering and all required regulatory approvals to commence
operations. If the offering is not completed or regulatory conditions are not
met, the money will be promptly returned to investors. In contrast, we have and
will continue to expend the proceeds received in the private placement prior to
the receipt of all regulatory approvals and completion of the offering.
Use of Proceeds
We expect to contribute all of the net proceeds remaining from the
private placement and all of the net proceeds of the offering to Village Bank as
capital. We intend to use the proceeds as the initial capital of the bank. See
pages ___ to ___, "Use of Proceeds."
Dividends
Our board of directors currently intends to initially fund the growth
in assets and deposits of the bank and not issue cash dividends. We may declare
dividends on the common stock at some time in the future depending upon our
profitability, regulatory and financial condition and other factors. However, no
assurance can be given that any dividends will be declared or, if declared, what
the amount of dividends will be, or whether such dividends, once declared, will
continue. See pages ___ to ___, "Risk Factors" and see pages ___ to ___,
"Dividends."
Market for Common Stock
We do not anticipate that there will be an active trading market for
our common stock upon completion of the offering or that our common stock will
be listed on any exchange. You should have a long-term investment intent. You
may not be able to sell your shares when you desire or sell them at a price
equal to or above the offering price. Following completion of the offering, we
anticipate that our common stock will be traded in the over-the-counter market
and reported on the OTC Bulletin Board.
See page ___, "Risk Factors - Lack of Trading Market."
Payment for Subscription
Payments for subscriptions must be for the full amount subscribed and
must be made by check, bank draft or money order made payable to "Summit Bank,
Escrow Agent for Village Financial Corporation," and sent to or delivered to us.
If we do not accept your subscription, we will mail you notice of the rejection
within ten business days after we have received your subscription. See page ___,
"The Offering and Plan of Distribution - How To Subscribe."
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RISK FACTORS
In addition to the other information in this Prospectus, you should
consider carefully the following risk factors in evaluating an investment in our
common stock.
Certain statements in this Prospectus are forward-looking and are
identified by the use of forward- looking words or phrases such as "intended,"
"will be positioned," "believes," "expects," is or are "expected,"
"anticipates," and "anticipated." These forward-looking statements are based on
our current expectations. The risk factors set forth below are cautionary
statements identifying important factors that could cause actual results to
differ materially from those in the forward-looking statements.
Potential Total Loss of Investment
Investment in our common stock involves significant risk. Each
subscriber should be financially able to sustain a total loss of his investment.
OUR COMMON STOCK CANNOT AND WILL NOT BE INSURED BY THE FDIC OR ANY OTHER
GOVERNMENT AGENCY.
Lack of Operating History
Our Company is recently formed. Village Bank will be formed following
regulatory approval. Neither entity has any operating history. Accordingly,
prospective investors do not have access to all of the information that is
available to the purchasers of securities of a financial institution with a
history of operations. Because our primary asset will be the capital stock of
the bank, our operating results and financial position will be dependent upon
the operating results and financial condition of the bank. The business of the
bank is subject to the risks inherent in the establishment of any new business
and, specifically, of a new Federal stock savings bank. As a result of the
substantial start-up expenditures that must be incurred by a new bank, we may
not be profitable for several years after commencing business, if ever. See
pages _____ to _____, "Unaudited Pro Forma Financial Information."
No Assurance of Ability to Raise Additional Capital
Although the organizers believe the proceeds from the offering will be
sufficient to support our initial operations and commitments, there can be no
assurance that the proceeds of the offering will be sufficient to meet our
future capital requirements without additional financing. The amount of capital
required will depend, among other things, upon operating results, the growth of
assets and regulatory requirements. The organizers have made no commitments to
provide additional funds for the operation of our company. Therefore, you should
not expect the organizers personally to provide additional funds for our
operations or capital requirements if the proceeds of this offering are
insufficient.
Lack of Trading Market
Due to the small size of the offering, it is highly unlikely that an
active trading market will develop and be maintained. If an active market does
not develop, you may not be able to sell your shares promptly or perhaps at all.
You may not be able to sell your shares at a price equal to or above the
offering price. It is anticipated that our common stock will be traded on the
OTC Bulletin Board. Our common stock may not be appropriate as a short-term
investment. See pages _____ to _____, "Market for Common Stock."
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Arbitrary Determination of Offering Price
The offering price of our common stock has been arbitrarily determined
by our organizers. Our company is a new enterprise. We previously sold shares of
our common stock in a private placement at $10.00 per share, the offering price
per share in this offering. There can be no assurance that the shares of our
common stock can be resold at the offering price or any other amount. See pages
_____ to _____, "The Offering and Plan of Distribution;" pages _____ to _____,
"Capitalization;" and pages ____ to ____ "Dilutive."
Dividends
Village Financial Corporation is a legal entity separate and distinct
from Village Bank. Because we initially will engage in no business other than
owning all of the outstanding shares of capital stock of Village Bank, our
payment of dividends to you will generally be funded only from dividends we
receive from the bank. Any dividends to be paid to you will be dependent on,
among other things, the bank's profitability. In addition, the payment of
dividends may be made only if we are in compliance with certain applicable
regulatory requirements governing the payment of dividends. No assurance can be
given that dividends on our common stock will ever be paid. We expect that
earnings, if any, will be used initially for operating capital. We do not
foresee payment of any dividends in the near future. OUR COMMON STOCK SHOULD NOT
BE PURCHASED BY PERSONS WHO NEED OR DESIRE DIVIDEND INCOME FROM THIS INVESTMENT.
See Page _____ "Dividends."
Government Regulation
We will operate in a highly regulated environment and will be subject
to examination, supervision and comprehensive regulation by the OTS and the
FDIC. Banking regulations, designed primarily for the safety of depositors, may
limit Village Bank's growth, and thus the return to you. The activities that may
be restricted include the payment of dividends, mergers with or acquisitions by
other institutions, investments, loans and interest rates, interest rates paid
on deposits and the creation of branch offices. We also will be subject to
capitalization guidelines set forth in federal legislation, and could be subject
to enforcement action to the extent Village Bank is found by regulatory
examiners to be undercapitalized. Laws and regulations applicable to us could
change at any time, and there can be no assurance that such changes would not
adversely affect our business. In addition, the cost of compliance with
regulatory requirements could adversely affect our ability to operate
profitably. See pages ____ to ____, "Regulation."
Competition
Our primary market area will be Lawrence Township and Pennington
Borough, New Jersey. See pages ____ to ____, "Proposed Business of the Bank -
Market Area." The Bank's primary emphasis will be on residential real estate
lending, and secondarily on commercial real estate financing, consumer and small
business lending. As of June 30, 1998, within four miles of our proposed main
office in Lawrence Township, there were 20 institutions, comprising 31
commercial bank branches, 6 thrift branches and 2 credit unions. We will be
competing for deposits with these larger established institutions as well as
with money market mutual funds, brokerage services, private banking and other
non-traditional financial intermediaries. We will have to attract our customer
base from existing financial institutions and new residents. Many of the
competitors will be much larger than Village Bank in terms of assets. Our
competitors have more extensive facilities and greater depth of organizational
and marketing capabilities, and may initially be able to offer a greater range
of services. There can be no assurance that we will be able to compete
successfully. See page ____ to ____ "Proposed Business of the Bank -
Competition."
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Possible Lack of Market Growth
Our organizers' assumptions about the viability of Village Financial
Corporation and Village Bank are based on their projections of growth trends in
population, deposits and housing starts in our primary market area, as well as
on their projections of interest rates, earning asset origination capability,
deposit account growth and operating expense trends. These projections are
merely forecasts and may prove to be inaccurate. Our primary market area has
experienced some growth in population, deposits and housing starts in recent
years, but there can be no assurance that growth will continue in the future or
that the Company will benefit from any such growth if it does continue. See page
____, "Proposed Business of the Bank - Market Area."
Interest Rate Risk
Our operating results will depend to a great extent upon Village Bank's
net interest income. Net interest income which is the difference between the
interest earned on assets (primarily loans and investment securities) and the
interest paid for liabilities (primarily savings and time deposits). Market
interest rates for loans, investments and deposits are highly sensitive to many
factors beyond our control. These factors include general economic conditions
and the policies of various governmental and regulatory authorities. In
addition, due to current low prevailing market interest rates, it may be
difficult for us to utilize the bank's capital to originate loans and purchase
investments at a sufficient yield. See pages ____ to ____, "Proposed Business of
the Bank - Lending Activities" and see page ____, "- Source of Funds."
Proposed Legislation
A bill, H.R. 10, has been passed by the U.S. House of Representatives,
that would curtail the powers of unitary thrift holding companies. We are a
proposed unitary thrift holding company. Furthermore, other proposed legislation
has been considered that might eliminate the federal thrift charter under, the
proposed charter of Village Bank. If this legislation becomes law, we will be
forced to convert Village Bank to a state chartered bank or national commercial
bank. If the bank becomes a commercial bank, the investment authority of the
bank and our ability to engage in diversified activities would be more limited.
This could affect our profitability. See pages ____ to ____, "Regulation."
Possible Delay in the Opening of Village Bank
We anticipate that we will have completed all of the regulatory
conditions precedent to commencing business and will have Village Bank ready for
opening in January or February 1999. This date is only a projection, however,
and the actual opening date may be later.
Anti-Takeover Provisions
Certain provisions included in our Certificate of Incorporation and
Bylaws are designed to encourage potential acquirors to negotiate directly with
our board of directors and to discourage takeover attempts. These provisions may
discourage non-negotiated takeover attempts. These provisions also tend to
perpetuate management. You may determine that these provisions are not in your
best interest. See page ____, "Description of Common Stock - Certain
Anti-Takeover Provisions."
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Dilution
After the offering, and subject to stockholder approval, we expect to
adopt a stock option plan and restricted stock plan that will permit us to grant
options to our officers, directors, and key employees. The option price will be
no less than the greater of the fair market value of our common stock on the
date the option is granted or $10.00 per share. The exercise of options could
have a dilutive effect on earnings and book values calculated on a per share
basis. In addition, we may issue additional shares of common stock or preferred
stock in the future. See page ____, "Dilution" and "Management of the Bank -
Remuneration of Directors and Officers."
Possible Year 2000 Computer Program Problems
A great deal of information has been disseminated about the global
computer crash that may occur in the Year 2000. Many computer programs that can
only distinguish the final two digits of the year entered (a common programming
practice in earlier years) are expected to read entries for the Year 2000 as the
Year 1900 and compute payment, interest or delinquency based on the wrong date
or are expected to be unable to compute payment, interest or delinquency. Rapid
and accurate data processing is essential to our operations. Data processing is
also essential to most other financial institutions and many other companies.
Most of the bank's material data processing that could be affected by
this problem are expected to be provided by a nationally recognized third party
service bureau. Village Bank's prospective service bureau provider has advised
us that it expects to resolve this potential problem before the Year 2000.
However, if this potential problem is not resolved before the Year 2000, we
would likely experience significant data processing delays, mistakes or
failures. These delays, mistakes or failures could have a significant adverse
impact on the our financial condition and results of operations. See page ____,
"Office Facilities."
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Direct Public Offering (No Underwriter)
No commitment exists for an underwriter to purchase any shares in this
offering. Instead, we are offering shares of our common stock directly to the
public on a "best efforts" basis. No assurance can be given that any shares will
be sold. If necessary, we may enter into a marketing or consulting agreement
with a registered broker/dealer to assist in the sale of our common stock
without notice to subscribers.
USE OF PROCEEDS
Although the amounts set forth below provide an indication of the
proposed use of funds based on the plans and estimates of our organizers, actual
expenses may vary from the estimates. The organizers believe that the minimum
proceeds of $4,100,000 from the offering, as well as the remaining proceeds from
the private placement, will satisfy the cash requirements of Village Financial
Corporation (hereafter the "Company") and the capital requirements of Village
Bank (hereafter the "Bank") for their respective first year of operations but
there can be no assurance that this will be the case. Because the Company and
the Bank constitute a new enterprise, the organizers cannot predict with any
certainty to what extent the Bank will generate revenues from investments and
loan originations. As a result, the organizers cannot predict precisely what the
actual application of proceeds will be. However, there is no assurance that the
proceeds of the offering will be sufficient to meet the future capital
requirements of the Company without additional financing.
The net proceeds to the Company from the sale of 410,000 and 610,000
shares of common stock in the offering are estimated at $4,030,000 and
$6,030,000, respectively. The preopening and offering expenses are estimated at
approximately $383,000. The preorganizing expenses, estimated to be $313,000,
are to be paid from the proceeds of the private placement. The estimated $70,000
in offering expenses may be paid from the proceeds of the offering. Estimated
preopening and offering expenses are the total of the following estimated
expenses: preopening salaries and benefits - $183,000; marketing, travel and
promotions - $8,000; legal - $100,000; accounting and consulting - $30,000;
printing and office supplies - $10,000; filing fees - $20,000; and other
miscellaneous operating expenses - $32,000. As a result of delays in the
offering, regulatory comments and other factors, expenses may be significantly
greater. In the event there are insufficient revenues from operations and
investments, the salaries and benefits of the officers and employees hired may
be paid from the proceeds of the offering. The approximate $950,000 invested by
the organizers and certain other initial investors in a private placement has
been used, in part, to pay salaries and benefits and the other preopening
expenses. On the basis of the foregoing assumptions, gross proceeds, expenses
and net proceeds at the minimum and maximum offering amount would be as follows:
5
<PAGE>
Minimum Maximum
410,000 610,000
Shares at Shares at
$10.00 Per Share $10.00 Per Share
---------------- ----------------
(In thousands)
Gross Proceeds from Private
Placement.......................... $ 949 $ 949
Gross Proceeds from offering......... 4,100 6,100
Less Estimated Preopening and
offering Expenses.................. (383) (383)
----- -----
Estimated Net Proceeds............... $4,666 $6,666
===== =====
All of the proceeds of the offering are expected to be invested by the
Company in the common stock of the Bank. The Bank will use the proceeds from the
sale of its Stock to the Company for (i) investment in residential and
commercial real estate, consumer, small business, and other loans, (ii) payment
of operating expenses, (iii) working capital purposes and (iv) the purchase of
investment securities as needed for liquidity purposes. Until utilized by the
Bank for operations, investments or lending purposes, proceeds of this offering
will be invested by the Company in short-term interest-bearing investments and
securities.
DIVIDENDS
The board of directors of the Company initially expects to follow a
policy of retaining any earnings to provide funds to operate and expand the
Company. Consequently, there are no plans for any cash dividends to be paid in
the near future. However, the Company may issue warrants or grant stock options
to the purchasers in the private placement. The Company may, instead, notify
stockholders of a stock split of the shares of the Company's stock purchased in
the private placement. The Company's ability to pay any cash dividends to its
stockholders in the future will depend primarily on the Bank's ability to pay
cash dividends to the Company. The payment of dividends may be made only if the
Bank is in compliance with certain applicable regulatory requirements governing
the payment of dividends. In addition, the payment of cash dividends by the
Company is subject to the discretion of the Company's board of directors, which
will consider a number of factors, including business condition. See "Regulation
- - Saving Institution Regulation -- Dividend and Other Capital Distribution
Limitations."
MARKET FOR COMMON STOCK
The Company issued a total of 94,850 shares of its common stock in a
private placement. There are 24 shareholders of the Company's common stock.
However, as a newly organized company, the Company has never publicly issued
capital stock. There is no established market for the common stock. Following
the completion of the offering, it is anticipated that the common stock will be
traded on the over-the-counter market with quotations available through the OTC
Electronic Bulletin Board. If the common stock cannot be quoted on the OTC
Bulletin Board it is expected that the transactions in the common stock will be
reported in the pink sheets of the National Quotations Bureau, Inc.
The development of an active trading market depends on the existence of
willing buyers and sellers. Due to the small size of the offering, it is highly
unlikely that an active trading market will develop and be maintained. Investors
should have a long-term investment intent. Investors may not be able to sell
their shares when they desire or sell them at a price equal to or above the
offering price.
6
<PAGE>
DILUTION
The following table illustrates, assuming the minimum or maximum shares to be
issued in the offering, the estimated dilution per share to new investors from
the offering:
410,000 610,000
Shares Shares
Minimum Maximum
Offering price per share.................... $10.00 $10.00
----- -----
Pro forma net tangible book value per
share at June 30, 1998 (1)................ $9.23 $9.23
Increase per share attributable to initial
public offering........................... .01 .23
Pro forma net tangible book value per
share after initial public offering....... 9.24 9.46
---- ----
Dilution per share to new investors from
initial public offering................... $0.76 $0.54
==== ====
- ----------------
(1) For further information regarding the Company's operational results
from inception through June 30, 1998, please refer to the "Financial
Statements" section of this Prospectus.
CAPITALIZATION
The table set forth below shows the pro forma capitalization of the
Company immediately following completion of the private placement and the
offering as though the private placement and the offering had been completed on
June 30, 1998, assuming that 410,000 and 610,000 shares of common stock had been
sold pursuant to the offering, after deduction of projected organizational and
initial public offering expenses of $383,000.
7
<PAGE>
PRO FORMA CAPITALIZATION
410,000 610,000
Shares Sold Shares Sold
----------- -----------
(In thousands)
Common Stock ($0.10 par value)
Authorized - 5,000,000 shares;
Assumed outstanding 505,000 and
705,000 shares (1)..................... $ 50 $ 70
Preferred Stock ($0.10 par value)
Authorized - 1,000,000; Assumed
none outstanding....................... -- --
Additional Paid-In Capital............... 4,928 6,908
----- -----
Pro Forma Retained Deficit............... (313) (313)
----- -----
Total Stockholders' Equity........... $4,665 $6,665
===== =====
- -------------------
(1) In addition to the 410,000 to 610,000 shares to be issued pursuant to
the offering, 94,850 shares have been issued to organizers and certain
other investors pursuant to the private placement.
THE OFFERING AND PLAN OF DISTRIBUTION
General
The Company is offering for sale in the offering a minimum of 410,000
shares and a maximum of 610,000 shares of its common stock at a purchase price
of $10.00 per share to raise proceeds between $4,100,000 and $6,100,000 for the
Company. The Company has established a minimum subscription of 100 shares
($1,000) and a maximum subscription of 50,000 shares ($500,000). Because the
Company is a new organization with no operating history and the Bank is in
organization, the offering price of the common stock was arbitrarily determined
by the organizers without reference to traditional criteria for determining
value such as book value or historical or projected earnings.
Subscribers should be aware that beneficial ownership of as little as
5% of the outstanding shares of common stock could obligate the beneficial owner
to comply with certain reporting and disclosure requirements of federal banking
laws. No person may purchase more than 9.9% of our outstanding stock without
prior approval of the OTS. See "Description of Capital Stock - Provisions of the
Company's Certificate of Incorporation and Bylaws -- and Regulatory
Restrictions."
The Company's directors are expected to purchase additional shares in
the offering, resulting in total aggregate purchases of at least 39,600 shares.
The organizers reserve the right to increase the amount of common stock they
purchase in the offering. See "Management of the Bank."
The shares are being offered to the public through the directors and
officers of the Company. No director or officer, other than Director Fogler, is
affiliated with a securities broker or dealer. Director Fogler will not act as a
broker or dealer in this transaction. No commission or other sales compensation
will be paid to any organizer in connection with the offering. The Company has
not
8
<PAGE>
entered into any marketing or consulting agreement with a registered
broker/dealer. If necessary, the Company may enter into an agreement with a
registered broker/dealer to assist in the sale of common stock in this public
offering, without notice to subscribers.
Except for one director of the Company, none of the Company's directors
and officers participating in the offering are registered or licensed as a
broker or dealer or an agent of a broker or dealer. The unlicensed officers and
directors of the Company will assist in sales activities in connection with the
offering pursuant to an exemption from registration as a broker or dealer
provided by Rule 3a4-1 promulgated under the Securities Exchange Act of 1934
("Rule 3a4-1"). Rule 3a4-1 generally provides that an "associated person of an
issuer" of securities shall not be deemed a broker solely by reason of
participation in the sale of securities of such issuer if the associated person
meets certain conditions. Such conditions include, but are not limited to, that
the associated person participating in the sale of an issuer's securities not be
compensated in connection therewith at the time of participating, that such
person not be associated with a broker or dealer and that such person observe
certain limitations on his participation in the sale of securities. For purposes
of this exemption, "associated person of an issuer" is defined to include any
person who is a director, officer or employee of the issuer or a company that
controls, is controlled by, or is under common control with, the issuer.
Subscriptions to purchase shares of the common stock will be received
until 5:00 p.m. New Jersey Time, on _______ __, 1998, unless all of the common
stock is earlier sold or the offering is earlier terminated or extended by the
Company. See "Conditions of the Offering and Release of Funds" below. The
Company reserves the right to extend the offering without further notice to
subscribers. However, if the offering is not completed by _______ __, 199_ all
subscription funds will be promptly refunded. The date the offering expires (as
possibly extended) is referred to herein as the "Expiration Date." No written
notice of an extension of the offering until _______ __, 199_ need be given
prior to any extension and any such extension will not alter the binding nature
of subscriptions already accepted by the Company. If the offering is extended
beyond _______ __, 199_, subscribers will be resolicited and all subscription
funds will be promptly refunded. If the above conditions are not satisfied by
_______ __, 199_, or if the offering is terminated at an earlier date, the funds
including any interest earned thereon, will be promptly repaid to investors.
Investors may not receive any interest on their subscription funds, if the
offering expenses are in excess of amounts to be covered by the proceeds of the
private placement. However, if such funds are held in excess of 90 days, such
funds will be promptly returned to the subscribers with any interest earned
thereon. See "Termination or Extension of the Offering."
Following acceptance by the Company, subscriptions are binding on
subscribers and may not be revoked by subscribers. The Company reserves the
right to cancel accepted subscriptions at any time and for any reason until the
proceeds of the offering are released from escrow (as discussed in greater
detail in "Conditions of the Offering and Release of Funds" below), and the
Company reserves the right to reject, in whole or in part and in its sole
discretion, any subscription.
Promptly after receipt of final regulatory approval and authorization
to do business, the Company will cause to be mailed or delivered to each
subscriber stock certificates representing the shares of common stock purchased
by such subscriber.
Conditions of the Offering and Release of Funds
Subscription proceeds for shares subscribed for will be promptly
deposited in an interest-earning escrow account with the Summit Bank, Princeton,
New Jersey, as escrow agent (the "Escrow Agent"), under the terms of an escrow
agreement (the "Escrow Agreement"), pending the satisfaction of the
9
<PAGE>
conditions of the offering or the termination of the offering. Neither the
Company nor any of its officers or directors is affiliated with the Escrow
Agent. The offering will be terminated, no shares of common stock will be
issued, and no subscription proceeds will be released from escrow to the Company
unless on or before the Expiration Date (i) the Company has accepted
subscriptions and payment in full for the minimum number of shares and (ii) the
organizers have made provisions for satisfying any regulatory or other
conditions that must be satisfied before the Bank may commence banking
operations.
The Escrow Agent is expected to place the funds held in the Escrow
Account solely in accounts that are FDIC-insured. Until the regulatory
authorities authorize the organizers to use the proceeds of this offering to
capitalize the Company, the $948,500 obtained from the organizers of the Company
and certain other initial investors in the private placement will be used to pay
for expenses incurred. Upon disbursement of funds from the Escrow Account to the
Company, the investment earnings or losses on the Escrow Account will be the
property of the Company. The Escrow Agent has not investigated the desirability
or advisability of an investment in the common stock by prospective investors
and has not approved, endorsed or passed upon the merits of an investment in the
common stock.
If the above conditions are not satisfied by _______ __, 199_, or if
the offering is terminated at an earlier date, the funds available from the
Escrow Account, including any interest earned thereon, will be promptly repaid
to investors. Investors may not receive any interest on their subscription
funds, if the offering expenses are in excess of amounts to be covered by the
proceeds of the private placement. However, if such funds are held in excess of
90 days, such funds will be promptly returned to the subscribers with any
interest earned thereon.
How To Subscribe
All subscriptions must be made by completing a Subscription Agreement.
Additional copies of the Prospectus and the Subscription Agreement may be
obtained by contacting the Company at the address set forth below. Subscriptions
will not be binding on subscribers until accepted by the Company.
SUBSCRIPTIONS WILL NOT BE ACCEPTED UNLESS ACCOMPANIED BY PAYMENT IN
FULL AT THE SUBSCRIPTION PRICE. The Company reserves the right to reject any
subscription, in whole or in part, with or without cause, but will inform the
subscriber of the reason for such rejection. The Company will refuse any
subscription by sending written notice to the subscriber by personal delivery or
first-class mail within ten calendar days after receipt of the subscription, and
the subscriber's Subscription Agreement and refund of payment will accompany
such notice, together with a statement as to the reason for such rejection. Any
Subscription Agreement which is completely and correctly filled out, which is
accompanied by proper and full payment and which is physically received at the
offices of the Company by any employee or agent of the Company, shall be deemed
to have been accepted if it is not refused as hereinbefore provided within ten
business days after such receipt.
A completed Subscription Agreement and payment in full (made in the
manner specified below) of the total subscription price for the number of shares
subscribed should be mailed to the Company at the following address:
Village Financial Corporation
P.O. Box 6554
Lawrenceville, New Jersey 08648
Subscriptions and payment in full also may be delivered in person to
the office of the Company at 23 Route 31 North, Suite A22, Pennington, New
Jersey between 10:00 a.m. and 5:00 p.m., Monday through Friday. If the offering
is canceled, all subscriptions will be promptly refunded.
