As filed with the Securities and Exchange Commission on
December 7, 1995
Registration No. 33-64807
_________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
____________________
SOVEREIGN BANCORP, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 6720 23-2453088
(State or other jurisdiction of (Primary Standard (I.R.S.
incorporation or organization) Industrial Employer
Classification Identi-
Code Number) fication
No.)
1130 Berkshire Boulevard
Wyomissing, Pennsylvania 19610
(610) 320-8400
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Jay S. Sidhu
President and Chief Executive Officer
Sovereign Bancorp, Inc.
1130 Berkshire Boulevard
Wyomissing, Pennsylvania 19610
(610) 320-8400
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
________________________________________
Copies to:
Jeffrey P. Waldron, Esquire Victor H. Boyajian, Esquire
William J. Reynolds, Esquire Frederic M. Tudor, Esquire
Stevens & Lee Sills Cummis Zuckerman Radin
111 N. Sixth Street Tischman Epstein & Gross
P.O. Box 679 One Riverfront Plaza
Reading, Pennsylvania 19603 Newark, New Jersey 07102-5400
________________________________________<PAGE>
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are being offered
in connection with the formation of a holding company and there
is compliance with General Instruction G, check the following
box: [ ]
CALCULATION OF REGISTRATION FEE
_________________________________________________________________
Title of Amount to be Proposed Proposed Amount of
each class registered(1) maximum maximum registra-
of secur- offering aggregate tion fee(2)
ities to be price per offering
registered unit price
_________________________________________________________________
Common Stock, 1,984,270(4) Not Not $5,351,16(5)
no par value shares applicable applicable
(and (with rights)
associated
stock purchase
rights)(3)
_______________________________________________________________
(1) Based on the maximum number of shares of the Registrant's
common stock which may be issued in connection with the
proposed merger (the "Merger") of West Jersey Bancshares,
Inc. ("WJB") with and into the Registrant. In accordance
with Rule 416, this Registration Statement shall also
register any additional shares of the Registrant's common
stock which may become issuable to prevent dilution
resulting from stock splits, stock dividends or similar
transactions as provided by the agreement relating to the
Merger.
(2) Estimated solely for purposes of calculating the
registration fee. Computed, in accordance with
Rule 457(f)(1), on the basis of the closing sale price of
the common stock of WJB on December 4, 1995 of $7.625 and
based on 1,958,196 shares of WJB common stock outstanding
and unexercised warrants to purchase 77,000 shares of WJB
common stock.
(3) Prior to the occurrence of certain events, the stock
purchase rights will not be evidenced separately from the
common stock.
(4) The number of shares of common stock being registered by the
Registrant has been increased by 94,872 shares to reflect a
5% stock dividend declared by the Registrant on December 20,
1995 which is payable on February 15, 1996 to shareholders
of record of the Registrant on February 1, 1996.
(5) The registration fee was paid by the Registrant on
December 7, 1995.
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.
_________________________________________________________________
<PAGE>
SOVEREIGN BANCORP, INC.
CROSS-REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K showing the
location in the Proxy Statement/Prospectus of the
information required by Part I of Form S-4
Location in Proxy
Form S-4 Item No. Statement/Prospectus
A. Information About the
Transaction.
1. Forepart of Registration
Statement and Outside Front
Cover Page of Prospectus ... Outside front cover page
2. Inside Front and Outside
Back Cover Pages of
Prospectus ................. Table of Contents;
Available Information;
Incorporation of Certain
Documents by Reference
3. Risk Factors, Ratio of
Earnings to Fixed Charges
and Other Information ...... Summary; Sovereign
Selected Financial Data;
WJB Selected Financial
Data
4. Terms of the Transaction ... Introduction; The Special
Meeting; The Merger;
Description of Sovereign
Capital Securities;
Comparison of Shareholder
Rights
5. Pro Forma Financial
Information ................ Not Applicable
6. Material Contacts with the
Company Being Acquired ..... The Merger; Interests of
Certain Persons in the
Merger; Certain Related
Transactions
7. Additional Information
Required for Reoffering by
Persons and Parties Deemed
to be Underwriters ......... Not Applicable
8. Interests of Named Experts
and Counsel ................ Legal Matters
9. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities ................ Not Applicable
B. Information About the Registrant.
10. Information with Respect to
S-3 Registrants ............ Incorporation of Certain
Documents by Reference;
Information With Respect
to Sovereign; Description
of Sovereign Capital
Securities
11. Incorporation of Certain
Information by Reference ... Incorporation of Certain
Documents by Reference
12. Information with Respect to
S-2 or S-3 Registrants ..... Not Applicable
13. Incorporation of Certain
Information by Reference ... Not Applicable
14. Information with Respect
to Registrants Other Than
S-2 or S-3 Registrants ..... Not Applicable
C. Information About the Company
Being Acquired.
15. Information with Respect
to S-3 Companies ........... Not Applicable
16. Information with Respect
to S-2 or S-3 Companies .... Incorporation of Certain
Documents by Reference;
Information With Respect
to WJB
17. Information with Respect to
Companies Other Than S-2 or
S-3 Companies .............. Not Applicable
D. Voting and Management Information.
18. Information if Proxies,
Consents or Authorizations
are to be Solicited ........ Incorporation of Certain
Documents by Reference;
The Meeting; The Merger-
Management and Operations
After the Merger; The
Merger-Employee Benefits
and Severance; Interests
of Certain Persons in the
Merger; Adjournment of
Special Meeting;
Shareholder Proposals
19. Information if Proxies,
Consents or Authorizations
are not to be Solicited
or in an Exchange Offer .... Not Applicable
<PAGE>
[LETTERHEAD OF WEST JERSEY BANCSHARES, INC.]
January 19, 1996
Dear Stockholder:
You are cordially invited to attend a Special Meeting of the
stockholders of West Jersey Bancshares, Inc. ("WJB") to be held
on Tuesday, February 20, 1996, at 10:00 a.m., local time, at the
corporate offices of WJB located at 165 Passaic Avenue,
Fairfield, New Jersey 07004.
The purpose of the Special Meeting is to consider and
vote upon the Agreement and Plan of Merger dated as of
September 29, 1995 (the "Merger Agreement"), between WJB and
Sovereign Bancorp, Inc. ("Sovereign"), providing for the merger
of WJB with and into Sovereign (the "Merger"). If the Merger
Agreement is approved and the Merger is consummated, each share
of common stock of WJB will be exchanged for 0.8335 of a share of
common stock of Sovereign, and related stock purchase rights,
subject to adjustment, as set forth in the Merger Agreement and
as more fully described in the accompanying Proxy
Statement/Prospectus. Completion of the Merger is subject to
certain conditions, including the approval of the Merger
Agreement by the stockholders of WJB at this Special Meeting.
The attached Proxy Statement/Prospectus contains important
information concerning the Merger. We urge you to give it your
careful attention.
The Board of Directors of WJB has carefully considered and
approved the Merger Agreement and believes that the Merger is in
the best interests of WJB and its stockholders. ACCORDINGLY,
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
APPROVAL OF THE MERGER AGREEMENT. The Directors of WJB intend to
vote all of their shares of common stock of WJB in favor of the
Merger Agreement.
YOUR VOTE IS IMPORTANT. You are urged to sign, date and
mail the enclosed proxy card promptly in the postage-prepaid
envelope provided. If you attend the Special Meeting, you may
vote in person even if you have already mailed your proxy card.
On behalf of the Board of Directors and our employees, I
wish to thank you for your continued support. We appreciate your
interest.
Sincerely yours,
John A. Van Voorhis,
President and Chief
Executive Officer
<PAGE>
West Jersey Bancshares, Inc.
165 Passaic Avenue
Fairfield, New Jersey 07004
____________________
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held on February 20, 1996
____________________
NOTICE IS HEREBY GIVEN that a Special Meeting of
Stockholders of West Jersey Bancshares, Inc. ("WJB"), a New
Jersey corporation, will be held on Tuesday, February 20, 1996,
at 10:00 a.m., local time, at the corporate offices of WJB
located at 165 Passaic Avenue, Fairfield, New Jersey 07004 (the
"Special Meeting"), to consider the following matters:
1. The approval and adoption of the Agreement
and Plan of Merger dated as of September 29, 1995 (the
"Merger Agreement") between WJB and Sovereign Bancorp, Inc.
("Sovereign"), which is attached as Annex A to the
accompanying Proxy Statement/Prospectus, providing for the
merger of WJB with and into Sovereign (the "Merger").
Pursuant to the Merger Agreement, each share of the common
stock, no par value, of WJB (the "WJB Common Stock")
outstanding at the closing of the Merger will be converted
(subject to certain anti-dilution adjustments and certain
adjustments if the Merger becomes effective after June 30,
1996) into 0.8335 of a share of common stock, no par value,
of Sovereign ("Sovereign Common Stock"), and related stock
purchase rights; provided, however, that (i) if the average
market value of Sovereign Common Stock is greater than
$11.09 per share, each share of WJB Common Stock will be
converted into that number of shares of Sovereign Common
Stock equal to $9.24 divided by the average market value of
a share of Sovereign Common Stock (as determined in
accordance with the Merger Agreement) and related stock
purchase rights; or (ii) if the average market value of
Sovereign Common Stock is less than $9.07 per share, each
share of WJB Common Stock will be converted into that number
of shares of Sovereign Common Stock equal to $7.56 divided
by the average market value of a share of Sovereign Common
Stock (as determined in accordance with the Merger
Agreement) and related stock purchase rights. Sovereign
will pay cash to WJB stockholders in lieu of issuing
fractional shares of Sovereign Common Stock.
2. To vote on adjournment of the Special
Meeting, if necessary, to permit further solicitation of
proxies in the event there are not sufficient votes at the
time of the Special Meeting to constitute a quorum or to
approve the Merger Agreement.
3. Such other matters as may properly be brought
before the Special Meeting or any adjournments thereof.
The Board of Directors of WJB has fixed the close of
business on January 2, 1996 as the record date for determining
stockholders entitled to notice of, and to vote at, the Special
Meeting and any adjournments thereof.
A Proxy Statement/Prospectus is set forth on the
following pages and a form of proxy is enclosed herewith. To
ensure that your vote is counted, please complete, sign, date and
return the proxy in the enclosed return envelope, whether or not
you plan to attend the Special Meeting in person. If you attend
the Special Meeting, you may revoke your proxy and vote your
shares in person.
BY ORDER OF THE BOARD OF DIRECTORS
Geraldine L. Marchitto,
Corporate Secretary
Fairfield, New Jersey
January 19, 1996
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE AND RETURN
PROMPTLY THE ENCLOSED PROXY CARD, WHETHER OR NOT YOU PLAN TO
ATTEND THE SPECIAL MEETING. PLEASE DO NOT SEND IN ANY
CERTIFICATES FOR YOUR SHARES AT THIS TIME.
IF YOU HAVE ANY QUESTIONS, PLEASE CALL WJB AT (800) 201-1415,
Attention: Geraldine L. Marchitto, Corporate Secretary.
<PAGE>
________________________________________________________________
WEST JERSEY BANCSHARES, INC.
PROXY STATEMENT
____________________
SOVEREIGN BANCORP, INC.
PROSPECTUS
1,984,270 SHARES OF COMMON STOCK
(and associated Stock Purchase Rights)
________________________________________________________________
This Proxy Statement/Prospectus ("Proxy
Statement/Prospectus") is being furnished to stockholders of West
Jersey Bancshares, Inc. ("WJB") in connection with the
solicitation of proxies by the Board of Directors of WJB for use
at a Special Meeting of Stockholders (including any adjournments
or postponements thereof) to be held on February 20, 1996 (the
"Special Meeting").
This Proxy Statement/Prospectus relates to up to
1,984,270 shares of common stock, no par value ("Sovereign Common
Stock"), of Sovereign Bancorp, Inc., a Pennsylvania corporation
("Sovereign"), to be issued upon the merger (the "Merger") of WJB
with and into Sovereign, pursuant to an Agreement and Plan of
Merger dated as of September 29, 1995 (the "Merger Agreement").
In the Merger, each outstanding share of WJB's common stock, no
par value ("WJB Common Stock"), will be converted into 0.8335 of
a share of Sovereign Common Stock, and related stock purchase
rights. This exchange ratio has been adjusted to reflect a 5%
stock dividend declared by Sovereign on December 20, 1995 which
is payable on February 15, 1996 to shareholders of record of
Sovereign on February 1, 1996 (the "Sovereign Stock Dividend").
This exchange ratio is subject to possible adjustment to be
determined subsequent to the date of the Special Meeting (such
exchange ratio, as adjusted, is hereinafter referred to as the
"Exchange Ratio"). Adjustment to the Exchange Ratio will be
determined based upon, among other things, the per share market
value of Sovereign Common Stock, as determined pursuant to the
terms of the Merger Agreement (the "Sovereign Market Value"). If
the Sovereign Market Value falls below $9.07 (adjusted to reflect
the Sovereign Stock Dividend) or rises above $11.09 (adjusted to
reflect the Sovereign Stock Dividend), then the Exchange Ratio
will be adjusted as described in this Proxy Statement/
Prospectus.
This Proxy Statement/Prospectus constitutes (1) the
proxy statement of WJB relating to the solicitation of proxies by
the WJB Board of Directors for use at the Special Meeting to be
held for the purpose of considering and voting upon a proposal to
approve the Merger Agreement, and (2) the prospectus of Sovereign
with respect to the Sovereign Common Stock to be issued in the
Merger. Completion of the Merger is subject to various
conditions including the approval of WJB stockholders.
This Proxy Statement/Prospectus and the accompanying
form of proxy are first being mailed to stockholders of WJB on or
about January 19, 1996.
THE SHARES OF SOVEREIGN COMMON STOCK OFFERED HEREBY
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE SHARES OF SOVEREIGN COMMON STOCK OFFERED HEREBY ARE
NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR
SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
________________
The date of this Proxy Statement/Prospectus is
January 19, 1996.
<PAGE>
Table of Contents
Page
AVAILABLE INFORMATION ................................... 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE ......... 2
SUMMARY ................................................. 4
The Companies ..................................... 4
The Meeting ....................................... 5
The Merger......................................... 7
Interests of Certain Persons in the Merger ........ 9
Certain Federal Income Tax Consequences ........... 10
Certain Related Transactions ...................... 15
Comparative Per Common Share Data ................. 17
INTRODUCTION ............................................ 20
RECENT DEVELOPMENTS ..................................... 21
SOVEREIGN SELECTED FINANCIAL DATA ....................... 22
WJB SELECTED FINANCIAL DATA ............................. 26
THE MEETING ............................................. 29
Matters to be Considered at the Meeting ........... 29
Record Date; Stock Entitled to Vote ............... 29
Votes Required; Quorum ............................ 29
Voting of Proxies ................................. 30
Revocability of Proxies ........................... 30
Appraisal Rights .................................. 31
Solicitation of Proxies ........................... 31
THE MERGER .............................................. 32
General ........................................... 32
Background of and Reasons for the Merger;
Recommendation of the WJB Board of
Directors ................................... 32
Opinion of Financial Advisor ...................... 39
Terms of the Merger ............................... 46
Effective Date of the Merger ...................... 49
Exchange of WJB Stock Certificates, Options
and Warrants ................................ 50
Conditions to the Merger .......................... 51
Subsidiary Bank Merger ............................ 53
Regulatory Approvals .............................. 53
Representations and Warranties .................... 54
Business Pending the Merger........................ 54
Dividends ......................................... 56
No Solicitation of Transactions ................... 57
Amendment; Waivers ................................ 57
Termination; Effect of Termination ................ 58
Management and Operations after the Merger ........ 59
Employee Benefits and Severance ................... 60
Accounting Treatment .............................. 61
Certain Federal Income Tax Consequences ........... 61
Expenses .......................................... 63
Resale of Sovereign Common Stock .................. 63
Dividend Reinvestment Plan ........................ 63
INTERESTS OF CERTAIN PERSONS IN THE MERGER .............. 64
Stock Options and Warrants ........................ 64
Indemnification ................................... 64
STOCK OPTION AGREEMENT ............................ 64
INFORMATION WITH RESPECT TO SOVEREIGN ................... 67
General ........................................... 67
Market Price of and Dividends on Sovereign
Common Stock and Related Shareholder
Matters ..................................... 67
INFORMATION WITH RESPECT TO WJB ......................... 69
General ........................................... 69
Market Price of WJB Common Stock and Related
Stockholder Matters ......................... 69
DESCRIPTION OF SOVEREIGN CAPITAL SECURITIES ............. 71
Common Stock ...................................... 71
Preferred Stock ................................... 74
Shareholder Rights Plan ........................... 77
Special Charter and Pennsylvania Corporate
Law Provisions .............................. 78
COMPARISON OF SHAREHOLDER RIGHTS ........................ 81
ADJOURNMENT OF SPECIAL MEETING .......................... 93
EXPERTS ................................................. 94
LEGAL MATTERS ........................................... 94
SHAREHOLDER PROPOSALS ................................... 94
ANNEXES
A. Agreement and Plan of Merger between
Sovereign Bancorp, Inc. and
West Jersey Bancshares, Inc...................... A-1
B. Opinion of Ryan, Beck & Co., Inc................. B-1
<PAGE>
No persons have been authorized to give any information
or to make any representations other than those contained in this
Proxy Statement/Prospectus in connection with the solicitation of
proxies or the offering of securities made hereby and, if given
or made, such information or representation must not be relied
upon as having been authorized by Sovereign or WJB. This Proxy
Statement/Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, any securities, or the
solicitation of a proxy, in any jurisdiction to or from any
person to whom it is not lawful to make any such offer or
solicitation in such jurisdiction. Neither the delivery of this
Proxy Statement/Prospectus nor any distribution of securities
made hereunder shall, under any circumstances, create an
implication that there has been no change in the affairs of
Sovereign or WJB since the date hereof or that the information
herein is correct as of any time subsequent to its date.
All information concerning Sovereign and its
subsidiaries contained herein, incorporated herein by reference
or supplied herewith has been furnished by Sovereign, and all
information concerning WJB and its subsidiaries contained herein,
incorporated herein by reference or supplied herewith has been
furnished by WJB.
AVAILABLE INFORMATION
Sovereign and WJB are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith file reports,
proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by Sovereign and WJB with
the Commission can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices located at 7 World Trade Center,
Suite 1300, New York, New York 10048, and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material also can be obtained from
the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
Sovereign has filed with the Commission a Registration
Statement on Form S-4 (together with any amendments thereto, the
"Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Sovereign
Common Stock to be issued pursuant to the Merger Agreement. This
Proxy Statement/Prospectus does not contain all the information
set forth in the Registration Statement and the exhibits thereto.
Such additional information may be obtained from the Commission's
principal office in Washington, D.C. Statements contained in
this Proxy Statement/Prospectus or in any document incorporated
in this Proxy Statement/Prospectus by reference or supplied
herewith as to the contents of any contract or other document
referred to herein or therein are not necessarily complete, and,
in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration
Statement or such other document, each such statement being
qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by
Sovereign (File No. 0-16533) pursuant to the Exchange Act are
incorporated by reference in this Proxy Statement/Prospectus:
1. Sovereign's Annual Report on Form 10-K for the
year ended December 31, 1994 (including certain
information contained in Sovereign's Proxy
Statement dated March 17, 1995 used in connection
with Sovereign's 1995 Annual Meeting of
Shareholders and incorporated by reference in the
Form 10-K).
2. Sovereign's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1995, June 30, 1995 and
September 30, 1995.
3. Sovereign's Current Reports on Form 8-K filed on
January 18, March 24, April 20, May 1, May 17,
July 10, July 13 and October 24, 1995.
In addition, all documents filed by Sovereign pursuant
to Section 13(a), 13(c), 14 and 15(d) of the Exchange Act
subsequent to the date of this Proxy Statement/Prospectus and
prior to the date of the Special Meeting shall be deemed to be
incorporated by reference in this Proxy Statement/Prospectus and
to be a part hereof from the dates of filing of such documents or
reports. Any statement contained herein or in a document all or
a portion of which is incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement/Prospectus to the extent
that a statement contained herein or in any other subsequently
filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except
as modified or superseded, to constitute a part of this Proxy
Statement/Prospectus.
The following documents filed with the Commission by
WJB (File No. 0-18319) pursuant to the Exchange Act are
incorporated by reference in this Proxy Statement/Prospectus:
1. WJB's Annual Report on Form 10-K for the year
ended December 31, 1994 (including certain
information contained in WJB's Proxy Statement
dated March 13, 1995 used in connection with WJB's
1995 Annual Meeting of Stockholders and
incorporated by reference in the Form 10-K).
2. WJB's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1995, June 30, 1995 and
September 30, 1995.
3. WJB's Current Report on Form 8-K filed on
October 17, 1995.
4. The description of WJB Common Stock set forth in
WJB's Registration Statement filed on Form 8-A
pursuant to Section 12 of the Exchange Act, and
any amendment or report filed for the purpose of
updating such description.
Accompanying this Proxy Statement/Prospectus is WJB's
Annual Report to Stockholders for the year ended December 31,
1994 and Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS
BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED
HEREWITH. SUCH DOCUMENTS (OTHER THAN EXHIBITS TO SUCH DOCUMENTS
UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE)
ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS
DELIVERED, ON WRITTEN OR ORAL REQUEST. DOCUMENTS RELATING TO
SOVEREIGN MAY BE REQUESTED FROM SOVEREIGN BANCORP, INC.,
1130 BERKSHIRE BOULEVARD, WYOMISSING, PENNSYLVANIA 19610
(TELEPHONE NUMBER (610) 320-8400), ATTENTION: LAWRENCE M.