10
<PAGE>
IMPORTANT: PAYMENTS MUST BE MADE IN UNITED STATES FUNDS BY CHECK, BANK
DRAFT OR MONEY ORDER PAYABLE TO "SUMMIT BANK, ESCROW AGENT FOR VILLAGE FINANCIAL
CORPORATION." FAILURE TO INCLUDE THE FULL SUBSCRIPTION PRICE WITH THE
SUBSCRIPTION AGREEMENT WILL RESULT IN THE SUBSCRIPTION BEING RETURNED BY THE
COMPANY.
Escrow Account
The offering is being made subject to the requirement that at least
410,000 shares are sold. Pending receipt of insurance of accounts, payments
received from subscribers will be held in an interest-bearing escrow account
maintained with the Escrow Agent. Funds in the Escrow Account may not be reached
by creditors of the organizers. The terms of the Escrow Agreement include the
following provisions:
(a) Payments of subscribers will be identified to each subscriber and
will be deposited by the Escrow Agent in the Escrow Account, which shall be
known as "Village Financial Corporation - Stock Purchase Account," and shall be
held in escrow and disbursed, including the interest earned thereon, only in
accordance with the provisions of the Escrow Agreement.
(b) The Escrow Agent will maintain its records of the Escrow Account so
that each subscriber will be entitled to FDIC insurance with respect to all
funds up to $100,000 paid by such subscriber.
(c) Funds deposited in the Escrow Account shall earn interest at the
Escrow Agent's current money market rate.
(d) Upon receipt of written confirmation that the Company has obtained
FDIC insurance of its accounts, the Escrow Agent will pay any and all funds in
the Escrow Account to the order of the Company. In the event that the offering
is not completed by _______ __, 199_, all funds in the Escrow Account, including
any interest earned thereon, will be promptly returned to subscribers.
Subscribers may not receive any interest on their money if offering expenses are
in excess of the amounts to be covered by the proceeds of the private placement.
However, if such funds are held in excess of 90 days, such funds will be
promptly returned to the subscriber with any interest earned thereon. The Escrow
Agent may conclusively rely on a certificate of the president of the Company
stating the amount of organizational expenses.
(e) The Escrow Agent will be liable only for monies received by it and
not disbursed by it pursuant to the provisions of the Escrow Agreement.
(f) The Company has agreed to indemnify the Escrow Agent for, and to
hold it harmless against, any loss, liability or expense incurred without gross
negligence or bad faith on the part of the Escrow Agent.
(g) All interest earned and accrued on the deposited subscription funds
shall accrue for the benefit of the subscribers and the Company and the Escrow
Agent shall report such interest as having been earned by the Company. All funds
will be repaid in accordance with paragraph (d) above.
(h) The Escrow Agent's fees will be paid by the Company and the Escrow
Agent may be authorized to deduct such fees from the interest earned on the
Escrow Account.
11
<PAGE>
Termination or Extension of the Offering
The offering will terminate at 5:00 p.m., Lawrenceville, New Jersey
Time, on _______ __, 1998, unless extended by the Company without further notice
to the subscriber. The Company reserves the right to terminate the offering at
any time. However, if the offering is not completed by _______ __, 199_, all
subscription funds will be promptly refunded. If the above conditions are not
satisfied by _______ __, 199_, or if the offering is terminated at an earlier
date, the funds including any interest earned thereon, will be promptly repaid
to investors. Investors may not receive any interest on their subscription
funds, if the offering expenses are in excess of amounts to be covered by the
proceeds of the private placement. However, if such funds are held in excess of
90 days, such funds will be promptly returned to the subscribers with any
interest earned thereon.
If an extension to the offering is obtained, subscribers will be
resolicited and would be provided a supplemental offering Prospectus, declared
effective by the Securities and Exchange Commission ("SEC"). Upon
resolicitation, subscribers would have an opportunity to increase or decrease
their subscriptions, subject to applicable minimum and maximum purchase
limitations.
The Company will deliver an effective Prospectus to all persons to whom
the securities offered hereby are to be sold at least 48 hours prior to the
acceptance or confirmation of sale to such persons or to send such a Prospectus
to such persons under circumstances that it would normally be received by them
48 hours prior to acceptance or confirmation of the sale. The Company will mail
to all subscribers and other persons who have received a Prospectus written
notice of any such determination to terminate the offering at least seven days
prior to such terminations. During this seven day period, the Company may
continue to accept subscriptions for up to 610,000 shares. The Company expects
only one closing.
OFFICE FACILITIES
The Company agreed to the terms of a lease in September 1998 with
Lawrenceville Associates, a New Jersey Partnership, to lease the premises
located at 590 Lawrence Square Boulevard, Lawrenceville, New Jersey to be the
main office of the Bank. The Company has also entered into a lease of space
within the Pennington Point complex. The Pennington Point adult community is
within the same complex in Pennington, New Jersey.
The Bank will purchase furniture, fixtures and equipment at the main office
approximating $35,000 from the local commercial bank that previously occupied
the premises. The main office is currently a vacant branch office previously
leased by the commercial bank. The building is a 3,952 square feet one story
facility located in a two-building office complex. The main office will include
a vault, six teller stations, a two lane drive-up area, walk-up ATM, night
depository and space designed for safe deposit boxes. The terms of the lease
provide for 20 designated parking spaces. The Bank does not intend to make any
renovations to the main office prior to opening other than adding signage and
other incidental changes in order to prepare the facility for operation. The
lease will expire on May 31, 2005. The lease will be assignable and renewable
for one additional five-year term. The annual base rental amount will increase
from approximately $50,000 to $70,000 over the course of the first five years
and will increase at an annual amount of four percent for any and all subsequent
years. In accordance with the terms of the lease, the Company intends to prepay
its rent for the proposed main office from November 1, 1998, the commencement of
the lease, through December 31, 1999. The Company intends to prepay the lease
from the funds received in the private placement.
12
<PAGE>
The Bank's limited service facility will be located in the Pennington
Point complex, where the Company has leased an office within a suite of offices
for one year. The Company anticipates signing a new lease at the expiration of
the current lease at the discretion of the board of directors. The office is
expected to include two teller desks and to operate during limited hours, three
days per week. The annual rental amount of the lease is $9,600. There is no
limit on the number of terms or years the lease may be renewed.
The bank intends to contract for data processing services with NCR in
Framingham, Massachusetts. The Bank will incur a monthly data processing fee of
approximately $5,000 to $6,000 and will also incur a one-time software licensing
fee of approximately $40,000 to $50,000. NCR will perform substantially all of
the data services needed by the Bank.
The Company presently occupies the office space in the Pennington Point
complex, 23 Route 31 North, Suite A22, Pennington, New Jersey. It is expected
that sometime after the opening of the Bank, the Company will move its
headquarters to 590 Lawrence Square Boulevard.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information and explanatory
notes have been derived from the historical financial statements of the Company,
adjusted to give effect to the sale of the minimum number of shares and the
maximum number of shares in the offering. The Unaudited Pro Forma Consolidated
Balance Sheet assumes that such transactions occurred on June 30, 1998, and that
the Company's application for the formation of the Bank has been approved. No
consolidated pro forma income statement is presented because as of June 30,
1998, the Company has only been in existence for approximately six months, and
all activity through this date has been dedicated to the formation of the Bank.
The unaudited pro forma financial information is not necessarily indicative of
the financial position that would have occurred had the transactions reflected
therein occurred on the dates presented, nor are they indicative of the
financial position of future periods.
13
<PAGE>
VILLAGE FINANCIAL CORPORATION
PRO FORMA COMBINED BALANCE SHEET
AS OF JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Company Company
As Adjusted As Adjusted
Minimum No. Maximum No. Minimum No. Maximum No.
Company of Shares of Shares of Shares of Shares
------- --------- --------- --------- ---------
ASSETS
<S> <C> <C> <C> <C> <C>
Cash and interest-bearing deposits in banks.............. $ 920,943 $3,744,447 (a) $ 5,744,447 (a) $ 4,665,390 $ 6,665,390
Premises, furniture and equipment........................ -- -- --
Deferred organization costs.............................. 55,000 (55,000)(b) (55,000)(b) -- --
--------- --------- ---------- ------------ ------------
TOTAL ASSETS.................................... $ 975,943 $3,689,447 $ 5,689,447 $ 4,665,390 $ 6,665,390
========= ========= ========== =========== ===========
LIABILITIES
Accounts payable and accrued expenses.................... $ 100,293 $ (100,293)(c) $ (100,293)(c) $ -- $ --
--------- --------- ---------- ------------ ------------
TOTAL LIABILITIES............................... 100,293 (100,293) (100,293) -- --
--------- --------- ---------- ------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock.......................................... -- -- -- -- --
Common stock............................................. 9,485 41,000 (d) 61,000 (d) 50,485 70,485
Additional paid-in Capital............................... 939,015 3,989,000 (d) 5,969,000 (d) 4,928,015 6,908,015
Retained deficit......................................... (72,850) (240,260)(b) (240,260)(b) (313,110) (313,110)
--------- --------- ----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY...................... 875,650 3,789,740 5,789,740 4,665,390 6,665,390
--------- ---------- ----------- ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..... $ 975,943 $3,689,447 $ 5,689,447 $ 4,665,390 $ 6,665,390
========= ========== =========== ============ ============
</TABLE>
14
<PAGE>
VILLAGE FINANCIAL CORPORATION
NOTES TO PRO FORMA BALANCE SHEET AT JUNE 30, 1998
- --------------------------------------------------------------------------------
(a) The net cash to be received, and after payments are made for certain
organizational costs incurred.
<TABLE>
<CAPTION>
Number of Shares Sold
----------------------------------
Minimum Maximum
---------- ----------
<S> <C> <C>
Proceeds from offering................................. $4,100,000 $6,100,000
Less:
Payment of accrued and additional organization costs... (355,553) (355,553)
--------- ---------
$3,744,447 $5,744,447
========= =========
</TABLE>
(b) Reflects the reclass of the deferred organization and offering costs
against the offering proceeds and available cash at June 30, 1998.
Organizational costs to be incurred are estimated to be $313,000, and will
be charged to operating expenses when paid. Such items are construed to be
start up activity expenditures, relating primarily to the regulatory
application processes for the proposed bank formation. These costs are for
consulting, legal, accounting and audit services, as well as for regulatory
filing fees and outside marketing assistance. These costs also include
in-formation period expenses to be incurred for normal operations and
salary and benefits of staff through the successful completion of the stock
offering and regulatory approval processes.
(c) Reflects the payments of payables outstanding at June 30, 1998 for offering
and organizational costs.
(d) Reflects stockholders' equity, after payments are made for certain
estimated costs incurred in the offering:
<TABLE>
<CAPTION>
Number of Shares Sold
------------------------------------
Minimum Maximum
----------- -----------
<S> <C> <C>
Proceeds from offering................................... $4,100,000 $6,100,000
Less: Offering costs.................................... (70,000) (70,000)
--------- ----------
Net proceeds from offering............................... 4,030,000 6,030,000
Less: Par value of common stock......................... 41,000 61,000
---------- ----------
Additional Paid In Capital............................... $3,989,000 $5,969,000
========= =========
</TABLE>
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION
The Company was incorporated under the laws of the State of New Jersey
on January 16, 1998, for the purpose of becoming a unitary savings and loan
holding company, which will own all of the outstanding shares of capital stock
of a proposed federal stock savings bank, Village Bank. It is anticipated,
though there is no assurance, that the Company will receive regulatory approval
to open the Bank in January or February, 1999.
Prior to the offering, the only material source of funds for the
Company has been private sales of the Company's common stock to the organizers
of the Company and certain other initial investors at a price of $10.00 per
share. In connection with such sales, these individuals purchased 94,850 shares
of Common Stock. The Company received aggregate gross proceeds of $948,500. The
Company may issue warrants, grant stock options or declare a split of the shares
of common stock to the organizers and other individuals who purchased shares in
the private placement, provided the Company is not prohibited from taking these
actions by applicable regulations or by regulatory authority. The warrants,
stock options, or split of shares is contemplated in recognition of the risk
undertaken by those individuals.
The Company is recently formed and the Bank will be newly formed, both
without any prior operating history. The operating results of the Company will
be dependent upon the operating results of the Bank. The Bank will to a large
extent be a first mortgage lender on residential real estate and its
profitability will depend in large part on the real estate market of its primary
market area. The Bank will incur operating expenses and there can be no
assurances as to when, if ever, the Bank will generate sufficient revenues to
operate profitably. Assuming that the minimum net proceeds from the offering are
raised, the Company presently believes that it will have sufficient capital
resources to meets its commitments over the next twelve months. See "Use of
Proceeds;" "Unaudited Pro Forma Financial Information;" and "Office Facilities."
PROPOSED BUSINESS OF THE COMPANY
General
The Company, a New Jersey corporation, was incorporated primarily to be
the holding company of the Bank. The Company has not conducted any business
activities to date other than entering into the Lease Agreement and those
activities deemed necessary by the Company to obtain regulatory approval for the
Bank and to proceed with the offering. The Company will initially engage
exclusively in the business of owning all of the outstanding shares of capital
stock of the Bank. However, the Company may pursue other business interests in
the future, subject to regulatory approval. There can be no assurances as to
when, if ever, the Company will pursue such interests. Accordingly, the
Company's initial earnings will be dependent upon dividends received by the
Company from the Bank, which dividends are dependent on the Bank's profitability
and the Bank's compliance with certain regulatory requirements. See "Regulation
- - Savings Institution Regulation -- Dividend and Other Capital Distribution
Limitations."
The Company may not acquire the capital stock of the Bank without the
approval of the Office of Thrift Supervision (the "OTS"). On August 3, 1998, the
Company filed with the OTS an Application for Permission to Organize the Bank,
and an Application H-(e)1 to become the holding company for the Bank. These
Applications were filed to obtain the necessary approvals and these approvals
were conditionally granted by the OTS on __________ ___, 1998. An FDIC
Application for Federal Deposit Insurance was filed on August 7, 1998 and
approval was conditionally granted on __________ ___, 1998.
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Upon satisfaction of the conditions of the offering and of the regulators and
the release of escrowed funds to the Company, the Company will proceed to
acquire all of the shares of capital stock of the Bank and the Company will
become, subject to the Bank's compliance with certain regulatory requirements
discussed below, a unitary savings and loan holding company. As such, the
company will be subject to examination and comprehensive regulation by the OTS.
Because the Company will own only one savings association, it generally will not
be restricted in the types of business activities in which it may engage,
provided that the Bank retains a specified amount of its assets in
housing-related investments. See "Regulation - Holding Company Regulation."
The Company is currently located at 23 Route 31 North, Suite A22,
Pennington, New Jersey 08534. The telephone number is (609) 730-0183. The
Company expects, upon the opening of the Bank, to relocate to the main office of
the Bank at 590 Lawrence Square Boulevard, Lawrenceville, New Jersey. At the
present time, upon the approval and opening of the Bank, the Company does not
intend to have any employees other than its officers. The Company may utilize
the support staff of the Bank from time to time. The Company initially will
engage in no business other than owning all of the outstanding shares of capital
stock of the Bank; therefore, the competitive conditions to be faced by the
Company will be the same as those faced by the Bank.
Additional Information
The Company has filed with the Securities and Exchange Commission (the
"SEC") a Registration Statement under the Securities Act of 1933, as amended,
with respect to the common stock offered hereby. This Prospectus does not
contain all of the information set forth in the Registration Statement. For
further information with respect to the Company and the common stock, reference
is hereby made to the Registration Statement and the exhibits thereto. The
Registration Statement may be examined at, and copies of the Registration
Statement may be obtained at prescribed rates from, the Public Reference Section
of the SEC, Room 1024, 450 Fifth Street, N.W., Washington, DC 20549. Such
material may also be accessed electronically by means of the SEC's home page on
the Internet at "http://www.sec.gov".
The Company and the Bank have filed various applications with the OTS
and the FDIC, as required by the applicable regulatory authorities. Prospective
investors should rely only on information contained in this Prospectus and in
the Company's related Registration Statement in making an investment decision.
To the extent that information available from the Company and information in
public files and records maintained by the OTS and the FDIC is inconsistent with
information presented in this Prospectus, such other information is superseded
by the information presented in this Prospectus.
Reports to Stockholders
Upon the effective date of the Registration Statement, the Company will
be subject to the reporting requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), which includes requirements to file annual
reports on Form 10-KSB and quarterly reports on Form 10-QSB with the SEC. This
reporting obligation will exist for at least one year and may continue for
fiscal years thereafter, except that such reporting obligations may be suspended
for any subsequent fiscal year if at the beginning of such year the common stock
of the Company is held of record by fewer than three hundred persons or if the
common stock of the Company is held of record by fewer than five hundred persons
and the total assets of the Company have not exceeded $10 million on the last
day of each of the Company's three most recent fiscal years.
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Regardless of whether the Company is subject to the reporting
requirements of the Exchange Act, the Company intends to furnish its
stockholders with annual reports containing audited financial information for
each fiscal year. The Company's fiscal year ends on December 31.
PROPOSED BUSINESS OF THE BANK
General
The proposed business of the Bank will primarily consist of accepting
deposits and originating mortgage, consumer, small business and other loans. The
Bank intends to supplement its portfolio of loans with investment securities
deemed prudent by the board of directors. Upon regulatory approval, the Bank
will seek to attract deposits. The Bank intends to pay money market deposit
account rates above the average market rates. The Bank also intends to offer a
checking account, a savings account and a NOW account and various certificates
of deposit products at competitive interest rates. The Bank or Company may also
offer through affiliations with other companies, alternative non-deposit
investments, such as mutual funds and securities, although no determination has
been made as to when, if ever, the Bank or Company will enter into such
affiliations. The Bank anticipates originating primarily residential mortgage
loans and home equity loans. To a lesser extent, the Bank intends to originate
consumer installment, commercial real estate and small business loans.
The organizers' assumptions as to the viability of the Bank, as
represented in their business plan, are based on projections of population
growth, deposit growth and housing development in the market area and adjacent
communities, as well as on assumed levels of earning assets, interest rates and
operating expenses. These projections and assumptions are thus subject to the
hazards of forecast and may prove to be inaccurate. Furthermore, although the
Company anticipates some growth in its primary market area, there can be no
assurance of any growth or that the Bank will benefit from any growth.
The Bank has prepared a strategic business plan to provide direction
for the Bank over the next three years. Although the Bank anticipates numerous
revisions as to tactics and possibly even to strategy, the basic objectives of
the Bank, though there is no assurance that such objectives will be attained,
are as follows:
o The Company will pursue aggressive, but controlled, balance
sheet growth with the Bank originating a broad array of
lending products, including residential mortgage, commercial
mortgage, consumer installment and commercial loans.
o The Bank anticipates attracting deposits with an emphasis on
core deposits and transaction accounts with competitive rates
and products, supported by individuals with strong customer
service attitudes and skills.
o The Bank intends to outsource non-banking services, such as
data processing, in order to employ a core group of banking
professionals focused on customer needs.
Prospects
Although investment in its common stock involves significant risk, the
organizers believe that the Company will be able to compete effectively.
Furthermore, as a stock-owned institution, the Bank will not be subject to the
limitations on raising capital that have constrained mutual institutions, and
will have the opportunity to raise capital from institutional and other private
investors.
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The Company, through the Bank, intends to fill what it perceives to be
a significant market niche that exists in central Mercer County, and
particularly in Lawrence Township and Pennington Borough. These areas are
currently served almost entirely by large financial institutions based outside
of the area. The Bank will have local owners, directors and senior management
and therefore anticipates being more responsive to the banking needs of the
local community. However, there can be no assurance that the Bank will achieve
this goal.
In the current environment of bank mergers, acquisitions, and
consolidations, there is a perceived need for banks focused on the needs of the
local community. The organizers believe this void of community focused banks is
particularly evident in the Lawrence Township and Pennington Borough areas. The
organizers of the proposed Bank intend to provide a community bank oriented
toward the local residents and small businesses in the primary market area.
The Bank believes that the following attributes will make the Bank
attractive to the local business people and residents:
o Direct and easy access to the Bank's President, officers and directors
by members of the community, whether during or after business hours.
o Local conditions and needs will be taken into account by the Bank when
deciding loan applications and making other business decisions
affecting members of the community.
o A personalized relationship banking approach that is supported by
decision making that is local and responsive to customer needs.
o Offering competitive interest rates and fees on savings and checking
accounts.
o Prompt review and processing of loan applications.
o Depositors' funds will be invested back into the community.
o Positive involvement of the Bank in the community affairs within its
primary market area.
o A staff of individuals with strong customer service attitudes and
skills dedicated to meeting customer needs.
In September 1998, Village Financial Corporation agreed to the terms of
a lease for 590 Lawrence Square Boulevard, a facility previously operated as a
bank branch and equipped with much of the necessary banking equipment. As such,
the Bank has leased a facility which can open immediately upon receipt of
regulatory approval. The Bank has also signed a lease to operate a limited
service facility near the Pennington Point adult community. Leasing these
facilities will provide the Bank with a convenient location in Lawrenceville,
with an ATM facility, a drive-in facility, teller stations and the potential to
add safe deposit boxes, as well as the potential to attract deposits from the
retirement community.
Market Area
The Bank's main office is expected to be located at 590 Lawrence Square
Boulevard, Lawrenceville, New Jersey. The Bank's primary market area will
consist of Lawrence Township and
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Pennington Borough in Mercer County. A final determination as to the boundaries
of the primary market area is subbject to regulatory approval or non-objection.
Lawrence Township is mainly a residential and small business community
consisting of approximately 50 square miles. The population within a four-mile
radius of the proposed main office has been estimated to be approximately 68,000
and the population of Mercer County has been estimated to be approximately
330,000. There are over 2,500 businesses located within four miles of the
proposed main office consisting mainly of small service and retail businesses
with less than 10 employees.
Competition
Competition for deposits and loans is strong among savings
institutions, commercial banks, mortgage banks, mortgage brokers, credit unions
and money market funds. There is also increasing competition from securities
firms and other financial service corporations not traditionally engaged in the
banking or savings business. The primary factors with which institutions compete
for deposits and loans are interest rates, loan origination fees and range of
services offered.
Mercer County, which includes the Bank's primary market area is served
almost entirely by large, regional financial institutions, almost all of which
are headquartered out of the area. As of June 30, 1998, these financial
institutions include Carnegie Bank (merged with Sovereign Bank), College Savings
Bank, CoreStates Bank, N.A. (merging with First Union National Bank), Dime
Savings Bank of New York, First Union National Bank, First Washington State
Bank, Fleet Bank, N.A., Mellon Bank, N.A., Mercer County New Jersey Teachers
Federal Credit Union, PNC Bank, N.A., Public Service Ed Trenton FCU, Pulse
Savings Bank (merging with First Source Bancorp, Inc.), Roma FSB, Sovereign
Bank, Summit Bank, Sun National Bank, Third Federal Savings Bank, Trenton
Savings Bank (merging with Sovereign Bank), U.S. Trust Company of New Jersey and
Yardville National Bank.
All of these institutions have been in existence for a longer period of
time than the Bank, are better established than the Bank and have financial
resources substantially greater than those of the Bank. The Bank will not have
an existing deposit base when it commences operations, and will be competing for
deposits with these larger established institutions as well as with investment
bankers, money market mutual funds and other non-traditional financial
intermediaries. The Bank will have to attract its loan customer base from
existing financial institutions and from growth in the community.
Market Strategy
The Bank's objective will be to create a customer-driven financial
institution focused on providing value to residents and businesses within the
local community by delivering products and services matched to the clients'
needs. It is believed that customers will be drawn to a locally managed
institution that demonstrates an active interest in its customers and their
business and personal financial needs.
The banking industry in general has experienced substantial
consolidation in recent years. From the organizers' point of view, this
consolidation has resulted in increasing fees for bank services, the dissolution
of local boards of directors, management and personnel changes and a decline in
the level of customer service and attention to the needs of local communities.
With the permissibility of interstate banking and the announcements of several
mergers by large financial institutions, the organizers anticipate this type of
consolidation to continue. The organizers believe that the present competitive
and economic environment is right for a new, independent, locally managed bank
to service the financial needs of residents and businesses of Lawrence Township
and Pennington Borough.
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Lending Activities
General. The Bank anticipates that its lending activities will be
primarily composed of the origination of residential mortgage loans and home
equity loans for the purpose of financing and refinancing one-to-four family
residential properties. To a lesser extent, the Bank anticipates that it will
originate commercial real estate loans, commercial business loans and consumer
installment loans. The types of loans the Bank will originate generally will be
subject to federal and state law and regulation. All loan requests will be
subject to appropriate underwriting guidelines, a loan review process,
management supervision and monitoring by the board of directors on an ongoing
basis. The Bank will implement various lending limits for the Bank's loan
officers and will maintain a loan committee composed of the President, Chief
Lending Officer and at least one outside director to be determined prior to the
opening of the Bank.
The Bank's ability to originate loans will be dependent upon the
relative customer demand, which will be affected by the current and expected
future level of interest rates. Interest rates will be affected by the demand
for loans and the supply of money available for lending purposes and the rates
offered by competitors. Among other things, these factors are, in turn, affected
by economic conditions, monetary policies of the federal government and
legislative tax policies.
The Bank intends to originate the following loans:
One- to Four-Family Mortgage Loans. The Bank intends to offer
fixed-rate and adjustable-rate mortgage loans primarily secured by one- to
four-family residences, with maturities up to 30 years. It is anticipated that
such loans will be secured by properties located in the Bank's market areas. All
one- to four-family loans will be underwritten using generally accepted lending
standards such as Government National Mortgage Association ("GNMA"), Federal
National Mortgage Association ("FNMA"), or the Federal Home Loan Mortgage
Corporation ("FHLMC"). The Bank will originate loans for both owner occupied and
non-owner occupied (investor) residential properties. Non-owner occupied
residential mortgage loans generally carry a higher degree of credit risk than
owner occupied residential mortgage loans. The Bank plans on maintaining all
residential mortgage loans originated during the first three years of existence
but intends to sell a portion of such loans if the Bank deems it necessary. If
the Bank sells any of its loans, the Bank intends to retain the servicing rights
to such loans. The Bank expects its one- to four-family mortgage loans to be
composed primarily of one-year adjustable rate loans, 15-year fixed rate loans
and 30-year fixed rate loans.
Home Equity Loans. The Bank intends to offer home equity term loans and
home equity revolving lines of credit, primarily secured by one- to four-family,
owner occupied residences. It is anticipated that the Bank will employ similar
underwriting standards in making home equity loans as those utilized in making
residential mortgage loans. The Bank expects to originate term loans for periods
up to 15 years and to originate adjustable rate revolving lines of credit.
Commercial Real Estate Loans. The Bank intends to offer commercial and
multi-family real estate loans (five units or more) generally secured by
property located in the Bank's market areas. The Bank intends to originate
commercial mortgage loans for the acquisition, construction and refinancing of
commercial real estate. At times such loans may exceed the Bank's internal
lending limits and will require the Bank to obtain the participation of other
financial institutions to assist in funding excess loan amounts. In such cases,
the Bank expects to maintain servicing responsibility for the loans.
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Commercial real estate and multi-family loans are generally larger and
present a greater degree of credit risk than loans secured by one- to
four-family residences. Because payments on loans secured by commercial real
estate and multi-family properties are often dependent on the successful
operation or management of the properties, repayment of such loans may be
subject to a greater extent to adverse conditions in the real estate market or
in the economy. It is anticipated that the Bank will seek to minimize these
risks through its underwriting standards.
Small Business Commercial Loans. The Bank intends to pursue
opportunities to offer small business loans, primarily to businesses located in
the Bank's market areas. Federally chartered savings institutions such as the
Bank are authorized to make secured or unsecured loans and letters of credit for
commercial, corporate, business and agricultural purposes and to engage in
commercial leasing activities. However, federally chartered savings institutions
generally are limited in the amount of commercial business loans they may hold
in their portfolio to a maximum of 20% of total assets.
Unlike residential mortgage loans, which generally are made on the
basis of the borrower's ability to make repayment from his or her employment and
other income, and which are secured by real estate property whose value tends to
be more easily ascertainable, commercial business loans are of higher credit
risk and typically are made on the basis of the borrower's ability to make
repayment from cash flow of the borrower's business. As a result, the
availability of funds for the repayment of commercial business loans may be
substantially dependent on the success of the business itself. Further, the
collateral securing the loans may depreciate over time, may be difficult to
appraise and may fluctuate in value on the success of the business.
Consumer Loans. The Bank intends to make a variety of consumer loans
which are anticipated to consist primarily of fixed-rate installment loans
secured by automobiles or by deposits at the Bank. The Bank may originate home
improvement loans not secured by real estate and other personal loans, both
secured and unsecured.
Consumer loans may entail greater credit risk than do residential
mortgage loans, particularly in the case of consumer loans that are unsecured or
that are secured by rapidly depreciable assets, such as automobiles. In such
cases, any repossessed collateral for a defaulted consumer loan may not provide
an adequate source of repayment of the outstanding loan balance as a result of
the greater likelihood of damage, loss or depreciation. In addition, consumer
loan collections are dependent on the borrower's continuing financial stability,
and therefore are more likely to be affected by adverse personal circumstances.
Furthermore, the application of various federal and state laws, including
bankruptcy and insolvency laws, may limit the amount which can be recovered on
such loan.
Participation Interests. The Bank will consider participating in loans
originated in New Jersey outside its primary market area, provided such loans
meet approval criteria as will be stipulated in the Bank's lending policies. The
Bank anticipates participation in the origination of loans through Thrift
Institutions' Community Investment Corporation, a subsidiary of the New Jersey
League - Savings and Community Bankers.
Loan Approval. The Bank's lending activity will be conducted primarily
through advertising, customer calls and contacts by the Bank's employees,
officers and directors and solicitations to local real estate brokers, builders
and real estate developers. The Bank's lending will be subject to written
underwriting standards (including, as applicable, a Year 2000 compliance clause)
and loan origination procedures. Decisions on loan applications will be made on
the basis of detailed applications and property valuations. The loan
applications will be designed primarily to determine the borrower's ability
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to repay and the more significant items on the applications will be verified
through the use of credit reports, financial statements, tax returns and/or
confirmations.
The Bank generally will require title insurance on its real estate
secured loans as well as fire and extended coverage casualty insurance in
amounts at least equal to the principal amount of the loan or the value of
improvements on the property, depending on the type of loan. The Bank also will
require flood insurance to protect the property securing its interest when the
property is located in a flood plain.
Loan Fees and Service Charges. In addition to interest earned on loans,
the Bank will generally recognize fees and service charges which consist
primarily of loan origination fees and late charges.
Loans to One Borrower. Under applicable regulations, the maximum amount
of loans that may be made to one borrower initially will not exceed the greater
of $500,000 or 15% of the unimpaired capital and surplus of the Bank. The Bank
may lend an additional 10% of unimpaired capital and surplus if a loan is fully
secured by readily marketable collateral.
Delinquencies. The Bank's collection procedures are expected to provide
that when a loan is 30 days past due, a late charge is added and the borrower is
contacted by mail and/or telephone and payment requested. If the delinquency
continues, subsequent efforts are made to contact the delinquent borrower.
Additional late charges may be added and, if the loan continues in a delinquent
status for 90 days or more, the Bank will likely initiate foreclosure
proceedings unless other repayment arrangements are made.
Non-Performing Assets and Asset Classification. Loans will be reviewed
on a regular basis and classified in accordance with the requirements of the OTS
and internal policies of the Bank. The Bank's internal classifications will be
reviewed annually through a loan review process. Such a loan review will likely
be outsourced to an independent qualified third party.
Investment Activities
The Bank will be required under federal regulations to maintain a
minimum amount of liquid assets which may be invested in specified short-term
securities and certain other investments. The Bank expects to maintain a
liquidity portfolio in excess of regulatory requirements. Until the Bank is able
to originate sufficient loans, it expects to leverage its capital by investing
deposits and borrowed money in securities and other investments at a positive
interest rate spread exceeding the cost of deposits received and borrowings.
Liquidity levels may be increased or decreased depending upon the yields on
investment alternatives and upon management's judgment as to the attractiveness
of the yields then available in relation to other opportunities and its
expectation of the level of yield that will be available in the future, as well
as management's projections as to the short term demand for funds to be used in
the Bank's loan origination and other activities. The Bank intends to invest
primarily in U.S. Government and agency obligations, federal funds sold and
U.S. government agency issued mortgage-backed securities.
Sources of Funds
General. The management of the Bank will endeavor to build a deposit
base with the expectation that deposits will be the major source of the Bank's
funds for lending and other investment purposes. In addition to deposits, the
Bank anticipates deriving funds from payment streams of loans and securities,
sale or maturities of investment securities, operations and, as needed, advances
from the Federal Home Loan Bank ("FHLB") of New York. Scheduled loan principal
repayments are generally a stable source of funds for banking institutions,
while deposit inflows and outflows and loan prepayments are significantly
influenced by general interest rates and market conditions. Borrowings may be
used on a
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short-term basis to compensate for reductions in the availability of funds from
other sources or on a longer term basis for general business purposes.
Deposits. Consumer and commercial deposits will be attracted
principally from within the Bank's primary market area through the offering of a
broad selection of deposit instruments including NOW, regular savings, money
market deposit, term certificate accounts (including negotiated jumbo
certificates in denominations of $100,000 or more) and individual retirement
accounts and Keogh accounts. Deposit account terms will vary according to the
minimum balance required, the time periods the funds must remain on deposit and
the interest rate, among other factors. The Bank will regularly evaluate the
internal cost of funds, survey rates offered by competing institutions, review
the Bank's cash flow requirements for lending and liquidity and execute rate
changes when deemed appropriate. The Bank does not anticipate obtaining funds
through brokers. The Bank may seek to acquire deposits from another financial
institution in the Bank's primary market area, but presently has no agreements
nor intentions to do so.
Employees
The Bank anticipates having 10 full-time equivalent employees,
including two executive officers, when it commences operations. The executive
officers of the Bank are expected to initially include (i) the President and
Chief Executive Officer (who will also serve initially as the Chief Financial
Officer) and (ii) a Chief Lending Officer. The Bank also expects to employ a
Senior Operations Officer. In addition, the Bank intends to employ a Branch
Manager, Administrative Assistant and a Customer Service Representative. The
Bank may employ a Loan Processor and an Operations Supervisor subsequent to the
opening of the Bank, but will not likely employ such individuals until the year
2000. The remaining employees will provide staff support in the teller, new
accounts and loan processing functions. The employees of the Bank will
concentrate on providing a high level of service to the customers of the Bank.
Non-banking services, such as data processing, will likely be outsourced to
companies specializing in those areas. The Company anticipates having the same
executive officers of the Bank act as executive officers of the Company. No
other employees of the Company are anticipated at this time. See "Management of
the Company" and "Management of the Bank."
Total compensation for the Bank's employees for the first full year of
operations is projected to be $387,000. In addition, the Bank intends to provide
its employees with certain benefits programs, including medical insurance, paid
vacation time and sick leave. Directors will receive fees in the amount of $300
per month. A stock option plan and restricted stock plan are expected to be
adopted by the Board, subject to stockholder approval. Other benefit programs
such as a profit sharing plan may also be adopted following commencement of
operations of the Bank. The board of directors will consider the implementation
of a pension plan, but no such plan will be in place at the commencement of
operations of the Bank.
REGULATION
Set forth below is a brief description of certain laws which relate to
the Company and the Bank. The description is not complete and is qualified in
its entirety by references to applicable laws and regulations.
Holding Company Regulation
General. The Company will be required to register and file reports with
the OTS and will be subject to regulation and examination by the OTS. In
addition, the OTS will have enforcement authority
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over the Company and any non-savings institution subsidiaries. This will permit
the OTS to restrict or prohibit activities that it determines to be a serious
risk to the Company and the Bank. This regulation is intended primarily for the
protection of the Bank's depositors and not for the benefit of the stockholders
of the Company.
Qualified Thrift Lender ("QTL") Test. Since the Company will only own
one savings institution, it will be able to diversify its operations into
activities not related to banking, if the Bank satisfies the QTL test. If the
Company controls more than one savings institution, it would lose the ability to
diversify its operations into non-banking related activities, unless such other
savings institutions each also qualify as a QTL or were acquired in a supervised
acquisition. See "- Savings Institution Regulation -- Qualified Thrift Lender
Test."
Restrictions on Acquisitions. The Company must obtain approval from the
OTS before acquiring control of any other SAIF-insured savings institution. No
person may acquire control of a federally insured savings institution without
providing at least 60 days written notice to the OTS and giving the OTS an
opportunity to disapprove the proposed acquisition.
Savings Institution Regulation
General. As a federally chartered, SAIF-insured savings institution,
the Bank is subject to extensive regulation by the OTS and the FDIC. The Bank's
lending activities and other investments must comply with various federal and
state statutory and regulatory requirements.
The OTS, in conjunction with the FDIC, will regularly examine the Bank
and prepare reports for the consideration of the board of directors on any
deficiencies that the OTS finds in the Bank's operations. The Bank's
relationship with the depositors and borrowers also will be regulated to a great
extent by federal and state law, especially in such matters as the ownership of
savings accounts and the form and content of its mortgage documents.
The Bank must file reports with the OTS and the FDIC concerning its
activities and financial condition, in addition to obtaining regulatory
approvals prior to entering into certain transactions such as mergers with or
acquisitions of other financial institutions. This regulation and supervision
establishes a comprehensive framework of activities in which an institution can
engage and is intended primarily for the protection of the SAIF and depositors.
The regulatory structure also gives the regulatory authorities extensive
discretion in connection with their supervisory and enforcement activities and
examination policies, including policies with respect to the classification of
assets and the establishment of adequate loan loss reserves for regulatory
purposes. Any change in regulations, whether by the OTS, the FDIC or any other
government agency, could have a material adverse impact on the Bank's
operations.
Insurance of Deposit Accounts. The FDIC is authorized to establish
separate annual assessment rates for deposit insurance for members of the BIF
and the SAIF. The FDIC may increase assessment rates for either fund if
necessary to restore the fund's ratio of reserves to insured deposits to its
target level within a reasonable time and may decrease such assessment rates if
such target level has been met. The FDIC has established a risk-based assessment
system for both SAIF and BIF members. Under this system, assessments are set
within a range, based on the risk the institution poses to its deposit insurance
fund. This risk level is determined based on the institution's capital level and
the FDIC's level of supervisory concern about the institution.
Because a significant portion of the assessments paid into the SAIF by
savings institutions were used to pay the cost of prior savings institution
failures, the reserves of the SAIF were below the level
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required by law. The BIF had, however, met its required reserve level during the
third calendar quarter of 1995. As a result, deposit insurance premiums for
deposits insured by the BIF were substantially less than premiums for deposits
which are insured by the SAIF. Legislation to capitalize the SAIF and to
eliminate the significant premium disparity between the BIF and the SAIF became
effective September 30, 1996. The recapitalization plan provided for a special
assessment equal to $.657 per $100 of SAIF deposits held at March 31, 1995, in
order to increase SAIF reserves to the level required by law. Certain BIF
institutions holding SAIF-insured deposits were required to pay a lower special
assessment.
The recapitalization plan also provides that the cost of prior failures
which were funded through the issuance of Fico Bonds (bonds issued to fund the
cost of savings institution failures in prior years) will be shared by members
of both the SAIF and the BIF. This increased BIF assessments for healthy banks
to approximately $.0125 per $100 of deposits in 1998. SAIF assessments for
healthy savings institutions in 1998 were approximately $.0628 per $100 in
deposits and may be reduced, but not below the level set for healthy BIF
institutions.
The FDIC has lowered the rates on assessments paid to the SAIF and
widened the spread of those rates. The FDIC's action established a base
assessment schedule for the SAIF with rates ranging from 4 to 31 basis points,
and an adjusted assessment schedule that reduces these rates by 4 basis points.
As a result, the effective SAIF rates range from 0 to 27 basis points as of
October 1, 1996. In addition, the FDIC's final rule prescribed a special interim
schedule of rates ranging from 18 to 27 basis points for SAIF-member savings
institutions for the last quarter of calendar 1996, to reflect the assessments
paid to the Financing Corporation (Fico Bonds). Finally, the FDIC's action
established a procedure for making limited adjustments to the base assessment
rates by rulemaking without notice and comment, for both the SAIF and the BIF.
The recapitalization plan also provides for the merger of the SAIF and
BIF effective January 1, 1999, assuming there are no savings institutions under
federal law. Under separate proposed legislation, Congress is considering the
elimination of the federal thrift charter and elimination of the separate
federal regulation of thrifts. As a result, the Bank may have to convert to a
different financial institution charter and be regulated under federal law as a
bank, including being subject to the more restrictive activity limitations
imposed on national banks. The Bank cannot predict the impact of the proposed
legislation unless and until the legislation requiring such change is enacted.
Regulatory Capital Requirements. OTS capital regulations require
savings institutions to meet three capital standards: (1) tangible capital equal
to 1.5% of total adjusted assets, (2) core capital equal to at least 3% of total
adjusted assets, and (3) risk-based capital equal to 8% of total risk-weighted
assets. The Bank's capital ratios, which are set forth under "Historical and Pro
Forma Capital Compliance," are expected to be well in excess of these
requirements.
Tangible capital is defined as core capital less all intangible assets
(including supervisory goodwill), less certain mortgage servicing rights and
less certain investments. Core capital is defined as common stockholders' equity
(including retained earnings), noncumulative perpetual preferred stock and
minority interests in the equity accounts of consolidated subsidiaries, certain
nonwithdrawable accounts and pledged deposits of mutual savings associations and
qualifying supervisory goodwill, less nonqualifying intangible assets, certain
mortgage servicing rights and certain investments.
The risk-based capital standard for savings institutions requires the
maintenance of total risk-based capital (which is defined as core capital plus
supplementary capital) of 8% of risk-weighted assets. The components of
supplementary capital include, among other items, cumulative perpetual preferred
stock, perpetual subordinated debt, mandatory convertible subordinated debt,
intermediate-term preferred stock,
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<PAGE>
and the portion of the allowance for loan losses not designated for specific
loan losses. The portion of the allowance for loan and lease losses includable
in supplementary capital is limited to a maximum of 1.25% of risk-weighted
assets. Overall, supplementary capital is limited to 100% of core capital. A
savings association must calculate its risk-weighted assets by multiplying each
asset and off-balance sheet item by various risk factors as determined by the
OTS, which range from 0% for cash to 100% for delinquent loans, property
acquired through foreclosure, commercial loans, and other assets.
The risk-based capital standards of the OTS generally require savings
institutions with more than a "normal" level of interest rate risk to maintain
additional total capital. An institution's interest rate risk will be measured
in terms of the sensitivity of its "net portfolio value" to changes in interest
rates. Net portfolio value is defined, generally, as the present value of
expected cash inflows from existing assets and off-balance sheet contracts less
the present value of expected cash outflows from existing liabilities. A savings
institution will be considered to have a "normal" level of interest rate risk
exposure if the decline in its net portfolio value after an immediate 200 basis
point increase or decrease in market interest rates (whichever results in the
greater decline) is less than two percent of the current estimated economic
value of its assets. An institution with a greater than normal interest rate
risk will be required to deduct from total capital, for purposes of calculating
its risk-based capital requirement, an amount (the "interest rate risk
component") equal to one-half the difference between the institution's measured
interest rate risk and the normal level of interest rate risk, multiplied by the
economic value of its total assets.
The OTS calculates the sensitivity of an institution's net portfolio
value based on data submitted by the institution in a schedule to its quarterly
Thrift Financial Report and using the interest rate risk measurement model
adopted by the OTS. The amount of the interest rate risk component, if any, to
be deducted from an institution's total capital will be based on the
institution's Thrift Financial Report filed two quarters earlier. Savings
institutions with less than $300 million in assets and a risk-based capital
ratio above 12% are generally exempt from filing the interest rate risk schedule
with their Thrift Financial Reports. However, the OTS may require any exempt
institution that it determines may have a high level of interest rate risk
exposure to file such schedule on a quarterly basis and may be subject to an
additional capital requirement based upon its level of interest rate risk as
compared to its peers. However, due to the Bank's net size and risk-based
capital level, it is expected to be exempt from the interest rate risk
component.
In accordance with the requirements of the Federal Deposit Insurance
Corporation with respect to the Application for Insurance of Deposits of Village
Bank, the organizers agreed to maintain a Tier 1 Capital ratio to total
estimated assets of at least 8% and an adequate allowance for loan and lease
losses for the first three years of operation of the Bank from the date the FDIC
deposit insurance is effective.
Dividend and Other Capital Distribution Limitations. OTS regulations
require the Bank to give the OTS 30 days advance notice of any proposed
declaration of dividends to the Company, and the OTS has the authority under its
supervisory powers to prohibit the payment of dividends by the Bank to the
Company.
OTS regulations impose limitations upon all capital distributions by
savings institutions, such as cash dividends, payments to repurchase or
otherwise acquire its shares, payments to stockholders of another institution in
a cash-out merger, and other distributions charged against capital. The rule
establishes three tiers of institutions based primarily on an institution's
capital level. An institution that exceeds all fully phased-in capital
requirements before and after a proposed capital distribution ("Tier 1
institution") and has not been advised by the OTS that it is in need of more
than the normal supervision can, after prior notice but without the approval of
the OTS, make capital distributions during a calendar year equal to the greater
of (i) 100% of its net income to date during the calendar year plus the amount
27
<PAGE>
that would reduce by one-half its "surplus capital ratio" (the excess capital
over its fully phased-in capital requirements) at the beginning of the calendar
year, or (ii) 75% of its net income over the most recent four quarter period.
Any additional capital distributions require prior regulatory notice. The Bank
expects to qualify as a Tier 1 institution, but there can be no assurance that
it will achieve this goal.
In the event the Bank's capital falls below the fully phased-in
requirement or the OTS notifies the Bank that it needs more than normal
supervision, the Bank would become a Tier 2 or Tier 3 institution and as a
result, its ability to make capital distributions could be restricted. Tier 2
institutions, which are institutions that before and after the proposed
distribution meet their current minimum capital requirements, may only make
capital distributions of up to 75% of net income over the most recent four
quarter period. Tier 3 institutions, which are institutions that do not meet
current minimum capital requirements and propose to make any capital
distribution, and Tier 2 institutions that propose to make a capital
distribution in excess of the noted safe harbor level, must obtain OTS approval
prior to making such distribution. In addition, the OTS could prohibit a
proposed capital distribution by any institution, which would otherwise be
permitted by the regulation, if the OTS determines that such distribution would
constitute an unsafe or unsound practice. The OTS has proposed rules relaxing
certain approval and notice requirements for well-capitalized institutions.
In January 1998, the OTS proposed amendments to its current regulations
with respect to capital distributions by savings associations. Under the
proposed regulation, savings associations that would remain at least adequately
capitalized following the capital distribution, and that meet other specified
requirements, would not be required to file a notice or application for capital
distributions (such as cash dividends) declared below specified amounts. Under
the proposed regulation, savings associations which are eligible for expedited
treatment under current OTS regulations are not required to file a notice or an
application with the OTS if (i) the savings association would remain at least
adequately capitalized following the capital distribution and (ii) the amount of
capital distribution does not exceed an amount equal to the savings
association's net income for that year to date, plus the savings association's
retained net income for the previous two years. Thus, under the proposed
regulation, only undistributed net income for the prior two years may be
distributed in addition to the current year's undistributed net income without
the filing of an application with the OTS. Savings associations which do not
qualify for expedited treatment or which desire to make a capital distribution
in excess of the specified amount, must file an application with, and obtain the
approval of, the OTS prior to making the capital distribution. Under certain
other circumstances, savings associations will be required to file a notice with
OTS prior to making the capital distribution. The OTS proposed limitations on
capital distributions are similar to the limitations imposed upon national
banks. The Company is unable to predict whether or when the proposed regulation
will become effective.
A savings institution is prohibited from making a capital distribution
if, after making the distribution, the savings institution would be
undercapitalized (i.e., not meet any one of its minimum regulatory capital
requirements). Further, a savings institution cannot distribute regulatory
capital that is needed for its liquidation account.
Qualified Thrift Lender Test. Savings institutions must meet a
qualified thrift lender ("QTL") test. If the Bank maintains an appropriate level
of qualified thrift investments ("QTIs") (primarily residential mortgages and
related investments, including certain mortgage-related securities) and
otherwise qualifies as a QTL, the Bank will continue to enjoy full borrowing
privileges from the FHLB of New York. The required percentage of QTIs is 65% of
portfolio assets (defined as all assets minus intangible assets, property used
by the institution in conducting its business and liquid assets equal to 10% of
total assets). Certain assets are subject to a percentage limitation of 20% of
portfolio assets. In addition,
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<PAGE>
savings institutions may include shares of stock of the FHLBs, FNMA, and FHLMC
as QTIs. Compliance with the QTL test is determined on a monthly basis in nine
out of every 12 months.
Transactions With Affiliates. Generally, restrictions on transactions
with affiliates require that transactions between a savings institution or its
subsidiaries and its affiliates be on terms as favorable to the savings
institution as comparable transactions with non-affiliates. In addition, certain
of these transactions are restricted to an aggregate percentage of the savings
institution's capital. Collateral in specified amounts must usually be provided
by affiliates in order to receive loans from the savings institution. The Bank's
affiliates include the Company and any company which would be under common
control with the Bank. In addition, a savings institution may not extend credit
to any affiliate engaged in activities not permissible for a bank holding
company or acquire the securities of any affiliate that is not a subsidiary. The
OTS has the discretion to treat subsidiaries of savings institutions as
affiliates on a case-by-case basis.
Liquidity Requirements. All savings institutions are required to
maintain an average daily balance of liquid assets equal to a certain percentage
of the sum of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less. The liquidity requirement may vary from
time to time (between 4% and 10%) depending upon economic conditions and savings
flows of all savings institutions. Monetary penalties may be imposed upon
institutions for violations of liquidity requirements.
Federal Home Loan Bank System. The Bank will be a member of the FHLB of
New York, which is one of 12 regional FHLBs. Each FHLB serves as a reserve or
central bank for its members within its assigned region. It is funded primarily
from funds deposited by savings institutions and proceeds derived from the sale
of consolidated obligations of the FHLB System. It makes loans to members (i.e.,
advances) in accordance with policies and procedures established by the board of
directors of the FHLB.
As a member, the Bank will be required to purchase and maintain stock
in the FHLB of New York in an amount equal to at least 1% of our aggregate
unpaid residential mortgage loans, home purchase contracts or similar
obligations at the beginning of each year. The FHLB imposes various limitations
on advances such as limiting the amount of certain types of real estate related
collateral to 30% of a member's capital and limiting total advances to a member.
The FHLBs are required to provide funds for the resolution of troubled
savings institutions and to contribute to affordable housing programs through
direct loans or interest subsidies on advances targeted for community investment
and low- and moderate-income housing projects. These contributions have
adversely affected the level of FHLB dividends paid and could continue to do so
in the future.