THOMPSON, JR., SECRETARY. DOCUMENTS RELATING TO WJB MAY BE
REQUESTED FROM WEST JERSEY BANCSHARES, INC., 165 PASSAIC AVENUE,
FAIRFIELD, NEW JERSEY 07004 (TELEPHONE NUMBER (201) 808-0007),
ATTENTION: GERALDINE L. MARCHITTO, CORPORATE SECRETARY. IN
ORDER TO ENSURE DELIVERY OF THE DOCUMENTS PRIOR TO THE
STOCKHOLDER'S MEETING, REQUESTS SHOULD BE RECEIVED BY FEBRUARY 5,
1996.
<PAGE>
SUMMARY
The following is a summary of certain information
relating to the Merger. This summary is not intended to include
all material information relating to the Merger and is qualified
in its entirety by reference to the more detailed information
contained elsewhere in this Proxy Statement/Prospectus, including
the Annexes hereto, and the documents incorporated herein by
reference. A copy of the Merger Agreement (excluding schedules
thereto) is set forth in Annex A to this Proxy Statement/
Prospectus and reference is made thereto for a complete
description of the terms of the Merger. Stockholders are urged
to read carefully this entire Proxy Statement/Prospectus,
including the Annexes hereto.
The Companies
Sovereign
Sovereign Bancorp, Inc. ("Sovereign"), a Pennsylvania
business corporation, is the holding company for Sovereign Bank,
a Federal Savings Bank ("Sovereign Bank"). At September 30,
1995, Sovereign and its subsidiaries had total consolidated
assets, deposits and shareholders' equity of approximately
$7.9 billion, $5.0 billion and $415.0 million, respectively. The
primary operating entity of Sovereign is Sovereign Bank.
Sovereign Bank's primary business consists of attracting deposits
from its network of 120 community banking offices, located in
Pennsylvania, New Jersey and Delaware, and originating
residential mortgage loans and home equity lines of credit in the
communities served by those offices. Sovereign's operating
strategy emphasizes consistent profitability and growth.
Accordingly, Sovereign seeks to (1) maintain superior asset
quality through emphasis on the origination of single-family
mortgage loans and other low risk loans; (2) limit interest rate
risk through the origination of adjustable rate mortgages for
retention in its portfolio; (3) maintain low overhead expenses
and high employee productivity; and (4) encourage a strong sales
and service culture.
The principal executive offices of Sovereign are
located at 1130 Berkshire Boulevard, Wyomissing, Pennsylvania
19610, and its telephone number is (610) 320-8400. For further
information concerning Sovereign, its subsidiaries and certain
pending transactions, see "AVAILABLE INFORMATION," "INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE," "INFORMATION WITH RESPECT TO
SOVEREIGN" and "DESCRIPTION OF SOVEREIGN CAPITAL SECURITIES."
WJB
West Jersey Bancshares, Inc. ("WJB"), a New Jersey
corporation, is the holding company for West Jersey Community
Bank ("WJCB"). At September 30, 1995, WJB had total consolidated
assets, deposits and stockholders' equity of approximately
$95.3 million, $86.6 million and $8.09 million, respectively.
WJCB is a state commercial bank located in Fairfield, New Jersey
and is the primary operating entity of WJB. WJCB engages in the
commercial banking business throughout northern New Jersey, with
primary emphasis on Fairfield Township and surrounding northern
Essex County, New Jersey communities. WJCB's business consists
of attracting deposits through a variety of deposit products and
using the deposited funds, together with funds from ongoing
operations, to originate commercial loans, mortgage loans, and
consumer loans.
The principal executive offices of WJB are located at
165 Passaic Avenue, Fairfield, New Jersey 07004, and its
telephone number is (201) 808-0007. For additional information
concerning WJB and WJCB, see "AVAILABLE INFORMATION,"
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and
"INFORMATION WITH RESPECT TO WJB."
The Meeting
General
A Special Meeting of the stockholders of WJB will be
held at the corporate offices of WJB located at 165 Passaic
Avenue, Fairfield, New Jersey 07004, on Tuesday, February 20,
1996 at 10:00 a.m., local time (the "Special Meeting").
Record Date
The record date for the Special Meeting is
January 2, 1996 (the "Record Date"). Only stockholders of record
at the close of business on the Record Date will be entitled to
receive notice of, and to vote at, the Special Meeting.
Matters to be Considered at the Meeting
At the Special Meeting, holders of WJB's common stock,
no par value (the "WJB Common Stock"), will consider and vote
upon a proposal to approve and adopt the Agreement and Plan of
Merger (the "Merger Agreement") dated as of September 29, 1995
between Sovereign and WJB, which is attached as Annex A to this
Proxy Statement/Prospectus, providing for the merger of WJB with
and into Sovereign (the "Merger"). In addition to the Merger
Agreement, stockholders of WJB are being asked to approve a
proposal to adjourn the Special Meeting, if necessary, to permit
further solicitation of proxies in the event there are not
sufficient votes at the Special Meeting to constitute a quorum or
to approve the Merger Agreement. Stockholders will also consider
and vote upon any other matter that may properly come before the
Special Meeting. See "THE MEETING -- Matters to be Considered at
the Meeting."
Vote Required
The Merger will require the approval of the Merger
Agreement by the affirmative vote of a majority of the votes cast
by the holders of the outstanding shares of WJB Common Stock
entitled to be voted thereon. The directors and executive
officers of WJB have agreed to vote all shares of WJB Common
Stock which they own on the Record Date in favor of the approval
and adoption of the Merger Agreement. At the Record Date,
directors and executive officers of WJB beneficially owned
(excluding shares which may be purchased upon the exercise of any
option or warrant) approximately 161,400 shares of WJB Common
Stock or approximately 8.24% of the outstanding shares of WJB
Common Stock which are entitled to be voted at the Special
Meeting. See "THE MEETING -- Votes Required."
Shares of WJB Common Stock represented by a proxy
properly signed and received at or prior to the Special Meeting,
unless subsequently revoked, will be voted in accordance with the
instructions thereon. If a proxy is signed and returned without
indicating any voting instructions, the shares of WJB Common
Stock represented by the proxy will be voted "FOR" the proposals
to approve the Merger Agreement and to adjourn the Special
Meeting, if necessary. Any proxy given pursuant to this
solicitation may be revoked by the person giving it by giving
written notice of such revocation to the Corporate Secretary of
WJB at any time before it is voted, by submitting to WJB a duly
executed, later-dated proxy or by voting the shares subject to
such proxy by written ballot at the Special Meeting. All written
notices of revocation and other communications with respect to
revocation of WJB proxies should be addressed West Jersey
Bancshares, Inc., 165 Passaic Avenue, Fairfield, New Jersey
07004, Attention: Geraldine L. Marchitto, Corporate Secretary.
Attendance at the Special Meeting will not in and of itself
constitute a revocation of a proxy.
As of the Record Date, there were 1,958,196 shares
of WJB Common Stock issued and outstanding. Each holder of WJB
Common Stock will have the right to one vote for each share
registered in such holder's name on the books of WJB as of the
close of business on the Record Date with respect to the matters
to be acted upon at the Special Meeting.
The Merger
Terms of the Merger
On the effective date of the Merger (the "Effective
Date"), each outstanding share of WJB Common Stock will be
automatically converted into, and become a right to receive,
0.8335 of a share of Sovereign common stock, no par value
("Sovereign Common Stock"), and related stock purchase rights
provided that the weighted average, based on daily trading
volume, of the closing sale price of a share of Sovereign Common
Stock on the National Association of Securities Dealers'
Automated Quotation System/National Market System (the
"Nasdaq/NMS") for the twenty consecutive trading days immediately
prior to the Effective Date (the "Sovereign Market Value") is not
less than $9.07 or greater than $11.09 (the "Fixed Exchange Ratio
Alternative"), subject to certain anti-dilution adjustments.
If on the Effective Date, the Sovereign Market Value
is less than $9.07, each outstanding share of WJB Common Stock
will be converted into and become a right to receive the number
of shares of Sovereign Common Stock equalling the amount obtained
by dividing $7.56 by the Sovereign Market Value (the "Low Fixed
Price Alternative"), and related stock purchase rights.
If on the Effective Date, the Sovereign Market Value
is greater than $11.09, each outstanding share of WJB Common
Stock will be converted into and become a right to receive the
number of shares of Sovereign Common Stock equalling the amount
obtained by dividing $9.24 by the Sovereign Market Value (the
"High Fixed Price Alternative"), and related stock purchase
rights.
The exchange ratios described in the Fixed Exchange
Ratio Alternative, the Low Fixed Price Alternative and the High
Fixed Price Alternative have each been adjusted to reflect a 5%
stock dividend declared by Sovereign on December 20, 1995 which
is payable on February 15, 1996 to shareholders of record of
Sovereign on February 1, 1996 (the "Sovereign Stock
Dividend").
For a description of Sovereign Common Stock and related
stock purchase rights, see "DESCRIPTION OF SOVEREIGN CAPITAL
SECURITIES -- Common Stock" and "--Shareholder Rights Plan,"
respectively.
With respect to each pricing alternative, (i) the ratio
at which shares of WJB Common Stock will be converted into shares
of Sovereign Common Stock, and related stock purchase rights, is
subject to certain anti-dilution adjustments and an adjustment
under certain circumstances if the Effective Date occurs after
June 30, 1996, and (ii) Sovereign will pay cash to WJB
shareholders in lieu of issuing fractional shares of Sovereign
Common Stock.
Sovereign or WJB may terminate the Merger Agreement
if, among other things, the Sovereign Market Value on the
Effective Date is less than $7.56 or greater than $12.60 per
share (subject to certain anti-dilution adjustments); provided,
however, that (i) in the event the Sovereign Market Value on the
Effective Date is less than $7.56 per share (subject to certain
anti-dilution adjustments), and Sovereign has elected to
terminate the Merger Agreement, WJB may elect not to terminate
the Merger Agreement in which case, notwithstanding Sovereign's
termination, no termination shall have occurred and each
outstanding share of WJB Common Stock will be converted into and
become a right to receive the number of shares of Sovereign
Common Stock equalling the amount obtained by dividing $7.56 by a
fixed Sovereign Market Value of $7.56, or 1.0 share of Sovereign
Common Stock, or (ii) in the event Sovereign Market Value on the
Effective Date is greater than $12.60 per share, (subject to
certain anti-dilution adjustments), and WJB has elected to
terminate the Merger Agreement, Sovereign may elect not to
terminate the Merger Agreement in which case, notwithstanding
WJB's termination, no termination shall have occurred and each
outstanding share of WJB Common Stock will be converted into and
become a right to receive the number of shares of Sovereign
Common Stock equalling the amount obtained by dividing $9.24 by a
fixed Sovereign Market Value of $12.60, or 0.7333 of a share of
Sovereign Common Stock. Sovereign or WJB may terminate the
Merger Agreement if, among other things, the Merger has not been
completed on or prior to June 30, 1996. The Sovereign Market
Values at which Sovereign and WJB may elect to terminate the
Merger Agreement and the related exchange ratio adjustments to be
applied in the event Sovereign or WJB exercises the right not to
terminate the Merger Agreement have been adjusted to reflect the
Sovereign Stock Dividend.
In connection with the Merger, options to acquire an
aggregate of 92,659 shares of WJB Common Stock under WJB's 1989
Stock Option and Stock Appreciation Rights Program (the "WJB
Stock Option Plan") and warrants to acquire an aggregate of
128,416 shares of WJB Common Stock will, if the Fixed Exchange
Ratio Alternative is applicable (subject to certain adjustments),
be converted on the Effective Date into (i) options to acquire an
aggregate of 120,086 (adjusted to reflect the Sovereign Stock
Dividend) shares of Sovereign Common Stock, at a per share
exercise price equal to the per share exercise price of the
option or warrant divided by the applicable exchange ratio, and
(ii) assuming a Sovereign Market Value of $10.08 (adjusted to
reflect the Sovereign Stock Dividend), an aggregate of 25,985
(adjusted to reflect the Sovereign Stock Dividend) shares of
Sovereign Common Stock. The ability of holders of options or
warrants to acquire WJB Common Stock to elect to receive
Sovereign Common Stock for their options or warrants may be
limited to the extent it precludes Sovereign from treating the
Merger as a "pooling of interests" for financial accounting
purposes. See "THE MERGER -- Terms of the Merger" and "--
Accounting Treatment."
The Effective Date will be determined by Sovereign and
WJB and will occur within the 30-day period following the
satisfaction of all conditions precedent to the Merger, unless
otherwise agreed to by Sovereign and WJB. See "THE MERGER --
Effective Date."
Recommendations of WJB's Board of Directors and Reasons
for the Merger
The Board of Directors of WJB has unanimously approved
the Merger Agreement and believes that the Merger is fair to, and
in the best interests of WJB's stockholders. Accordingly, the
Board of Directors of WJB unanimously recommends that WJB
stockholders vote "FOR" approval of the Merger Agreement. For a
discussion of the background of the Merger and the factors
considered by the Board of Directors of WJB in reaching its
decision to approve the Merger Agreement, see "THE MERGER --
Background of and Reasons for the Merger; Recommendation of the
WJB Board of Directors."
Opinion of Financial Advisor
Ryan, Beck & Co., Inc. ("Ryan, Beck"), the financial
advisor to WJB in connection with the Merger, has delivered its
written opinion to the Board of Directors of WJB that, as of
January 16, 1996, the terms of the Merger are fair, from a
financial point of view, to the stockholders of WJB. For
information on the assumptions made, matters considered, and
limitations on the review undertaken by Ryan, Beck, see "THE
MERGER -- Opinion of Financial Advisor." Stockholders are urged
to read in its entirety the opinion of Ryan, Beck dated
January 16, 1996, attached as Annex B to this Proxy Statement/
Prospectus.
Interests of Certain Persons in the Merger
Certain members of WJB's management and of the Board of
Directors of WJB have interests in the Merger in addition to any
interests they may have as stockholders of WJB generally. These
interests include, among others, provisions in the Merger
Agreement relating to indemnification, directors' and officers'
liability insurance, and certain severance and other employee
benefits. In addition, Sovereign has agreed in the Merger
Agreement to elect, on an annual basis, seven individuals
selected by WJB to comprise an autonomous Board of Directors of
the WJCB commercial bank division of Sovereign Bank for a period
of at least three years. These individuals will be permitted to
participate in any stock option plan adopted by Sovereign for the
benefit of directors of Sovereign Bank.
Pursuant to the Merger Agreement, Sovereign has agreed
to assume WJB's obligations under employment agreements with
certain executive officers of WJB. In particular, the employment
agreements of Messrs. John A. Van Voorhis, the President and
Chief Executive Officer of WJB, and Gerard Riker, the Executive
Vice President and Chief Financial Officer of WJB, will be
assumed by Sovereign. Messrs. Van Voorhis and Riker were among
the members of the Board of Directors of WJB who approved the
Merger.
Certain directors and executive officers of WJB are
the holders of options and warrants to acquire an aggregate of
184,659 shares of WJB Common Stock which, if the Fixed Exchange
Ratio Alternative is applicable (subject to certain adjustments),
will be converted on the Effective Date into options to acquire
an aggregate of 107,237 (adjusted to reflect the Sovereign Stock
Dividend) shares of Sovereign Common Stock and, assuming a
Sovereign Market Value of $10.08 (adjusted to reflect the
Sovereign Stock Dividend), 18,898 (adjusted to reflect the
Sovereign Stock Dividend) shares of Sovereign Common Stock. The
ability of option or warrant holders to elect to receive
Sovereign Common Stock for their options may be limited to the
extent it precludes Sovereign from treating the Merger as a
"pooling of interests" for financial accounting purposes. Also,
Sovereign has agreed to indemnify, for a specified period of time
after the Effective Date, persons who served as directors and
officers of WJB. See "INTERESTS OF CERTAIN PERSONS IN THE
MERGER."
Certain Federal Income Tax Consequences
Consummation of the Merger is conditioned upon receipt
by Sovereign and WJB of an opinion of Stevens & Lee, P.C.,
counsel to Sovereign, to the effect that no gain or loss will be
recognized for federal income tax purposes by holders of WJB
Common Stock who receive shares of Sovereign Common Stock in the
Merger, other than in respect of any cash received in lieu of
fractional share interests.
BECAUSE CERTAIN TAX CONSEQUENCES MAY VARY DEPENDING
UPON THE PARTICULAR CIRCUMSTANCES OF EACH WJB STOCKHOLDER AND
HOLDERS OF OPTIONS AND WARRANTS TO ACQUIRE WJB COMMON STOCK ("WJB
OPTIONHOLDERS"), IT IS RECOMMENDED THAT WJB STOCKHOLDERS AND WJB
OPTIONHOLDERS CONSULT THEIR TAX ADVISORS CONCERNING THE FEDERAL
(AND ANY STATE, LOCAL AND FOREIGN) TAX CONSEQUENCES OF THE MERGER
IN THEIR PARTICULAR CIRCUMSTANCES. See "THE MERGER -- Certain
Federal Income Tax Consequences."
Conditions to the Merger; Regulatory Approvals
The obligations of Sovereign and WJB to complete the
Merger are subject to various conditions usual and customary in
transactions similar to the Merger, including obtaining requisite
stockholder and regulatory approvals. Application has been made
to obtain required regulatory approvals from the Office of Thrift
Supervision and state bank regulatory authorities. In addition,
confirmation has been requested from the Board of Governors of
the Federal Reserve System that no application is required to be
filed with such Board. No assurance can be given that all
required approvals will be received or as to the timing or
conditions of such approvals. See "THE MERGER--Regulatory
Approvals." The obligation of Sovereign to complete the Merger
is also subject to certain other conditions, including the
receipt of an opinion from its independent auditors to the effect
that the Merger will be treated as a "pooling of interests" for
financial accounting purposes. No assurances can be made that
all conditions to the obligations of Sovereign and WJB to
complete the Merger will be met. See "THE MERGER -- Conditions
to the Merger."
Termination; Effect of Termination
The Merger Agreement may be terminated at any time
prior to the Effective Date by (i) mutual written consent of
Sovereign and WJB, (ii) either party if (a) the Merger is not
completed on or prior to June 30, 1996, unless such fact is due
to a breach of the Merger Agreement by the party seeking its
termination, (b) either party is informed in writing by any
regulatory authority that a requisite regulatory approval is
unlikely to be granted, unless such fact is due to a breach of
the Merger Agreement by the party seeking its termination, (c) if
the other party materially breaches any representation, warranty
or covenant contained in the Merger Agreement, and such breach
(1) has not or cannot be cured by the earlier of thirty days from
the date written notice of such breach was given to such party
committing the breach or the Effective Date and (2) would
constitute the failure to satisfy any condition precedent to the
non-breaching party's obligation to complete the Merger; (d) on
the Effective Date, the Sovereign Market Value is less than $7.56
or greater than $12.60; provided, however, that (1) in the event
the Sovereign Market Value on the Effective Date is less than
$7.56 per share (subject to certain anti-dilution adjustments),
and Sovereign has elected to terminate the Merger Agreement, WJB
may elect not to terminate the Merger Agreement in which case,
notwithstanding Sovereign's termination, no termination shall
have occurred and each outstanding share of WJB Common Stock will
be converted into and become a right to receive the number of
shares of Sovereign Common Stock equalling the amount obtained by
dividing $7.56 by a fixed Sovereign Market Value of $7.56, or
1.0 share of Sovereign Common Stock, or (2) in the event the
Sovereign Market Value on the Effective Date is greater than
$12.60 per share, (subject to certain anti-dilution adjustments),
and WJB has elected to terminate the Merger Agreement, Sovereign
may elect not to terminate the Merger Agreement in which case,
notwithstanding WJB's termination, no termination shall have
occurred and each outstanding share of WJB Common Stock will be
converted into and become a right to receive the number of shares
of Sovereign Common Stock equalling the amount obtained by
dividing $9.24 by $12.60, which is 0.7333 of a share of Sovereign
Common Stock, or (e) the stockholders of WJB vote not to approve
the Merger Agreement, unless due to a breach of the Merger
Agreement by the party seeking its termination; or (iii) by
Sovereign if it receives an opinion from its independent
accountant that the Merger will not qualify as a pooling-of-
interests for financial accounting purposes. The Sovereign
Market Values at which Sovereign and WJB may elect to terminate
the Merger Agreement and the related exchange ratio adjustments
to be applied in the event Sovereign or WJB exercises the right
not to terminate the Merger Agreement have been adjusted to
reflect the Sovereign Stock Dividend. See "THE MERGER --
Termination; Effect of Termination."
In the event that the Merger Agreement is terminated by
Sovereign as a result of a material breach by WJB of its
obligations thereunder (provided that such breach is not caused
by Sovereign's breach of its obligations thereunder), Sovereign
and WJB shall each pay its own expenses incurred in connection
with the Merger. Otherwise, Sovereign shall pay the out-of-
pocket expenses of WJB in connection with the transaction
contemplated by the Merger Agreement, except that Sovereign and
WJB shall each pay one-half of the costs of printing and mailing
this Proxy Statement/Prospectus.
Certain Differences in Shareholder Rights
Sovereign is a Pennsylvania corporation subject to the
provisions of the Pennsylvania Business Corporation Law of 1988,
as amended (the "PaBCL"). WJB is a New Jersey corporation
subject to the provisions of the New Jersey Business Corporation
Act (the "NJBCA"). Upon completion of the Merger, stockholders
of WJB will become shareholders of Sovereign and their rights as
such will be governed by Sovereign's Articles of Incorporation
and Bylaws and by the PaBCL. The rights of shareholders of
Sovereign are different in certain respects from the rights of
stockholders of WJB. See "COMPARISON OF SHAREHOLDER RIGHTS."
Business Pending the Merger and Related Matters
Pursuant to the Merger Agreement, WJB has made certain
covenants relating to the conduct of business pending
consummation of the Merger. WJB has agreed (except as otherwise
contemplated by the Merger Agreement or with the written consent
of Sovereign), among other things, not to: (i) conduct its
business other than in the ordinary and usual course; (ii) pay
dividends or redeem or otherwise acquire shares of its capital
stock, issue additional shares of its capital stock or give any
person the right to acquire any such shares; (iii) grant any
severance or termination pay or increase any compensation or
enter into or modify any employment agreements, except for
certain increases in the ordinary course of business; (iv) merge
or consolidate with any other corporation; or make any
acquisition of all or any substantial portion of the business or
assets of any other person; or (v) sell or otherwise dispose of
the capital stock of WJCB or sell any other asset other than in
the ordinary course of business.
Absence of Dissenters' Rights of Appraisal
Holders of shares of WJB Common Stock will not be
entitled to dissenters' rights of appraisal under applicable law.
Management and Operations After the Merger
The Board of Directors and executive officers of
Sovereign in office immediately prior to completion of the Merger
will remain as Sovereign's Board of Directors and executive
officers upon completion of the Merger. In connection with the
Merger, Sovereign Bank and WJCB entered into a Bank Plan of
Merger dated September 29, 1995 (the "Bank Plan of Merger"),
pursuant to which, concurrently with or as soon as practicable
after completion of the Merger, WJCB will merge with and into
Sovereign Bank (the "Bank Merger"). See "THE MERGER --
Subsidiary Bank Merger." The officers of Sovereign Bank in
office immediately prior to the effective date of the Bank Merger
will continue to be the officers of Sovereign Bank, except for
any officers of WJB or WJCB as Sovereign may designate. Under
the terms of the Merger Agreement, Sovereign has agreed to
operate WJCB as a separate and autonomous commercial bank
division of Sovereign Bank for a period of at least three years
following the Effective Date. Sovereign also has agreed in the
Merger Agreement to elect, on an annual basis, seven individuals
selected by WJB to serve on an autonomous board of directors of
the WJCB commercial bank division of Sovereign Bank for a period
of at least three years. The initial members of this autonomous
board will be elected on the effective date of the Bank Merger.
On the effective date of the Bank Merger, the officers of
Sovereign Bank in office immediately prior to such effective date
will be the officers of the WJCB commercial bank division of
Sovereign Bank, except that (i) Messrs. John A. Van Voorhis and
Gerard Riker shall be designated and elected as the Chief
Executive Officer and the Chief Financial Officer, respectively,
of the WJCB commercial bank division of Sovereign Bank and
(ii) such other officers of WJB or WJCB, as Sovereign and WJB
shall mutually agree, will be designated and elected as officers
of the WJCB commercial bank division of Sovereign Bank.
Under the terms of the Merger Agreement, Sovereign
has agreed to assume the preexisting employment contracts of
Messrs. John A. Van Voorhis and Gerard Riker on the same terms
and conditions, except that Sovereign has agreed to amend the
employment agreements to provide that (i) the respective terms of
the employment agreements will not expire earlier than three
years from the Effective Date, (ii) if the employee's employment
is terminated by Sovereign without cause or by the employee for
good reason (each as defined in the employment agreements, except
that the definition of good reason shall be appropriately amended
to be consistent with the post-Merger structure contemplated by
the Merger Agreement) the employee shall have the right to
receive all payments which would have been due under his
employment agreement (as amended) through the remainder of the
term of the employment agreement and (iii) the employee will
receive incentive compensation equivalent to the amount of
incentive compensation he would have received if the Merger had
not occurred. Sovereign has also agreed to assume the employment
agreement of Mr. Michael J. McGrath, Jr. and the
consulting/severance agreement of Mr. Michael J. McGrath, Sr.
(who resigned as a member of the Board of Directors of WJB on
December 13, 1995). Sovereign expects to retain substantially
all of the employees of WJCB with appropriate changes in title
consistent with Sovereign's management structure and the
operation of WJCB as a division of Sovereign Bank. See "THE
MERGER -- Subsidiary Bank Merger," and "-- Management and
Operations after the Merger."
Exchange of Certificates, Options and Warrants
After the Effective Date, Sovereign will send to
(i) WJB stockholders transmittal materials for use in effecting
the exchange of their certificates representing shares of WJB
Common Stock for certificates representing shares of Sovereign
Common Stock and (ii) holders of options and warrants to acquire
WJB Common Stock transmittal materials for use in effecting the
exchange of their options and warrants for certificates
representing shares of Sovereign Common Stock or options to
acquire shares of Sovereign Common Stock, as elected by such
option or warrant holders. See "THE MERGER -- Exchange of WJB
Stock Certificates, Options and Warrants."
Certain Related Transactions
Stock Option Agreement
As an inducement to and a condition of Sovereign
entering into the Merger Agreement, WJB granted Sovereign an
option to purchase up to 19.9% of the issued and outstanding WJB
Common Stock, subject to adjustment in certain circumstances,
pursuant to a Stock Option Agreement, dated September 29, 1995
(the "Stock Option Agreement"). The option may be exercised by
Sovereign only upon the occurrence of certain limited and
specified events which have the potential for a third party to
effect an acquisition of control of WJB prior to the termination
of the Merger Agreement. The exercise price per share to
purchase WJB Common Stock under the option is equal to the lower
of $8.40 or the lowest price per share which a person or group,
other than Sovereign or an affiliate of Sovereign, paid or offers
to pay for WJB Common Stock upon the occurrence of one of the
specified events which triggers the ability of Sovereign to
exercise the option. To the best knowledge of Sovereign and WJB,
none of such triggering events has occurred as of the date
hereof. Acquisitions of shares of WJB Common Stock pursuant to
an exercise of the option would be subject to prior regulatory
approval to the extent required. See "CERTAIN RELATED
TRANSACTIONS -- Stock Option Agreement."
Other
WJB has agreed in the Merger Agreement that during the
term of the Merger Agreement it will not solicit or engage in any
discussions with any person other than Sovereign concerning any
acquisition of WJB or any of its subsidiaries, except that WJB
may respond to unsolicited inquiries (i) in connection with
investor relations or (ii) to the extent the fiduciary duty of
WJB's Board of Directors may legally require it to do so. See
"THE MERGER -- No Solicitation of Transactions." In addition,
the directors and executive officers of WJB have agreed to vote
their shares of WJB Common Stock in favor of the Merger
Agreement. See "THE MERGER -- Matters to be Considered at the
Meeting."
The Stock Option Agreement and the agreements of WJB's
directors and executive officers to vote in favor of the Merger
Agreement are intended to increase the likelihood that the Merger
will be consummated on the terms set forth in the Merger
Agreement and may have the effect of precluding or discouraging
persons who might now or prior to the Effective Date be
interested in acquiring all of or a significant interest in WJB
from considering or proposing such an acquisition, even if such
persons were to pay a higher price per share for WJB Common Stock
than the price per share being paid by Sovereign under the Merger
Agreement, or might result in a potential acquiror proposing to
pay a lower price per share to acquire WJB than it might
otherwise have proposed to pay. See "CERTAIN RELATED
TRANSACTIONS -- Stock Option Agreement."
Accounting Treatment
Consummation of the Merger is conditioned upon receipt
of a letter from Sovereign's independent auditors to the effect
that the Merger may be accounted for as a pooling of interests
under generally accepted accounting principles. See "THE
MERGER -- Conditions to the Merger" and "-- Accounting
Treatment."
Resale of Sovereign Common Stock
The Sovereign Common Stock issuable in connection with
the Merger has been registered under the Securities Act of 1933,
as amended (the "Securities Act"). Accordingly, there will be no
restrictions upon the resale or transfer of such shares by
stockholders of WJB except for those stockholders who are deemed
to be "affiliates" of WJB as such term is used in Rule 145 under
the Securities Act. With respect to those stockholders who may
be deemed to be affiliates of WJB, Rule 145 imposes certain
restrictions on the transfer of Sovereign Common Stock which may
be received by them pursuant to the Merger.
This Proxy Statement/Prospectus does not cover resales
of Sovereign Common Stock received by any person who may be
deemed to be an affiliate of WJB. Persons who may be deemed to
be affiliates of WJB generally include individuals who, or
entities which, directly or indirectly control, are controlled by
or are under common control with WJB and would include certain
officers and directors of WJB, as well as principal stockholders
of WJB.
Directors of WJB have agreed not to sell or otherwise
dispose of any Sovereign Common Stock or WJB Common Stock
beneficially owned by them except in compliance with the
Securities Act or during a period commencing 30 days prior to the
Effective Date and ending upon publication by Sovereign of
combined financial statements covering at least 30 days of the
combined entities' operations after the Merger. See "THE
MERGER -- Resale of Sovereign Common Stock."
Recent Developments -- WJB
Branch Application. In August of 1995, WJCB filed
an application with the New Jersey Department of Banking (the
"NJDB") to establish a full branch in Caldwell, New Jersey. The
NJDB approved the application on September 29, 1995. WJCB also
notified the Federal Reserve Bank of New York (the "FRB") of its
intention to operate this branch. On November 9, 1995, WJCB
received approval from the FRB to operate this branch. This
branch is expected to open in the first quarter of 1996.
Comparative Per Common Share Data
The following table sets forth certain unaudited
comparative per share data relating to book value per common
share, cash dividends declared per common share and income from
continuing operations per common share (i) on a historical basis
for Sovereign and WJB, (ii) on a pro forma basis per share of
Sovereign Common Stock to reflect completion of the Merger, and
(iii) on an equivalent pro forma basis per share of WJB Common
Stock to reflect completion of the Merger. The pro forma
information has been prepared giving effect to the Merger using
the pooling of interests accounting method. For a description of
the effect of pooling of interests accounting, see "THE MERGER --
Accounting Treatment." This information should be read in
conjunction with the consolidated financial statements of each of
Sovereign and WJB, including the notes thereto, incorporated by
reference in this Proxy Statement/Prospectus, and the other
financial data appearing elsewhere in this Proxy
Statement/Prospectus. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE" and "AVAILABLE INFORMATION."
The following information is not necessarily indicative
of the results of operations of future periods or future combined
financial position.
<TABLE>
<CAPTION>
At September 30, 1995 At December 31, 1994
--------------------- --------------------
<S> <C> <C>
Book Value Per Common Share:
Historical:
Sovereign(1) . . . . . . . . . . . $7.14 $6.05
WJB . . . . . . . . . . . . . . . . 4.13 3.79
Pro Forma:
Pro forma per share of Sovereign
Common Stock(1) . . . . . . . . . 7.08 6.00
Equivalent pro forma per share of
WJB Common Stock(1)(2) . . . . . 5.90 5.00
</TABLE>
<TABLE>
<CAPTION>
For the Nine For the Year Ended December 31,
Months Ended -------------------------------
September 30, 1995 1994(3) 1993(3) 1992(3)
------------------ ------- ------- -------
<S> <C> <C> <C> <C>
Cash Dividends Declared Per Common
Share:
Historical:
Sovereign(1) . . . . . . . . . . . $.0629 $.1062 $.1009 $.0847
WJB . . . . . . . . . . . . . . . . 0 0 0 0
Pro Forma:
Pro forma per share of Sovereign
Common Stock(1) . . . . . . . . . .0629 .1062 .1009 .0847
Equivalent pro forma per share of
WJB Common Stock(1)(2). . . . . . .0524 .0885 .0841 .0706
Income from Continuing Operations
Per Common Share:
Historical:
Sovereign(1). . . . . . . . . . . . .73 .90 .70 .51
WJB . . . . . . . . . . . . . . . . .34 .31 .27 .14
Pro Forma:
Pro forma per share of Sovereign
Common Stock(1) . . . . . . . . . .72 .39 .69 .50
Equivalent pro forma per share of
WJB Common Stock(1)(2) . . . . . .60 .74 .57 .42
__________________
</TABLE>
(1) Adjusted to reflect the Sovereign Stock Dividend.
(2) WJB pro forma equivalent amounts represent pro forma
combined information multiplied by an exchange ratio of
0.8335.
(3) Data reflects WJB historical financial data for the years
ended December 31, 1994, 1993 and 1992.
<PAGE>
Market Value of Securities
The following table sets forth the market value per
share of Sovereign Common Stock, the market value per share of
WJB Common Stock and the equivalent market value per share of WJB
Common Stock on September 29, 1995, the last business day
preceding public announcement of the Merger. The equivalent
market value per share of WJB Common Stock indicated in the table
is based upon the Fixed Exchange Ratio Alternative because the
market value of a share of Sovereign Common Stock at the close of
business on September 29, 1995 was $10.18 (adjusted to reflect
the Sovereign Stock Dividend) which is between $9.07 (adjusted to
reflect the Sovereign Stock Dividend) and $11.09 (adjusted to
reflect the Sovereign Stock Dividend). See "THE MERGER -- Terms
of the Merger."
The historical market values per share of Sovereign
Common Stock and WJB Common Stock and the historical market value
of Sovereign Common Stock used to determine the equivalent market
value per share of WJB Common Stock are the per share last sale
prices on September 29, 1995, as reported on the Nasdaq/NMS with
respect to Sovereign Common Stock and the Nasdaq Small-Cap Market
with respect to WJB Common Stock.
WJB
---------------------------
Equivalent
Sovereign Market Value
Historical Historical Per Share
---------- ---------- ------------
September 29, 1995 $10.18 $7.25 $8.49
Market Price and Dividend Information
At January 11, 1996, the last reported sale price of
Sovereign Common Stock, as reported on the Nasdaq/NMS, was $10
per share. For information concerning cash dividends paid by
Sovereign, see "INFORMATION WITH RESPECT TO SOVEREIGN -- Market
Price of and Dividends on Sovereign Common Stock and Related
Shareholder Matters."
END OF SUMMARY
<PAGE>
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to
stockholders of WJB in connection with the solicitation of
proxies by WJB's Board of Directors for use at the Special
Meeting of Stockholders of WJB (the "Special Meeting") to be held
at the corporate offices of WJB located at 165 Passaic Avenue,
Fairfield, New Jersey 07004, on Tuesday, February 20, 1996, at
10:00 a.m., local time, and at any adjournments thereof.
At the Special Meeting, the stockholders of WJB will be
asked to approve the Merger Agreement dated as of September 29,
1995 (the "Merger Agreement") between WJB and Sovereign, which is
attached as Annex A and incorporated by reference and more fully
described herein. Stockholders of WJB will also be asked to
approve a proposal to adjourn the Special Meeting, if necessary,
to permit further solicitation of proxies in the event there are
not sufficient votes at the time of the Special Meeting to
constitute a quorum or to approve the Merger Agreement. The
description of the Merger Agreement set forth herein is qualified
in its entirety by reference to the Merger Agreement.
This Proxy Statement/Prospectus does not cover resales
of Sovereign Common Stock received in the Merger by any person
who may be deemed to be an "affiliate" of WJB as such term is
used in Rule 145 under the Securities Act of 1933, as amended
(the "Securities Act"). Under Rule 145, affiliates of WJB will
be subject to certain restrictions on their ability to transfer
Sovereign Common Stock received by them in the Merger. See "THE
MERGER -- Resale of Sovereign Common Stock."
The approximate date on which this Proxy
Statement/Prospectus is first being sent to stockholders of WJB
is on or about January 19, 1996.
<PAGE>
RECENT DEVELOPMENTS
In August of 1995, WJCB filed an application with
the New Jersey Department of Banking (the "NJDB") to establish a
full branch in Caldwell, New Jersey. The NJDB approved the
application on September 29, 1995. WJCB also notified the
Federal Reserve Bank of New York (the "FRB") of its intention to
operate this branch. On November 9, 1995, WJCB received approval
from the FRB to operate this branch. This branch is expected to
open in the first quarter of 1996.
<PAGE>
SOVEREIGN SELECTED FINANCIAL DATA
The following table sets forth certain historical
consolidated summary financial data for Sovereign. This data is
derived from, and should be read in conjunction with, among other
things, the consolidated financial statements of Sovereign,
including the notes thereto, incorporated by reference in this
Proxy Statement/Prospectus. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE" and "AVAILABLE INFORMATION." Interim
unaudited data for the nine months ended September 30, 1995 and
1994 reflects, in the opinion of management of Sovereign, all
adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation of such data. Results for the
nine months ended September 30, 1995 are not necessarily
indicative of results which may be expected for any other interim
period or for the year as a whole.
<PAGE>
SOVEREIGN SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
At or for
the Nine Months
Ended September 30, At or for the Year Ended December 31,
------------------------ ------------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
(Dollars in thousands, except per share data and ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet
Data
Total assets . . . . . . . . . . . $7,854,057 $6,147,289 $6,564,082 $4,877,166 $3,699,084 $2,274,702 $1,871,053
Loans. . . . . . . . . . . . . . . 4,621,351 4,131,416 4,350,898 2,898,014 2,337,382 1,437,247 1,329,177
Allowance for possible loan
losses . . . . . . . . . . . . . 34,480 39,100 36,289 33,099 26,562 13,198 8,823
Mortgage-backed securities . . . . 2,575,148 1,468,954 1,653,042 1,468,403 847,085 582,049 330,281
Investment securities. . . . . . . 269,931 252,376 250,926 220,901 154,271 62,012 79,219
Deposits . . . . . . . . . . . . . 4,987,862 4,086,866 4,027,119 3,183,107 2,961,058 1,815,679 1,396,748
Borrowings . . . . . . . . . . . . 2,383,400 1,690,433 2,162,587 1,367,100 427,591 285,059 339,056
Shareholders' equity . . . . . . . 415,006 293,567 303,900 259,121 220,419 137,259 106,458
Summary Statement
of Operations
Total interest income. . . . . . . $356,456 $251,774 $354,141 $282,790 $199,431 $182,015 $176,870
Total interest expense . . . . . . 228,668 137,860 198,741 153,318 118,585 125,326 130,736
-------- -------- ---------- ---------- ---------- ---------- ----------
Net interest income. . . . . . . . 127,788 113,914 155,400 129,472 80,846 56,689 46,134
Provision for possible loan
losses . . . . . . . . . . . . . 750 3,500 4,100 8,650 10,080 6,796 8,732
-------- -------- ---------- ---------- ---------- ---------- ----------
Net interest income after
provision for possible loan
losses . . . . . . . . . . . . . 127,038 110,414 151,300 120,822 70,766 49,893 37,402
-------- -------- ---------- ---------- ---------- ---------- ----------
Other income . . . . . . . . . . . 19,055 10,165 14,554 15,167 10,965 5,083 4,472
Other expenses . . . . . . . . . . 84,168 64,245 90,989 77,377 47,036 33,460 29,711
-------- -------- ---------- ---------- ---------- ---------- ----------
Income before income taxes and
cumulative effect of change in
accounting principle . . . . . . 61,925 56,334 74,865 58,612 34,695 21,516 12,163
Income tax provision . . . . . . . 21,214 21,503 28,467 22,998 15,057 9,534 5,458
-------- -------- ---------- ---------- ---------- ---------- ----------
Income before cumulative effect of
change in accounting principle . 40,711 34,831 46,398 35,614 19,638 11,982 6,705
Cumulative effect of change in
accounting principle . . . . . . --- --- --- 4,800 --- --- ---
-------- -------- ---------- ---------- ---------- ---------- ----------
Net income . . . . . . . . . . . . $ 40,711 $ 34,831 $ 46,398 $ 40,414 $ 19,638 $ 11,982 $ 6,705
======== ======== ========== ========== ========== ========== ==========
Net income applicable to
common stock . . . . . . . . . . $ 37,585 $ 34,831 $ 46,398 $ 40,414 $ 19,638 $ 11,982 $ 6,705
======== ======== ========== ========== ========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
At or for
the Nine Months
Ended September 30, At or for the Year Ended December 31,
------------------------ ------------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
(Dollars in thousands, except per share data and ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
Share Data (1)
Common shares outstanding at end of
period (in thousands). . . . . . 45,839 45,290 45,567 41,357 40,682 23,898 19,906
Preferred shares outstanding at end
of period (in thousands) . . . . 2,000 --- --- --- --- --- ---
Earnings per share(2):
Before cumulative effect of
change in accounting
principle. . . . . . . . . . . $ .73 $ .68 $ .90 $ .70 $ .51 $ .37 $ .22
After cumulative effect of
change in accounting
principle. . . . . . . . . . . .73 .68 .90 .80 .51 .37 .22
Book value per share at end of
period . . . . . . . . . . . . . 7.14 5.88 6.05 5.24 4.53 3.73 3.57
Common share price at end of
period . . . . . . . . . . . . . 10-1/8 9-1/16 7 10-11/16 6-1/16 3-3/16 1-7/16
Dividends per common share . . . . .063 .085 .106 .099 .082 .058 .042
Dividend payout ratio. . . . . . . 8.63% 12.50% 11.78% 14.14% 16.08% 15.68% 19.09%
Performance Ratios(3)
Return on average equity . . . . . 14.88% 16.75% 16.47% 14.77%(4) 13.51% 10.40% 6.35%
Return on average risk-based
assets(5). . . . . . . . . . . . 1.68 1.86 1.77 1.66 (4) 1.44 1.09 .64
Return on average total assets . . .77 .87 .84 .81 (4) .75 .61 .37
Interest rate spread(6). . . . . . 2.43 2.87 2.82 2.96 3.10 2.86 2.56
General and administrative
expenses to average total
assets . . . . . . . . . . . . . 1.42 1.52 1.53 1.68 1.72 1.65 1.64
Capital Ratios(7)
Shareholders' equity to total
assets . . . . . . . . . . . . . 5.28 4.78 4.63 5.31 5.96 6.03 5.69
Risk-based capital to risk-
adjusted assets. . . . . . . . . 14.50 12.64 12.65 16.20 11.98 11.79 10.94
Asset Quality
Nonperforming assets to total
assets . . . . . . . . . . . . . .56 .64 .62 .75 1.15 1.16 1.40
Residential real estate loans to
total loans. . . . . . . . . . . 98.38 97.91 98.16 98.29 96.59 93.39 92.04
Allowance for possible loan losses
to total loans . . . . . . . . . .74 .94 .83 1.12 1.11 .92 .66
Allowance for possible loan losses
to nonperforming loans . . . . . 93.88 137.49 114.11 136.97 116.72 85.18 53.23
________________
</TABLE>
(1) All per share data, including share price at end of period,
has been adjusted to reflect all stock dividends and stock
splits, including the 5% stock dividend declared by
Sovereign on December 20, 1995 which is payable on
February 15, 1996 to shareholders of record of Sovereign on
February 1, 1996.