Federal Reserve System. The Federal Reserve System requires all
depository institutions to maintain non-interest bearing reserves at specified
levels against their transaction accounts (primarily checking, NOW and Super NOW
checking accounts) and non-personal time deposits. The balances maintained to
meet the reserve requirements imposed by the Federal Reserve System may be used
to satisfy the liquidity requirements that are imposed by the OTS. Savings
institutions have authority to borrow from the Federal Reserve System "discount
window," but Federal Reserve System policy generally requires savings
institutions to exhaust all other sources before borrowing from the Federal
Reserve System.
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<PAGE>
MANAGEMENT OF THE COMPANY
The board of directors of the Company currently consists of the same
individuals who will serve as directors of the Bank. The Company's certificate
of incorporation and bylaws require that directors be divided into three
classes, as nearly equal in number as possible. Each class of directors serves
for a three-year period, with approximately one-third of the directors elected
each year. The Bank's officers will be elected by the Board and serve at the
Board's discretion.
MANAGEMENT OF THE BANK
Directors
The board of directors of the Bank is currently composed of six
members. The proposed stock charter and bylaws for the Bank require that
directors be divided into three classes, as nearly equal in number as possible.
The officers are elected annually by the Board and serve at the Board's
discretion.
The following table sets forth information with respect to the
directors, executive officers, and significant employees, all of whom will
continue to serve in the same capacities after the offering. The Bank is
currently negotiating with one individual to become Vice President and Chief
Lending Officer and another individual to become Vice President and Senior
Operations Officer.
<TABLE>
<CAPTION>
Proposed % of
Stock Proposed
Organization Subscription Total Ownership
Directors Age (1) Position Shares Shares Shares (2)(3)
- --------- ------- -------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
William C. Hart 65 Chairman of 2,500 2,500 5,000 1.0
the Board
Kenneth J. Stephon 39 President, 5,100 10,000 15,100 3.0
CEO and
Director
William V. R. Fogler 53 Director 3,000 3,000 6,000 1.2
Paul J. Russo 47 Director 5,000 1,000 6,000 1.2
Jonathan R. Sachs 41 Director 1,500 2,000 3,500 *
George M. Taber 56 Director 1,500 2,500 4,000 *
------ ------ ----- ---
18,600 21,000 39,600 7.9
====== ====== ====== ===
</TABLE>
- -------------------
(1) At June 30, 1998.
(2) Includes shares purchased in the private placement.
(3) Based upon 505,000 shares (outstanding after the issuance of common
stock in the private placement and the offering).
* Less than 1%
There is no family relationship between any director or executive
officer. No director or executive officer has filed a petition in bankruptcy in
the past five years, nor been convicted in a criminal proceeding. The business
experience for the past five years of each of the directors and executive
officers is as follows:
Kenneth J. Stephon was President, Chief Executive Officer and a
Director of CloverBank, Pennsauken, New Jersey from 1993 until July 1998, having
previously served CloverBank as Executive Vice President and Chief Financial
Officer. Mr. Stephon has over twenty years of experience in the banking and
thrift industries, with experience in all facets of financial institution
operations, with
30
<PAGE>
particular emphasis on administration, strategic planning and implementation,
investment portfolio management, asset and liability management, budgeting and
accounting. While at CloverBank, he was responsible for the daily management of
the $30 million, three office, community-oriented federal savings bank. Mr.
Stephon presently serves as Chairman of the MBA Advisory Board of Rowan
University, Glassboro, New Jersey. He is a member of the School of Business
Advisory Committee of The College of New Jersey and the Business Advisory
Commission of Mercer County Community College, West Windsor Township, New
Jersey. He has also served as a member of the Board of Governors of the New
Jersey League - Community and Savings Bankers for two terms and is a Past
President of the Burlington/Camden Counties Savings League. He has a Master's
Degree in Business Administration from Rider University, Lawrenceville, New
Jersey and a Bachelor of Science Degree in Accounting from The College of New
Jersey (formerly Trenton State College), Ewing Township, New Jersey.
William C. Hart has been the President and Chief Executive Officer of
Mercer Mutual Insurance Company, Pennington, New Jersey since 1987. Mr. Hart has
been a Director of Mercer Mutual Insurance Company since 1970 and was Chairman
of the Board from 1979 to 1985. He has also been the Chairman of the Investment
Committee at the insurance company since 1979. His experience in the thrift
industry includes Executive Vice President of Colonial Savings and Loan
Association, Roselle Park, New Jersey and President of Colonial Service
Corporation from 1984 to 1985 and Chief Executive Officer of Centennial Savings
and Loan Association, Pennington, New Jersey from 1962 to 1984. He has a
Bachelor of Science Degree in Accounting from Rider University, Lawrenceville,
New Jersey.
William V. R. Fogler is the founder and President of Van Rensselaer,
Ltd., Princeton, New Jersey, a registered investment advisory and arbitration
consulting firm, founded in 1989. The registered investment advisory division of
Van Rensselaer, Ltd. specializes in the management of individual, corporate and
ERISA portfolios. Mr. Fogler's exchange affiliations include, NYSE and NASD
General Securities Representative and the American Stock Exchange Puts and
Calls. He is a member of the NYSE, NASD and American Arbitration Association
arbitration panels. He is a Licensed Life Insurance Agent with the State of New
Jersey. He is a three term board member of the Rider University Business
Advisory Board and is the Chairman of the Development Committee. He has a
Bachelor of Science Degree in Business Administration from Rider University
School of Business Administration.
Paul J. Russo is the Vice President and part-owner of the Lawrenceville
Home Improvement Center, Inc., Lawrenceville, New Jersey, where he has worked
since 1973. Mr. Russo's responsibilities include sales, marketing and
management. He has been a volunteer manager and coach for the Lawrence Township
Little League and Babe Ruth League for ten years. He has a Bachelor's Degree of
Science in Commerce, magna cum laude, from Rider University, Lawrenceville, New
Jersey.
Jonathan R. Sachs, M.D. has been a physician with the Princeton
Gastroenterology Associates, Princeton, New Jersey since 1993, and in private
practice since 1989. Dr. Sachs is a licensed Medical Doctor in the State of New
Jersey and the Commonwealth of Pennsylvania. He became board certified in
Internal Medicine in 1987 and in Gastroenterology in 1989. He is a Fellow in
both the American College of Physicians and the American College of
Gastroenterology. He is the co-author of numerous articles in professional
publications and abstracts. He is the past Chairman of the Section of
Gastroenterology, Department of Internal Medicine at the Medical Center at
Princeton. He has been active with the Unitarian Church of Princeton, the
Citizens for Quality Schools in Hopewell Township, New Jersey, and as a hockey
coach in the Nassau Hockey League. He is a summa cum laude graduate of Amherst
College, where he received his Bachelor of Arts Degree and graduated medical
school from the Medical College of Pennsylvania, Philadelphia, Pennsylvania.
31
<PAGE>
George M. Taber is the founder and President of BUSINESS NEWS New
Jersey. BUSINESS NEWS New Jersey, founded in its original form in 1988, is a
weekly newspaper with a readership of approximately 50,000. Mr. Taber is also
the daily business commentator for the radio station New Jersey 101.5, and
moderated "Business New Jersey This Week," a weekly cable television show. He
was a reporter and editor with Time magazine for 21 years. He has a Master of
Arts Degree from the College of Europe in Bruges, Belgium and a Bachelor of Arts
Degree from Georgetown University in Washington, D.C.
Remuneration of Directors and Officers
Director Compensation. The directors of the Bank will each receive fees
in the amount of $300 per month, except Mr. Stephon, who will not receive
directors' fees. The organizers do not intend for the Company to pay directors'
fees apart from those paid by the Bank. The Company may consider the payment of
separate board fees in the future based upon several factors, including, but not
limited to, the contribution of board members to the operations of the Company
rather than the Bank and the financial condition of the Company.
Employment Agreement. The Company entered into an employment agreement
with Mr. Stephon to serve as President and Chief Executive Officer of the
Company and the Bank for a three-year term. Mr. Stephon received compensation
since August 1998 during the Bank's organizational period at a rate of $6,250
per month. Upon the filing of the Prospectus, he will receive an annual base
salary of $110,000. The terms of the employment agreement also provide that Mr.
Stephon will be awarded between 10,000 and 30,000 stock options prior to the
effective date of this Prospectus, exercisable at a price equal to the offering
price in this offering, and exercisable for a period of ten years from the
effective date of the Prospectus.
Pension Plan. The Bank will not initially sponsor a tax-qualified
pension plan. Initially, the Bank may implement a 401(k) plan, which initially
will have contributions only by the employee. In the future, the Bank will
consider the implementation of a retirement plan that will involve contributions
made by the Bank.
Stock Option Plan. The board of directors expects to consider a stock
option plan or plans (the Option Plan) following the offering. The exercise
price is expected to be the fair market value of the common stock on the date of
grant, but not less than $10.00 per share. Options are expected to vest over
three years. The Board considers the adoption of the Option Plan to be in the
best interests of the Company and its shareholders by assisting the Company and
the Bank in attracting and retaining highly qualified individuals to serve as
members of management and the Board. The Option Plan shares may be issued from
shares purchased from the market or they may be issued from authorized but
unissued shares.
Restricted Stock Plan. The board of directors expects to consider a
restricted stock plan (the RSP) following the offering, the objective of which
is to enable the Company and the Bank to retain personnel and directors of
experience and ability in key positions of responsibility. The RSP will be
implemented in accordance with applicable OTS regulations. The RSP would be
managed by a committee of non-employee directors. The RSP shares may be issued
from shares purchased from the market or from authorized but unissued shares.
Other Benefits. The Bank expects to pay benefit costs for its
employees, including its officers. These costs may include such items as health
care, disability insurance and group term life insurance.
32
<PAGE>
Transactions with Related Parties
After the Company commences operations, it may engage in transactions
with its organizers, officers, employees, directors or other affiliated persons
only to the extent that such activities are permitted by, and consistent with,
all applicable state and federal regulations. OTS and FDIC regulations impose a
number of restrictions on transactions and dealings between the Company and
affiliated persons. The definition of "affiliated person" includes the Company's
directors and officers and their spouses and certain members of their immediate
families. Also included as affiliated persons are certain persons, corporations
and other organizations that have a close relationship with the Company as set
out in the regulations. All dealings between the Company and its affiliated
persons will have to comply with those regulations. The Company plans to adopt
policies designed to assure compliance with those regulations. Such
transactions, should they occur, are expected to be primarily in the nature of
loans made in the ordinary course of business such as home loans, educational
loans or consumer loans. In addition, future material transactions made or
entered into will be no less favorable to the Company than those that can be
obtained from unaffiliated third parties. All future loans to directors,
officers and affiliates, if any, will be made for bona fide business purposes.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of June 30, 1998, the shares of
common stock owned by each person who is a beneficial owner of more than five
percent of the outstanding common stock of the Company and is not an officer or
director of the Company.
Name and Address of Amount of Percent of Class
Beneficial Owner Beneficial Ownership Before Offering(1)
- ------------------- -------------------- ------------------
Fred D. Price
Cranbury, NJ 20,000 21.09%
Peter and Mary Russo Trust
Lawrenceville, NJ 10,000 10.54%
Felix Buccellata
Belle Mead, NJ 7,500 7.91%
Raman R. Patel
Lawrenceville, NJ 5,000 5.27%
John P. Russo, Jr.
Lawrenceville, NJ 5,000 5.27%
- -------------------
(1) Prior to this pubic offering of the common stock of the Company, there were
94,850 shares of Company common stock outstanding.
33
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue 5,000,000 shares of the common
stock, $0.10 par value, of which 94,850 shares were issued on May 20, 1998 in
the private placement. The Company is authorized to issue 1,000,000 shares of
serial preferred stock, $0.10 par value, with none issued to date. The Company
does not intend to issue any shares of serial preferred stock in the offering,
nor are there any present plans to issue such preferred stock following the
offering. The following is a summary of certain terms of the common stock and is
subject to and qualified in its entirety by reference to the certificate of
incorporation and bylaws of the Company which are filed with the SEC as exhibits
to the registration statement of which this Prospectus forms a part.
Common Stock
Voting Rights. Each share of the common stock will have the same
relative rights and will be identical in all respects to every other share of
the common stock. The holders of the common stock will possess exclusive voting
rights in the Company, except to the extent that shares of serial preferred
stock issued in the future may have voting rights, if so designated by the board
of directors of the Company. Each holder of the common stock will be entitled to
only one vote for each share held of record on all matters submitted to a vote
of holders of the common stock and will not be permitted to cumulate their votes
in the election of the Company's directors.
Liquidation. In the unlikely event of the complete liquidation or
dissolution of the Company, the holders of the common stock will be entitled to
receive all assets of the Company available for distribution in cash or in kind,
after payment or provision for payment of (i) all debts and liabilities of the
Company (including all savings accounts and accrued interest thereon); (ii) any
accrued dividend claims; and (iii) liquidation preferences of any serial
preferred stock which may be issued in the future.
Restrictions on Acquisition of the Common Stock. See "Certain
Anti-Takeover Provisions" for a discussion of the limitations on acquisition of
shares of the common stock.
Other Characteristics. Holders of the common stock will not have
preemptive rights with respect to any additional shares of the common stock
which may be issued. Therefore, the board of directors may sell shares of
capital stock of the Company without first offering such shares to existing
stockholders of the Company. The common stock is not subject to call for
redemption, and the outstanding shares of common stock when issued and upon
receipt by the Company of the full purchase price therefor will be fully paid
and non-assessable.
Issuance of Additional Shares. Other than shares to be issued pursuant
to the benefit plans, the Company has no present plans, proposals, arrangements
or understandings to issue additional authorized shares of the common stock. In
the future, the authorized but unissued and unreserved shares of the common
stock will be available for general corporate purposes, including, but not
limited to, possible issuance as stock dividends, in connection with mergers or
acquisitions, under a cash dividend reinvestment or stock purchase plan, in a
public or private offering, or under employee benefit plans. Normally no
stockholder approval would be required for the issuance of these shares, except
as described herein or as otherwise required to approve a transaction in which
additional authorized shares of the common stock are to be issued.
34
<PAGE>
Serial Preferred Stock
None of the 1,000,000 authorized shares of serial preferred stock of
the Company will be issued in the offering. After the offering is completed, the
board of directors of the Company will be authorized to issue serial preferred
stock and to fix and state voting powers, designations, preferences or other
special rights of such shares and the qualifications, limitations and
restrictions thereof, subject to regulatory approval but without stockholder
approval. If and when issued, the serial preferred stock is likely to rank prior
to the common stock as to dividend rights, liquidation preferences, or both, and
may have full or limited voting rights. The board of directors, without
stockholder approval, can issue serial preferred stock with voting and
conversion rights which could adversely affect the voting power of the holders
of the common stock. The board of directors has no present intention to issue
any of the serial preferred stock. If such stock is issued without shareholder
approval, such issuance will be approved by a majority of independent directors
who do not have an interest in the transaction and who have access to counsel.
Certain Anti-Takeover Provisions
The following discussion is a general summary of the material
provisions of the certificate of incorporation, bylaws, and certain other
regulatory provisions of the Company, which may be deemed to have such an
anti-takeover effect.
Provisions of the Company's Certificate of Incorporation and Bylaws
Election of Directors. Certain provisions of the Company's certificate
of incorporation and bylaws will impede changes in majority control of the board
of directors. The Company's certificate of incorporation provides that the board
of directors of the Company will be divided into three staggered classes, with
directors in each class elected for three-year terms. Thus, it would take two
annual elections to replace a majority of the Company's board. The Company's
certificate of incorporation provides that the size of the board of directors
may be increased or decreased only if two-thirds of the directors then in office
concur in such action. The certificate of incorporation also provides that any
vacancy occurring in the board of directors, including a vacancy created by an
increase in the number of directors, shall be filled for the remainder of the
unexpired term by a majority vote of the directors then in office. Finally, the
certificate of incorporation and the bylaws impose certain notice and
information requirements in connection with the nomination by stockholders of
candidates for election to the board of directors or the proposal by
stockholders of business to be acted upon at an annual meeting of stockholders.
The certificate of incorporation provides that a director may only be
removed for cause by the affirmative vote of at least 80% of the outstanding
shares of the Company entitled to vote generally in an election of directors
cast at a meeting of stockholders called for that purpose.
Restrictions on Call of Special Meetings. The certificate of
incorporation of the Company provides that a special meeting of stockholders may
be called only by the President of the Company, by a majority of the board of
directors of the Company, or by a committee of the board of directors pursuant
to a resolution adopted by a majority of the board of directors or pursuant to
the bylaws of the Company.
Absence of Cumulative Voting. The Company's certificate of
incorporation provides that stockholders may not cumulate their votes in the
election of directors.
Authorized Shares. The certificate of incorporation authorizes the
issuance of 5,000,000 shares of common stock and 1,000,000 shares of preferred
stock. The shares of common stock and preferred
35
<PAGE>
stock were authorized in an amount greater than that to be issued in the
offering to provide the Company's board of directors with as much flexibility as
possible to effect, among other transactions, financings, acquisitions, stock
dividends, stock splits and the exercise of stock options. However, these
additional authorized shares may also be used by the board of directors
consistent with its fiduciary duty to deter future attempts to gain control of
the Company. The board of directors also has sole authority to determine the
terms of any one or more series of Preferred Stock, including voting rights,
conversion rates, and liquidation preferences. As a result of the ability to fix
voting rights for a series of Preferred Stock, the board has the power, to the
extent consistent with its fiduciary duty, to issue a series of Preferred Stock
to persons friendly to management in order to attempt to block a post-tender
offer merger or other transaction by which a third party seeks control, and
thereby assist management to retain its position.
Procedures for Business Combinations. The certificate of incorporation
requires the affirmative vote of at least 80% of the outstanding shares of the
Company for any merger, consolidation, liquidation, or dissolution of the
Company or any action that would result in the sale or other disposition of at
least 50% of the tangible assets of the Company, unless the transaction has been
approved by the board of directors. Any amendment to this provision requires the
affirmative vote of at least 80% of the outstanding shares of capital stock of
the Company entitled to vote generally in the election of directors.
Amendment to Certificate of Incorporation and Bylaws. Amendments to the
Company's certificate of incorporation must be approved by the Company's board
of directors and also by a majority of the outstanding shares of the Company's
voting stock, provided, however, that approval by at least 80% of the
outstanding voting stock entitled to vote generally in the election of directors
is generally required for certain provisions (i.e., number, classification,
election and removal of directors; amendment of bylaws; call of special
stockholder meetings; preemptive rights; nomination of directors and stockholder
proposals; voting rights; director liability; business combinations; power of
indemnification; and amendments to provisions relating to the foregoing in the
certificate of incorporation).
The bylaws may be amended by a two-thirds vote of the board of
directors or the affirmative vote of the holders of at least 80% of the
outstanding shares of the Company entitled to vote in the election of directors
cast at a meeting called for that purpose.
Regulatory Restrictions. Federal regulations require that, prior to
obtaining control of an insured institution, a person, other than a company,
must give 60 days notice to the OTS and have received no OTS objection to such
acquisition of control, and a company must apply for and receive OTS approval of
the acquisition. Control involves a 25% voting stock test, control in any manner
of the election of a majority of the institution's directors, or a determination
by the OTS that the acquiror has the power to direct, or directly or indirectly
to exercise a controlling influence over, the management or policies of the
institution. Acquisition of more than 10% of an institution's voting stock, if
the acquiror also is subject to any one of either "control factors," constitutes
a rebuttable determination of control under the regulations. The determination
of control may be rebutted by submission to the OTS, prior to the acquisition of
stock or the occurrence of any other circumstances giving rise to such
determination, of a statement setting forth facts and circumstances which would
support a finding that no control relationship will exist and containing certain
undertakings. The regulations provide that persons or companies which acquire
beneficial ownership exceeding 10% or more of any class of a savings
association's stock after the effective date of the regulations must file with
the OTS a certification that the holder is not in control of such institution,
is not subject to a rebuttable determination of control and will take no action
which would result in a determination or rebuttable determination of control
without prior notice to or approval of the OTS, as applicable.
36
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, the Company will have a minimum of
504,850 and a maximum of 704,850 shares of common stock issued and outstanding.
All shares of common stock issued in the offering will be available for resale
in the public market without restriction or further registration under the
Securities Act, except for shares purchased by affiliates of the Company (in
general, any person who has a control relationship with the Company) which
shares will be subject to the resale limitations of Rule 144 under the
Securities Act. After the offering, shares of common stock held by affiliates
will be considered "control shares", and are eligible for sale in the public
market in compliance with Rule 144.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including a person who may be deemed to be an
"affiliate" of the Company as that term is defined under the Securities Act, is
entitled to sell, within any three month period, a number of restricted shares
as to which at least one year has elapsed from the later of the acquisition of
such shares from the Company or an affiliate of the Company in an amount that
does not exceed the greater of (i) one percent of the then outstanding shares of
common stock, or (ii) if the Common Shares are quoted on the Nasdaq National
Market or a stock exchange, the average weekly trading volume of the Common
Shares during the four calendar weeks preceding such sale. Sales under Rule 144
are also subject to certain requirements as to the manner of sale, notice, and
the availability of current public information about the Company. However, a
person who is not deemed to have been an affiliate of the Company during the 90
days preceding a sale by such person and who has beneficially owned shares as to
which at least two years have elapsed from the later of the acquisition of such
shares from the Company or an affiliate of the Company is entitled to sell them
without regard to the volume, manner of sale, or notice requirements of Rule
144.
LEGAL MATTERS
The validity of the common stock offered hereby and certain other
matters will be passed upon for the Company by Malizia, Spidi, Sloane & Fisch,
P.C., Washington D.C., counsel to the Company.
37
<PAGE>
VILLAGE FINANCIAL CORPORATION
INDEX TO FINANCIAL STATEMENTS
Page
----
Balance Sheet (unaudited)................................................. F-1
Statement of Operations (unaudited)....................................... F-2
Statement of Cash Flows (unaudited)....................................... F-3
Notes to Financial Statements (unaudited)................................. F-4
38
<PAGE>
VILLAGE FINANCIAL CORPORATION
BALANCE SHEET
(UNAUDITED)
June 30,
1998
-----------
ASSETS
Cash and interest-bearing deposits in banks $ 920,943
Deferred organization costs 55,000
---------
TOTAL ASSETS $ 975,943
=========
LIABILITIES
Accounts payable and accrued expenses $ 100,293
---------
STOCKHOLDERS' EQUITY
Preferred stock, par value $.10; 1,000,000 shares authorized;
none outstanding -
Common stock, par value $.10; 5,000,000 shares authorized;
94,850 issued and outstanding 9,485
Additional paid-in capital 939,015
Retained deficit (72,850)
---------
TOTAL STOCKHOLDERS' EQUITY 875,650
---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 975,943
=========
See accompanying notes to the financial statements.
F - 1
<PAGE>
VILLAGE FINANCIAL CORPORATION
STATEMENT OF OPERATIONS
(UNAUDITED)
Period From
January 16, 1998
(Inception)
to June 30, 1998
----------------
INTEREST INCOME $ 4,530
-------------
EXPENSES
Professional services 76,688
Other 692
-------------
Total expenses 77,380
-------------
Loss before income taxes (72,850)
Income taxes -
-------------
NET LOSS $ (72,850)
=============
LOSS PER SHARE ($0.77)
AVERAGE SHARES OUTSTANDING 94,850
See accompanying notes to the financial statements.
F - 2
<PAGE>
VILLAGE FINANCIAL CORPORATION
STATEMENT OF CASH FLOWS
(UNAUDITED)
Period From
January 16, 1998
(Inception)
to June 30, 1998
----------------
OPERATING ACTIVITIES
Net loss $ (72,850)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Increase in accrued expenses, net 45,293
-------------
Net cash used for operating activities (27,557)
-------------
FINANCING ACTIVITIES
Proceeds from sale of common stock 948,500
-------------
Net cash provided by financing activities 948,500
-------------
Increase in cash and cash equivalents 920,943
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD -
-------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 920,943
=============
See accompanying notes to the financial statements.
F - 3
<PAGE>
VILLAGE FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCEPTION
TO JUNE 30, 1998
(UNAUDITED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation
- --------------------------------------
Village Financial Corporation ("the Corporation") was incorporated under the
laws of the State of New Jersey on January 16, 1998, for the purpose of becoming
a holding company, which will own all of the outstanding shares of capital stock
of a proposed federal stock savings bank with the name Village Bank ("the
Bank"). The Corporation will be a unitary savings and loan holding company and
will own only the Bank. As of June 30, 1998, the Corporation is capitalized to
the extent currently considered necessary to provide adequate funding of the
ongoing organization efforts of management in the formation of the Bank.
Additional funds necessary to adequately capitalize the Bank will be raised
through a contemplated initial public offering ("IPO"), which is discussed in
greater detail in these notes. Upon satisfaction of the conditions of the IPO
and receipt of appropriate regulatory approval, the Bank will operate two branch
offices as a community oriented bank concentrating on consumer residential and
installment loan products and deposit services, and will be headquartered in
Lawrenceville, New Jersey. Qualifying customer bank deposit accounts will be
insured by the Federal Deposit Insurance Corporation. The anticipated opening of
the Bank is scheduled for January 4, 1999, pending receipt of necessary
regulatory approvals and raising adequate capital funds.
To date, the Corporation's operations have been limited to in-formation
procedures; raising capital, recruiting officers and staff, obtaining a banking
facility and working towards obtainment of regulatory approval. Since the
Corporation's planned principal operations have not yet commenced no significant
revenue has been derived therefrom. There is no assurance that the Corporation
will be able to raise sufficient capital to satisfy minimum regulatory capital
requirements. Further, if such capital requirements are not met, the formation
of the Bank will be delayed or not materialize.