(2) Based on average shares (including assumed conversion of
preferred shares) outstanding during the period.
(3) September 30 ratios are computed on an annualized basis.
(4) Results do not include a $4.8 million cumulative effect of a
change in accounting principle resulting from the adoption
of Statement of Financial Accounting Standards No. 109 in
1993.
(5) Net income divided by average risk-adjusted assets (total
assets adjusted for credit risk pursuant to OTS
regulations).
(6) Represents the difference between the yield on average total
assets and the cost of average total liabilities.
(7) OTS capital regulations do not apply to savings and loan
holding companies. These ratios are computed as if these
regulations did apply to Sovereign.
<PAGE>
WJB SELECTED FINANCIAL DATA
The following table sets forth certain selected
historical consolidated financial data for WJB. This data is
derived from, and should be read in conjunction with, among other
things, the consolidated financial statements of WJB, including
the related notes thereto, incorporated by reference in this
Proxy Statement/Prospectus. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE" and "AVAILABLE INFORMATION." Interim
unaudited data for the nine months ended September 30, 1995 and
1994 reflect, in the opinion of management of WJB, all
adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of such data. Results for the
nine months ended September 30, 1995 are not necessarily
indicative of results which may be expected for any other interim
period or for the year as a whole.
<PAGE>
WJB SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
At or for the Nine
Months Ended September 30, At or for the Year Ended December 31,
-------------------------- ----------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
(Dollars in thousands, except per share data and ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data
Total assets . . . . . . . . . . . . 95,310 83,336 92,482 70,859 65,856 67,848 31,942
Total loans net . . . . . . . . . . 73,126 62,965 67,670 55,642 45,538 49,842 22,132
Loans to depository institutions . -0- -0- -0- -0- -0- -0- 4,850
Real estate mortgage loans . . . . 18,655 22,338 18,983 17,788 14,737 16,295 2,371
Commercial loans . . . . . . . . . 34,238 23,434 30,393 22,912 11,677 16,969 7,404
Consumer loans . . . . . . . . . . 17,660 15,547 16,512 11,493 18,427 16,578 7,507
Loans available for sale . . . . . 2,573 1,646 1,782 3,449 697 -0- -0-
Federal funds sold and interest-
bearing deposits in other banks. . 1,275 2,500 300 1,525 3,325 6,800 3,050
Investment securities . . . . . . . 15,027 12,253 18,197 10,495 13,220 8,873 4,198
Deposits . . . . . . . . . . . . . . 86,627 75,802 84,737 63,051 59,470 61,967 26,749
Stockholders' equity . . . . . . . . 8,090 7,267 7,420 6,476 5,965 4,625 5,079
Summary Statement of
Operations
Interest income. . . . . . . . . . . 5,992 4,368 6,116 5,137 5,434 5,249 1,241
Interest expense . . . . . . . . . . 2,666 1,530 2,233 1,849 2,698 3,241 600
Net interest income before provision
for loan losses . . . . . . . . . 3,326 2,838 3,883 3,288 2,736 2,008 641
Provision for loan losses. . . . . . 284 92 128 106 77 142 563
Net interest income after provision
for loan losses . . . . . . . . . 3,042 2,746 3,755 3,182 2,659 1,866 78
Other fees and service charges . . . 160 142 194 148 94 84 8
Gain on sale of mortgage loans . . . 444 342 461 272 -0- -0- -0-
Gain on sale of services . . . . . . 223 -0- -0- -0- -0- -0- -0-
Miscellaneous income . . . . . . . . 124 33 48 23 16 16 3
Other expenses . . . . . . . . . . . 3,323 2,817 3,858 3,114 2,523 43 2,182
Gain on sale of securities . . . . . -0- -0- -0- -0- 7 23 -0-
Income (loss) before income taxes. . 670 446 600 511 253 (454) (2,093)
Income taxes . . . . . . . . . . . . -0- -0- -0- -0- -0- -0- -0-
Net income (loss) . . . . . . . . . 670 446 600 511 253 (454) (2,093)
Share Data
Earnings (loss) per common share . . .34 .23 .31 .27 .14 (.28) (1.50)
Dividends per common share . . . . . -0- -0- -0- -0- -0- -0- -0-
Performance Ratios
Return on average assets . . . . . . .95 .76 .74 .76 .38 (.80) (14.00)
Return on average equity . . . . . . 12.29 9.01 8.57 8.25 4.79 (9.80) (39.54)
Average equity to average assets . . 7.70 8.44 8.65 9.17 7.90 8.12 35.38
Average interest rate spread during
the period(1) . . . . . . . . . . 3.77 4.31 4.39 4.57 3.65 2.91 1.92
Net yield on average interest-earning
assets . . . . . . . . . . . . . . 8.58 7.70 7.97 8.08 8.56 9.70 9.19
Dividend payout ratio . . . . . . . -0- -0- -0- -0- -0- -0- -0-
Ratio of non-performing loans (ninety
days or more delinquent to total
net loans) . . . . . . . . . . . . .000 .008 .011 .005 .003 .002 .002
Average interest-earning assets to
average interest-bearing
liabilities. . . . . . . . . . . . 1.23 1.25 1.23 1.21 1.15 1.13 1.64
____________________
</TABLE>
(1) Represents the average yield earned on interest-earning
assets less the average cost of interest-bearing
liabilities.
<PAGE>
THE MEETING
Matters to be Considered at the Meeting
At the Special Meeting, the stockholders of WJB will
consider and vote upon the approval and adoption of the Merger
Agreement. In addition to the Merger Agreement, stockholders of
WJB are being asked to approve a proposal to adjourn the Special
Meeting, if necessary, to permit further solicitation of proxies
in the event there are not sufficient votes at the time of the
Special Meeting to constitute a quorum or approve the Merger
Agreement (the "Adjournment Proposal"). Stockholders will also
consider and vote upon such other matters, if any, as may be
properly brought before the Special Meeting.
The Board of Directors of WJB has unanimously approved
the Merger Agreement and the Adjournment Proposal, and believes
that the Merger is fair to, and in the best interests of, WJB's
stockholders. Accordingly, the Board of Directors of WJB
unanimously recommends a vote "FOR" approval and adoption of the
Merger Agreement and "FOR" approval of the Adjournment Proposal.
For a discussion of the background of the Merger and the factors
considered by the Board of Directors of WJB in reaching its
decision to approve the Merger, see "THE MERGER -- Background and
Reasons for the Merger; Recommendation of the WJB Board of
Directors."
Record Date; Stock Entitled to Vote
The Record Date for the Special Meeting is
January 2, 1996 (the "Record Date"). Only stockholders of record
of WJB at the close of business on the Record Date will be
entitled to receive notice of the Special Meeting or any
adjournment thereof, and only stockholders of record of WJB
Common Stock at that time will be entitled to vote at the Special
Meeting. At the Record Date, WJB had issued and outstanding
1,958,196 shares of WJB Common Stock, which were owned by
approximately 326 stockholders of record.
Votes Required; Quorum
Approval of the Merger Agreement and the Adjournment
Proposal requires the affirmative vote of a majority of votes
cast by the holders of the outstanding shares of WJB Common Stock
entitled to be voted thereon, provided a quorum (as defined
below) is present. To conduct the Special Meeting, a quorum (a
majority of the shares of WJB Common Stock outstanding) must be
present in person or by proxy. Each share of WJB Common Stock is
entitled to one vote. Abstentions and broker nonvotes will be
voted for the purpose of establishing a quorum at the Special
Meeting, but will not constitute or be counted as votes cast for
purposes of the Special Meeting.
The directors and executive officers of WJB have
executed a letter agreement pursuant to which they agreed to be
present (in person or by proxy) at the Special Meeting and to
vote all shares of WJB Common Stock which they own for approval
and adoption of the Merger Agreement. A copy of the letter
agreement executed by the directors and executive officers of WJB
is included as Exhibit 1 to the Merger Agreement attached hereto
as Annex A. In November of 1995, Mr. Michael McGrath, Sr. sold
50,400 shares of his WJB Common Stock and on December 13, 1995,
Mr. McGrath, Sr. resigned from the Board of Directors of WJB. In
addition, as a condition to being seated on WJB's Board of
Directors, in December of 1995, Mr. Thomas Giblin purchased
200 shares of WJB Common Stock. At the Record Date, directors
and executive officers of WJB beneficially owned (excluding
shares which may be purchased upon the exercise of any option or
warrant) approximately 161,400 shares of WJB Common Stock, or
approximately 8.24% of the outstanding shares of WJB Common Stock
which are entitled to be voted at the Special Meeting.
Under Pennsylvania law, Sovereign's Articles of
Incorporation, and applicable Nasdaq/NMS rules, Sovereign's
shareholders are not required to approve the Merger Agreement or
the issuance of Sovereign Common Stock in connection with the
Merger.
Voting of Proxies
Shares represented by all properly executed proxies
received prior to the Special Meeting and not revoked prior to
exercise will be voted in the manner specified by the holders
thereof. Proxies which do not contain voting instructions will
be voted in favor of approval and adoption of the Merger
Agreement and, if applicable, the Adjournment Proposal.
It is not expected that any matter, other than those
referred to herein, will be brought before the Special Meeting.
If, however, other matters are properly presented, the persons
named as proxies will vote in accordance with their judgment with
respect to such matters; provided, however, that such
discretionary authority will only be exercised to the extent
permissible under applicable federal securities laws.
Revocability of Proxies
The grant of a proxy on the enclosed form does not
preclude a stockholder from voting in person. A stockholder may
revoke a proxy at any time prior to its exercise by filing with
the Corporate Secretary of WJB a duly executed revocation or a
proxy bearing a later date, or by voting in person by ballot at
the Special Meeting. Attendance, without voting in person at the
Special Meeting, will not of itself constitute revocation of a
proxy. All written notices of revocation and other
communications with respect to the revocation of WJB stockholder
proxies should be addressed to: West Jersey Bancshares, Inc.,
165 Passaic Avenue, Fairfield, New Jersey 07004, Attention:
Geraldine L. Marchitto, Corporate Secretary. If a stockholder's
shares are not held in the stockholder's name, such stockholder
will need additional documentation from the record holder in
order to vote personally at the Special Meeting.
Appraisal Rights
Record holders of WJB Common Stock will not be entitled
to dissenters' or appraisal rights under applicable law in
connection with the Merger.
Solicitation of Proxies
The solicitation of proxies may be by directors,
officers and employees of WJB and WJCB. In addition to
solicitations by mail, the directors, officers and employees of
WJB and WJCB may solicit proxies from WJB stockholders by
telephone, telefacsimile, telegram or in person without
additional compensation payable with respect thereto.
Arrangements will also be made with brokerage houses and other
custodians, nominees and fiduciaries for the forwarding of
solicitation material to the beneficial owners of stock held of
record by such persons, and Sovereign will reimburse such
custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses incurred in connection therewith.
Sovereign will bear the cost of soliciting proxies from WJB
stockholders, except that Sovereign and WJB will share equally
the cost of printing and mailing this Proxy Statement/Prospectus;
provided, however, that if Sovereign terminates the Merger
Agreement due to a material breach by WJB of its obligations
under the Merger Agreement and such breach is not caused by a
breach by Sovereign of its obligations under the Merger
Agreement, WJB will reimburse Sovereign for, among other things,
all amounts Sovereign paid in connection with soliciting proxies
from WJB stockholders.
STOCKHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH
THEIR PROXY CARDS. AS DESCRIBED BELOW UNDER THE CAPTION "THE
MERGER -- EXCHANGE OF WJB STOCK CERTIFICATES, OPTIONS AND
WARRANTS," EACH WJB STOCKHOLDER WILL BE PROVIDED WITH MATERIALS
FOR EXCHANGING SHARES OF WJB COMMON STOCK AS PROMPTLY AS
PRACTICABLE AFTER THE EFFECTIVE DATE.
<PAGE>
THE MERGER
The following information relating to the Merger is
qualified in its entirety by reference to the other information
contained elsewhere in this Proxy Statement/Prospectus, including
the Annexes hereto, and the documents incorporated herein by
reference. A copy of the Merger Agreement is set forth in
Annex A to this Proxy Statement/Prospectus and is incorporated
herein by reference, and reference is made thereto for a complete
description of the terms of the Merger. Stockholders are urged
to read the Merger Agreement and each of the other Annexes hereto
carefully.
General
Subject to the terms and conditions of the Merger
Agreement, on the Effective Date, WJB will merge with and into
Sovereign. Upon consummation of the Merger, each outstanding
share of WJB Common Stock will be converted into the right to
receive 0.8335 of a share of Sovereign Common Stock, subject to
possible adjustment under certain circumstances, with cash being
paid in lieu of any fractional share interest (the "Exchange
Ratio"). The Exchange Ratio has been adjusted to reflect a 5%
stock dividend declared by Sovereign on December 20, 1995 which
is payable on February 15, 1996 to shareholders of record of
Sovereign on February 1, 1996 (the "Sovereign Stock Dividend").
See "DESCRIPTION OF SOVEREIGN CAPITAL SECURITIES" and "COMPARISON
OF SHAREHOLDER RIGHTS."
Background of and Reasons for the Merger; Recommendation of the
WJB Board of Directors
Background of the Merger
As part of its review of strategic alternatives
designed to maximize stockholder value, the Board of Directors of
WJB has considered from time to time the possible affiliation of
WJB with other financial institutions.
In July 1994, the WJB Board of Directors formally
retained Ryan, Beck & Co. ("Ryan, Beck") to act as its financial
advisor in connection with WJB's evaluation of strategic
alternatives to, among other things, assist in exploring ways to
enhance stockholder value, and identifying potential strategic
partners. Ryan, Beck was authorized to contact a limited number
of qualified prospects to determine their interest principally in
a merger-of-equals business combination. WJB and Ryan, Beck
contacted certain potential candidates and, after execution of
confidentiality agreements, delivered due diligence materials.
During the course of the next twelve months, these efforts
resulted in numerous discussions with three financial
institutions during the course of the year. None of the
discussions resulted in any definitive offer.
In June 1995, the WJB Board of Directors reevaluated
WJB's strategic alternatives. In particular, three basic
strategic options were considered: (i) continuing the policy of
independence with growth generated through internal operations;
(ii) a merger-of-equals type transaction; and (iii) a merger with
a larger financial institution. While the WJB Board and its
advisors continued to explore merger-of-equals opportunities,
business combinations with larger financial institutions were
also pursued. Beginning in June 1995 and continuing through
September 1995, the WJB Board of Directors and its Special
Committee, in consultation with its advisors, considered various
strategic alternatives and through its representatives engaged in
preliminary and informal exploratory discussions with various
financial institutions, including Sovereign. As part of this
process, WJB entered into discussions with various potential
acquirors which resulted either in no offer being received or
resulted in certain informal proposals on terms less favorable
than the terms offered by Sovereign.
On August 16, 1995, Messrs. Peter G. Stewart and
John A. Van Voorhis of WJB and Ryan, Beck met with Mr. Jay Sidhu,
Chief Executive Officer of Sovereign, to informally discuss the
strategic direction of WJB and Sovereign as well as a possible
strategic alliance. On September 6, 1995, Sovereign informally
expressed an interest in acquiring WJB. On September 11, 1995,
Messrs. Stewart and Van Voorhis, along with Mr. John Sullivan, a
member of the Board of WJB, met with Messrs. Sidhu, and Richard
Mohn, Chairman of the Board of Sovereign, to discuss a possible
acquisition. Sovereign presented WJB with the parameters of a
transaction which would likely be acceptable to the Board of
Directors of Sovereign. Ryan, Beck participated in this meeting.
At these meetings there was no agreement with respect to any
material terms, including structure and price.
On September 15, 1995, the Board of Directors of WJB
met to discuss various strategic alternatives, including the
proposal of Sovereign. Ryan, Beck presented the Board of
Directors of WJB with an analysis of the various strategic
alternatives. In consultation with Ryan, Beck and after careful
consideration of the financial condition of Sovereign and any
other potential strategic partners, the strategic benefits of an
alliance between Sovereign and WJB, the pro forma financial
performance of a combined entity, the structure and terms of the
proposed transaction and the other factors discussed below, the
Board of Directors of WJB authorized the special committee of
disinterested members of the Board which had been formed earlier
in the year (the "Special Committee") to negotiate with
Sovereign. The WJB Board, after consultation with Ryan, Beck,
determined to continue discussions with Sovereign and to continue
considering proposals of other parties which may be made to WJB
in the future.
On September 23, 1995, Messrs. Stewart, as Chairman of
the Special Committee, and Van Voorhis met with the Special
Committee's special counsel and Ryan, Beck to analyze the terms
of the proposed Sovereign proposal as reflected in documents
delivered by Sovereign on September 20, 1995. An analysis of the
proposed transaction was prepared by special counsel and
delivered to each member of the Board of Directors of WJB.
During the period from September 23, 1995 through
September 29, 1995, members of the Special Committee and
management of WJB and Ryan, Beck continued a due diligence review
and, with WJB's special counsel and Ryan Beck, continued
negotiating the terms of the Merger Agreement and the related
documentation (including the Stock Option Agreement).
On September 27, 1995, the Board of Directors of WJB
met to discuss the Sovereign transaction with its special counsel
and Ryan, Beck. A description of the proposed transaction and
the status of the negotiations with Sovereign were presented by
Mr. Stewart and special counsel. Ryan, Beck presented an
analysis of the proposed transaction and confirmed its
preliminary opinion of the fairness of the transaction from a
financial point of view to the stockholders of WJB. The Board
reconfirmed its grant of authority to the Special Committee to
negotiate with Sovereign.
On September 29, 1995, the Board of Directors of WJB
and its Special Committee convened to discuss the definitive
terms of the proposed transaction negotiated by its special
counsel and Ryan, Beck. Special counsel summarized the terms of
the transaction. Ryan, Beck distributed its analyses and
delivered orally its opinion that the proposed transaction was
fair from a financial point of view to the stockholders of WJB.
The Board of WJB also discussed the potential financial and
strategic benefits of the proposed transaction, the results of
the due diligence review, the anticipated tax and accounting
treatment of the proposed transaction and the terms of the Merger
Agreement and transactions contemplated thereby. The Special
Committee, after due consideration of all of the information
presented and consultation with its advisors, voted unanimously
to approve the Merger Agreement and transactions contemplated
thereby and made a recommendation to the Board of Directors. The
Board of Directors, after due consideration and consultation with
its advisors, voted unanimously to accept the recommendation of
the Special Committee and approved the Merger Agreement (and
related documentation) and the transactions contemplated thereby
as being in the best interests of WJB and its stockholders. The
Merger Agreement was executed by the parties that evening.
Reasons for the Merger
Sovereign's Reasons for the Merger. Sovereign's acquisition
strategy consists of identifying financial institutions with
business philosophies that are similar to Sovereign, which
operate in strong markets that are geographically compatible with
Sovereign, are financially sound and can be acquired at
reasonable cost. Acquisitions are also evaluated in terms of
asset quality, interest rate risk, potential operating
efficiencies and management capabilities.
In determining the terms of its offer for WJB and
whether to enter into the Merger Agreement, Sovereign's Board of
Directors considered a number of factors, including the
following: (i) the financial condition, operating results and
future prospects of Sovereign and WJB, (ii) historical pro forma
financial information on the Merger, including, among other
things, the pro forma book value, earnings and dividends per
share to Sovereign shareholders, (iii) a comparison of the price
being paid in this Merger to other comparable financial
institution mergers, based, among other things, on multiples of
book value and earnings, and (iv) the historical trading prices
for WJB Common Stock and Sovereign Common Stock.
In the view of Sovereign's Board of Directors, the
Merger is a strategic acquisition for Sovereign that provides a
natural extension of its existing New Jersey community bank
franchise and will strengthen its community bank branch system in
northern New Jersey. Sovereign believes that its acquisition of
WJB will provide expertise and an established customer base for
the origination of commercial real estate loans. Sovereign's
Board of Directors further believes that this expertise and
customer base, combined with Sovereign's existing expertise and
customer base, will enable Sovereign to significantly increase
its lending within the commercial real estate market.
Sovereign's Board of Directors believes this strategy should
result in improved returns for Sovereign's shareholders over
time. The Merger also creates approximately $8.1 million of
shareholders' equity for Sovereign.
In approving the transaction, the Sovereign Board did
not specifically identify any one factor or group of factors as
being more significant than any other factor in the decision
making process, although individual directors may have given one
or more factors more weight than other factors.
The emphasis of the Sovereign Board's discussion in
considering the transaction, however, was on the financial
aspects of the transaction, particularly (i) the strategic fit
and enhanced franchise value discussed above, (ii) the relative
strength of WJB's balance sheet and its growth in earnings over
the five year period ended December 31, 1994 (see "WJB SELECTED
FINANCIAL DATA"), and (iii) the relative strength of the
historical combined Sovereign and WJB consolidated pro forma
balance sheet and capital ratios.
WJB's Reasons for the Merger. In determining to approve the
Merger Agreement, the WJB Board considered, among others, the
following factors:
(i) Advice of Financial Advisor and Fairness Opinion.
The WJB Board considered the advice of its financial
advisor, Ryan, Beck, and reviewed the detailed
financial analyses, pro forma results and other
information presented by Ryan, Beck. The WJB Board
considered the opinion of Ryan, Beck (including the
assumptions and financial information and
projections relied upon by them in arriving at such
opinion) that, as of January 16, 1996 and based upon
the matters set forth in its written opinion as of
that date, the terms of the transaction were fair
from a financial point of view to the holders of WJB
Common Stock. For a discussion of the opinion of
Ryan, Beck, including a summary of the procedures
followed, the matters considered, the scope of the
review undertaken and the assumptions made with
respect thereto, see "THE MERGER -- Opinion of
Financial Advisor."
(ii) Exchange Ratio. The WJB Board considered the
Exchange Ratio in the Merger from a number of
valuation perspectives, as presented by Ryan, Beck
(including a comparable company analysis, selected
comparable nationwide merger transactions and a
discounted cash flow analysis). See "THE MERGER --
Opinion of Financial Advisor."
(iii) The Financial and Other Terms of the Merger
Agreement. The WJB Board considered the terms of
the Merger Agreement and the transactions
contemplated thereby, including the Stock Option
Agreement. The WJB Board took into account the
historical trading ranges for Sovereign Common Stock
and WJB Common Stock and the Exchange Ratio. The
WJB Board also considered that under the Merger
Agreement it would have the right to terminate the
Merger Agreement in the event of a specified
significant decline in the price of Sovereign Common
Stock prior to the consummation of the Merger
Agreement. See "THE MERGER -- Termination; Effect
of Termination."
(iv) Certain Financial and Other Information Concerning
Sovereign and WJB. The WJB Board analyzed
information with respect to, among other things, the
historical financial results of Sovereign and WJB
and the projected financial results and reviewed
information with respect to the business,
operations, financial condition and future prospects
of Sovereign and WJB, including information with
respect to their respective recent and historical
stock and earnings performance. The WJB Board
considered detailed financial analyses, pro forma
and other information with respect to Sovereign and
WJB.
(v) Due Diligence Review. The WJB Board considered the
results of the due diligence investigations
conducted by WJB's management, including, among
other things, assessments of Sovereign's credit
policies, asset quality, adequacy of loan loss
reserves and interest rate risk.
(vi) The Tax and Accounting Treatment of the Transaction.
The WJB Board considered that the Merger is expected
to be generally tax-free to WJB stockholders for
federal income tax purposes and to be accounted for
under the pooling of interests method of accounting
for business combinations. See "THE MERGER --
Certain Federal Income Tax Consequences" and
"-- Accounting Treatment."
(vii) Economic and Competitive Environment. The WJB Board
considered the current and prospective economic,
regulatory and competitive environment facing
financial institutions, including, among other
things, the consolidations currently underway in the
banking industry and the need for financial
institutions to diversify revenue sources.
(viii) Impact on WJB Constituencies. The WJB Board
considered the general impact the Merger would have
on the various constituencies served by WJB,
including its customers, employees and others. The
WJB Board took into account that the combined entity
would be able to offer a more extensive range of
products and banking services to WJB's customers.
(ix) Increased Resources and Market Presence. The WJB
Board considered that the combined entity resulting
from the Merger would have over $7.5 billion in
assets. The WJB Board recognized that such an
institution would be likely to possess the financial
resources to compete more effectively in the
changing marketplace.
(x) Regulatory Approvals. The WJB Board considered the
nature of, and likelihood of obtaining, the
regulatory approvals that would be required with
respect to the Merger. See "THE MERGER --
Regulatory Approvals."
(xi) Alternatives to the Merger Agreement. The WJB Board
considered the effect on stockholder value of WJB
continuing as a stand-alone entity or combining with
other potential merger partners (including the
potential merger-of-equals and other merger partners
with whom WJB had engaged in exploratory
discussions) and the risks associated with such
alternative strategies, compared to the effect of
its combining with Sovereign pursuant to the
proposed Merger Agreement and determined that the
Merger with Sovereign presented the best opportunity
for maximizing stockholder value and achieving WJB's
other strategic alternatives.
(xii) Interests of Management. The WJB Board considered
the interests of certain members of WJB management
and the WJB Board in the Merger. See "INTERESTS OF
CERTAIN PERSONS IN THE MERGER".
(xiii) Lack of Liquidity. The WJB considered the relative
lack of liquidity of WJB Common Stock.
The WJB Board of Directors also took into account that
WJB stockholders would have the opportunity to participate in the
future growth of Sovereign by obtaining Sovereign Common Stock in
the Merger. The WJB Board noted that WJB, as part of an
interstate savings institution holding company of greater size
and resources, should be able to provide its customers with a
greater range of services and should become a stronger competitor
in its existing markets. The Board of Directors of WJB believes
that the Merger will result in a stronger and more effective
competitor in WJB's markets, better able to compete effectively
in the rapidly changing marketplace for banking and financial
services and to take advantage of opportunities that might not be
available to WJB on its own. WJB's Board of Directors believes
that the Merger will provide WJB's customers with a broader range
of products and services, as well as greater convenience, and
will provide its stockholders with a more liquid investment.
The foregoing discussion of the information and factors
considered by the WJB Board is not intended to be exhaustive. In
reaching its determination to approve and recommend the Merger,
the WJB Board did not assign any relative or specific weights to
the foregoing factors, and individual directors may have given
differing weights to different factors.
Recommendation of the WJB Board of Directors.
THE WJB BOARD UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND BELIEVES THE MERGER IS FAIR TO, AND IS IN THE BEST INTERESTS
OF, WJB STOCKHOLDERS. ACCORDINGLY THE WJB BOARD UNANIMOUSLY
RECOMMENDS THAT WJB STOCKHOLDERS VOTE "FOR" APPROVAL OF THE
MERGER AGREEMENT.
Opinion of Financial Advisor
On July 21, 1994 WJB retained Ryan, Beck to advise WJB
on various financial matters relating to the enhancement of
stockholder value with a focus on acquisition strategy and a
merger-of-equals business combination. Ryan, Beck is regularly
engaged in the valuation of banks, bank holding companies,
savings and loan associations and savings and loan holding
companies in connection with mergers, acquisitions and other
securities-related transactions. Ryan, Beck has knowledge of,
and experience with, the New Jersey banking market and banking
organizations operating in that market, and was selected by WJB
because of its knowledge of, experience with, and reputation in
the financial services industry.
In response to changes in the competitive banking
environment, in June 1995 the Board of WJB expanded the role of
Ryan, Beck to include the selective exploration of a possible
merger with a larger financial institution while continuing to
pursue merger-of-equals opportunities.
In its capacity as WJB's financial advisor, Ryan,
Beck participated in the negotiations with respect to the pricing
and other terms and conditions of the Merger, but the decision as
to whether to accept the Sovereign proposal and the final pricing
of the Merger was ultimately made by the Board of Directors of
WJB. Ryan, Beck rendered its oral opinion to the WJB Board on
September 29, 1995 and rendered its formal written opinion (the
"Opinion") on January 16, 1996, that the Exchange Ratio is "fair"
to WJB and its stockholders from a financial point of view. No
limitations were imposed by the WJB Board upon Ryan, Beck with
respect to the investigations made or procedures followed by it
in arriving at its Opinion.
The full text of the Opinion of Ryan, Beck dated as
of January 16, 1996, which sets forth assumptions made and
matters considered, is attached as Annex B to this Proxy
Statement/Prospectus. Stockholders of WJB are urged to read this
Opinion in its entirety. Ryan, Beck's Opinion is directed only
to the Exchange Ratio and does not constitute a recommendation to
any WJB stockholder as to how such stockholder should vote at the
Special Meeting. The summary of the Opinion of Ryan, Beck set
forth in this Proxy Statement/Prospectus is qualified in its
entirety by reference to the full text of such Opinion. Ryan,
Beck's oral opinion as of September 29, 1995 was to the same
effect as such Opinion.
In connection with its analysis, Ryan, Beck:
(i) reviewed the Merger Agreement and related documents;
(ii) reviewed this Proxy Statement/Prospectus; (iii) reviewed
Sovereign's Annual Report to Shareholders and Annual Report on
Form 10-K for the years ended December 31, 1992 through 1994, and
Sovereign's Quarterly Reports on Form 10-Q for the periods ended
March 31, 1995, June 30, 1995 and September 30, 1995;
(iv) reviewed WJB's Annual Reports to Stockholders for the years
ended December 31, 1989 through 1994 and WJB's Quarterly Reports
on Form 10-Q for the periods ended March 31, 1995, June 30, 1995
and September 30, 1995; (v) reviewed certain operating and
financial information provided to Ryan, Beck by the management of
WJB relating to its business and prospects; (vi) reviewed the
historical stock prices and trading volume of Sovereign's Common
Stock; (vii) reviewed the historical stock prices and trading
volume of WJB's Common Stock; (viii) as more particularly
described below, reviewed the terms of recent acquisitions of
commercial banking institutions which Ryan, Beck deemed generally
comparable to WJB; (ix) as more particularly described below,
reviewed the publicly-available financial data of commercial
banking organizations which Ryan, Beck deemed generally
comparable to WJB; (x) as more particularly described below,
reviewed the publicly-available financial data of thrift
institutions which Ryan, Beck deemed generally comparable to
Sovereign; and (xi) conducted such other studies, analyses,
inquiries and examinations as Ryan, Beck deemed appropriate.
Ryan, Beck also reviewed WJB's budget for the year ending
December 31, 1995, and certain projections provided by WJB for
the fiscal years ending December 31, 1996 and December 31, 1997
and met with certain members of WJB's senior management to
discuss WJB's past and current business operations, financial
condition, strategic plan and future prospects. Ryan, Beck also
reviewed Sovereign's budget for the fiscal year ended
December 31, 1995, and certain projections provided by Sovereign
for the fiscal year ending December 31, 1996 and met with certain
members of Sovereign's senior management to discuss Sovereign's
past and current business operations, financial condition,
strategic plan and future prospects. Ryan, Beck, as part of its
review of the Merger, also analyzed Sovereign's ability to
consummate the Merger and considered the future prospects of WJB
in the event it remained independent.
The preparation of a fairness opinion on a transaction
such as the Merger involves various determinations as to the most
appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances and,
therefore, the Opinion is not readily susceptible to summary
description. In arriving at its Opinion, Ryan Beck performed a
variety of financial analyses. Ryan Beck believes that its
analyses must be considered as a whole and the consideration of
portions of such analyses and the factors considered therein,
without considering all factors and analyses, could create an
incomplete view of the analyses and the process underlying Ryan
Beck's Opinion. No one of the analyses was assigned a greater
significance than any other.
In connection with its review, Ryan, Beck relied
upon and assumed, without independent verification, the accuracy
and completeness of the financial and other information regarding
WJB and Sovereign provided to Ryan, Beck by WJB and Sovereign and
their representatives. Ryan, Beck is not an expert in the
evaluation of allowances for loan losses. Therefore, Ryan, Beck
has not assumed any responsibility for making an independent
evaluation of the adequacy of the allowances for loan losses as
set forth on Sovereign's and WJB's balance sheets at
September 30, 1995, and Ryan, Beck assumed such allowances were
adequate and complied fully with applicable law, regulatory
policy and sound banking practice as of the date of such
financial statements. Ryan, Beck has reviewed certain historical
financial data and financial and operating forecasts and
projections (and the assumptions and bases therefor) provided by
WJB and Sovereign. Ryan, Beck also relied upon the managements
of WJB and Sovereign as to the reasonableness and achievability
of the financial and operating forecasts and projections (and the
assumptions and bases therefor) provided to Ryan, Beck. In
certain instances, for the purposes of its analyses, Ryan, Beck
made adjustments to such financial and operating forecasts which
in Ryan, Beck's judgment were appropriate under the
circumstances. Ryan, Beck assumed that such forecasts and
projections reflected the best currently available estimates and
judgments of the respective managements. Ryan, Beck was not
retained to nor did it make any independent evaluation or
appraisal of the assets or liabilities of WJB or Sovereign nor
did Ryan, Beck review any loan files of WJB or Sovereign. Ryan,
Beck also assumed that the Merger in all respects is, and will
be, undertaken and consummated in compliance with all laws and
regulations that are applicable to Sovereign and WJB.
The projections furnished to Ryan, Beck were prepared
by the respective managements of WJB and Sovereign. WJB and
Sovereign do not publicly disclose internal management
projections of the type provided to Ryan, Beck in connection with
the review of the Merger. Such projections were not prepared
with a view towards public disclosure. The public disclosure of
such projections could be misleading since the projections were
based on numerous variables and assumptions which are inherently
uncertain, including, without limitation, factors related to
general economic and competitive conditions. Accordingly, actual
results could vary significantly from those set forth in such
projections.
In its analyses, Ryan, Beck made numerous assumptions
with respect to industry performance, business and economic
conditions, and other matters, many of which are beyond the
control of WJB or Sovereign. Any estimates contained in Ryan,
Beck's analyses are not necessarily indicative of future results
or values, which may be significantly more or less favorable than
such estimates. Estimates of values of companies do not purport
to be appraisals nor do they necessarily reflect the prices at
which companies or their securities may actually be sold.
The following is a brief summary of the analyses and
procedures performed by Ryan, Beck in the course of arriving at
its September 29, 1995 oral opinion, which analyses and
procedures were presented to WJB Board of Directors on that date.
Comparable Companies and Comparable Acquisition Analyses. Ryan,
Beck compared WJB's financial data as of June 30, 1995 with that
of a group of twelve selected commercial banking organizations
with total assets between $50 million and $155 million located in
New Jersey, New York, Pennsylvania and Maryland for which public
trading and pricing data was available. Ryan, Beck deemed this
group to be generally comparable to WJB. At or for the twelve
months ended June 30, 1995, WJB had tangible equity to assets of
7.63%, a total capital to risk adjusted assets ratio of 11.18%, a
0.85% return on average assets, a return on average equity of
10.20%, a dividend yield of 0.0%, a net interest margin of 4.89%,
a ratio of non-interest expense to average assets of 4.70%, a
ratio of non-performing loans to total loans of 0.05%, a ratio of
loan loss reserves to non-performing loans of 1,621.2% and a
ratio of non-performing assets to assets of 0.03%. These ratios
were compared to the median ratios of the twelve selected
commercial banking organizations, which were, as calculated,
tangible equity to assets of 9.15%, a total capital to risk
adjusted assets ratio of 13.9%, a 0.78% return on average assets,
a return on average equity of 8.34%, a dividend yield of 0.0%, a
net interest margin of 5.11%, a ratio of non-interest expense to
average assets of 4.02%, a ratio of non-performing loans to total
loans of 1.09%, a ratio of loan loss reserves to non-performing
loans of 96.13%, and a ratio of non-performing assets to assets
of 0.68%.
Ryan, Beck also compared WJB's common stock price of
$6.50 per share prior to the announcement of the merger
negotiations which represented 162.09% of stated book value and
16.7 times the latest twelve month earnings to the median trading
multiples of 126.00% of stated book value and 14.1 times latest
twelve months earnings for the peer group.
Ryan, Beck compared WJB's financial data as of June 30,
1995 with that of a group of 18 selected commercial banking
organizations being acquired in announced transactions since
January 1, 1995 and for which pricing data pertaining to the
transactions was publicly available. This group was comprised of
commercial banking organizations located in the Northeastern
portion of the United States each having total assets between
$50 million and $150 million. Ryan, Beck deemed this group to be
generally comparable to WJB. The median ratios of the
18 selected commercial banking organizations, as calculated,
represented a 9.59% tangible equity to assets ratio, a non-
performing assets to assets ratio of 1.22%, an annualized year-
to-date return on average assets of 0.99% and an annualized year-
to-date return on average equity of 9.84%.
Ryan, Beck also calculated certain ratios based on the
proposed transaction price for WJB's Common Stock of $8.40 per
share, or an aggregate of approximately $16.45 million for all of
the issued and outstanding shares of WJB. These ratios included
the proposed transaction price to WJB's stated book value of
209.48%, the proposed transaction price to WJB's tangible book
value of 209.48%, the proposed transaction price of 21.5 times
WJB's actual earnings for the twelve month period ended June 30,
1995, and the proposed transaction price's tangible book premium
as a percentage of core deposits of 9.6%. Ryan, Beck also
considered the proposed transaction price to WJB's projected
stated book value as of September 30, 1995 of 204.38% and the
proposed transaction price of 18.3 times WJB's projected earnings
for the twelve months ended December 31, 1996. The median ratios
for the group of 18 comparable acquisition transactions were
transaction price to stated book value of 174.48%, transaction
price to tangible book value of 179.69%, transaction price to
earnings of 18.61 times and transaction price's tangible book
premium as a percentage of core deposits of 10.68%.
Ryan, Beck also compared Sovereign's financial data as
of June 30, 1995 with that of a group of twelve selected thrift
institutions with assets between $5.0 billion and $15.0 billion
located throughout the United States for which public trading and
pricing data was available. Ryan, Beck deemed this group to be
generally comparable to Sovereign. At or for the twelve months
ended June 30, 1995, Sovereign had equity to assets of 5.66%, a
0.82% annualized return on average assets for the three months
ended June 30, 1995, a return on average equity for the twelve
months ended June 30, 1995 of 15.88%, a dividend yield of 0.82%,
a net interest margin of 2.71%, an efficiency ratio of 53.18%, a
ratio of non-performing assets to total assets of 0.53% and a
ratio of reserves to non-performing assets of 88.94%. These
ratios were compared to the median ratios of the twelve selected
thrift institutions, which were, as calculated, a 6.45% equity
assets ratio, a 0.92% annualized return on average assets for the
three months ended June 30, 1995, a 12.92% return on average
equity for the twelve months ended June 30, 1995, a dividend
yield of 2.04%, a net interest margin of 2.93%, an efficiency
ratio of 49.62%, a ratio of non-performing assets to total assets
of 0.87% and a ratio of reserves to non-performing assets of
75.01%. Ryan, Beck then compared the Sovereign stock price
multiples of 146.06% of stated book value, 235.75% of tangible
book value and 10.9 times earnings for the twelve months ended
June 30, 1995 with the median stock price multiples of the twelve
selected thrift institutions which were 143.76% of stated book
value, 143.76% of tangible book value and 10.8 times earnings for
the twelve months ended June 30, 1995.
No company or transaction used in the Comparable
Companies and Comparable Transactions section is identical to
WJB, Sovereign or the Merger. Accordingly, an analysis of the
results of the foregoing is not mathematical; rather it involves
complex considerations and judgments concerning differences in
financial and operating characteristics of the companies involved
and other factors that could affect the trading values of the
securities of the company or companies to which they are being
compared.
Impact Analysis: Ryan, Beck analyzed the Merger in
terms of its effect on WJB's latest twelve months earnings per
share, book value per share, tangible book value per share and
dividends per share, based on information provided by the
management of WJB at or for the twelve months ended June 30,
1995. Ryan, Beck analyzed the impact of the merger on certain
Sovereign values per WJB share based on the exchange ratio of
0.7938 shares of Sovereign Common Stock for each share of WJB
Common Stock using Sovereign's earnings per share, book value per
share and tangible book value per share at or for the twelve
months ended June 30, 1995 and Sovereign's Common Stock market
price on September 28, 1995. That analysis found that, based on
such exchange ratio, WJB's equivalent earnings per share would
have been approximately 102.1% greater than WJB's actual
earnings. WJB's equivalent book value would have been 42.6%
greater than WJB's book value at June 30, 1995 and WJB's
equivalent tangible book value would have been approximately
11.7% less than WJB's tangible book value at June 30, 1995.