The accounting and reporting policies of the Corporation will conform with
generally accepted accounting principles ("GAAP"). The preparation of financial
statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities as of the
balance sheet date and income and expenses during the reported period. Actual
results could differ from those estimates. In the opinion of management, the
accompanying financial statements of the Corporation contain all adjustments
necessary for the fair presentation of the Corporation's balance sheet, results
of operations and cash flows for the period from inception through June 30,
1998. The results of operations for this period are not indicative of the
results that may actually occur once operations commence and could be materially
different.
Business Office Facility
- ------------------------
On July 17, 1998 the Corporation entered into an operating lease arrangement for
office space located in Pennington, New Jersey. Monthly office rental payments
of $350 and furniture rental payments of $62 a month will be payable over the
lease term, which is for one year.
F - 4
<PAGE>
VILLAGE FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCEPTION
TO JUNE 30, 1998
(UNAUDITED) (Continued)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Deferred Organization Costs and Start-up Activities Expenses
- ------------------------------------------------------------
Such costs are for organization work being completed as well as the registration
process for the IPO. Offering expenses will be charged to stockholders' equity
upon completion of the IPO and are presently recorded as deferred organization
costs. Organizational services relating to the preparation of regulatory
applications, feasibility studies, and financial projections are considered
costs of start-up activities and will be charged to expense once paid.
All other ongoing organizational and start-up costs incurred primarily before
the commencement of operations as a bank will also be expensed in accordance
with the AICPA accounting statement of Position 98-5, "Reporting on the Costs of
Start-up Activities." The Statement requires entities to expense costs of
start-up activities as they are incurred.
Cash Flow Information
- ---------------------
Cash equivalents include amounts due from banks, and interest-bearing deposits
with banks that have original maturities of 90 days or less.
Income Taxes
- ------------
The Corporation has not provided for a federal or state income tax provision for
the period ending June 30, 1998, as the Corporation represents an entity
in-formation and has incurred a cumulative operating loss since the date of
incorporation. As such, a 100% valuation allowance for the deferred tax assets,
comprised solely of the tax benefit generated from the operating loss, has been
recorded.
Stockholders' Equity and Initial Public Offering
- ------------------------------------------------
Initial capitalization of the Corporation has occurred through the subscription
and issuance of common stock, in a private placement during the second quarter
of 1998. As of June 30, 1998, a total of 94,850 shares, at an offering price of
$10.00 per share, have been subscribed to and issued.
The Corporation intends to issue between 410,000 and 610,000 shares of common
stock at $10.00 per share in the IPO. Current shares of common stock owned by
investors, from a private placement, and any other additional shares issued
prior to the IPO, will remain issued and outstanding. The Corporation
anticipates purchasing all of the common stock to be issued by the Bank with the
net proceeds received from the private placement and the IPO.
Earnings Per Share
- ------------------
For the period ending June 30, 1998, earnings per share is calculated using the
weighted average number of shares outstanding from May 20, 1998 (issue date)
through June 30, 1998. For 1998, the Corporation has maintained a simple capital
structure; therefore, there are no dilutive effects on loss per share
computations.
F - 5
<PAGE>
APPENDIX A
VILLAGE FINANCIAL CORPORATION
A proposed
Holding Company for Village Bank
(In Organization)
Lawrenceville, New Jersey
SUBSCRIPTION AGREEMENT
THE OFFER OF THE SECURITIES IS MADE ONLY
BY THE ACCOMPANYING PROSPECTUS
Subject to the terms and conditions of sale contained in the Prospectus
dated ______, 1998, (the "Prospectus"), the undersigned hereby subscribes for
the purchase of the number of shares shown below of the common stock ($0.10 par
value), of Village Financial Corporation (the "Company"), a proposed holding
company for Village Bank (In Organization) (the "Bank"). The purchase price is
$10.00 per share and full payment is enclosed with this Subscription Agreement.
Enclosed as payment for the shares subscribed to herein is a check, bank draft
or money order payable to "Summit Bank, Escrow Agent for Village Financial
Corporation," in the amount shown below.
Terms not otherwise defined herein shall have the same meaning as in
the Prospectus.
All subscriptions for the offering are subject to a 100 share purchase
minimum and a 50,000 share maximum purchase limitation per subscriber. For
purposes of determining the maximum purchase limitation, the term subscriber
includes all persons who are affiliates of the person submitting this
Subscription Agreement (an affiliate is a person that directly, or indirectly,
controls, is controlled by or is under common control with, the subscriber).
Method of Subscription
All subscriptions must be made on this Subscription Agreement.
Subscriptions are not binding until accepted by the Company. The Company
reserves the right to reject any subscription, with or without cause. The
Company will refuse any subscription by sending written notice to the subscriber
by first-class mail within ten calendar days after receipt of the subscription,
and the subscriber's Subscription Agreement and refund of payment will accompany
such notice. Any Subscription Agreement which is completely and correctly filled
out, which is accompanied by proper and full payment and which is physically
received at the office of the Company by an employee or agent of the Company by
the date set forth in the Prospectus, shall be deemed to have been accepted if
it is not refused as hereinbefore provided within ten calendar days after such
receipt.
A-1
<PAGE>
A completed Subscription Agreement and payment in full (made in the
manner specified below) of the total subscription price for the number of shares
subscribed should be mailed to the Company at the following address:
Village Financial Corporation
P.O. Box 6554
Lawrenceville, New Jersey 08648
Subscriptions also may be delivered in person to the office of the Company at 23
Route 31 North, Suite A22, Pennington, New Jersey between 10:00 a.m. and 5:00
p.m. Monday through Friday.
IMPORTANT: PAYMENTS MUST BE MADE IN UNITED STATES FUNDS BY CHECK, BANK DRAFT OR
MONEY ORDER PAYABLE TO "SUMMIT BANK, ESCROW AGENT FOR VILLAGE FINANCIAL
CORPORATION," CHECKS MAY NOT BE MADE PAYABLE TO THE ORGANIZERS OF THE COMPANY.
FAILURE TO INCLUDE THE FULL SUBSCRIPTION PRICE WITH THE SUBSCRIPTION AGREEMENT
WILL RESULT IN THE SUBSCRIPTION BEING RETURNED BY THE ESCROW AGENT.
Terms of the offering
The Company is offering a minimum of 410,000 shares and a maximum of
610,000 shares at $10.00 per share pursuant to the Prospectus. The offering will
terminate at 5:00 p.m., New Jersey Time, on _______ __, 1998, unless extended by
the Company without further notice to subscribers. If the offering is not
completed by _______ __, 199_, subscribers will be refunded their subscription
funds.
If an extension to the offering is obtained, subscribers would be
resolicited and all subscription funds would be promptly refunded. Subscribers
would also be provided with a supplemental offering prospectus declared
effective by the SEC. Upon resolicitation, subscribers would have an opportunity
to increase or decrease their subscriptions.
The Company will deliver an effective prospectus to all persons to whom
the securities offered hereby are to be sold at least 48 hours prior to the
acceptance or confirmation of sale to such persons or to send such a prospectus
to such persons under circumstances that it would normally be received by them
48 hours prior to acceptance or confirmation of the sale. The Company will mail
to all subscribers who have theretofore received a Prospectus written notice of
any such determination to terminate the offering at least seven days prior to
such termination. During this seven day period, the Company will continue to
accept subscriptions for up to 610,000 shares. The Company expects only one
closing.
Subscription Escrow Agreement
The Escrow Agent will maintain the records of the Escrow Account so
that each subscriber's funds will be insured up to $100,000 by the FDIC so long
as such funds are held in the escrow account.
Subscribers may not receive interest on their subscription funds, if
the offering expenses are in excess of the amounts to be covered by the proceeds
of the private placement. However, if such funds are held by the Company in
excess of 90 days, such funds will be promptly returned to the subscriber with
any interest earned thereon. Subscribers will not be entitled to any return of
funds during the offering period.
A-2
<PAGE>
Receipts
Not sooner than forty-eight hours after receipt of the subscriber's
Subscription Agreement and payment in full for the shares subscribed the Company
will deliver a receipt to the subscriber by first-class mail or by personal
delivery.
Stock Certificates
Within approximately seven business days after receipt of final
regulatory approval and authorization to do business, the Company will cause to
be mailed by first-class mail or deliver to each subscriber a certificate
representing the shares of common stock purchased by such subscriber.
Acknowledgements
The undersigned hereby acknowledges receipt of a copy of the
Prospectus, and represents that this Subscription Agreement is made solely on
the basis of the information contained in the Prospectus and is not made in
reliance on any inducement, representation or statement not contained in the
Prospectus. The undersigned understands that no person (including any Organizer)
has authority to give any information or to make any representation not
contained in the Prospectus, and if given or made, such information or
representation must not be relied upon as having been authorized. The
undersigned represents that this subscription is made for the benefit of the
undersigned and not for the benefit of any other person who is not identified on
this Subscription Agreement. The undersigned also acknowledges that there is in
the offering a minimum purchase requirement of 100 shares and a maximum purchase
limitation of 50,000 shares. The undersigned is aware that ownership of 5% or
more of the outstanding common stock could obligate the undersigned to comply
with certain reporting and other requirements of federal and state banking and
securities laws. The undersigned understands that the shares of the common stock
offered by the Company are not savings accounts or deposits and are not insured
by the Federal Deposit Insurance Corporation, the Savings Association Insurance
Fund or any other governmental or private agency.
A-3
<PAGE>
This Subscription Agreement is made in consideration of the premises
set forth in the Prospectus and the subscriptions of others, and the undersigned
acknowledges that this Subscription Agreement creates a legally binding
obligation unless refused by the Company.
Number of shares __________ at $10.00 per share (100 share minimum) equals
$___________________
(Total Purchase Price)
-----------------------------------------------------------------------
(Name(s) in which stock certificates should be registered*)
-----------------------------------------------------------------------
(Street Address)
-----------------------------------------------------------------------
(City/State/Zip Code)
( )
--------------------------------------- ---------------------------
(Social Security or Tax I.D. No.) (Telephone No.)
- ------------------------------------------ --------------------------------
(Date) (Signature)
- ------------------------------------------ --------------------------------
(Date) (Signature)
*Stock certificates for shares to be issued in the names of two or more
persons will be registered in the names of such persons as joint tenants with
right of survivorship, and not as tenants in common.
If shares are to be held in joint ownership, all joint owners should
sign this Agreement. Information on the Agreement will be treated confidentially
by the Company, to the extent legally permissible.
If purchaser is a corporation or partnership, list the names of the
principals of the corporation or partnership as well as the name of the
corporation or partnership.
A-4
<PAGE>
VILLAGE FINANCIAL CORPORATION
410,000 to 610,000 Shares
Common Stock
PROSPECTUS
Dated _______ __, 1998
THESE SECURITIES ARE NOT DEPOSITS OR ACCOUNTS
AND ARE NOT FEDERALLY INSURED OR GUARANTEED.
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Officers and Directors.
Section 14A:3-5 of the New Jersey Business Corporation Act sets forth
circumstances under which directors, officers, employees and agents may be
insured or indemnified against liability which they may incur in their
capacities as such.
Provisions regarding indemnification of directors, officers, employees
or agents of the Company are contained in Article 17 of the Company's Articles
of Incorporation.
Under a directors' and officers' liability insurance policy, directors
and officers of the Company are insured against certain liabilities, including
certain liabilities under the Securities Act, as amended.
Item 25. Other Expenses of Issuance and Distribution
* Legal services..............................................$100,000
* Accounting and consulting fees.............................. 30,000
* Registration and application fees........................... 20,000
* Printing, stationery and supplies........................... 10,000
* Pre-opening salaries/benefits/health insurance.............. 183,000
* Occupancy costs............................................. 20,000
* Marketing, travel and promotions............................ 8,000
* Postage and telephone....................................... 2,000
* Miscellaneous............................................... 10,000
-------
TOTAL ......................................................$383,000
========
* Estimated. Includes all expenses in connection with all regulatory
applications (i.e., SEC, OTS, and FDIC).
Item 26. Recent Sales of Unregistered Securities.
Set forth below is certain information concerning all sales of
securities by the Company since inception that were not registered under the
Securities Act of 1933 (the "Securities Act").
During the second quarter of 1998, the Company offered and sold to
investors 94,850 shares of its common stock at $10.00 per share. The total
offering price was $948,500. The Company received all of the proceeds of the
offering. There were no underwriting fees or commissions.
The above sales were exempt from the registration requirements of the
Securities Act pursuant to Section 3(b) and the provisions of Rule 504 of
Regulation D.
<PAGE>
Item 27. Exhibits:
The exhibits filed as part of this Registration Statement are
as follows:
<TABLE>
<CAPTION>
<S> <C>
3(i) Certificate of Incorporation of Village Financial Corporation
(ii) Bylaws of Village Financial Corporation
4.1 Specimen Stock Certificate of Village Financial Corporation
4.2 Form of Subscription Agreement (included as Appendix A to the Prospectus)
5 Opinion of Malizia, Spidi, Sloane & Fisch, P.C.
10.1 Employment Agreement with Kenneth J. Stephon
10.2 Lease Agreement (Lawrenceville)*
10.3 Lease Agreement (Pennington)*
10.4 Escrow Agreement*
23 Consent of Malizia, Spidi, Sloane & Fisch, P.C. (included in Exhibit 5)
24 Power of Attorney (reference is made to the Signature page)
27 Financial Data Schedule**
99 Marketing Materials*
--------------
* To be filed by amendment
** Electronic filing only
</TABLE>
Item 28. Undertakings
The undersigned registrant hereby undertakes:
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act, and is therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer 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 small business
issuer 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 Securities Act and will be governed by the final adjudication
of such issue.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in Lawrenceville, New
Jersey, on September 22, 1998.
VILLAGE FINANCIAL CORPORATION
By: /s/Kenneth J. Stephon
-----------------------------------------------
Kenneth J. Stephon
President, Director and Chief Executive Officer
(Duly Authorized Representative)
We the undersigned directors and officers of Village Financial
Corporation do hereby severally constitute and appoint Kenneth J. Stephon our
true and lawful attorney and agent, to do any and all things and acts in our
names in the capacities indicated below and to execute all instruments for us
and in our names in the capacities indicated below which said Kenneth J. Stephon
may deem necessary or advisable to enable Village Financial Corporation to
comply with the Securities Act of 1933, as amended, and any rules, regulations
and requirements of the Securities and Exchange Commission, in connection with
the registration statement on Form SB-2 relating to the offering of Village
Financial Corporation's common stock, including specifically but not limited to,
power and authority to sign for us or any of us, in our names in the capacities
indicated below, the registration statement and any and all amendments
(including post-effective amendments) thereto; and we hereby ratify and confirm
all that Kenneth J. Stephon shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities indicated as of September 22, 1998.
By:/s/Kenneth J.Stephon By:/s/Paul J. Russo
-------------------------------------- ---------------------------
Kenneth J. Stephon Paul J. Russo
President, Director, Chief Executive Director
Officer and Chief Financial/
Accounting Officer
By:/s/William C. Hart By:/s/Jonathan R. Sachs
-------------------------------------- ---------------------------
William C. Hart Jonathan R. Sachs
Director Director
(Chairman of the Board)
By:/s/William V.R. Fogler By:/s/George M. Taber
-------------------------------------- ---------------------------
William V.R. Fogler George M. Taber
Director Director
EXHIBIT 3(i)
<PAGE>
CERTIFICATE OF INCORPORATION
OF
VILLAGE FINANCIAL CORPORATION
ARTICLE I
Name
----
The name of the corporation is Village Financial Corporation (herein
the "Corporation").
ARTICLE II
Registered Office
-----------------
The address of the Corporation's registered office in the State of New
Jersey is 455 Federal City Road, Pennington, New Jersey, in the County of
Mercer. The name of the Corporation's registered agent at such address is
William C. Hart.
ARTICLE III
Powers
------
The purpose of the Corporation is to engage in any activity within the
purposes for which corporations may be organized under 14A:2-7 of the New Jersey
Business Corporation Act.
ARTICLE IV
Term
----
The Corporation is to have perpetual existence.
ARTICLE V
Incorporator
------------
The name and mailing address of the Incorporator is as follows:
Name Mailing Address
---- ---------------
William C. Hart 455 Federal City Road
Pennington, New Jersey 08534
<PAGE>
ARTICLE VI
Initial Directors
-----------------
The number of directors constituting the initial board of directors of
the Corporation is two (2) and the names and addresses of the persons who are to
serve as directors until their successors are elected and qualified, are:
Name Mailing Address
---- ---------------
William C. Hart 455 Federal City Road
Pennington, New Jersey 08534
William V.R. Fogler 4 Cleveland Road
Princeton, New Jersey 08540
ARTICLE VII
Capital Stock
-------------
The aggregate number of shares of all classes of capital stock which
the Corporation has authority to issue is 6,000,000 of which 5,000,000 are to be
shares of common stock, $.10 par value per share, and of which 1,000,000 are to
be shares of serial preferred stock, $.10 par value per share. The shares may be
issued by the Corporation without the approval of stockholders except as
otherwise provided in this Article VII or the rules of a national securities
exchange, if applicable. The consideration for the issuance of the shares shall
be paid to or received by the Corporation in full before their issuance and
shall not be less than the par value per share. The consideration for the
issuance of the shares shall be cash, services rendered, personal property
(tangible or intangible), real property, leases of real property or any
combination of the foregoing. In the absence of actual fraud in the transaction,
the judgment of the board of directors as to the value of such consideration,
shall be conclusive. Upon payment of such consideration, such shares shall be
deemed to be fully paid and nonassessable. In the case of a stock dividend, the
part of the surplus of the Corporation which is transferred to stated capital
upon the issuance of shares as a stock dividend shall be deemed to be the
consideration for their issuance.
A description of the different classes and series (if any) of the
Corporation's capital stock, and a statement of the relative powers,
designations, preferences and rights of the shares of each class and series (if
any) of capital stock, and the qualifications, limitations or restrictions
thereof, are as follows:
A. Common Stock. Except as provided in this Certificate, the holders of
the common stock shall exclusively possess all voting power. Each holder of
shares of common stock shall be entitled to one vote for each share held by such
holders.
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class of stock having
preference over the common stock as to the payment of dividends, the full amount
of dividends and sinking fund or retirement fund or other retirement payments,
if any, to which such holders are respectively entitled in preference to the
common stock, then dividends may be paid on the common stock, and on any class
or series of stock entitled to participate therewith as to dividends, out of any
assets legally available for the payment of dividends, but only when as declared
by the board of directors of the Corporation.
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In the event of any liquidation, dissolution or winding up of the
Corporation, after there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class having preference
over the common stock, the full preferential amounts to which they are
respectively entitled, the holders of the common stock and of any class or
series of stock entitled to participate therewith, in whole or in part, as to
distribution of assets shall be entitled, after payment or provision for payment
of all debts and liabilities of the Corporation, to receive the remaining assets
of the Corporation available for distribution, in cash or in kind.
Each share of common stock shall have the same relative powers,
preferences and rights as, and shall be identical in all respects with, all the
other shares of common stock of the Corporation.
B. Serial Preferred Stock. Except as provided in this Certificate, the
board of directors of the Corporation is authorized, by resolution or
resolutions from time to time adopted, to provide for the issuance of serial
preferred stock in series and to fix and state the powers, designations,
preferences and relative, participating, optional or other special rights of the
shares of such series, and the qualifications, limitations or restrictions
thereof, including, but not limited to determination of any of the following:
1. the distinctive serial designation and the number of shares
constituting such series; and
2. the dividend rates or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative and, if so, from
which date or dates, the payment date or dates for dividends, and the
participating or other special rights, if any, with respect to dividends; and
3. the voting powers, full or limited, if any, of the shares of such
series; and
4. whether the shares of such series shall be redeemable and, if so,
the price or prices at which, and the terms and conditions upon which, such
shares may be redeemed; and
5. the amount or amounts payable upon the shares of such series in the
event of voluntary or involuntary liquidation, dissolution or winding up of the
Corporation; and
6. whether the shares of such series shall be entitled to the benefits
of a sinking or retirement fund to be applied to the purchase or redemption of
such shares, and, if so entitled, the amount of such fund and the manner of its
application, including the price or prices at which such shares may be redeemed
or purchased through the application of such funds; and
7. whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or any other series of
the same or any other class or classes of stock of the Corporation and, if so
convertible or exchangeable, the conversion price or prices, or the rate or
rates of exchange, and the adjustments thereof, if any, at which such conversion
or exchange may be made, and any other terms and conditions of such conversion
or exchange; and
8. the subscription or purchase price and form of consideration for
which the shares of such series shall be issued; and
9. whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of serial preferred
stock and whether such shares may be reissued as shares of the same or any other
series of serial preferred stock.
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Each share of each series of serial preferred stock shall have the same
relative powers, preferences and rights as, and shall be identical in all
respects with, all the other shares of the Corporation of the same series.
ARTICLE VIII
Preemptive Rights
-----------------
No holder of any of the shares of any class or series of capital stock
or of options, warrants or other rights to purchase shares of any class or
series of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any class or
series, or any unissued bonds, certificates of indebtedness, debentures of other
securities convertible into or exchangeable for stock of any class or series or
carrying any right to purchase stock of any class or series; but any such
unissued stock, bonds, certificates or indebtedness, debentures or other
securities convertible into or exchangeable for stock or carrying any right to
purchase stock may be issued pursuant to resolution of the board of directors of
the Corporation to such persons, firms, corporations or associations, whether or
not holders thereof, and upon such terms as may be deemed advisable by the board
of directors in the exercise of its sole discretion.
ARTICLE IX
Repurchase of Shares
--------------------
The Corporation may from time to time, pursuant to authorization by the
board of directors of the Corporation and without action by the stockholders,
purchase or otherwise acquire shares of capital stock of any class, bonds,
debentures, notes, script, warrants, obligations, evidences of indebtedness, or
other securities of the Corporation in such manner, upon such terms, and in such
amounts as the board of directors shall determine; subject, however, to such
limitations or restrictions, if any, as are contained in the express terms of
any class of shares of the Corporation outstanding at the time of the purchase
or acquisition or as are imposed by law or regulation.
ARTICLE X
Meetings of Stockholders; Cumulative Voting; Proxies
----------------------------------------------------
A. Notwithstanding any other provision of this Certificate or the
Bylaws of the Corporation, any action required to be taken or which may be taken
at any annual or special meeting of stockholders of the Corporation may be taken
without a meeting, if all shareholders entitled to vote thereon consent thereto
in writing. The power of shareholders to take action by non-unanimous consent is
specifically denied. In the case of a merger, consolidation, acquisition of all
capital shares of the Corporation or sale of assets, such action may be taken
without a meeting only if all shareholders consent in writing, or if all
shareholders entitled to vote consent in writing and all other shareholders are
provided the advance notification required by Section 14A: 5-6(2)(b) of the New
Jersey Business Corporation Act.
B. Special meetings of the stockholders of the Corporation for any
purpose or purposes may be called at any time by the President of the
Corporation, by a majority of the board of directors of the Corporation, or by a
committee of the board of directors which has been duly designated by the board
of directors and whose powers and authorities, as provided in a resolution of
the board of directors or
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in the Bylaws of the Corporation, include the power and authority to call such
meetings, but such special meetings may not be called by any other person or
persons.
C. Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him or her by proxy, but no such
proxy shall be voted or acted upon after eleven months from its date, unless the
proxy provides for a longer period. To be valid, a proxy must be executed and
authorized as required or permitted by law.
D. There shall be no cumulative voting by stockholders of any class or
series in the election of directors of the Corporation.
E. Meetings of stockholders may be held within or outside the State of
New Jersey, as the Bylaws may provide.
F. The presence, in person or by proxy, of the holders of a majority of
the outstanding shares of voting stock shall constitute a quorum at a meeting of
stockholders.
ARTICLE XI
Notice for Nominations and Proposals
------------------------------------
Advance notice of stockholder nominations for the election of directors
and of business to be brought by stockholders before any meeting of the
stockholders of the Corporation shall be given in the manner provided in the
Bylaws of the Corporation.
ARTICLE XII
Directors
---------
A. Number; Vacancies. The number of directors of the Corporation shall
be such number as shall be provided from time to time in or in accordance with
the Bylaws, provided that a decrease in the number of directors shall not have
the effect of shortening the term of any incumbent director, and provided
further that no action shall be taken to decrease or increase the number of
directors from time to time unless at least two-thirds of the directors then in
office shall concur in said action. Vacancies in the board of directors of the
Corporation, however caused, and newly-created directorships shall be filled by
a vote of a majority of the directors then in office, whether or not a quorum,
or by a sole remaining director, and any director so chosen shall hold office
for a term expiring at the next annual meeting of stockholders. Directors shall
not be required to own any shares of the Corporation's common stock and need not
be residents of any particular state, country or other jurisdiction.
B. Classified Board. The board of directors of the Corporation shall be
divided into three classes of directors which shall be designated Class I, Class
II and Class III. The members of each class shall be elected for a term of three
years and until their successors are elected and qualified. Such classes shall
be as nearly equal in number as the then total number of directors constituting
the entire board of directors shall permit, with the terms of office of all
members of one class expiring each year. At the first annual meeting of
stockholders, directors in Class I shall be elected to hold office for a term
expiring at
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the third succeeding annual meeting thereafter. At the second annual meeting of
stockholders, directors of Class II shall be elected to hold office for a term
expiring at the third succeeding meeting thereafter. At the third annual meeting
of stockholders, directors of Class III shall be elected to hold office for a
term expiring at the third succeeding annual meeting thereafter. Thereafter, at
each succeeding annual meeting, directors whose term shall expire at any annual
meeting shall continue to serve until such time as his or her successor shall
have been duly elected and shall have qualified unless his or her position on
the board of directors shall have been abolished by action taken to reduce the
size of the board of directors prior to said meeting.
If the number of directors of the Corporation is reduced, the
directorship(s) eliminated shall be allocated among classes as appropriate so
that the number of directors in each class is as specified in the immediately
preceding paragraph. The board of directors shall designate, by the name of the
incumbent(s), the position(s) to be abolished. Notwithstanding the foregoing, no
decrease in the number of directors shall have the effect of shortening the term
of any incumbent director. If the number of directors of the Corporation is
increased, the additional directorships shall be allocated among classes as
appropriate so that the number of directors in each class is as specified in the
immediately preceding paragraph.
Whenever the holders of any one or more series of preferred stock of
the Corporation shall have the right, voting separately as a class, to elect one
or more directors of the Corporation, the board of directors shall consist of
said directors so elected in addition to the number of directors fixed as
provided above in this Article XII. Notwithstanding the foregoing, and except as
otherwise may be required by law, whenever the holders of any one or more series
of preferred stock of the Corporation shall have the right, voting separately as
a class, to elect one or more directors of the Corporation, the terms of the
director or directors elected by such holders shall expire at the next
succeeding annual meeting of stockholders.
ARTICLE XIII
Removal of Directors
--------------------
Notwithstanding any other provision of this Certificate or the Bylaws
of the Corporation, any director or the entire board of directors of the
Corporation may be removed for cause, at any time, by the affirmative vote of
the holders of at least 80% of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors (considered
for this purpose as one class) cast at a meeting of the stockholders called for
that purpose. In addition, the board of directors shall have the power to remove
directors for cause and to suspend directors pending a final determination that
cause exists for removal.
ARTICLE XIV
Certain Limitations on Voting Rights
------------------------------------
Notwithstanding any other provision of this Certificate of
Incorporation, in no event shall any record owner of any outstanding Common
Stock which is beneficially owned, directly or indirectly, by a person who, as
of any record date for the determination of stockholders entitled to vote on any
matter, beneficially owns in excess of 10% of the then-outstanding shares of
Common Stock (the "Limit"), be entitled, or permitted to any vote in respect of
the shares held in excess of the Limit. The number of
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votes which may be cast by any record owner by virtue of the provisions hereof
in respect of Common Stock beneficially owned by such person owning shares in
excess of the Limit shall be a number equal to the total number of votes which a
single record owner of all Common Stock owned by such person would be entitled
to cast, multiplied by a fraction, the numerator of which is the number of
shares of such class or series which are both beneficially owned by such person
and owned of record by such record owner and the denominator of which is the
total number of shares of Common Stock beneficially owned by such person owning
shares in excess of the Limit.
A. The following definitions shall apply to this Article XIV.
1. "Affiliate" shall have the meaning ascribed to it in Rule 12b-2 of
the General Rules and Regulations under the Securities Exchange Act of 1934, as
in effect on the date of filing of this Certificate.
2. "Beneficial Ownership" (including beneficially owned) shall be
determined pursuant to Rule 13d-3 of the General Rules and Regulations under the
Securities Exchange Act of 1934 (or any successor rule or statutory provision),
or, if said Rule 13d-3 shall be rescinded and there shall be no successor rule
or provision thereto, pursuant to said Rule 13d-3 as in effect on the date of
filing of this Certificate of Incorporation; provided, however, that a person
shall, in any event, also be deemed the "beneficial owner" of any Common Stock:
(1) which such person or any of its affiliates beneficially
owns, directly or indirectly; or
(2) which such person or any of its affiliates has (i) the right
to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement,
arrangement or understanding (but shall not be deemed to be
the beneficial owner of any voting shares solely by reason of
an agreement, contract, or other arrangement with this
Corporation to effect any transaction which is described in
any one or more of sections of Article XV) or upon the
exercise of conversion rights, exchange rights, warrants, or
options or otherwise, or (ii) sole or shared voting or
investment power with respect thereto pursuant to any
agreement, arrangement, understanding, relationship or
otherwise (but shall not be deemed to be the beneficial owner
of any voting shares solely by reason of a revocable proxy
granted for a particular meeting of stockholders, pursuant to
a public solicitation of proxies for such meeting, with
respect to shares of which neither such person nor any such
affiliate is otherwise deemed the beneficial owner); or
(3) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of
its affiliates acts as a partnership, limited partnership,
syndicate or other group pursuant to any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock of
this Corporation;
and provided further, however, that (1) no Director or Officer of this
Corporation (or any affiliate of any such Director or Officer) shall, solely by
reason of any or all of such Directors or Officers acting in their capacities as
such, be deemed, for any purposes hereof, to beneficially own any Common Stock
beneficially owned by any other such Director or Officer (or any affiliate
thereof), and (2) neither any employee stock ownership or similar plan of this
Corporation or any subsidiary of this Corporation, nor any trustee with respect
thereto or any affiliate of such trustee (solely by reason of such capacity of
such
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trustee), shall be deemed, for any purposes hereof, to beneficially own any
Common Stock held under any such plan. For purposes of computing the percentage
beneficial ownership of Common Stock of a person, the outstanding Common Stock
shall include shares deemed owned by such person through application of this
subsection but shall not include any other Common Stock which may be issuable by
this Corporation pursuant to any agreement, or upon exercise of conversion
rights, warrants or options, or otherwise. For all other purposes, the
outstanding Common Stock shall include only Common Stock then outstanding and
shall not include any Common Stock which may be issuable by this Corporation
pursuant to any agreement, or upon the exercise of conversion rights, warrants
or options, or otherwise.
3. "Continuing Directors" shall mean those members of the Board of
Directors who were directors prior to the time when the Interested stockholder
became an Interested stockholder.
4. A "person" shall mean any individual, firm, corporation, or other
entity.
B. The Board of Directors shall have the power to construe and apply
the provisions of this Article XIV and to make all determinations necessary or
desirable to implement such provisions, including but not limited to matters
with respect to (i) the number of shares of Common Stock beneficially owned by
any person, (ii) whether a person is an affiliate of another, (iii) whether a
person has an agreement, arrangement, or understanding with another as to the
matters referred to in the definition of beneficial ownership, (iv) the
application of any other definition or operative provision of the section to the
given facts, or (v) any other matter relating to the applicability or effect of
this Article XIV. Any constructions, applications, or determinations made by the
directors pursuant to this Article XIV in good faith and on the basis of such
information and assistance as was then reasonably available for such purpose
shall be conclusive and binding upon the Corporation and its stockholders.
C. The Board of Directors shall have the right to demand that any
person who is reasonably believed to beneficially own Common Stock in excess of
the Limit (or holders of record of Common Stock beneficially owned by any person
in excess of the Limit) ("Holder in Excess") supply the Corporation with
complete information as to (i) the record owner(s) of all shares beneficially
owned by such person who is reasonably believed to own shares in excess of the
Limit, (ii) any other factual matter relating to the applicability or effect of
this Article XIV as may reasonably be requested of such person. The Board of
Directors shall further have the right to receive from any Holder in Excess
reimbursement for all expenses incurred by the Board in connection with its
investigation of any matters relating to the applicability or effect of this
section on such Holder in Excess, to the extent such investigation is deemed
appropriate by the Board of Directors as a result of the Holder in Excess
refusing to supply the Corporation with the information described in the
previous sentence.
D. Except as otherwise provided by law or expressly provided in this
Article XIV, the presence in person or by proxy, of the holders of record of
shares of capital stock of the Corporation entitling the holders thereof to cast
a majority of the votes (after giving effect, if required, to the provisions of
this Article XIV) entitled to be cast by the holders of shares of capital stock
of the Corporation entitled to vote shall constitute a quorum at all meetings of
the stockholders, and every reference in this Certificate of Incorporation to a
majority or other proportion of capital stock (or the holders thereof) for
purposes of determining any quorum requirement or any requirement for
stockholder consent or approval shall be deemed to refer to such majority or
other proportion of the votes (or the holders thereof) then entitled to be cast
in respect of such capital stock.
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E. The provisions of this Article XIV shall not be applicable to the
acquisition of more than 10% of any class of equity security of the Corporation
if such acquisition has been approved by a majority of the Corporation's
Continuing Directors.
F. In the event any provision (or portion thereof) of this Article XIV
shall be found to be invalid, prohibited or unenforceable for any reason, the
remaining provisions (or portions thereof) of this Article XIV shall remain in
full force and effect, and shall be construed as if such invalid, prohibited or
unenforceable provision had been stricken here from or otherwise rendered
inapplicable, it being the intent of this Corporation and its stockholders that
each such remaining provision (or portion thereof) of this Article XIV remain,
to the fullest extent permitted by law, applicable and enforceable as to all
stockholders, including stockholders owning an amount of stock over the Limit,
notwithstanding any such finding.
ARTICLE XV
Approval of Business Combinations
---------------------------------
A. Definitions and Related Matters. For the purposes of this Article XV
and as otherwise expressly referenced hereto in this Certificate of
Incorporation:
1. "Affiliate" means a person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, a specified person.
2. "Announcement date," when used in reference to any business
combination, means the date of the first public announcement of the final,
definitive proposal for that business combination.
3. "Associate," when used to indicate a relationship with any
person, means (1) any corporation or organization of which that person is an
officer or partner or is, directly or indirectly, the beneficial owner of 10% or
more of any class of voting stock, (2) any trust or other estate in which that
person has a substantial beneficial interest or as to which that person serves
as trustee or in a similar fiduciary capacity, or (3) any relative or spouse of
that person, or any relative of that spouse, who has the same home as that
person.
4. "Beneficial owner," when used with respect to any stock,
means a person:
(1) that, individually or with or through any of its
affiliates or associates, beneficially owns that stock, directly or indirectly;
(2) that, individually or with or through any of
its affiliates or associates, has (a) the right to acquire that stock (whether
that right is exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding (whether or not in
writing), or upon the exercise of conversion rights, exchange rights, warrants
or options, or otherwise; provided, however, that a person shall not be deemed
the beneficial owner of stock tendered pursuant to a tender or exchange offer
made by that person or any of that person's affiliates or associates until that
tendered stock is accepted for purchase or exchange; or (b) the right to vote
that stock pursuant to any agreement, arrangement or understanding (whether or
not in writing); provided, however, that a person shall not be
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deemed the beneficial owner of any stock under this subparagraph if the
agreement, arrangement or understanding to vote that stock (i) arises solely
from a revocable proxy or consent given in response to a proxy or consent
solicitation made in accordance with the applicable rules and regulations under
the Exchange Act, and (ii) is not then reportable on a Schedule 13D under the
Exchange Act (or any comparable or successor report); or
(3) that has any agreement, arrangement or
understanding (whether or not in writing), for the purpose of acquiring,
holding, voting (except voting pursuant to a revocable proxy or consent as
described in subparagraph (b) of paragraph (2) of this subsection, or disposing
of that stock with any other person that beneficially owns, or whose affiliates
or associates beneficially own, directly or indirectly, that stock.
5. "Business combination," when used in reference to the
Corporation and any interested stockholder of the Corporation, means:
(1) any merger or consolidation of the Corporation or
any subsidiary of the Corporation with (a) that interested stockholder or (b)
any other corporation (whether or not it is an interested stockholder of the
Corporation) which is, or after a merger or consolidation would be, an affiliate
or associate of that interested stockholder;
(2) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a series of transactions)
to or with that interested stockholder or any affiliate or associate of that
interested stockholder of assets of the Corporation or any subsidiary of the
Corporation (a) having an aggregate market value equal to 10% or more of the
aggregate market value of all the assets, determined on a consolidated basis, of
the Corporation, (b) having an aggregate market value equal to 10% or more of
the aggregate market value of all the outstanding stock of the Corporation, or
(c) representing 10% or more of the earnings power or income, determined on a
consolidated basis, of the Corporation;
(3) the issuance or transfer by the Corporation
or any subsidiary of the Corporation (in one transaction or a series of
transactions) of any stock of the corporation or any subsidiary of the
Corporation which has an aggregate market value equal to 5% or more of the
aggregate market value of all the outstanding stock of the Corporation to that
interested stockholder or any affiliate or associate of that interested
stockholder, except pursuant to the exercise of warrants or rights to purchase
stock offered, or a dividend or distribution paid or made, pro rata to all
stockholders of the Corporation;
(4) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation proposed by, on behalf of or
pursuant to any agreement, arrangement or understanding (whether or not in
writing) with that interested stockholder or any affiliate or associate of that
interested stockholder;
(5) any reclassification of securities (including,
without limitation, any stock split, stock dividend, or other distribution of
stock in respect of stock, or any reverse stock split), or recapitalization of
the corporation, or any merger or consolidation of the Corporation with any
subsidiary of the Corporation, or any other transaction (whether or not with, or
into, or otherwise involving that interested stockholder), proposed by, on
behalf of or pursuant to any agreement, arrangement or understanding (whether or
not in writing) with that interested stockholder or any affiliate or associate
of
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that interested stockholder, which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any class or
series of stock or securities convertible into voting stock of the Corporation
or any subsidiary of the Corporation which is directly or indirectly owned by
that interested stockholder or any affiliate or associate of that interested
stockholder, except as a result of immaterial changes due to fractional share
adjustments; or
(6) any receipt by that interested stockholder or
any affiliate or associate of that interested stockholder of the benefit,
directly or indirectly (except proportionately as a stockholder of the
Corporation), of any loans, advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantages provided by or through the
Corporation; provided, however, that the term "business combination" shall not
be deemed to include the receipt of any of the foregoing benefits by the
Corporation or any of the Corporation's affiliates arising from transactions
(such as intercompany loans or tax sharing arrangements) between the Corporation
and its affiliates in the ordinary course of business.
6. "Common stock" means any stock other than preferred stock.
7. "Consummation date," with respect to any business
combination, means the date of consummation of that business combination.
8. "Control," including terms "controlling" "controlled by"
and "under common control with," means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a person, whether through the ownership of voting stock, by contract, or
otherwise. A person's beneficial ownership of 10% or more of the voting power of
the Corporation's voting stock shall create a presumption that person has
control of the Corporation. Notwithstanding the foregoing in this subsection, a
person shall not be deemed to have control of a corporation if that person holds
voting power, in good faith and not for the purpose of circumventing this
section, as an agent, bank, broker, nominee, custodian or trustee for one or
more beneficial owners who do not individually or as a group have control of the
Corporation.
9. "Exchange Act" means the "Securities Exchange Act of 1934,"
(15 U.S.C. ss.78a et seq.) as the same has been or hereafter may be amended from
time to time.
10. "Interested stockholder," when used in reference to the
Corporation, means any person (other than the Corporation or any subsidiary of
the Corporation) that:
(1) is the beneficial owner, directly or indirectly,
of 10% or more of the voting power of the outstanding voting stock of the
Corporation; or
(2) is an affiliate or associate of the Corporation
and at any time within the five-year period immediately prior to the date in
question was the beneficial owner, directly or indirectly, of 10% or more of the
voting power of the then outstanding stock of the Corporation. For the purpose
of determining whether a person is an interested stockholder pursuant to this
subsection, the number of shares of voting stock of the Corporation deemed to be
outstanding shall include shares deemed to be beneficially owned by the person
through application of subsection A.4 of this Article but shall not include any
other unissued shares of voting stock of the Corporation which may be issuable
pursuant to any agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or options, or otherwise.
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(3) is an assignee of or has otherwise succeeded to
any shares of voting stock which were at any time within the two-year period
immediately prior to the date in question beneficially owned by any Interested
Stockholder, if such assignment or succession shall have occurred in the course
of a transaction or series of transactions not involving a public offering
within the meaning of the Securities Act of 1933.
11. "Market value," when used in reference to property of the
Corporation, means:
(1) in the case of stock, the highest closing sales
price of the stock during the 30 day period immediately preceding the date in
question, on the principal United States securities exchange registered under
the Exchange Act on which that stock is listed, or, if that stock is not listed
on any such exchange, the highest closing bid quotation with respect to a share
of that stock during the 30-day period preceding the date in question on the
National Association of Securities Dealers, Inc. Automated Quotation System, or
any system then in use, or if no such quotations are available, the fair market
value on the date in question of a share of the Corporation's stock as
determined by the board of directors of the Corporation in good faith; and
(2) in the case of property other than cash or stock,
the fair market value of that property on the date in question as determined by
the board of directors of the Corporation in good faith.
12. "Stock" means:
(1) any stock or similar security, any certificate
of interest, any participation in any profit sharing agreement, any voting trust
certificate, or any certificate of deposit for stock; and
(2) any security convertible, with or without
consideration, into stock, or any warrant, call or other option or privilege of
buying stock without being bound to do so, or any other security carrying any
right to acquire, subscribe to or purchase stock.
13. "Stock acquisition date," with respect to any person and
the Corporation, means the date that that person first becomes an interested
stockholder of the Corporation.
14. "Subsidiary" of the Corporation means any other
corporation of which voting stock having a majority of the votes entitled to be
cast is owned, directly or indirectly, by the Corporation.
15. "Voting stock" means shares of capital stock of the
Corporation entitled to vote generally in the election of directors.
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B. Approval of Business Combinations.
The Corporation shall not engage in a business combination with any
interested stockholder for a period of five years following that interested
stockholder's stock acquisition date unless the business combination is approved
by the board of directors prior to the interested stockholder's stock
acquisition date.
In addition, the Corporation shall not engage in any business
combination with any interested stockholder of the Corporation at any time
unless one of the following three conditions are met:
1. the business combination is approved by the board of directors of
the Corporation prior to that interested stockholder's stock acquisition date
and thereafter approved by stockholders in accordance with applicable law.
2. the business combination is approved by the affirmative vote of the
holders of at least 80% of the voting stock not beneficially owned by that
interested stockholder at a meeting called for such purpose.
3. the business combination meets all of the following conditions:
(1) the aggregate amount of the cash and the market value, as
of the consummation date, of consideration other than cash to be received per
share by holders of outstanding shares of common stock of the Corporation in
that business combination is at least equal to the higher of the following:
(a) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid by that
interested stockholder for any shares of common stock of the same class or
series acquired by it (i) within the five-year period immediately prior to the
announcement date with respect to that business combination, or (ii) within the
five-year period immediately prior to, or in, the transaction in which that
interested stockholder became an interested stockholder, whichever is higher;
plus, in either case, interest compounded annually from the earliest date on
which that highest per share acquisition price was paid through the consummation
date at the rate for one-year United States Treasury obligations from time to
time in effect; less the aggregate amount of any cash dividends paid, and the
market value of any dividends paid other than in cash, per share of common stock
since that earliest date, up to the amount of that interest; and
(b) the market value per share of common stock on
the announcement date with respect to that business combination or on that
interested stockholder's stock acquisition date, whichever is higher; plus
interest compounded annually from that date through the consummation date at the
rate for one-year United States Treasury obligations from time to time in
effect; less the aggregate amount of any cash dividends paid, and the market
value of any dividends paid other than in cash, per share of common stock since
that date, up to the amount of that interest;
(2) the aggregate amount of the cash and the market value as
of the consummation date of consideration other than cash to be received per
share by holders of outstanding shares of any class or series of stock, other
than common stock, of the Corporation is at least equal to the highest of the
following (whether or not that interested stockholder has previously acquired
any shares of that class or series of stock):
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(a) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid by that
interested stockholder for any shares of that class or series of stock acquired
by it (i) within the five-year period immediately prior to the announcement date
with respect to that business combination, or (ii) within the five-year period
immediately prior to, or in, the transaction in which that interested
stockholder became an interested stockholder, whichever is higher; plus, in
either case, interest compounded annually from the earliest date on which the
highest per share acquisition price was paid through the consummation date at
the rate for one-year United States Treasury obligations from time to time in
effect; less the aggregate amount of any cash dividends paid, and the market
value of any dividends paid other than in cash, per share of that class or
series of stock since that earliest date, up to the amount of that interest;
(b) the highest preferential amount per share to
which the holders of shares of that class or series of stock are entitled in the
event of any liquidation, dissolution or winding up of the Corporation, plus the
aggregate amount of any dividends declared or due at to which those holders are
entitled prior to payment of dividends on some other class or series of stock
(unless the aggregate amount of those dividends is included in that preferential
amount); and
(c) the market value per share of that class or
series of stock on the announcement date with respect to that business
combination or on that interested stockholder's stock acquisition date,
whichever is higher; plus interest compounded annually from that date through
the consummation date at the rate for one-year United States Treasury
obligations from time to time in effect; less the aggregate amount of any cash
dividends paid, and the market value of any dividends paid other than in cash,
per share of that class or series of stock since that date, up to the amount of
that interest;
(3) the consideration to be received by holders of a
particular class or series of outstanding stock (including common stock) of the
Corporation in that business combination is in cash or in the same form as the
interested stockholder has used to acquire the largest number of shares of that
class or series of stock previously acquired by it;
(4) the holders of all outstanding shares of stock of the
Corporation not beneficially owned by that interested stockholder immediately
prior to the consummation of that business combination are entitled to receive
in that business combination cash or other consideration for those shares in
compliance with paragraphs (1), (2) and (3) of this subsection; and
(5) after that interested stockholder's stock acquisition date
and prior to the consummation date with respect to that business combination,
that interested stockholder has not become the beneficial owner of any
additional shares of stock of the Corporation, except:
(a) as part of the transaction which resulted in
that interested stockholder becoming an interested stockholder;
(b) by virtue of proportionate stock splits, stock
dividends or other distributions of stock in respect of stock not constituting a
business combination as defined in Section A.5(5) of this Article;
(c) through a business combination meeting all
of the conditions of paragraph (3) and this paragraph; or
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<PAGE>
(d) through the purchase by that interested
stockholder at any price which, if that price had been paid in an otherwise
permissible business combination, the announcement date and consummation date of
which was the date of that purchase, would have satisfied the requirements of
paragraphs (1), (2) and (3) of this subsection.
(6) Exceptions. The provisions of this Article XV shall not
apply to any business combination of the Corporation with an interested
stockholder of the Corporation which became an interested stockholder
inadvertently, if such interested stockholder (i) as soon as practicable divests
itself, himself or herself of a sufficient amount of the voting stock of the
Corporation so that it, he or she no longer is the beneficial owner, directly or
indirectly, of 10% or more of the voting power of the outstanding voting stock
of the Corporation or a subsidiary corporation, and (ii) would not at any time
within the five-year period preceding the announcement date with respect to that
business combination have been an interested stockholder but for that
inadvertent acquisition. Nothing contained in this Article XV shall be construed
to relieve any interested stockholder from any fiduciary obligation imposed by
law.
Evaluation of Business Combinations. In connection with the exercise of
its judgment in determining what is in the best interests of the Corporation and
of the stockholders, when evaluating a business combination or a tender or
exchange offer, the board of directors of the Corporation shall, in addition to
considering the adequacy of the amount to be paid in connection with any such
transaction, consider all of the following factors and any other factors which
it deems relevant: (i) the social and economic effects of entering into the
transaction on the Corporation and its subsidiaries, and its present and future
employees, depositors, loan and other customers, creditors and other elements of
the communities in which the Corporation and its subsidiaries operate or are
located; (ii) the business and financial condition and earnings prospects of the
acquiring person or entity, including, but not limited to, debt service and
other existing financial obligations, financial obligations to be incurred in
connection with the acquisition, and other likely financial obligations of the
acquiring person or entity, and the possible effect of such conditions upon the
Corporation and its subsidiaries and the other elements of the communities in
which the Corporation and its subsidiaries operate or are located; and (iii) the
competence, experience, and integrity of the acquiring person or entity and its
or their management.
ARTICLE XVI
Elimination of Directors' and Officers' Liability
-------------------------------------------------
Directors and officers of the Corporation shall have no personal
liability to the Corporation or its stockholders for damages for breach of any
duty owed to the Corporation or its stockholders, provided that this Article XVI
shall not relieve a director or officer from liability for any breach of duty
based upon an act or omission (i) in breach of the director's or officer's duty
of loyalty to the Corporation or its stockholders, (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. Any repeal or modification of this
Article XVI by the stockholders of the Corporation shall not adversely affect
any right or protection of a director or officer of the Corporation hereunder or
otherwise with respect to any act or omission occurring before such repeal or
modification is effective. If the New Jersey Business Corporation Act is amended
to further limit the personal liability of directors and officers, then such
liability will be limited to the fullest extent permitted under the law.
15
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ARTICLE XVII
Indemnification
---------------
A. Indemnification. The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, including actions by or in the right of
the Corporation, whether civil, criminal, administrative, arbitrative or
investigative, by reason of the fact that such person is or was a director,
officer, employee or agent of the Corporation or of any constituent corporation
absorbed by the Corporation in a consolidation or merger, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another Corporation, partnership, joint venture, sole proprietorship, trust or
other enterprise, against expenses (including attorneys' fees), judgements,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding to the full extent
permissible under New Jersey law.
B. Advance Payment. The Corporation may pay in advance any expenses
(including attorneys' fees) which may become subject to indemnification under
Section A of this Article XVII if the person receiving the payment undertakes in
writing to repay the same if it is ultimately determined that he or she is not
entitled to indemnification by the Corporation under New Jersey law.
C. Nonexclusive. The indemnification and advancement of expenses
provided by Sections A and B of this Article XVII or otherwise granted pursuant
to New Jersey law shall not be exclusive of any other rights to which a person
may be entitled by law, bylaw, agreement, vote of stockholders, or disinterested
directors, or otherwise.