Additionally, WJB's stockholders would have received an
equivalent annual dividend of $0.07 per share versus no dividend
as a stockholder of WJB. The market price per equivalent WJB
common share would have increased 48.9% from the market price
which existed prior to the announcement of merger negotiations.
The market price per equivalent WJB common share would have
increased 76.7% from the WJB six month average trading price.
Discounted Cash Flow Analysis: Ryan, Beck estimated
the future earnings per share that WJB could produce over a five-
year period ending December 31, 2000 based upon the projections
of WJB for the fiscal years 1996 and 1997 and then assuming an
annual growth rate of 10% thereafter for fiscal 1998, 1999 and
2000. As WJB has historically not paid a dividend, no dividend
stream was assumed. Ryan, Beck then calculated the present value
of WJB's estimated market value and acquisition value. Ryan,
Beck estimated the terminal value of WJB's Common Stock at the
end of the five-year period by applying an earnings per share
multiple range of 10.0 to 14.0 times WJB's terminal year earnings
per share to estimate a trading price per share and a multiple
range of 16.0 to 18.0 times WJB's terminal year earnings per
share to estimate an acquisition price per share. Using a
discounted cash flow analysis, the terminal values were then
discounted to present values using discount rates ranging from
10% to 15%, reflecting different assumptions regarding the
required rates of return of holders and prospective buyers of
WJB's Common Stock. As a result of varying these assumptions,
36 values were calculated with a range from a low of $4.08 per
share to a high of $8.38 per share. The low value of $4.08 was
calculated assuming an earnings per share trading multiple of
10.0 times and a 15% discount rate. The high value of $8.38 was
calculated assuming an earnings per share acquisition multiple of
18.0 times and a 10% discount rate. None of the 36 calculated
values were greater than the $8.40 per share proposed purchase
price.
In connection with its written Opinion dated as of
January 16, 1996, Ryan, Beck confirmed the appropriateness of its
reliance on the analyses used to render its September 29, 1995
oral opinion by performing procedures to update certain of such
analyses and by reviewing the assumptions and conclusions
contained in the Opinion.
Ryan, Beck's written Opinion dated as of January 16,
1996 was based solely upon the information available to it and
the economic, market and other circumstances as they existed as
of the date of such Opinion. Events occurring after such date
could materially affect the assumptions and conclusions contained
in such Opinion. Ryan, Beck has not undertaken to reaffirm or
revise its Opinion or otherwise comment upon any events occurring
after the date thereof.
The summary set forth above does not purport to be a
complete description, but is a brief summary of the material
analyses and procedures performed by Ryan, Beck in the course of
arriving at its Opinion.
With regard to Ryan, Beck's services in connection
with the financial advisory agreement and the Merger Agreement,
WJB has paid to Ryan, Beck a $25,000 retainer and has agreed to
pay Ryan, Beck an advisory fee equal to 1.5% of the aggregate
dollar value of the consideration received by WJB's stockholders
in the Merger. Additionally, WJB has agreed to pay to Ryan, Beck
$35,000 upon delivery of the Opinion provided, however, that the
total of such advisory fee and the fee for the Opinion shall not
exceed $265,000. Based upon the estimated aggregate purchase
price to be paid in connection with the Merger, Ryan, Beck's
aggregate fees will be approximately $290,000 (including the
$25,000 retainer fee). Ryan, Beck was paid approximately $88,000
upon signing of the Merger Agreement, $35,000 upon delivery of
the Opinion and will be paid approximately $142,000 upon the
consummation of the Merger. In addition, WJB has agreed to
reimburse Ryan, Beck for its reasonable out-of-pocket costs and
expenses incurred in connection with the services rendered to WJB
pursuant to its engagement, including the fees of its legal
counsel. To date, WJB has paid Ryan, Beck approximately $645 as
reimbursement of out-of-pocket expenses. WJB has also agreed to
indemnify Ryan, Beck against certain labilities, including
liabilities under federal securities law, incurred in connection
with its services. The amounts of all of Ryan, Beck's fees were
determined by negotiation between WJB and Ryan, Beck.
Ryan, Beck's trading department has actively engaged
in making a market in WJB's Common Stock. Ryan, Beck has had an
investment banking relationship with Sovereign during the last
three years. Ryan, Beck provided a fairness opinion to Sovereign
in connection with Sovereign's acquisition of Charter FSB
Bancorp, Inc., completed November 1, 1994. Additionally, Ryan,
Beck represented Harmonia Bancorp, Inc. which was acquired by
Sovereign in 1993. During the term of Ryan, Beck's engagement by
WJB to perform financial advisory services, Ryan, Beck performed
investment banking services related to a divestiture of an
insignificant portion of Sovereign's Pennsylvania franchise.
Sovereign has recently agreed to retain Ryan, Beck to provide
financial advisory services to Sovereign with respect to the
potential acquisition of a financial institution. Ryan, Beck has
provided no services to Sovereign with respect to the WJB
transaction. Ryan, Beck's trading department has actively
engaged in making a market in Sovereign's Common Stock. Ryan,
Beck's research department has produced earnings estimates and
research reports on Sovereign.
Terms of the Merger
Upon completion of the Merger, the separate legal
existence of WJB will cease. All property, rights, powers,
duties, obligations and liabilities of WJB will automatically be
transferred to Sovereign, in accordance with Pennsylvania and New
Jersey law. Sovereign, as the surviving corporation, will be
governed by the Articles of Incorporation and Bylaws of Sovereign
in effect immediately prior to completion of the Merger. The
directors and executive officers of Sovereign prior to the Merger
will continue, in their respective capacities, as the directors
and executive officers of Sovereign after the Merger.
Upon completion of the Merger, each outstanding
share of Sovereign Common Stock and related stock purchase rights
will continue to be outstanding as an identical share of
Sovereign Common Stock and related stock purchase rights. Under
the Merger Agreement, if the weighted average, based on daily
trading volume, of the closing sale price of a share of Sovereign
Common Stock (the "Sovereign Market Value"), on the National
Association of Securities Dealers' Automated Quotation
System/National Market System (the "Nasdaq/NMS") for the twenty
consecutive trading days immediately prior to the Effective Date
(the "Pricing Period") is equal to or greater than $9.07 or equal
to or less than $11.09, each outstanding share of WJB Common
Stock will be converted automatically into, and become a right to
receive, 0.8335 of a share of Sovereign Common Stock and related
stock purchase rights (collectively, the "Fixed Exchange Ratio
Alternative").
If the Sovereign Market Value is less than $9.07,
each outstanding share of WJB Common Stock will be converted
automatically into, and become a right to receive, the number of
shares of Sovereign Common Stock equalling the amount obtained by
dividing $7.56 by the Sovereign Market Value, and related stock
purchase rights (the "Low Fixed Price Alternative").
If the Sovereign Market Value is greater than
$11.09, each outstanding share of WJB Common Stock will be
converted automatically into, and become a right to receive, the
number of shares of Sovereign Common Stock equalling the amount
obtained by dividing $9.24 by the Sovereign Market Value, and
related stock purchase rights (the "High Fixed Price
Alternative"). See "THE MERGER -- Effective Date" for a
discussion of Sovereign's ability to determine the Effective Date
and the Pricing Period, and therefore, the possibility that
Sovereign may have some influence over whether the Fixed Exchange
Ratio Alternative, the Low Fixed Price Alternative, or the High
Fixed Price Alternative will apply.
The Exchange Ratios described in the Fixed Exchange
Ratio Alternative, the Low Fixed Price Alternative and the High
Fixed Price Alternative have each been adjusted to reflect the
Sovereign Stock Dividend.
For a description of Sovereign Common Stock and related
stock purchase rights, see "DESCRIPTION OF SOVEREIGN CAPITAL
SECURITIES -- Common Stock" and "--Shareholder Rights Plan,"
respectively.
If, on the Effective Date, the Sovereign Market
Value is less than $7.56 or greater than $12.60, Sovereign or WJB
may terminate the Merger Agreement; provided, however, that
(i) in the event the Sovereign Market Value on the Effective Date
is less than $7.56 per share (subject to certain anti-dilution
adjustments), and Sovereign has elected to terminate the Merger
Agreement, WJB may elect not to terminate the Merger Agreement in
which case, notwithstanding Sovereign's termination, no
termination shall have occurred and each outstanding share of WJB
Common Stock will be converted into and become a right to receive
the number of shares of Sovereign Common Stock equalling the
amount obtained by dividing $7.56 by a fixed Sovereign Market
Value of $7.56, or 1.0 share of Sovereign Common Stock, or
(ii) in the event the Sovereign Market Value on the Effective
Date is greater than $12.60 per share (subject to certain
anti-dilution adjustments), and WJB has elected to terminate the
Merger Agreement, Sovereign may elect not to terminate the Merger
Agreement in which case, notwithstanding WJB's termination, no
termination shall have occurred and each outstanding share of WJB
Common Stock will be converted into and become a right to receive
the number of shares of Sovereign Common Stock equalling the
amount obtained by dividing $9.24 by a fixed Sovereign Market
Value of $12.60, or 0.7333 of a share of Sovereign Common Stock.
The Sovereign Market Values at which Sovereign and WJB may elect
to terminate the Merger Agreement and the related exchange ratio
adjustments to be applied in the event Sovereign or WJB exercises
the right not to terminate the Merger Agreement have been
adjusted to reflect the Sovereign Stock Dividend. See
"Termination; Effect of Termination" herein.
With respect to the Fixed Exchange Ratio Alternative,
the Low Fixed Price Alternative and the High Fixed Price
Alternative, WJB's stockholders will receive cash in lieu of
fractional shares of Sovereign Common Stock. See "Exchange of
WJB Stock Certificates" herein.
If Sovereign, at any time before the Effective Date,
(i) issues a dividend in shares of Sovereign Common Stock,
(ii) combines the outstanding shares of Sovereign Common Stock
into a smaller number of shares, (iii) subdivides the outstanding
shares of Sovereign Common Stock or (iv) reclassifies the shares
of Sovereign Common Stock, then (i) the Sovereign Market Values
at which the Low Fixed Price Alternative and the High Fixed Price
Alternative become applicable will be adjusted by multiplying
such Sovereign Market Values by a fraction, the numerator of
which is equal to the number of shares of Sovereign Common Stock
outstanding immediately prior to the happening of such event, and
the denominator of which is equal to the number of shares of
Sovereign Common Stock outstanding immediately after the
happening of such event and (ii) the Fixed Exchange Ratio
Alternative will be adjusted by multiplying the Exchange Ratio by
a fraction, the numerator of which is equal to the number of
shares of Sovereign Common Stock outstanding immediately after
the happening of such event and the denominator of which is equal
to the number of shares of Sovereign Common Stock outstanding
immediately prior to the happening of such event.
If the Effective Date occurs after June 30, 1996 and
the book value of WJB Common Stock on June 30, 1996 is less than
the book value of WJB Common Stock on the Effective Date, then
the Exchange Ratio shall be increased by an amount equal to
(i) the difference between the fully diluted tangible book value
of WJB Common Stock as of the last date of the month preceding
the Effective Date and the tangible book value of WJB Common
Stock as of June 30, 1996, divided by (ii) the Sovereign Market
Value.
Options to acquire an aggregate of 92,659 shares of
WJB Common Stock issuable under the WJB 1989 Stock Option and
Stock Appreciation Rights Program (the "WJB Stock Option Plan")
and warrants to acquire an aggregate of 128,416 shares of WJB
Common Stock issuable under such warrants shall cease to be
outstanding and will, if the Fixed Exchange Ratio Alternative is
applicable (subject to certain adjustments), be converted on the
Effective Date into (i) options to acquire an aggregate of
120,086 (adjusted to reflect the Sovereign Stock Dividend) shares
of Sovereign Common Stock at an exercise price equal to the
present stated exercise price of such option or warrant, as the
case may be, divided by the Exchange Ratio, and (ii) assuming, a
Sovereign Market Value of $10.08 (adjusted to reflect the
Sovereign Stock Dividend), an aggregate of 25,985 (adjusted to
reflect the Sovereign Stock Dividend) shares of Sovereign Common
Stock. Shares issuable upon the exercise of such options to
acquire Sovereign Common Stock shall be issuable, at the election
of Sovereign, either under Sovereign's stock option plans or
WJB's Stock Option Plan.
If the conversion of options and warrants to acquire
WJB Common Stock into Sovereign Common Stock would, in the
opinion of Sovereign's independent auditors, prevent Sovereign
from accounting for the Merger as a pooling of interests (see
"Accounting Treatment" herein), then Sovereign may reduce the
number of shares of Sovereign Common Stock that will be
distributed upon the conversion of options and warrants to
acquire WJB Common Stock, but only by the minimum amount
necessary to permit Sovereign to account for the Merger as a
pooling of interests. In such event, the maximum number of
shares of Sovereign Common Stock which may be distributed to
holders of options and warrants to acquire WJB Common Stock
without preventing Sovereign from accounting for the Merger as a
pooling of interests shall be allocated among the holders of
options and warrants on a pro rata basis, by lot or pursuant to
any other equitable method that Sovereign and WJB may agree upon.
In the event the distribution of Sovereign Common Stock to
holders of options and warrants to acquire WJB Common Stock
become so limited, options and warrants to acquire WJB Common
Stock which cannot be satisfied will be converted into an option
to acquire Sovereign Common Stock. In such case, each option and
warrant which cannot be converted into Sovereign Common Stock
will be converted and become an option to acquire that number of
shares of Sovereign Common Stock equal to the number of shares of
WJB Common Stock covered by the option or warrant, as the case
may be, multiplied by the Exchange Ratio, at an exercise price
equal to the present stated exercise price of such option or
warrant, as the case may be, divided by the Exchange Ratio.
The Sovereign Common Stock (and related stock purchase
rights) and cash to be received by the holders of WJB Common
Stock (including the holders of options and warrants to acquire
WJB Common Stock) in exchange for each share of WJB Common Stock
(including shares subject to options or warrants) shall be
referred to herein as the "Merger Consideration."
Effective Date of the Merger
Under the Merger Agreement, the Effective Date is the
date determined by Sovereign, with the approval of WJB, upon five
days prior written notice to WJB, but in no event may the
Effective Date be later than thirty days after the last condition
precedent to the completion of the Merger set forth in the Merger
Agreement has been fulfilled or waived, unless agreed to by
Sovereign and WJB. See "Conditions to the Merger" herein. While
Sovereign does not intend to influence the applicability of any
particular Exchange Ratio alternative, because Sovereign has the
ability to propose the Effective Date within the time limitations
set forth above, Sovereign, subject to the fluctuations in
trading volume and the range of the market prices for Sovereign
Common Stock during such period, may be able to have some
influence on whether the Fixed Exchange Ratio Alternative, the
Low Fixed Price Alternative, or the High Fixed Price Alternative
will apply.
The Merger will become effective upon the filing of
Articles of Merger between Sovereign and WJB with the Secretary
of the Commonwealth of Pennsylvania and the Secretary of State of
the State of New Jersey. The Merger Agreement may be terminated
by either party if, among other reasons, the Merger is not
completed before June 30, 1996 and the terminating party is not
in breach of the Merger Agreement. See "THE MERGER--Termination;
Effect of Termination."
Exchange of WJB Stock Certificates, Options and Warrants
The conversion of WJB Common Stock into Sovereign
Common Stock will occur automatically at the Effective Date. As
soon as practicable after the Effective Date, Sovereign, or a
bank or trust company designated by Sovereign, in the capacity of
exchange agent (the "Exchange Agent"), will send a transmittal
form to each WJB stockholder and each holder of an option or
warrant to acquire WJB Common Stock. The transmittal form will
contain instructions with respect to the surrender of
certificates representing WJB Common Stock to be exchanged for
Sovereign Common Stock and the surrender of options or warrants
to acquire WJB Common Stock for Sovereign Common Stock or options
to acquire Sovereign Common Stock, as elected by the holders of
such options or warrants.
WJB STOCKHOLDERS AND HOLDERS OF OPTIONS AND WARRANTS TO
ACQUIRE WJB COMMON STOCK SHOULD NOT FORWARD WJB STOCK
CERTIFICATES, OPTIONS OR WARRANTS TO THE EXCHANGE AGENT UNTIL
THEY HAVE RECEIVED TRANSMITTAL FORMS. WJB STOCKHOLDERS AND
HOLDERS OF OPTIONS AND WARRANTS TO ACQUIRE WJB COMMON STOCK
SHOULD NOT RETURN STOCK CERTIFICATES, OPTIONS OR WARRANTS WITH
THE ENCLOSED PROXY CARD.
Until the certificates representing WJB Common Stock,
and options and warrants which are to be converted into shares of
Sovereign Common Stock, are surrendered for exchange after
completion of the Merger, holders of such certificates will not
receive, and will not be paid dividends on, the Sovereign Common
Stock into which such shares, options and warrants have been
converted. When such certificates, options and warrants are
surrendered, any unpaid dividends will be paid without interest.
For all other purposes, however, each certificate which
represents shares of WJB Common Stock outstanding at the
Effective Date, and each option and warrant to acquire shares of
WJB Common Stock to be converted into shares of Sovereign Common
Stock, will be deemed to evidence ownership of the shares of
Sovereign Common Stock into which those shares, options and
warrants have been converted by virtue of the Merger.
All shares of Sovereign Common Stock into which shares
of WJB Common Stock, and options and warrants to acquire shares
of WJB Common Stock, are converted on the Effective Date will be
deemed issued as of the Effective Date. After the Effective
Date, former holders of record of WJB Common Stock, and of
options and warrants to acquire shares of WJB Common Stock,
converted into shares of Sovereign Common Stock will be entitled
to vote at any meeting of holders of Sovereign Common Stock the
number of whole shares of Sovereign Common Stock into which their
shares of WJB Common Stock, or options or warrants to acquire
shares of WJB Common Stock, have been converted, regardless of
whether they have surrendered their WJB Common Stock
certificates, options or warrants. As of the Effective Date, the
stock transfer books of WJB will be closed, and there will be no
transfers on the transfer books of WJB of the share of WJB Common
Stock that were outstanding immediately prior to the Effective
Date.
All shares of Sovereign Common Stock issued upon
conversion of shares of WJB Common Stock shall be deemed to have
been issued in full satisfaction of all rights pertaining to such
shares of WJB Common Stock, subject, however, to Sovereign's
obligation to pay any dividends or make any other distributions
with a record date prior to the Effective Date, which may have
been declared or made by WJB on such shares of WJB Common Stock
in accordance with the Merger Agreement and which remain unpaid
at the Effective Date.
No fractional shares of Sovereign Common Stock will be
issued to any WJB stockholder upon completion of the Merger. For
each fractional share that would otherwise be issued, Sovereign
will pay by check an amount equal to the product obtained by
multiplying the fractional share interest to which such holder
would otherwise be entitled by the Sovereign Market Value.
Neither Sovereign nor WJB will be liable to any holder
of shares of WJB Common Stock, or of any option or warrant to
acquire WJB Common Stock, which are converted into shares of
Sovereign Common Stock in the Merger for any such shares of
Sovereign Common Stock (or dividends, distributions or net sale
proceeds with respect thereto) delivered to a public official
pursuant to any applicable abandoned property, escheat or similar
law.
Conditions to the Merger
The obligations of Sovereign and WJB to effect the
Merger are subject to various conditions which include the
following:
(a) The Merger Agreement shall have been duly
approved by a majority of the votes cast by holders of the
outstanding shares of WJB Common Stock entitled to be voted
thereon;
(b) All necessary governmental approvals for the
Merger shall have been obtained, and all waiting periods required
by law or imposed by any governmental authority with respect to
the Merger shall have expired or been terminated (see "Regulatory
Approvals" herein);
(c) There shall not be any order, decree, or
injunction in effect preventing the completion of the
transactions contemplated by the Merger Agreement;
(d) There shall have been delivered to each of
Sovereign and WJB an opinion of counsel that, among other things,
the Merger will be treated for Federal income tax purposes as a
"reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (see "Certain Federal
Income Tax Consequences" herein);
(e) There shall not have been any material
adverse change in the consolidated assets, business, financial
condition or results of operations of the other since June 30,
1995.
(f) The registration statement covering the
shares of Sovereign Common Stock to be issued in the Merger to
WJB's stockholders shall have been declared effective and such
shares shall have been listed with NASDAQ; and
(g) each party has duly performed its obligations
under the Merger Agreement to be performed prior to the Effective
Date and the representations and warranties made by each party in
the Merger Agreement shall be true in all material respects
(other than those which relate to an earlier date).
In addition, Sovereign's obligation to effect the
Merger is subject to, among others, the following additional
conditions:
(a) Sovereign shall have received an opinion from
its independent certified public accountant to the effect that
the Merger will be treated as a "pooling of interests" for
financial accounting purposes (see "Accounting Treatment"
herein); and
(b) The results of any "phase I environmental
audit" that Sovereign shall have had performed at its expense at
any office or branch of WJB or WJCB shall be reasonably
satisfactory to Sovereign.
WJB's obligation to effect the Merger is subject to,
among other things, receipt by WJB, within five days of the date
this Proxy Statement/Prospectus was mailed to WJB stockholders,
of a written opinion from Ryan, Beck to the effect that the
consideration to be received by WJB's stockholders in the Merger
is fair from a financial point of view.