D. Continuation. The indemnification and advance payment provided by
Sections A and B shall continue as to a person who has ceased to hold a position
named in paragraph A of this Article XVII and shall inure to his or her heirs,
executors and administrators. In addition, any repeal or modification of this
Article XVII by the stockholders of the Corporation shall not adversely affect
any right or protection of a director or officer of the Corporation hereunder or
otherwise with respect to any act or omission occurring before such repeal or
modification is effective.
E. Insurance. The Corporation may purchase and maintain insurance on
behalf of any person who holds or who has held any position named in Section A
of this Article XVII, against any liability incurred by him or her in any such
position, or arising out of his or her status as such, whether or not the
Corporation would have power to indemnify him or her against such liability
under this Article and New Jersey law.
F. Savings Clause. If this Article XVII or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director, officer, employee, and
agent of the Corporation as to costs, charges, and expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement with respect
to any action, suit, or proceeding, whether civil, criminal, administrative,
arbitrative or investigative, including an action by or in the right of the
Corporation to the full extent permitted by any applicable portion of this
Article XVII that shall not have been invalidated and to the full extent
permitted by applicable law.
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ARTICLE XVIII
Amendment of Bylaws
-------------------
In furtherance and not in limitation of the powers conferred by
statute, the board of directors of the Corporation is expressly authorized to
make, repeal, alter, amend and rescind the Bylaws of the Corporation by a vote
of two-thirds of the board of directors present at a legal meeting held in
accordance with the provisions of the Bylaws. Notwithstanding any other
provision of this Certificate or the Bylaws of the Corporation (and
notwithstanding the fact that some lesser percentage may be specified by law),
the Bylaws shall not be made, repealed, altered, amended or rescinded by the
stockholders of the Corporation except by the vote of the holders of not less
than 80% of the outstanding shares of the capital stock of the Corporation
entitled to vote generally in the election of directors (considered for this
purpose as one class) cast at a meeting of the stockholders called for that
purpose (provided that notice of such proposed adoption, repeal, alteration,
amendment or rescission is included in the notice of such meeting), or, as set
forth above, by the board of directors.
ARTICLE XIX
Amendment of Certificate of Incorporation
-----------------------------------------
The Corporation reserves the right to repeal, alter, amend or rescind
any provision contained in this Certificate in the manner now or hereafter
prescribed by law, and all rights conferred on stockholders herein are granted
subject to this reservation. Notwithstanding the foregoing, the provisions set
forth in Articles VIII, X, XI, XII, XIII, XIV, XV, XVI, XVII, XVIII and this
Article XIX of this Certificate may not be repealed, altered, amended or
rescinded in any respect unless such action is approved by the affirmative vote
of the holders of not less than 80% of the outstanding shares of capital stock
of the Corporation entitled to vote generally in the election of directors
(considered for this purpose as a single class) cast at a meeting of the
stockholders called for that purpose (provided that notice of such proposed
adoption, repeal, alteration, amendment or rescission is properly included in
the notice of such meeting).
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EXHIBIT 3.ii
<PAGE>
BYLAWS
OF
VILLAGE FINANCIAL CORPORATION
ARTICLE I - Home Office
The home office of Village Financial Corporation (the "Corporation")
shall be located at 455 Federal City Road, in Pennington, in the County of
Mercer, in the State of New Jersey. The Corporation may also have offices at
such other places within or without the State of New Jersey as the board of
directors shall from time to time determine.
ARTICLE II - Shareholders
Section 1. Place of Meetings. All annual and special meetings of
shareholders shall be held at the home office of the Corporation or at such
other place in the State of New Jersey as the board of directors may determine.
Section 2. Annual Meeting. A meeting of the shareholders of the
Corporation for the election of directors and for the transaction of any other
business of the Corporation shall be held annually at such date and time as the
board of directors may determine.
Section 3. Special Meetings. Notwithstanding any other provision of the
Certificate of Incorporation or these Bylaws of the Corporation, any action
required to be taken or which may be taken at any annual or special meeting of
shareholders of the Corporation may be taken without a meeting, only as provided
in the Certificate of Incorporation.
Unless otherwise required by law, special meetings of the stockholders
of the Corporation for any purpose or purposes may be called at any time by the
board of directors of the Corporation, by a committee of the board of directors
which has been duly designated by the board of directors and whose powers and
authorities, as provided in a resolution of the board of directors or in the
Bylaws of the Corporation, include the power and authority to call such
meetings, by the chairman, a vice-chairman or the president.
Section 4. Conduct of Meetings. Annual and special meetings shall be
conducted in accordance with rules and procedures adopted by the board of
directors.
Section 5. Notice of Meetings. Written notice stating the place, day,
and hour of the meeting and the purpose(s) for which the meeting is so called
shall be delivered not fewer than ten nor more than 50 days before the date of
the meeting, either personally or by mail, by or at the direction of the
chairman of the board, the president, or the secretary, or the directors calling
the meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the mail,
addressed to the shareholder at the address as it appears on the stock transfer
books or records of the Corporation as of the record date prescribed in Section
6 of this Article II with postage prepaid. When any shareholders' meeting,
either annual or special, is adjourned for 30 days or more, notice of the
adjourned meeting shall be given as in the case of an original meeting. It shall
not be necessary to give any notice of the time and place of any meeting
adjourned for less than 30 days or of the business to be transacted at the
meeting, other than an announcement at the meeting at which such adjournment is
taken.
<PAGE>
Section 6. Fixing of Record Date. For the purpose of determining the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment, or the shareholders entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
proper purpose, the board of directors shall fix in advance a date as the record
date for any such determination of shareholders. Such date in any case shall be
not more than 60 days and, in case of a meeting of shareholders, not fewer than
10 days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this Section 6 of Article II, such determination shall apply to any
adjournment.
Section 7. Voting Lists. A list of shareholders shall be kept on file
at the home office of the Corporation and shall be subject to inspection by any
shareholder for a proper purpose and upon five days written demand, who has been
a shareholder of record for at least six months preceding his or her demand or,
any person holding, or so authorized in writing by the holders of at least 5% of
the outstanding shares.
Section 8. Quorum. A majority of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority of the
outstanding shares is represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time, subject to the notice
requirements of Section 5 of this Article II. At such adjourned meeting at which
a quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified. The
shareholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
shareholders to constitute less than a quorum.
Section 9. Proxies. At all meetings of stockholders, a stockholder may
vote by proxy executed by the stockholder in the manner provided by the
Certificate of Incorporation. Proxies solicited on behalf of the management
shall be voted as directed by the stockholder or, in the absence of such
direction, as determined by a majority of the board of directors. No proxy shall
be valid after eleven months from the date of its execution unless otherwise
provided in the proxy.
Section 10. Voting. At each election for directors, every stockholder
entitled to vote at such election shall be entitled to one vote for each share
of stock held by him or her. Directors shall be elected by a plurality of votes
of the shares present in person or represented by proxy at the meeting and
entitled to vote on the election of directors. Unless otherwise provided in the
Certificate of Incorporation, by statute, or by these Bylaws, in matters other
than the election of directors, a majority of the shares present in person or
represented by proxy at a lawful meeting and entitled to vote on the subject
matter, shall be sufficient to pass on a transaction or matter.
Section 11. Voting of Shares in the Name of Two or More Persons. When
ownership of stock stands in the name of two or more persons, in the absence of
written directions to the Corporation to the contrary, at any meeting of the
shareholders of the Corporation, any one or more of such shareholders may cast,
in person or by proxy, all votes to which such ownership is entitled. In the
event an attempt is made to cast conflicting votes, in person or by proxy, by
the several persons in whose names shares of stock stand, the vote or votes to
which those persons are entitled shall be cast as directed by a majority of
those holding such and present in person or by proxy at such meeting, but no
votes shall be cast for such stock if a majority cannot agree.
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Section 12. Voting of Shares of Certain Holders. Shares standing in the
name of another corporation may be voted by any officer, agent, or proxy as the
bylaws of such corporation may prescribe, or, in the absence of such provision,
as the board of directors of such corporation may determine. Shares held by an
administrator, executor, guardian, or conservator may be voted by him or her,
either in person or by proxy, without a transfer of such shares into his or her
name. Shares standing in the name of a trustee may be voted by him or her,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him or her without a transfer of shares into his or her name. Shares
standing in the name of a receiver may be voted by such receiver, and shares
held by or under the control of a receiver may be voted by such receiver without
the transfer into his or her name if authority to do so is contained in an
appropriate order of the court or other public authority by which such receiver
was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter, the pledgee shall be entitled to vote the shares so transferred.
Neither treasury shares of its own stock held by the Corporation nor
shares held by another corporation, if a majority of the shares entitled to vote
for the election of directors of such other corporation are held by the
Corporation, shall be voted at any meeting or counted in determining the total
number of outstanding shares at any given time for purposes of any meeting.
Section 13. Inspectors of Election. In advance of any meeting of
shareholders, the board of directors may appoint any persons other than nominees
for office as inspectors of election to act at such meeting or any adjournment.
The number of inspectors shall be either one or three. Any such appointment
shall not be altered at the meeting. If inspectors of election are not so
appointed, the chairman of the board or the president may, or on the request of
not fewer than 10 percent of the votes represented at the meeting shall, make
such appointment at the meeting. If appointed at the meeting, the majority of
the votes present shall determine whether one or three inspectors are to be
appointed. In case any person appointed as inspector fails to appear or fails or
refuses to act, the vacancy may be filled by appointment by the board of
directors in advance of the meeting or at the meeting by the chairman of the
board or the president.
Unless otherwise prescribed by regulation of the board, the duties of
such inspectors shall include: determining the number of shares and the voting
power of each share, the shares represented at the meeting, the existence of a
quorum, and the authenticity, validity and effect of proxies; receiving votes,
ballots, or consents; hearing and determining all challenges and questions in
any way arising in connection with the rights to vote; counting and tabulating
all votes or consents; determining the result; and such acts as may be proper to
conduct the election or vote with fairness to all shareholders.
Section 14. Nominating Committee. The board of directors shall act as a
nominating committee for selecting the management nominees for election as
directors. Except in the case of a nominee substituted as a result of the death
or other incapacity of a management nominee, the nominating committee shall
deliver written nominations to the secretary at least twenty days prior to the
date of the annual meeting. Provided such committee makes such nominations, no
nominations for directors except those made by the nominating committee shall be
voted upon at the annual meeting unless other nominations by stockholders are
made in writing and delivered to the secretary of the Corporation in accordance
with the provisions of Article II, Section 15 of these Bylaws.
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<PAGE>
Section 15. Notice for Nominations and Proposals. Nominations of
candidates for election as directors at any annual meeting of stockholders may
be made (a) by, or at the direction of, a majority of the board of directors or
(b) by any stockholder entitled to vote at such annual meeting. Only persons
nominated in accordance with the procedures set forth in this Section 15 shall
be eligible for election as directors at an annual meeting. Ballots bearing the
names of all the persons who have been nominated for election as directors at an
annual meeting in accordance with the procedures set forth in this Section 15
shall be provided for use at the annual meeting.
Nominations, other than those made by or at the direction of the board
of directors, shall be made pursuant to timely notice in writing to the
Secretary of the Corporation as set forth in this Section 15. To be timely, a
stockholder's notice shall be delivered to, or mailed and received at, the
principal office of the Corporation not less than 60 days prior to the
anniversary date of the immediately preceding annual meeting of stockholders of
the Corporation; provided, however, that with respect to the first scheduled
annual meeting, notice by the stockholder must be so delivered or received no
later than the close of business on the tenth day following the day on which
notice of the date of the scheduled meeting must be delivered or received no
later than the close of business on the fifth day preceding the date of the
meeting. Such stockholder's notice shall set forth (a) as to each person whom
the stockholder proposes to nominate for election or re-election as a director
and as to the stockholder giving the notice (i) the name, age, business address
and residence address of such person, (ii) the principal occupation or
employment of such person, (iii) the class and number of shares of Corporation
stock which are Beneficially Owned (as defined in Article XIV of the Certificate
of Incorporation) by such person on the date of such stockholder notice, and
(iv) any other information relating to such person that is required to be
disclosed in solicitations of proxies with respect to nominees for election as
directors, pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), including, but not limited to, information
required to be disclosed by Items 4, 5, 6 and 7 of Schedule 14A to be filed on
with the Securities and Exchange Commission (or any successors of such items or
schedule); and (b) as to the stockholder giving the notice (i) the name and
address, as they appear on the Corporation's books, of such stockholder and any
other stockholders known by such stockholder to be supporting such nominees and
(ii) the class and number of shares of Corporation stock which are Beneficially
Owned by such stockholder on the date of such stockholder notice and, to the
extent known, by any other stockholders known by such stockholder to be
supporting such nominees on the date of such stockholder notice. At the request
of the board of directors, any person nominated by, or at the direction of, the
Board for election as a director at an annual meeting shall furnish to the
Secretary of the Corporation that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee.
Proposals, other than those made by or at the direction of the board of
directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation as set forth in this Section 15. For stockholder proposals to
be included in the Corporation's proxy materials, the stockholder must comply
with all the timing and informational requirements of Rule 14a-8 of the Exchange
Act (or any successor regulation). With respect to stockholder proposals to be
considered at the annual meeting of stockholders but not included in the
Corporation's proxy materials, the stockholder's notice shall be delivered to,
or mailed and received at, the principal office of the Corporation not less than
60 days prior to the anniversary date of the immediately preceding annual
meeting of stockholders of the Corporation. Such stockholder's notice shall set
forth as to each matter the stockholder proposes to bring before the annual
meeting (a) a brief description of the proposal desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (b) the name and address, as they appear on the Corporation's books, of
the stockholder proposing such business and, to the extent known,
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<PAGE>
any other stockholders known by such stockholder to be supporting such proposal,
(c) the class and number of shares of the Corporation stock which are
Beneficially Owned by the stockholder on the date of such stockholder notice
and, to the extent known, by any other stockholders known by such stockholder to
be supporting such proposal on the date of such stockholder notice, and (d) any
financial interest of the stockholder in such proposal (other than interests
which all stockholders would have).
The board of directors may reject any nomination by a stockholder or
stockholder proposal not timely or properly made in accordance with the
requirements of this Section 15. If the board of directors, or a designated
committee thereof, determines that the information provided in a stockholder's
notice does not satisfy the informational requirements of this Section 15 in any
material respect, the Secretary of the Corporation shall notify such stockholder
of the deficiency in the notice. The stockholder shall have an opportunity to
cure the deficiency by providing additional information to the Secretary within
such period of time, not to exceed five days from the date such deficiency
notice is given to the stockholder, as the board of directors or such committee
shall reasonably determine. If the deficiency is not cured within such period,
or if the board of directors or such committee reasonably determines that the
additional information provided by the stockholder, together with information
previously provided, does not satisfy the requirements of this Section 15 in any
material respect, then the board of directors may reject such stockholder's
nomination or proposal. The Secretary of the Corporation shall notify a
stockholder in writing whether his or her nomination or proposal has been made
in accordance with the time and informational requirements of this Section 15.
Notwithstanding the procedures set forth in this paragraph, if neither the board
of directors nor such committee makes a determination as to the validity of any
nominations or proposals by a stockholder, the presiding officer of the annual
meeting shall determine and declare at the annual meeting whether the nomination
or proposal was made in accordance with the terms of this Section 15. If the
presiding officer determines that a nomination or proposal was made in
accordance with the terms of this Section 15, he shall so declare at the annual
meeting and ballots shall be provided for use at the meeting with respect to
such nominee or proposal. If the presiding officer determines that a nomination
or proposal was not made in accordance with the terms of this Section 15, he
shall so declare at the annual meeting and the defective nomination or proposal
shall be disregarded.
ARTICLE III - Board of Directors
Section 1. General Powers. The business and affairs of the Corporation
shall be under the direction of its board of directors. The board of directors
may annually elect a chairman of the board and one or more vice chairmen from
among its members and shall designate, when present, either the chairman of the
board or in his or her absence, one of the vice chairmen to preside at its
meetings.
Section 2. Number, Term and Election. The board of directors shall
initially consist of two members and shall be divided into three classes as
nearly equal in number as possible. The members of each class shall be elected
for a term of three years and until their successors are elected or qualified.
The board of directors shall be classified in accordance with the provisions of
the Corporation's Certificate of Incorporation. Directors are to be elected by a
plurality of votes cast by the shares entitled to vote in the election at a
meeting of stockholders at which a quorum is present. The board of directors may
increase the number of members of the board of directors but in no event shall
the number of directors be increased in excess of fifteen (15) persons.
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Section 3. Place of Meeting. All annual and special meetings of the
board of directors shall be held at the principal office of the Corporation or
at such other place within or outside the State in which the principal office of
the Corporation is located as the board of directors may determine and as
designated in the notice of such meeting.
Section 4. Regular Meetings. A regular meeting of the board of
directors shall be held without other notice than this Bylaw at such time and
date as the board of directors may determine.
Section 5. Special Meetings. Special meetings of the board of directors
may be called by or at the request of the chairman of the board, the president,
or one-third of the directors. The persons authorized to call special meetings
of the board of directors may fix any place, within or outside the State of New
Jersey, as the place for holding any special meeting of the board of directors
called by such persons.
Members of the board of directors may participate in special meetings
by means of conference telephone or similar communications equipment by which
all persons participating in the meeting can hear each other. Such participation
shall constitute presence in person.
Section 6. Notice of Special Meeting. Written notice of at least 24
hours regarding any special meeting of the board of directors or of any
committee designated thereby shall be given to each director in accordance with
these Bylaws, although such notice may be waived by the director. The attendance
of such director at a meeting shall constitute a waiver of notice of such
meeting, except where a director attends a meeting for the express purpose of
objecting to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any meeting need be specified in the notice of waiver of notice of such
meeting.
Section 7. Quorum. A majority of the number of directors fixed by
Section 2 of this Article III shall constitute a quorum for the transaction of
business at any meeting of the board of directors, but if less than such
majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time. Notice of any adjourned meeting shall be
given in the same manner as prescribed by Section 6 of this Article III.
Section 8. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors, unless a greater number is prescribed by these Bylaws, the
Certificate of Incorporation or the laws of New Jersey.
Section 9. Action Without a Meeting. Any action required or permitted
to be taken by the board of directors at a meeting may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the directors.
Section 10. Resignation. Any director may resign at any time by sending
a written notice of such resignation to the home office of the Corporation
addressed to the chairman of the board or the president. Unless otherwise
specified, such resignation shall take effect upon receipt by the chairman of
the board or the president.
Section 11. Vacancies. Any vacancy occurring on the board of directors
may be filled by the affirmative vote of a majority of the remaining directors,
although less than a quorum of the board of directors. A director elected to
fill a vacancy shall be elected to serve until the next election of
-6-
<PAGE>
directors by the shareholders. Any directorship to be filled by reason of an
increase in the number of directors may be filled by election by the board of
directors for a term of office continuing only until the next election of
directors by the shareholders.
Section 12. Compensation. Directors, as such, may receive a stated
salary for their services. By resolution of the board of directors, a reasonable
fixed sum, and reasonable expenses of attendance, if any, may be allowed for
actual attendance at each regular or special meeting of the board of directors.
Members of either standing or special committees may be allowed such
compensation as the board of directors may determine.
Section 13. Presumption of Assent. A director of the Corporation who is
present at a meeting of the board of directors at which action on any
Corporation matter is taken shall be presumed to have assented to the action
taken unless his dissent or abstention shall be entered in the minutes of the
meeting or unless he or she shall file a written dissent to such action with the
person acting as the secretary of the meeting before the adjournment thereof or
shall forward such dissent by registered mail to the secretary of the
Corporation within five days after the date a copy of the minutes of the meeting
is received. Such right to dissent shall not apply to a director who voted in
favor of such action.
Section 14. Removal of Directors. Directors of the Corporation may be
removed only in accordance with the Corporation's Certificate of Incorporation.
ARTICLE IV - Executive And Other Committees
Section 1. Appointment. The board of directors, by resolution adopted
by a majority of the full board, may designate the chief executive officer and
two or more of the other directors to constitute an executive committee. The
designation of any committee pursuant to this Article IV and the delegation of
authority shall not operate to relieve the board of directors, or any director,
of any responsibility imposed by law or regulation.
Section 2. Authority. The executive committee, when the board of
directors is not in session, shall have and may exercise all of the authority of
the board of directors except to the extent, if any, that such authority shall
be limited by the resolution appointing the executive committee; and except also
that the executive committee shall not have the authority of the board of
directors with reference to: the declaration of dividends; the amendment of the
Certificate of Incorporation or these Bylaws of the Corporation, or recommending
to the shareholders a plan of merger, consolidation, or conversion; the sale,
lease, or other disposition of all or substantially all of the property and
assets of the Corporation otherwise than in the usual and regular course of its
business; a voluntary dissolution of the Corporation; a revocation of any of the
foregoing; or the approval of a transaction in which any member of the executive
committee, directly or indirectly, has any material beneficial interest.
Section 3. Tenure. Subject to the provisions of Section 8 of this
Article IV, each member of the executive committee shall hold office until the
next regular annual meeting of the board of directors following his or her
designation and until a successor is designated as a member of the executive
committee.
Section 4. Meetings. Regular meetings of the executive committee may be
held without notice at such times and places as the executive committee may fix
from time to time by resolution.
-7-
<PAGE>
Special meetings of the executive committee may be called by any member thereof
upon not less than one day's notice stating the place, date and hour of the
meeting. Any member of the executive committee may waive notice of any meeting
and no notice of any meeting need be given to any member thereof who attends in
person. The notice of a meeting of the executive committee need not state the
business proposed to be transacted at the meeting.
Section 5. Quorum. A majority of the members of the executive committee
shall constitute a quorum for the transaction of business at any meeting
thereof, and action of the executive committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
Section 6. Action Without a Meeting. Any action required or permitted
to be taken by the executive committee at a meeting may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the members of the executive committee.
Section 7. Vacancies. Any vacancy in the executive committee may be
filled by a resolution adopted by a majority of the full board of directors.
Section 8. Resignations and Removal. Any member of the executive
committee may be removed at any time with or without cause by resolution adopted
by a majority of the full board of directors. Any member of the executive
committee may resign from the executive committee at any time by giving written
notice to the president or secretary of the Corporation. Unless otherwise
specified, such resignation shall take effect upon its receipt; the acceptance
of such resignation shall not be necessary to make it effective.
Section 9. Procedure. The executive committee shall elect a presiding
officer from its members and may fix its own rules of procedure which shall not
be inconsistent with these Bylaws. It shall keep regular minutes of its
proceedings and report the same to the board of directors for its information at
the meeting held next after the proceedings shall have occurred.
Section 10. Other Committees. The board of directors may by resolution
establish any other committee composed of directors as they may determine to be
necessary or appropriate for the conduct of the business of the Corporation and
may prescribe the duties, constitution, and procedures thereof.
ARTICLE V - Officers
Section 1. Positions. The officers of the Corporation shall include a
chief executive officer, president, one or more vice presidents, a secretary and
a treasurer, each of whom shall be elected by the board of directors. The
offices of the secretary and treasurer may be held by the same person and a vice
president may also be either the secretary or the treasurer. The board of
directors may designate one or more vice presidents as executive vice president
or senior vice president. The board of directors may also elect or authorize the
appointment of such other officers as the business of the Corporation may
require. The officers shall have such authority and perform such duties as the
board of directors may from time to time authorize or determine. In the absence
of action by the board of directors, the officers shall have such powers and
duties as generally pertain to their respective offices.
-8-
<PAGE>
Section 2. Election and Term of Office. The officers of the Corporation
shall be elected annually at the first meeting of the board of directors held
after each annual meeting of the shareholders. If the election of officers is
not held at such meeting, such election shall be held as soon thereafter as
possible. Each officer shall hold office until a successor has been duly elected
and qualified or until the officer's death, resignation, or removal in the
manner hereinafter provided. Election or appointment of an officer, employee, or
agent shall not of itself create contractual rights. The board of directors may
authorize the Corporation to enter into an employment contract with any officer,
but no such contract shall impair the right of the board of directors to remove
any officer at any time in accordance with Section 3 of this Article V.
Section 3. Removal. Any officer may be removed by the board of
directors whenever in its judgment the best interests of the Corporation will be
served thereby, but such removal, other than for cause, shall be without
prejudice to any contractual rights of the person so removed.
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or otherwise may be filled by the board
of directors for the unexpired portion of the term.
Section 5. Remuneration. The remuneration of the officers shall be
fixed from time to time by the board of directors, by employment contracts or
otherwise.
ARTICLE VI - Contracts, Loans, Checks, and Deposits
Section 1. Contracts. Except as otherwise prescribed by these Bylaws
with respect to certificates for shares, the board of directors may authorize
any officer, employee, or agent of the Corporation to enter into any contract or
execute and deliver any instrument in the name of and on behalf of the
Corporation. Such authority may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the
Corporation and no evidence of indebtedness shall be issued in its name unless
authorized by the board of directors. Such authority may be general or confined
to specific instances.
Section 3. Checks, Drafts, Etc. All checks, drafts, or other orders for
the payment of money, notes, or other evidences of indebtedness issued in the
name of the Corporation shall be signed by one or more officers, employees, or
agents of the Corporation, which may include facsimile signatures, in such
manner as shall from time to time be determined by the board of directors.
Section 4. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in any duly authorized depositories as the board of directors may select.