Except for the requirements of shareholder approval,
regulatory approvals and the absence of any order, decree, or
injunction preventing the transactions contemplated by the Merger
Agreement, each of the conditions described above may be waived
in the manner and to the extent described in "Amendment; Waivers"
herein.
Subsidiary Bank Merger
In connection with the Merger, Sovereign Bank and WJCB
entered into a Bank Plan of Merger (the "Bank Plan of Merger")
dated September 29, 1995. Pursuant to the Bank Plan of Merger,
concurrently with or as soon as practicable after completion of
the Merger, WJCB will merge with and into Sovereign Bank, with
Sovereign Bank surviving (the "Bank Merger"), but with WJCB
operating as a separate and autonomous division of Sovereign Bank
for a period of at least three years following the Effective
Date. Completion of the Bank Merger is subject to, among other
things, receipt of all necessary governmental and regulatory
approvals. See "Regulatory Approvals" herein. Sovereign and WJB
anticipate that the Bank Merger will be completed concurrently
with the completion of the Merger, although there can be no
assurance that all necessary governmental and regulatory
approvals will be obtained.
Regulatory Approvals
The Bank Merger is subject to the prior approval of the
Office of Thrift Supervision ("OTS") under the Home Owners' Loan
Act (the "HOLA") and the regulations adopted under the HOLA and
the New Jersey Department of Banking (the "NJDB") under Title 17,
Chapter 9A, Section 136 of the New Jersey Banking Law of 1948, as
amended. An application for approval of the Bank Merger was
filed with the OTS on November 13, 1995. The Bank Plan of Merger
was filed with the NJDB on November 17, 1995.
In addition, Sovereign, on January 5, 1996,
requested confirmation from the Federal Reserve Bank of New York
that no application need be filed with the Board of Governors of
the Federal Reserve System pursuant to Section 3(a)(1) of the
Bank Holding Company Act of 1956, as amended.
The OTS has the responsibility by statute and
regulation to review the performance of all involved institutions
in meeting their responsibilities under the Community
Reinvestment Act ("CRA"). No protest of the Merger or the Bank
Merger has been filed with the OTS under the CRA as of the date
of this Proxy Statement/Prospectus.
There can be no assurance that the regulatory
authorities described above will approve the Merger or the Bank
Merger, and, if approved, there can be no assurance as to the
date of such approvals.
Representations and Warranties
The Merger Agreement contains customary representations
and warranties relating to, among other things, (a) the corporate
organization of Sovereign, Sovereign Bank, WJB and WJCB; (b) the
capital structures of Sovereign and WJB; (c) the due
authorization, execution, delivery, performance and
enforceability of the Merger Agreement and the Bank Plan of
Merger; (d) consents or approvals of regulatory authorities or
third parties necessary to complete the Merger and the Bank
Merger; (e) the consistency of financial statements with
generally accepted accounting principles and, where appropriate,
applicable regulatory accounting principles; (f) the absence of
material adverse changes, since June 30, 1995, in the
consolidated assets, business, financial condition or results of
operations of Sovereign or WJB; (g) the filing of tax returns and
payment of taxes; (h) the absence of undisclosed material pending
or threatened litigation; (i) compliance with applicable laws and
regulations; (j) retirement and other employee plans and matters
relating to the Employee Retirement Income Security Act of 1974,
as amended; (k) the quality of title to assets and properties;
(l) the maintenance of adequate insurance; (m) the accuracy of
information supplied by Sovereign and WJB in connection with the
Registration Statement on Form S-4 filed with the Securities and
Exchange Commission (the "SEC") in connection with the issuance
of Sovereign Common Stock in the Merger, this Proxy
Statement/Prospectus and all applications filed with regulatory
authorities for approval of the Merger and the Bank Merger; and
(n) documents filed with the SEC and the accuracy of information
contained therein.
The Merger Agreement also contains other
representations and warranties by WJB relating to, among other
things, (a) certain contracts relating to employment, consulting
and benefits matters; (b) the absence of material environmental
violations, actions or liabilities of or against WJB and its
subsidiaries; (c) the adequacy of WJB's allowance for loan
losses, the consistency of such allowance with generally accepted
accounting principles and all applicable regulatory criteria;
(d) transactions with affiliates; and (e) the absence of
undisclosed brokers' or finders' fees.
Business Pending the Merger
Pursuant to the Merger Agreement, Sovereign and WJB
have each agreed to use their best efforts (and WJB has agreed to
cause WJCB to use its best efforts) to preserve their business
organizations intact, to maintain good relationships with
employees and to preserve the goodwill of customers and others
with whom business relationships exist. In addition, WJB has
agreed to conduct its business and to engage in transactions only
in the ordinary course of business, consistent with past
practice, except as otherwise required by the Merger Agreement or
with the written consent of Sovereign.
In addition, WJB has agreed in the Merger Agreement
that neither it nor WJCB may, without the written consent of
Sovereign, among other things, (i) change its Certificate of
Incorporation or Bylaws; (ii) change the number of authorized or
issued shares of its capital stock, except for the possible
issuance of up to 221,075 shares of WJB Common Stock upon the
exercise of then outstanding stock options and warrants;
(iii) grant options or similar rights with respect to its capital
stock or any securities convertible into its capital stock;
(iv) split, combine or reclassify any shares of its capital
stock; (v) declare, set aside or pay any dividend or other
distribution in respect of its capital stock (see "Dividends"
herein); (vi) grant any severance pay, except in accordance with
WJB's severance policy in effect on the date of the Merger
Agreement (see "Employee Benefits and Severance" herein), or
enter into or amend any employment agreement; (vii) grant any pay
increase except for routine periodic increases in accordance with
past practice; (viii) engage in any merger, acquisition or
similar transaction; (ix) dispose of any assets other than in the
ordinary course of business; (x) change any accounting practices,
except for implementation of Statement of Financial Accounting
Standards ("SFAS"); (xi) implement any new employee benefit or
welfare plan, or amend any such plan, unless such amendment does
not result in an increase in cost; (xii) purchase any security
for its investment portfolio not rated "A" or higher by either
Standard & Poor's Corporation or Moody's Investor Services, Inc.;
(xiii) make, enter into, renew, extend, modify or compromise any
transaction (including loans and commitments to lend) with any
affiliate of WJB, except as consistent with past practice;
(xiv) enter into any swap or similar arrangement; (xv) take any
action which would give rise to a right of payment to any
individual under any employment agreement; (xvi) intentionally
and knowingly take any action that would preclude the treatment
of the Merger as a pooling of interests for financial accounting
purposes; (xvii) waive, release, grant or transfer any rights of
value, or modify or change in any material respect any existing
agreement to which WJB or WJCB is a party, other than in the
ordinary course of business, consistent with past practice; or
(xviii) agree to do any of the foregoing.
WJB has also agreed in the Merger Agreement, among
other things, (i) to permit Sovereign, if Sovereign elects to do
so at its own expense, to cause a "phase I environmental audit"
to be performed at any WJB or WJCB office or branch; (ii) to
permit a representative of Sovereign to attend committee meetings
of WJB and WJCB's management, and to reasonably consider
Sovereign's requests that its representatives be permitted to
attend WJB's Board of Directors' meetings; (iii) if Sovereign
requests and agrees to bear the expense, to retain a proxy
solicitor in connection with the solicitation of WJB stockholder
approval of the Merger Agreement; (iv) if Sovereign requests, to
cause its independent certified public accountants to perform a
review of WJB's unaudited consolidated financial statements as of
the end of any calendar quarter, in accordance with Statement of
Auditing Standards No. 36, and to issue their report on such
financial statements; (v) if Sovereign requests, to use its best
efforts to obtain an extension of any contract with an outside
service bureau or other vendor of services to WJB or WJCB, on
terms and conditions mutually acceptable to WJB and Sovereign;
(vi) to submit the Merger Agreement to its stockholders for
approval at a meeting to be held as soon as practicable, and use
its best efforts to cause its Board of Directors to unanimously
recommend approval of the Merger Agreement to WJB's stockholders,
subject to its fiduciary duties under applicable law; (vii) to
provide to Sovereign copies of the minutes of all meetings of the
Board of Directors of WJB and WJCB, and of any of their
respective committees or of any senior management committee; and
(viii) to approve the Bank Merger as sole shareholder of WJCB.
Sovereign and WJB have jointly agreed, among other
things, (i) to prepare all applications for, and use their best
efforts to obtain, all required regulatory consents; (ii) to take
all actions necessary to complete the transactions contemplated
by the Merger Agreement; (iii) to maintain adequate insurance;
(iv) to maintain accurate books and records; (v) to file all tax
returns and pay all taxes when due; (vi) to cooperate with each
other and use their best efforts to identify those persons who
may be deemed to be affiliates of WJB; (vii) to agree upon the
form and substance of any press release or public disclosure
related to the Merger Agreement, the Merger and the Bank Merger;
and (viii) to deliver to the other copies of all securities
documents when filed.
Dividends
Under the terms of the Merger Agreement, WJB,
consistent with past practice, may not pay any cash dividend on
any share of WJB Common Stock outstanding without the written
consent of Sovereign. The Merger Agreement permits WJCB to pay
cash dividends to WJB in an amount sufficient to fund cash
dividends Sovereign permits WJB to pay to its stockholders. The
determination of whether a dividend will be declared and paid by
WJCB will be made by WJCB's Board of Directors. WJCB's ability
to pay dividends is determined in accordance with the New Jersey
Banking Act of 1948, as amended, and, in some instances, further
restrictions imposed by the Federal Deposit Insurance
Corporation. Under applicable law, no cash dividend can be paid
by WJCB unless, following the payment of such dividend, the
capital stock of WJCB will be unimpaired and WJCB will have a
surplus of not less than fifty percent of its capital stock or,
if not, the payment of such dividend will not reduce the surplus
of WJCB. The power of the Board of Directors of WJCB to declare
and issue dividends is subject to the oversight and approval of
the New Jersey Commission of Banking. WJCB is currently
prohibited from paying cash dividends. There can be no assurance
that WJCB will be permitted by law to declare and pay a dividend,
or that its Board of Directors will decide to declare and pay a
dividend, even if permitted to do so under the Merger Agreement.
No Solicitation of Transactions
The Merger Agreement provides that, except as described
below, WJB will not, and WJB will not permit its affiliates,
officers, directors, employees, agents or representatives to,
directly or indirectly, solicit, encourage, initiate or engage in
discussions or negotiations with, or respond to requests for
information, inquiries or other communications from, any person
other than Sovereign concerning the Merger Agreement or any
acquisition of WJB, WJCB or any substantial portion of the assets
or business of either WJB or WJCB; provided, however, that
(i) WJB's officers may respond to inquiries of stock analysts,
regulatory authorities and WJB stockholders in the ordinary
course of business and (ii) the Board of Directors of WJB may
respond to any offer or requests for information, inquiries,
proposals or other communications through its representatives if
such Board of Directors, after having consulted with and
considered the advice of outside counsel, has determined that the
failure to provide such information or participate in such
negotiations or discussions would cause the members of such Board
of Directors to breach their fiduciary duties under applicable
law. Further, the Merger Agreement requires WJB to notify
Sovereign immediately if any such discussions or negotiations are
sought by, or if any such requests for information, inquiries or
communications are received from, any person other than
Sovereign.
The directors and executive officers of WJB have
executed a letter agreement pursuant to which they agreed to be
bound by provisions similar to those described above, and such
directors and executive officers have also agreed to vote all
shares of WJB Common Stock owned by them in favor of the Merger
Agreement. A copy of the letter agreement executed by the
directors and executive officers of WJB is included as Exhibit 1
to the Merger Agreement attached hereto as Annex A. In November
of 1995, Mr. Michael McGrath, Sr. sold 50,400 shares of his WJB
Common Stock and on December 13, 1995, Mr. McGrath, Sr. resigned
from the Board of Directors of WJB. In addition, as a condition
to being seated on WJB's Board of Directors, in December of 1995,
Mr. Thomas Giblin purchased 200 shares of WJB Common Stock. At
the Record Date, directors and executive officers of WJB
beneficially owned (excluding shares which may be purchased upon
the exercise of any option or warrant) approximately
161,400 shares of WJB Common Stock or approximately 8.24% of the
outstanding shares of WJB Common Stock which are entitled to be
voted at the Special Meeting.
Amendment; Waivers
Subject to applicable law, (i) the Merger Agreement may
be amended at any time by written action taken by duly authorized
officers of Sovereign and WJB, which is authorized by their
respective Boards of Directors, and (ii) Sovereign or WJB, by
written action taken by a duly authorized officer, may extend the
time for performance of the obligations of the other under the
Merger Agreement and may waive inaccuracies in any
representations and warranties or compliance with any agreements
or conditions for their respective benefit set forth in the
Merger Agreement.
Termination; Effect of Termination
The Merger Agreement may be terminated at any time
prior to the Effective Date by (i) mutual written consent of
Sovereign and WJB, (ii) either party if (a) the Merger is not
completed on or prior to June 30, 1996, unless such fact is due
to a breach of the Merger Agreement by the party seeking its
termination, (b) either party is informed in writing by any
regulatory authority that a requisite regulatory approval is
unlikely to be granted, unless such fact is due to a breach of
the Merger Agreement by the party seeking its termination, (c) if
the other party materially breaches any representation, warranty
or covenant contained in the Merger Agreement, and such breach
(1) has not or cannot be cured by the earlier of thirty days from
the date written notice of such breach was given to such party
committing the breach or the Effective Date and (2) would
constitute the failure to satisfy any condition precedent to the
non-breaching party's obligation to complete the Merger; (d) on
the Effective Date, the Sovereign Market Value is less than $7.56
or greater than $12.60; provided, however, that (1) in the event
Sovereign Market Value on the Effective Date is less than
$7.56 per share (subject to certain anti-dilution adjustments),
and Sovereign has elected to terminate the Merger Agreement, WJB
may elect not to terminate the Merger Agreement in which case,
notwithstanding Sovereign's termination, no termination shall
have occurred and each outstanding share of WJB Common Stock will
be converted into and become a right to receive the number of
shares of Sovereign Common Stock equalling the amount obtained by
dividing $7.56 by a fixed Sovereign Market Value of $7.56, or
1.0 share of Sovereign Common Stock, or (2) in the event the
Sovereign Market Value on the Effective Date is greater than
$12.60 per share (subject to certain anti-dilution adjustments),
and WJB has elected to terminate the Merger Agreement, Sovereign
may elect not to terminate the Merger Agreement in which case,
notwithstanding WJB's termination, no termination shall have
occurred and each outstanding share of WJB Common Stock will be
converted into and become a right to receive the number of shares
of Sovereign Common Stock equalling the amount obtained by
dividing $9.24 by a fixed Sovereign Market Value of $12.60, or
0.7333 of a share of Sovereign Common Stock, or (e) the
stockholders of WJB vote not to approve the Merger Agreement,
unless due to a breach of the Merger Agreement by the party
seeking its termination; or (iii) by Sovereign if it receives an
opinion from its independent accountant that the Merger will not
qualify as a pooling-of-interests for financial accounting
purposes. The Sovereign Market Values at which Sovereign and WJB
may elect to terminate the Merger Agreement and the related
exchange ratio adjustments to be applied in the event Sovereign
or WJB exercises the right not to terminate the Merger Agreement
have been adjusted to reflect the Sovereign Stock Dividend.
It is not possible to know whether any of the foregoing
events will occur after the date of the Special Meeting. The
Board of WJB has made no decision as to whether it would exercise
its right to terminate the Merger Agreement if such an event does
occur. In considering whether to exercise its termination right
in such situation, the Board of WJB would, consistent with its
fiduciary duties, take into account all relevant facts and
circumstances that exist at such time and would consult with its
financial advisor and legal counsel. Approval of the Merger
Agreement by the stockholders of WJB at the Special Meeting will
confer on the Board of WJB the power, consistent with its
fiduciary duties, to elect to consummate the Merger if such an
event should occur without any further action by, or
resolicitation of, the stockholders of WJB.
In the event that the Merger Agreement is terminated by
Sovereign as a result of a material breach by WJB of its
obligations thereunder (provided that such breach is not caused
by Sovereign's breach of its obligations thereunder), Sovereign
and WJB shall each pay its own expenses incurred in connection
with the Merger. Otherwise, Sovereign shall pay the out-of-
pocket expenses of WJB in connection with the transaction
contemplated by the Merger Agreement, except that Sovereign and
WJB shall each pay one-half of the costs of printing and mailing
this Proxy Statement/Prospectus.
Management and Operations after the Merger
The Board of Directors and executive officers of
Sovereign in office immediately prior to the completion of the
Merger will constitute Sovereign's Board of Directors and
executive officers after completion of the Merger. The Board of
Directors and executive officers of Sovereign Bank in office
immediately prior to completion of the Bank Merger will
constitute Sovereign Bank's Board of Directors and executive
officers after completion of the Bank Merger.
WJCB will be operated as a separate and autonomous
commercial bank division of Sovereign Bank for a period of at
least three years following the Effective Date. Sovereign has
agreed in the Merger Agreement to elect seven individuals
selected by WJB to serve on an autonomous board of directors of
the WJCB commercial bank division of Sovereign Bank. These
directors will be elected, on an annual basis, for a period of at
least three years from the Effective Date (provided they desire
and are eligible to serve). The outside directors of the WJCB
commercial bank division of Sovereign Bank will be entitled to
receive as compensation for attendance at meetings of the Board
of Directors the same per meeting fees paid to the directors of
WJB for attending a meeting of WJB Board of Directors prior to
September 19, 1995. On the effective date of the Bank Merger,
the officers of Sovereign Bank in office immediately prior to
such effective date will be the officers of the WJCB commercial
bank division of Sovereign Bank, except that (i) Messrs. John A.
Van Voorhis and Gerard Riker shall be designated and elected as
the Chief Executive Officer and the Chief Financial Officer,
respectively, of the WJCB commercial bank division of Sovereign
Bank and (ii) such other officers of WJB or WJCB, as Sovereign
and WJB shall mutually agree, will be designated and elected as
officers of the WJCB commercial bank division of Sovereign Bank.
The WJCB commercial division of Sovereign Bank will be permitted
during such three-year period to (i) set its own policies with
respect to interest rates and the other terms and conditions of
its business so long as such policies are coordinated with
Sovereign's asset/liability management policy, and (ii) retain
the loan origination division of WJCB existing immediately prior
to the Effective Date.
Under the terms of the Merger Agreement, Sovereign has
agreed to assume the preexisting employment contracts of
Messrs. John A. Van Voorhis and Gerard Riker on the same terms
and conditions, except that Sovereign has agreed to amend the
employment agreements to provide that (i) the respective terms of
the employment agreements will not expire earlier than three
years from the Effective Date, (ii) if the employee's employment
is terminated by Sovereign without cause or by the employee for
good reason (each as defined in the employment agreements, except
that the definition of good reason shall be appropriately amended
to be consistent with the post-Merger structure contemplated by
the Merger Agreement) the employee shall have the right to
receive all payments which would have been due under his
employment agreement through the remainder of the term of the
employment agreement (as amended) and (iii) the employees will
receive incentive compensation equivalent to the amount of
incentive compensation they would have received if the Merger had
not occurred. Sovereign has also agreed to assume the employment
agreement with Mr. Michael J. McGrath, Jr. and the
consulting/severance agreement with Mr. Michael J. McGrath, Sr.
Employee Benefits and Severance
Sovereign expects to retain substantially all of the
officers and other employees of WJCB after the Effective Date
with appropriate changes in title to be consistent with
Sovereign's management structure and the operation of WJCB as a
division of Sovereign Bank. Any employees of WJB or WJCB not
retained by Sovereign after the Effective Date will receive
severance benefits in accordance with Sovereign's severance
policy and employees of WJB and WJCB will be given credit for
prior years of service to WJB and WJCB.
Sovereign shall maintain employee benefits for WJB and
WJCB employees at levels which, in the aggregate, are at least as
favorable as such benefits which they were entitled to on
September 19, 1995. On and after the Effective Date, so long as
such benefits are so maintained, the employee pension and welfare
benefit plans of Sovereign and WJB may, at Sovereign's election,
continue to be maintained separately or consolidated. In the
event of a consolidation of any or all of such plans, WJB and
WJCB employees shall receive credit for service with WJB or WJCB
under any Sovereign benefit plan or new Sovereign benefit plan in
which such employees would be eligible to enroll, for purposes of
eligibility and vesting determination. Employees of WJB and WJCB
who are retained as employees of Sovereign or Sovereign Bank
after the Effective Date will be permitted to participate in
Sovereign's 401(k) plan and Employee Stock Ownership Plan to the
extent permitted by the terms of such plans.
Accounting Treatment
The Merger is expected to qualify as a "pooling-of-
interests" for accounting and financial reporting purposes.
Under this method of accounting, the recorded assets and
liabilities of Sovereign and WJB will be carried forward to the
combined corporation at their recorded amounts; income of the
combined corporation will include income of both Sovereign and
WJB for the entire fiscal year of Sovereign in which the Merger
occurs; and the reported income of the separate corporations for
prior periods will be combined and restated as income of the
combined corporation. Expenses incurred in connection with the
Merger will constitute expenses for the accounting periods to
which such expenses relate. The receipt of a letter from
Sovereign's independent auditors confirming that the Merger will
qualify for pooling of interests accounting is a condition to
Sovereign's obligation to complete the Merger.