ARTICLE VII - Certificates for Shares and Their Transfer
Section 1. Certificates for Shares. Certificates representing shares of
capital stock of the Corporation shall be in such form as shall be determined by
the board of directors. Such certificates shall be signed by the chief executive
officer or by any other officer of the Corporation authorized by the
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<PAGE>
board of directors, attested by the secretary or an assistant secretary, and
sealed with the corporate seal or a facsimile thereof. The signatures of such
officers upon a certificate may be facsimiles if the certificate is manually
signed on behalf of a transfer agent or a registrar other than the Corporation
itself or one of its employees. Each certificate for shares of capital stock
shall be consecutively numbered or otherwise identified. The name and address of
the person to whom the shares are issued, with the number of shares and date of
issue, shall be entered on the stock transfer books of the Corporation. All
certificates surrendered to the Corporation for transfer shall be canceled and
no new certificate shall be issued until the former certificate for a like
number of shares has been surrendered and canceled, except that in the case of a
lost or destroyed certificate, a new certificate may be issued upon such terms
and indemnity to the Corporation as the board of directors may prescribe.
Section 2. Transfer of Shares. Transfer of shares of capital stock of
the Corporation shall be made only on its stock transfer books. Authority for
such transfer shall be given only by the holder of record or by his or her legal
representative, who shall furnish proper evidence of such authority, or by his
or her attorney authorized by a duly executed power of attorney and filed with
the Corporation. Such transfer shall be made only on surrender for cancellation
of the certificate for such shares. The person in whose name shares of capital
stock stand on the books of the Corporation shall be deemed by the Corporation
to be the owner for all purposes.
Section 3. Payment for Shares. No certificate shall be issued for any
shares until such share is fully paid.
Section 4. Form of Payment for Shares. The consideration for the
issuance of shares shall be paid in accordance with the provisions of New Jersey
law.
Section 5. Stock Ledger. The stock ledger of the Corporation shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 7 of Article II of these Bylaws or the
books of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
Section 6. Lost Certificates. The board of directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. When authorizing such issue of a new certificate,
the board of directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen, or destroyed
certificate, or his or her legal representative, to give the Corporation a bond
in such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen, or destroyed.
Section 7. Beneficial Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such shares on
the part of any other person, whether or not the Corporation shall have express
or other notice thereof, except as otherwise provided by law.
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<PAGE>
ARTICLE VIII - Fiscal Year; Annual Audit
The fiscal year of the Corporation shall end on the last day of
December of each year. The Corporation shall be subject to an annual audit as of
the end of its fiscal year by independent public accountants appointed by and
responsible to the board of directors.
ARTICLE IX - Dividends
Subject only to the terms of the Corporation's Certificate of
Incorporation and applicable law, the board of directors may, from time to time,
declare and the Corporation may pay, dividends on its outstanding classes of
capital stock which are eligible for dividends.
ARTICLE X - Corporate Seal
The board of directors shall provide a Corporate seal which shall be
two concentric circles between which shall be the name of the Corporation. The
year of incorporation or an emblem may appear in the center.
ARTICLE XI - Amendments
These Bylaws may be amended only as specified in the Corporation's
Certificate of Incorporation.
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EXHIBIT 4.1
<PAGE>
================================================================================
CERTIFICATE NO. VILLAGE FINANCIAL CORPORATION CUSIP NO.
92707P 10 7
INCORPORATED UNDER THE SEE REVERSE FOR CERTAIN RIGHTS,
LAWS OF THE STATE OF NEW JERSEY RESTRICTIONS, DEFINITION, ETC.
THIS
CERTIFIES
THAT
IS THE REGISTERED
HOLDER OF
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK,
$0.10 PAR VALUE PER SHARE OF
VILLAGE FINANCIAL CORPORATION
The shares represented by this certificate are transferable only on the
stock transfer books of the Corporation by the holder of record hereof, or by
his or her duly authorized attorney or legal representative, upon the surrender
of this certificate properly endorsed. This certificate and the shares
represented hereby are issued and shall be held subject to all the provisions of
the Certificate of Incorporation of the Corporation and any amendments thereto
(copies of which are on file with the Secretary of the Corporation), to all of
the provisions the holder by acceptance hereof, assents.
THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT AND IS NOT FEDERALLY INSURED OR
GUARANTEED.
IN WITNESS WHEREOF, Village Financial Corporation has caused this
certificate to be executed by the signatures of its duly authorized officers and
has caused its corporate seal to be hereunto affixed.
DATED:
- ------------------------ ---------------------------
President SEAL Secretary
Incorporated 1998
================================================================================
<PAGE>
VILLAGE FINANCIAL CORPORATION
The Board of Directors of the Corporation is authorized by resolution
or resolutions, from time to time adopted, to provide for the issuance of serial
preferred stock, no par value per share, in series and to fix and state the
voting powers, designations, preferences and relative, participating, optional,
or other special rights of the shares of each such series and the
qualifications, limitations and restrictions thereof. The Corporation will
furnish to any shareholder upon request and without charge a full description of
each class of stock and any series thereof.
The shares represented by this Certificate may not be cumulatively
voted in the election of directors of the Corporation. The affirmative vote of
the holders of at least 80% of each class or series of the voting stock of the
Corporation, voting separately for each class or series entitled to vote
separately and together as a single class for all classes or series not entitled
to vote separately, shall be required to approve certain business combinations
and other transactions, pursuant to the Certificate of Incorporation or to amend
certain provisions of the Certificate of Incorporation.
The shares represented by this certificate are subject to a limitation
contained in the Certificate of Incorporation to the effect that in no event
shall any record owner of any outstanding common stock which is beneficially
owned, directly or indirectly, by a person who beneficially owns in excess of
10% of the outstanding shares of common stock ( the "Limit") be entitled or
permitted to any vote in respect of shares held in excess of the Limit and may
have their voting rights reduced below the Limit.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT -_______________Custodian_______________
(Cus) (Minor)
TEN ENT - as tenants by the entireties
under Uniform Transfers to Minors
JT TEN - as joint tenants with right of
survivorship and not as tenants Act ___________________________
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED ________________________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
- ----------------------------------------------
- ----------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares of the Common Stock
- -----------------------------------------------------
represented by the within Certificate and do hereby irrevocably constitute and
appoint
- --------------------------------------------------------------------------------
Atorney to transfer the said Stock on the books of the within named Corporation
with full power of substitution in the premises.
Dated
----------- -------------------------------------------------------------
X
-------------------------------------------------------------
X
NOTICE: The signature to this assignment must correspond with
the name as written upon the face of the Certificate
in every particular, without alteration or enlargement
or any change whatever.
EXHIBIT 5
<PAGE>
MALIZIA, SPIDI, SLOANE & FISCH, P.C.
ATTORNEYS AT LAW
1301 K STREET, N.W.
SUITE 700 EAST
WASHINGTON, D.C. 20005
(202) 434-4660
FACSIMILE: (202) 434-4661
September 22, 1998
Board of Directors
Village Financial Corporation
590 Lawrence Square Boulevard
Lawrenceville, New Jersey 08648
Re: Registration Statement Under the Securities Act of 1933
-------------------------------------------------------
Gentlemen:
This opinion is rendered in connection with the Registration Statement
on Form SB-2 to be filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act") relating
to the offer and sale of up to 610,000 shares of common stock, par value $0.10
per share (the "Common Stock"), of Village Financial Corporation (the
"Company"). As special counsel to the Company, we have reviewed corporate
proceedings and such other legal matters as we have deemed appropriate for the
purpose of rendering this opinion.
Based on the foregoing, we are of the opinion that the shares of Common
Stock of the Company covered by the aforesaid Registration Statement will, when
issued in accordance with the terms of the offering against full payment
therefor, be validly issued, fully paid, and non-assessable shares of Common
Stock of the Company.
We assume no obligation to advise you of changes that may hereafter be
brought to our attention.
We hereby consent to the use of this opinion and to the reference to
our firm appearing in the Company's Prospectus under the heading "Legal
Matters." In giving this consent, we do not admit that we come within the
category of persons whose consent is required under Section 7 of the Act or the
rules and regulations of the Commission adopted under the Act.
Very truly yours,
/s/Malizia, Spidi, Sloane & Fisch, P.C.
MALIZIA, SPIDI, SLOANE & FISCH, P.C.
EXHIBIT 10.1
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT, is entered into this 1st day of August 1998,
("Effective Date") by and between Village Financial Corporation (the "Company")
and Kenneth J. Stephon (the "Executive").
WITNESSETH
WHEREAS, the Company desires to induce the Executive to commence
employment with the Company; and
WHEREAS, the Executive is experienced in all phases of the business of
the Company;
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereby agree as follows:
1. Employment. The Company hereby employs the Executive in the capacity
of President. The Executive hereby accepts said employment and agrees to render
such administrative and management services to the Company and to any
to-be-formed subsidiary ("Subsidiary") as are currently rendered and as are
customarily performed by persons situated in a similar executive capacity. The
Executive shall promote the business of the Company and Subsidiary. The
Executive's other duties shall be such as the Board of Directors for the Company
(the "Board of Directors" or "Board") may from time to time reasonably direct,
including normal duties as an officer of the Company.
2. Term of Employment. The term of employment under this Agreement
shall be for three years, commencing on the date of this Agreement ("Term").
Additionally, on, or before, each annual anniversary date from the Effective
Date, the Term of employment under this Agreement shall be extended for up to an
additional period beyond the then effective expiration date upon a determination
and resolution of the Board of Directors that the performance of the Executive
has met the requirements and standards of the Board, and that the Term of such
Agreement shall be extended. References herein to the Term of this Agreement
shall refer both to the initial term and successive terms. In the event that the
Board or the Executive elects not to renew the Term of the Agreement, such party
shall furnish written notice to the other party of such election not to extend
the Term with such notice to be given not less than thirty (30) days following
the anniversary date of the Efective Date.
<PAGE>
3. Compensation, Benefits and Expenses.
(a) Base Salary. The Company shall compensate and pay the
Executive during the Term of this Agreement a minimum base salary at the rate of
$6,250 per month ("Base Salary"), payable in cash not less frequently than
monthly; provided, that the rate of such salary shall be reviewed by the Board
of Directors not less often than annually, and the Executive shall be entitled
to receive increases at such percentages or in such amounts as determined by the
Board of Directors. The base salary may not be decreased without the Executive's
express written consent. Notwithstanding the foregoing, the Base Salary of such
Executive shall be increased to $9,167 per month as of the filing date of the
Company's Registration Statement associated with the initial public offering
with the Securities and Exchange Commission or at the close of a second private
placement, whichever is earlier.
(b) Discretionary Bonus. The Executive shall be entitled to
participate in an equitable manner with all other senior management employees of
the Company in discretionary bonuses that may be authorized and declared by the
Board of Directors to its senior management executives from time to time. No
other compensation provided for in this Agreement shall be deemed a substitute
for the Executive's right to participate in such discretionary bonuses when and
as declared by the Board.
(c) Participation in Benefit and Retirement Plans. The Executive
shall be entitled to participate in and receive the benefits of any plan of the
Company which may be or may become applicable to senior management relating to
pension or other retirement benefit plans, profit-sharing, stock options or
incentive plans, or other plans, benefits and privileges given to employees and
executives of the Company, to the extent commensurate with his then duties and
responsibilities, as fixed by the Board of Directors of the Company.
(d) Participation in Medical Plans and Insurance Policies. The
Executive shall be entitled to participate in and receive the benefits of any
plan or policy of the Company which may be or may become applicable to senior
management relating to life insurance, short and long term disability, medical,
dental, eye-care, prescription drugs or medical reimbursement plans. In the
event that the Company does not sponsor such medical reimbursement plans,
Company shall reimburse the Executive monthly for the expenses associated with
the Executive and dependents remaining covered under the medical reimbursement
plan under a prior employer in accordance with a timely COBRA election by
Executive to continue enrollment under such prior employer medical plan. It is
anticipated that the Company shall offer employee benefit programs comparable to
those offered to participating institutions under the programs sponsored by the
New Jersey League - Community and Savings Bankers.
(e) Vacations and Sick Leave. The Executive shall be entitled to
paid annual vacation leave in accordance with the policies as established from
time to time by the Board of Directors, which shall in no event be less than
three weeks per annum. The Executive shall also be entitled to an annual sick
leave benefit as established by the Board for senior management employees of the
Company. The Executive shall not be entitled to receive any additional
2
<PAGE>
compensation from the Company for failure to take a vacation or sick leave,
however the Executive shall be permitted to accumulate unused vacation or sick
leave from one year to the next at the discretion of the Board of Directors.
(f) Expenses. The Company shall reimburse the Executive or
otherwise provide for or pay for all reasonable expenses incurred by the
Executive in furtherance of, or in connection with the business of the Company,
including, but not by way of limitation, automobile and traveling expenses, and
all reasonable entertainment expenses, subject to such reasonable documentation
and other limitations as may be established by the Board of Directors of the
Company. If such expenses are paid in the first instance by the Executive, the
Company shall reimburse the Executive therefor. The Company will maintain a
semi-luxury class automobile ("Executive Car") for the use of the Executive.
Alternatively, in lieu of maintaining such Executive Car, the Company may elect
to pay the Executive an allowance of $500 per month during the organizational
phase of the Bank.
(g) Changes in Benefits. The Company shall not make any changes
in such plans, benefits or privileges previously described in Section 3(c), (d)
and (e) which would adversely affect the Executive's rights or benefits
thereunder, unless such change occurs pursuant to a program applicable to all
executive officers of the Company and does not result in a proportionately
greater adverse change in the rights of, or benefits to, the Executive as
compared with any other executive officer of the Company. Nothing paid to
Executive under any plan or arrangement presently in effect or made available in
the future shall be deemed to be in lieu of the salary payable to Executive
pursuant to Section 3(a) hereof.
(h) Stock Option Award. During the period of employment with the
Company, the Executive is hereby granted a stock option ("Options") to purchase
833 shares of common stock of the Company for each full calendar month from the
Effective Date through the effective date of the initial public offering ("IPO")
of the Company; provided that the aggregate number of such Options to be awarded
shall be not less than Options to purchase 10,000 shares of the Company Common
Stock, nor more than Options to purchase 30,000 shares of the Company Common
Stock. Such Options shall be exercisable at a price equal to the offering price
of the Company's Common Stock as of the IPO. Such Options shall remain
exercisable for a period of ten years from the effective date of the IPO. In the
event of the death of the Executive, any Options granted to the Executive may be
exercised by the person or persons to whom the Executive's rights under any such
Options pass by will or by the laws of descent and distribution (including the
Executive's estate during the period of administration). At the discretion of
the Board of Directors of the Company, upon exercise of such Options the
Executive may receive shares or cash or a combination thereof. If cash shall be
paid in lieu of shares, such cash shall be equal to the difference between the
fair market value of such shares and the exercise price of such Options on the
exercise date. The Options specified herein are in addition to the anticipated
award of up to 25% of the stock options available for award to management and
directors under any stock option plans anticipated to be implemented hereafter
by the Company.
3
<PAGE>
4. Loyalty; Noncompetition.
(a) The Executive shall devote his full time and attention to the
performance of his employment under this Agreement. During the term of the
Executive's employment under this Agreement, the Executive shall not engage in
any business or activity contrary to the business affairs or interests of the
Company or Subsidiary.
(b) Nothing contained in this Section 4 shall be deemed to
prevent or limit the right of Executive to invest in the capital stock or other
securities of any business dissimilar from that of the Company or Subsidiary,
or, solely as a passive or minority investor, in any business.
5. Standards. During the term of this Agreement, the Executive shall
perform his duties in accordance with such reasonable standards expected of
executives with comparable positions in comparable organizations and as may be
established from time to time by the Board of Directors.
6. Termination and Termination Pay. The Executive's employment under
this Agreement shall be terminated upon any of the following occurrences:
(a) The death of the Executive during the term of this Agreement,
in which event the Executive's estate shall be entitled to receive the
compensation due the Executive through the last day of the calendar month in
which Executive's death shall have occurred.
(b) The Board of Directors may terminate the Executive's
employment at any time, but any termination by the Board of Directors other than
termination for Just Cause, shall not prejudice the Executive's right to
compensation or other benefits under the Agreement. The Executive shall have no
right to receive compensation or other benefits for any period after termination
for Just Cause. The Board may within its sole discretion, acting in good faith,
terminate the Executive for Just Cause and shall notify such Executive
accordingly. Termination for "Just Cause" shall include termination because of
the Executive's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of the Agreement.
(c) Except as provided pursuant to Section 9 hereof, in the event
Executive's employment under this Agreement is terminated by the Board of
Directors without Just Cause, the Company shall be obligated to continue to pay
the Executive the salary provided pursuant to Section 3(a) herein, up to the
date of termination of the remaining Term of this Agreement, but in no event for
a period of less than six (6) months and the cost of Executive obtaining all
health, life, disability, and other benefits which the Executive would be
eligible to participate in through such date based upon the benefit levels
substantially equal to those being provided Executive at the date of termination
of employment.
4
<PAGE>
(d) The voluntary termination by the Executive during the term of
this Agreement with the delivery of no less than 60 days written notice to the
Board of Directors, other than pursuant to Section 9(b), in which case the
Executive shall be entitled to receive only the compensation, vested rights, and
all employee benefits up to the date of such termination.
7. Regulatory Exclusions. Notwithstanding anything herein to the
contrary, any payments made to the Executive pursuant to the Agreement, or
otherwise, shall be subject to and conditioned upon compliance with 12 USC
ss.1828(k) and any regulations promulgated thereunder.
8. Disability. If the Executive shall become disabled or incapacitated
to the extent that he is unable to perform his duties hereunder, by reason of
medically determinable physical or mental impairment, as determined by a doctor
engaged by the Board of Directors, Executive shall nevertheless continue to
receive the compensation and benefits provided under the terms of this Agreement
as follows: 100% of such compensation and benefits for a period of 12 months,
but not exceeding the remaining term of the Agreement, and 65% thereafter for
the remainder of the term of the Agreement. Such benefits noted herein shall be
reduced by any benefits otherwise provided to the Executive during such period
under the provisions of disability insurance coverage in effect for Company
employees. Thereafter, Executive shall be eligible to receive benefits provided
by the Company under the provisions of disability insurance coverage in effect
for Company employees. Upon returning to active full-time employment, the
Executive's full compensation as set forth in this Agreement shall be reinstated
as of the date of commencement of such activities. In the event that the
Executive returns to active employment on other than a full-time basis, then his
compensation (as set forth in Section 3(a) of this Agreement) shall be reduced
in proportion to the time spent in said employment, or as shall otherwise be
agreed to by the parties.
9. Change in Control.
(a) Notwithstanding any provision herein to the contrary, in the
event of the involuntary termination of Executive's employment during the term
of this Agreement following any Change in Control of the Company or Subsidiary,
or within 24 months thereafter of such Change in Control, absent Just Cause,
Executive shall be paid an amount equal to the product of 2.99 times the
Executive's "base amount" as defined in Section 280G(b)(3) of the Internal
Revenue Code of 1986, as amended (the "Code") and regulations promulgated
thereunder. Said sum shall be paid, at the option of Executive, either in one
(1) lump sum within thirty (30) days of such termination of service or in
periodic payments over the next 36 months or the remaining term of this
Agreement whichever is less, as if Executive's employment had not been
terminated, and such payments shall be in lieu of any other future payments
which the Executive would be otherwise entitled to receive under Section 6 of
this Agreement. Notwithstanding the forgoing, all sums payable hereunder shall
be reduced in such manner and to such extent so that no such payments made
hereunder when aggregated with all other payments to be made to the Executive by
the Company or the Subsidiary shall be deemed an "excess parachute payment" in
accordance with Section 280G of the Code and be subject to the excise tax
provided at Section
5
<PAGE>
4999(a) of the Code. The term "Change in Control" shall refer to: (i) the sale
of all, or a material portion, of the assets of the Company or the Subsidiary;
(ii) the merger or recapitalization of the Company or the Subsidiary whereby the
Company or the Subsidiary is not the surviving entity; (iii) a change in control
of the Company or the Subsidiary, as otherwise defined or determined by the
Office of Thrift Supervision or regulations promulgated by it; or (iv) the
acquisition, directly or indirectly, of the beneficial ownership (within the
meaning of that term as it is used in Section 13(d) of the Securities Exchange
Act of 1934 and the rules and regulations promulgated thereunder) of twenty-five
percent (25%) or more of the outstanding voting securities of the Company or the
Subsidiary by any person, trust, entity or group. The term "person" means an
individual other than the Executive, or a corporation, partnership, trust,
association, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization or any other form of entity not specifically listed herein.
(b) Notwithstanding any other provision of this Agreement to the
contrary, Executive may voluntarily terminate his employment during the term of
this Agreement following a Change in Control of the Company or Subsidiary, or
within twenty-four months following such Change in Contriol, and Executive shall
thereupon be entitled to receive the payment described in Section 9(a) of this
Agreement, upon the occurrence, or within 120 days thereafter, of any of the
following events, which have not been consented to in advance by the Executive
in writing: (i) if Executive would be required to move his personal residence or
perform his principal executive functions more than thirty-five (35) miles from
the Executive's primary office as of the signing of this Agreement; (ii) if in
the organizational structure of the Company, Executive would be required to
report to a person or persons other than the Board of Directors of the Company;
(iii) if the Company should fail to maintain Executive's base compensation in
effect as of the date of the Change in Control and the existing employee
benefits plans, including material fringe benefit, stock option and retirement
plans; (iv) if Executive would be assigned duties and responsibilities other
than those normally associated with his position as referenced at Section 1,
herein; (v) if Executive's responsibilities or authority have in any way been
materially diminished or reduced; or (vi) if Executive would not be reelected to
the Board of Directors of the Company.
10. Tax Withholding. All payments required to be made by the Company
hereunder to the Executive shall be subject to the withholding of such amounts,
if any, relating to tax and other payroll deductions as the Company may
reasonably determine should be withheld pursuant to any applicable law or
regulation.
11. Successors and Assigns.
(a) This Agreement shall inure to the benefit of and be binding
upon any corporate or other successor of the Company which shall acquire,
directly or indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Company or Subsidiary.
6
<PAGE>
(b) Since the Company is contracting for the unique and personal
skills of the Executive, the Executive shall be precluded from assigning or
delegating his rights or duties hereunder without first obtaining the written
consent of the Company.
12. Amendment; Waiver. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing, signed by the Executive and such officer or officers as may be
specifically designated by the Board of Directors of the Company to sign on its
behalf. No waiver by any party hereto at any time of any breach by any other
party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
13. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the United States
where applicable and otherwise by the substantive laws of the State of New
Jersey.
14. Nature of Obligations. Nothing contained herein shall create or
require the Company to create a trust of any kind to fund any benefits which may
be payable hereunder, and to the extent that the Executive acquires a right to
receive benefits from the Company hereunder, such right shall be no greater than
the right of any unsecured general creditor of the Company.
15. Headings. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
16. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect.
17. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the rules then in effect of the district office of the American
Arbitration Association ("AAA") nearest to the home office of the Company, and
judgment upon the award rendered may be entered in any court having jurisdiction
thereof, except to the extent that the parties may otherwise reach a mutual
settlement of such issue. Further, the settlement of the dispute to be approved
by the Board of the Company may include a provision for the reimbursement by the
Company to the Executive for all reasonable costs and expenses, including
reasonable attorneys' fees, arising from such dispute, proceedings or actions,
or the Board of the Company or the Subsidiary may authorize such reimbursement
of such reasonable costs and expenses by separate action upon a written action
and determination of the Board following settlement of the dispute. Such
reimbursement shall be paid within ten (10) days of Executive furnishing to the
Company or Subsidiary evidence, which may be in the form, among other things, of
a canceled check or receipt, of any costs or expenses incurred by Executive.
7
<PAGE>
18. Confidential Information. The Executive acknowledges that during his
or her employment he or she will learn and have access to confidential
information regarding the Company and the Subsidiary and its customers and
businesses ("Confidential Information"). The Executive agrees and covenants not
to disclose or use for his or her own benefit, or the benefit of any other
person or entity, any such Confidential Information, unless or until the Company
or the Subsidiary consents to such disclosure or use or such information becomes
common knowledge in the industry or is otherwise legally in the public domain.
The Executive shall not knowingly disclose or reveal to any unauthorized person
any Confidential Information relating to the Company, the Subsidiary, or any
subsidiaries or affiliates, or to any of the businesses operated by them, and
the Executive confirms that such information constitutes the exclusive property
of the Company and the Subsidiary. The Executive shall not otherwise knowingly
act or conduct himself (a) to the material detriment of the Company or the
Subsidiary, or its subsidiaries, or affiliates, or (b) in a manner which is
inimical or contrary to the interests of the Company or the Subsidiary.
Executive acknowledges and agrees that the existence of this Agreement and its
terms and conditions constitutes Confidential Information of the Company, and
the Executive agrees not to disclose the Agreement or its contents without the
prior written consent of the Company. Notwithstanding the foregoing, the Company
reserves the right in its sole discretion to make disclosure of this Agreement
as it deems necessary or appropriate in compliance with its regulatory reporting
requirements. Notwithstanding anything herein to the contrary, failure by the
Executive to comply with the provisions of this Section may result in the
immediate termination of the Agreement within the sole discretion of the
Company, disciplinary action against the Executive taken by the Company,
including but not limited to the termination of employment of the Executive for
breach of the Agreement and the provisions of this Section, and other remedies
that may be available in law or in equity.
19. Entire Agreement. This Agreement together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.
8
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE THE
UNAUDITED FINANCIAL STATEMENTS SECTION OF THE PROSPECTUS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL INFORMATION.
</LEGEND>
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
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0
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