Certain Federal Income Tax Consequences
Completion of the Merger is conditioned upon there
being delivered to Sovereign and WJB an opinion of Stevens & Lee,
P.C., counsel to Sovereign, that for Federal income tax purposes,
under current law, assuming that the Merger and related
transactions will take place as described in the Merger
Agreement, among other things, the Merger will constitute a
reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and
Sovereign and WJB will each be a party to the reorganization
within the meaning of Code Section 368(b).
In that case, in the opinion of Stevens & Lee, P.C.,
the following would be the material Federal income tax
consequences of the Merger:
(i) no gain or loss will be recognized by
Sovereign or WJB in the Merger;
(ii) no gain or loss will be recognized by
holders of shares of WJB Common Stock upon their receipt of
Sovereign Common Stock in exchange for their WJB Common Stock,
except that stockholders who receive cash proceeds for fractional
interests in Sovereign Common Stock will recognize gain or loss
equal to the difference between such proceeds and the tax basis
allocated to their fractional share interests, and such gain or
loss will constitute capital gain or loss if their WJB Common
Stock is held as a capital asset at the Effective Date;
(iii) the tax basis of the shares of Sovereign
Common Stock received (including fractional share interests
deemed received) by the stockholders of WJB will be the same as
the tax basis of their WJB Common Stock exchanged therefor; and
(iv) the holding period of the Sovereign Common
Stock in the hands of the WJB stockholders will include the
holding period of their WJB Common Stock exchanged therefor,
provided such WJB Common Stock is held as a capital asset at the
Effective Date.
Under the Merger Agreement, the condition that
Stevens & Lee deliver the opinion described above can be waived
by Sovereign and WJB. However, in the event that the delivery of
such opinion of counsel is waived, or such opinion would
otherwise set forth tax consequences materially different to a
stockholder than those described above, Sovereign and WJB intend
to resolicit proxies as required in accordance with the rules and
regulations of the SEC.
THE DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND IS BASED ON CURRENTLY EXISTING PROVISIONS OF
THE CODE, EXISTING AND PROPOSED TREASURY REGULATIONS THEREUNDER,
AND CURRENT ADMINISTRATIVE RULINGS AND COURT DECISIONS. ALL OF
THE FOREGOING ARE SUBJECT TO CHANGE AND ANY SUCH CHANGE COULD
AFFECT THE CONTINUING VALIDITY OF THE DISCUSSION. THE DISCUSSION
IS NOT A COMPLETE DESCRIPTION OF ALL THE FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER AND, IN PARTICULAR, DOES NOT ADDRESS
(A) TAX CONSIDERATIONS THAT MAY AFFECT THE TREATMENT OF
STOCKHOLDERS WHO ACQUIRED THEIR WJB COMMON STOCK PURSUANT TO THE
EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION,
OR STOCKHOLDERS WHICH ARE EXEMPT ORGANIZATIONS OR WHO ARE NOT
CITIZENS OR RESIDENTS OF THE UNITED STATES, OR (B) ANY OF THE TAX
CONSEQUENCES TO WJB OPTIONHOLDERS WITH RESPECT TO THE CONVERSION
OR EXCHANGE OF THEIR OPTIONS OR WARRANTS TO ACQUIRE WJB COMMON
STOCK. EACH STOCKHOLDER'S INDIVIDUAL CIRCUMSTANCES MAY AFFECT
THE TAX CONSEQUENCES OF THE MERGER TO SUCH STOCKHOLDER. IN
ADDITION, NO INFORMATION IS PROVIDED HEREIN WITH RESPECT TO THE
TAX CONSEQUENCES OF THE MERGER UNDER APPLICABLE STATE, LOCAL, OR
FOREIGN LAWS. ACCORDINGLY, EACH WJB STOCKHOLDER AND EACH WJB
OPTIONHOLDER IS ADVISED TO CONSULT A TAX ADVISOR AS TO THE
SPECIFIC TAX CONSEQUENCES OF THE MERGER TO SUCH STOCKHOLDER.
Expenses
Except for the cost of printing and mailing this Proxy
Statement/Prospectus, which will be shared equally, Sovereign
will pay its own costs and expenses and WJB's out-of-pocket
expenses incurred in connection with the transactions
contemplated by the Merger Agreement; provided, however, that if
Sovereign terminates the Merger Agreement due to a material
breach by WJB of its obligations under the Merger Agreement and
such breach is not caused by a breach by Sovereign of the
obligations under the Merger Agreement, WJB will reimburse
Sovereign for all out-of-pocket expenses of WJB which were paid
by Sovereign.
Resale of Sovereign Common Stock
The Sovereign Common Stock issued pursuant to the
Merger will be freely transferable under the Securities Act of
1933, as amended (the "Securities Act"), except for shares issued
to any WJB stockholder who may be deemed to be an "affiliate" of
WJB or Sovereign for purposes of Rule 145 under the Securities
Act. Each director and executive officer of WJB has entered into
an agreement with Sovereign providing that, as an affiliate, he
or she will not transfer any Sovereign Common Stock received in
the Merger except in compliance with the Securities Act and will
make no dispositions of any Sovereign Common Stock or WJB Common
Stock (or any interest therein) during the period commencing 30
days prior to the Effective Date through the date on which
financial results covering at least 30 days of combined
operations of Sovereign and WJB after the Merger have been made
public. A copy of such agreement is included as Exhibit 1 to the
Merger Agreement attached hereto as Annex A. Sovereign has
agreed in the Merger Agreement to file with the SEC combined
operating results of Sovereign and WJB for the one-month period
ended on the last day of the first full calendar month after the
Effective Date within thirty days after the end of such one-month
period. This Proxy Statement/Prospectus does not cover resales
of Sovereign Common Stock received by any person who may be
deemed an affiliate of WJB or Sovereign.
Dividend Reinvestment Plan
Sovereign currently maintains a Dividend Reinvestment
and Stock Purchase Plan. This plan provides shareholders of
Sovereign with a simple and convenient method of investing cash
dividends, as well as voluntary cash payments, in additional
shares of Sovereign Common Stock, without payment of any
brokerage commission or service charge. It is anticipated that,
after the Effective Date, Sovereign will continue to offer this
plan and stockholders of WJB who become shareholders of Sovereign
will be eligible to participate therein.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Stock Options and Warrants
As of the Record Date, the directors and executive
officers of WJB owned options and warrants to acquire an
aggregate of 184,659 shares of WJB Common Stock. These options
and warrants to acquire WJB Common Stock outstanding at the
Effective Date will, if the Fixed Exchange Ratio Alternative is
applicable (subject to certain adjustments), be converted into
(i) options to acquire an aggregate of 107,237 (adjusted to
reflect the Sovereign Stock Dividend) shares of Sovereign Common
Stock and (ii) assuming a Sovereign Market Value of $10.08
(adjusted to reflect the Sovereign Stock Dividend), an aggregate
of 18,898 (adjusted to reflect the Sovereign Stock Dividend)
shares of Sovereign Common Stock, subject to certain conditions,
as set forth under "THE MERGER -- Terms of the Merger."
Indemnification
For a period of six years from and after the Effective
Date, Sovereign is obligated to indemnify, and advance expenses
in matters which may be subject to indemnification to, persons
who served as directors and officers of WJB with respect to
liabilities and claims (and related expenses) made against them
resulting from their service prior to the Effective Date. Such
indemnification is required to be (i) in accordance with and
subject to the requirements and other provisions of Sovereign's
Articles of Incorporation and Bylaws in effect on the date of the
Merger Agreement and applicable provisions of law, and (ii) to
the same extent as Sovereign is obliged to indemnify and advance
expenses to its own directors and officers with respect to
liabilities and claims made against them resulting from their
service with Sovereign.
Sovereign is obligated to maintain WJB's existing
directors' and officers' liability insurance policy (or a policy
providing a comparable coverage amount on terms no less
favorable, including Sovereign's existing policy if it meets the
foregoing standard) covering (i) for a period of six years after
the Effective Date, persons who were covered under WJB's
directors' and officers' liability insurance policy on the date
the Merger Agreement was executed by Sovereign and WJB for the
costs and expenses set forth in the immediately preceding
paragraph and (ii) all officers and directors of WJB for service
in such capacity with Sovereign after the Effective Date.
STOCK OPTION AGREEMENT
As a condition to entering into the Merger Agreement,
WJB executed and delivered to Sovereign the Stock Option
Agreement dated September 29, 1995 (the "Stock Option
Agreement"). A copy of the Stock Option Agreement is included as
Exhibit 2 to the Merger Agreement attached hereto as Annex A.
Pursuant to the Stock Option Agreement, Sovereign was granted an
option to purchase up to that number of shares of the issued and
outstanding WJB Common Stock which will equal 19.9% of the shares
of WJB Common Stock issued and outstanding immediately prior to
such purchase. The exercise price per share to purchase WJB
Common Stock under the option is equal to the lower of $8.40 or
the lowest price per share that a person or group, other than
Sovereign or an affiliate of Sovereign, paid or offered to pay
for WJB Common Stock upon the occurrence of one of the specified
events which triggered exercise of the option. The option may
only be exercised, in whole or in part, upon the occurrence of
certain events (collectively, "Triggering Events"), including,
among other things, the acquisition by a person or group of a
significant number of shares of WJB Common Stock, WJB entering
into an agreement to merge, consolidate or sell assets, or a
public announcement by a third party of an intent to acquire
control of WJB under certain circumstances.
The Stock Option Agreement, together with (i) WJB's
agreement to not solicit other transactions relating to the
acquisition of WJB by a third party and (ii) the agreement of
WJB's directors and executive officers to vote their shares in
favor of the Merger Agreement (see "THE MERGER--No Solicitation
of Transactions"), are intended to increase the likelihood that
the Merger will be consummated on the terms set forth in the
Merger Agreement and may have the effect of discouraging persons
who might now or prior to the Effective Date be interested in
acquiring all of or a significant interest in WJB from
considering or proposing such an acquisition, even if such
persons were prepared to pay a higher price per share for WJB
Common Stock than the price per share implicit in the Merger
Consideration. Certain attempts to acquire WJB or an interest in
WJB would cause the option to become exercisable as described
above. Sovereign's exercise of such option would significantly
increase a potential acquiror's cost of acquiring WJB compared to
the cost that would be incurred without the Stock Option
Agreement. Such increased cost might discourage a potential
acquiror from considering or proposing an acquisition or might
result in a potential acquiror proposing to pay a lower per share
price to acquire WJB than it might otherwise have proposed to
pay. In addition, the management of Sovereign and WJB believe
that the existence of the Stock Option Agreement is likely to
prohibit any acquiror of WJB from accounting for any acquisition
of WJB using the "pooling of interests" accounting method. In
addition, exercise of the option would increase the ability of
Sovereign to obtain the approval of WJB's stockholders necessary
to complete the Merger and adversely affect the ability of a
third party to obtain any necessary approval of such stockholders
to complete an alternative transaction.
The option may not be exercised (i) until all
governmental and regulatory approvals and agreements necessary
for WJB to issue WJB Common Stock in connection therewith have
been obtained (or until the expiration or termination of any
waiting period required by law), or (ii) so long as any
injunction or other order, decree or ruling issued by a court is
outstanding which prohibits the sale or delivery of WJB Common
Stock in connection therewith. The Stock Option Agreement
terminates upon the earlier to occur of (i) the Effective Date,
and (ii) the termination of the Merger Agreement in accordance
with its terms, provided that the option shall be deferred for
any period during which it could not be exercised by Sovereign
for the reasons described in the preceding sentence. The Stock
Option Agreement further provides that upon the occurrence of a
Triggering Event and after receipt of a written request from
Sovereign, WJB shall prepare and file a registration statement
with the SEC covering the option and such number of shares
subject thereto as Sovereign shall specify in its request, and
shall use its best efforts to cause such registration statement
to become effective; provided that in no event will Sovereign
have the right to have more than one such registration statement
become effective.
<PAGE>
INFORMATION WITH RESPECT TO SOVEREIGN
General
Financial and other information relating to Sovereign,
including information relating to Sovereign's directors and
executive officers, is incorporated herein by reference. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and "AVAILABLE
INFORMATION."
Market Price of and Dividends on Sovereign Common Stock and
Related Shareholder Matters
The Sovereign Common Stock is traded in the
over-the-counter market and is quoted on the Nasdaq/NMS under the
symbol SVRN. As of September 30, 1995, there were approximately
7,415 shareholders of record. The table below sets forth the
quarterly ranges of high and low sales prices for Sovereign
Common Stock as reported by the Nasdaq/NMS and does not
necessarily reflect mark-ups, mark-downs or commissions. All per
share information has been adjusted to show the effect of all
stock dividends and stock splits effected since January 1, 1993.
The Sovereign Common Stock commenced trading in August 1986 upon
the conversion of Sovereign Bank's predecessor from mutual to
stock form. The initial offering price was $12 per share, which
has been restated to $1.40 to reflect all stock dividends and
splits effected since that date, including the Sovereign Stock
Dividend.
<TABLE>
<CAPTION>
Quarterly
Quarter Ended Dividend High Low
<S> <C> <C> <C>
March 31, 1996(1) $ ---- $ 9.6250 $9.3750
December 31, 1995 .0209 10.2500 9.1875
September 30, 1995 .0209 10.2500 8.9375
June 30, 1995 .0209 10.2500 7.0000
March 31, 1995 .0209 8.8125 7.0000
December 31, 1994 .0209 9.0625 7.0000
September 30, 1994 .0258 10.2500 8.6875
June 30, 1994 .0256 10.5000 8.6875
March 31, 1994 .0336 10.9375 7.8750
December 31, 1993 .0231 10.9375 8.6875
September 30, 1993 .0252 9.3125 7.2500
June 30, 1993 .0259 7.8750 6.8125
March 31, 1993 .0250 8.1250 5.6875
__________________
</TABLE>
(1) Through January 11, 1996
On September 29, 1995, the last business day
preceding public announcement of the execution of the Merger
Agreement, the last sale price for Sovereign Common Stock was
$10.6875 per share. On November 29, 1995, the last sale price
for the Sovereign Common Stock was $10.172 per share (adjusted to
reflect the Sovereign Stock Dividend). The average weekly
trading volume for the Sovereign Common Stock during the quarter
ended September 30, 1995 was 1,486,380 shares (adjusted to
reflect the Sovereign Stock Dividend).
For certain limitations on the ability of Sovereign
Bank to pay dividends to Sovereign, see Sovereign's Annual Report
on Form 10-K for the year ended December 31, 1994 which is
incorporated herein by reference. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
<PAGE>
INFORMATION WITH RESPECT TO WJB
General
Financial and other information concerning WJB,
including information relating to WJB's directors and executive
officers, is incorporated herein by reference. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." Copies of
WJB's 1994 Annual Report to Stockholders and Quarterly Report on
Form 10-Q for the Quarter ended September 30, 1995 have been sent
to WJB's stockholders together with this Proxy
Statement/Prospectus.
Market Price of WJB Common Stock and Related Stockholder Matters
The WJB Common Stock is traded on the Nasdaq Small-Cap
Market under the symbol Wjersb. As of September 30, 1995, there
were 357 stockholders of record. The table below sets forth the
quarterly ranges of high and low closing sales prices as reported
by the Nasdaq Small-Cap Market for the period beginning July 27,
1995 through November 30, 1995 and as reported in the over-the-
counter pink sheets published by the National Quotation Bureau
for the period beginning on January 1, 1993 through July 26,
1995. Such prices do not necessarily reflect mark-ups,
mark-downs or commissions.
<TABLE>
<CAPTION>
Quarterly
Quarter Ended High Low
<S> <C> <C>
March 31, 1996(1) $7.875 $7.25
December 31, 1995 7.625 7.125
September 30, 1995 8.00 4.50
June 30, 1995 4.00 3.00
March 31, 1995 4.625 3.00
December 31, 1994 4.00 3.125
September 30, 1994 5.00 3.75
June 30, 1994 5.00 3.50
March 31, 1994 4.75 4.50
December 31, 1993 4.875 4.50
September 30, 1993 4.50 3.50
June 30, 1993 3.375 3.22
March 31, 1993 2.375 2.25
</TABLE>
__________________
(1) Through January 11, 1996
On September 29, 1995, the last business day preceding
public announcement of the execution of the Merger Agreement, the
last sale price for WJB Common Stock was $7.25 per share. On
November 30, 1995, the last sale price for WJB Common Stock was
$7.625 per share. The average weekly trading volume for the WJB
Common Stock during the quarter ended September 30, 1995 was
26,950 shares. WJB Common Stock was listed on the Nasdaq Small-
Cap Market on July 27, 1995.
Under the terms of the Merger Agreement, WJB,
consistent with past practice, may not pay any cash dividends to
WJB stockholders without the prior written consent of Sovereign.
See "THE MERGER -- Dividends." Further, WJB's ability to pay
dividends may be dependent upon its receipt of dividends from
WJCB. See "THE MERGER -- Dividends" and "MARKET FOR REGISTRANT'S
COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS" and Note 8 to
WJB's audited consolidated financial statements set forth in
WJB's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, which is incorporated herein by reference.
See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
<PAGE>
DESCRIPTION OF SOVEREIGN CAPITAL SECURITIES
The authorized capital stock of Sovereign consists of
100,000,000 shares of common stock, no par value ("Sovereign
Common Stock"), and 7,500,000 shares of authorized preferred
stock ("Sovereign Preferred Stock"). As of September 30, 1995,
there were 48,365,124 shares of Sovereign Common Stock issued and
outstanding and no shares held by Sovereign as treasury stock,
and 2,000,000 shares of 6-1/4% Cumulative Convertible Preferred
Stock, Series B ($50 liquidation preference) issued and
outstanding. There are no other shares of capital stock of
Sovereign authorized, issued or outstanding. Sovereign has no
options, warrants, or other rights authorized, issued or
outstanding, other than as described herein under "Shareholder
Rights Plan" and options granted under the Sovereign Bancorp,
Inc. Stock Option Plan and the 1993 Sovereign Bancorp, Inc. Stock
Option Plan.
Common Stock
The holders of Sovereign Common Stock are entitled to
share ratably in dividends when and if declared by the Sovereign
Board of Directors from funds legally available therefor.
Declaration and payment of cash dividends by Sovereign depends
upon dividend payments by Sovereign Bank, which are Sovereign's
primary source of revenue and cash flow. Sovereign is a legal
entity separate and distinct from its subsidiaries. Accordingly,
the right of Sovereign, and consequently the right of creditors
and shareholders of Sovereign, to participate in any distribution
of the assets or earnings of any subsidiary is necessarily
subject to the prior claims of creditors of the subsidiary,
except to the extent that claims of Sovereign in its capacity as
a creditor may be recognized.
Sovereign Bank will not be permitted to pay dividends
on its capital stock or repurchase shares of its stock if its
shareholders' equity would be reduced below the amount required
for the liquidation accounts established in the respective
conversions from mutual to stock form of the predecessors of
Sovereign Bank or applicable regulatory capital requirements.
Current OTS regulations require a holding company's insured
institutions to give the OTS 30 days advance notice of any
proposed declaration of dividends to the holding company, and the
OTS has the authority under its supervisory powers to prohibit
the payment of dividends to the holding company.
The OTS capital distribution rule, which became
effective on August 1, 1990, provides for three tiers of savings
associations: (i) Tier 1 associations, associations that have
capital ("total capital" as calculated under the OTS capital
regulations) equal to or greater than their fully phased-in
capital requirements (the requirements applicable at December 31,
1994) prior to, and on a pro forma basis after giving effect to,
a proposed capital distribution; (ii) Tier 2 associations,
associations that have capital equal to or greater than their
minimum capital requirements, but less than their fully phased-in
capital requirements prior to, and on a pro forma basis after
giving effect to, a proposed capital distribution; and
(iii) Tier 3 associations, associations that do not meet their
minimum capital requirements, either before or after giving
effect to a proposed capital distribution. At September 30,
1995, Sovereign Bank is a "Tier 1 association" both historically
and on a pro forma basis after giving effect to the Merger.
Under the OTS capital distribution rule, a Tier 1 association may
make capital distributions of up to the greater of (a) 100% of
its net income during a calendar year plus the amount that would
reduce by one-half its surplus capital ratio (the percentage by
which the association's capital-to-assets ratio exceeds the ratio
of its fully phased-in capital requirements to its assets) at the
beginning of the calendar year, or (b) 75% of its net income over
the most recent four-quarter period. A Tier 1 association may
make capital distributions in excess of the foregoing limits if
the OTS does not object after receiving notice thereof. A Tier 2
association is authorized to make distributions of up to 75% of
net income over the most recent four-quarter period if it
satisfies its fully phased-in risk-based capital requirement, or
up to 50% of such net income if it satisfies its interim (90% of
fully phased-in amount) risk-based capital requirement. A Tier 2
association may, through a written approval process, obtain OTS
approval to make distributions in excess of these amounts.
Tier 3 associations are not authorized to make any capital
distributions without prior written OTS approval unless, in the
case of an association operating in compliance with an approved
capital plan, the capital distribution is consistent with the
association's capital plan. The OTS has supervisory authority to
prohibit the payment of capital distributions for Tier 1 and
Tier 2 associations.
For certain limitations on the ability of Sovereign
Bank to pay dividends to Sovereign, see Sovereign's Annual Report
on Form 10-K for the year ended December 31, 1994 which is
incorporated herein by reference. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
Prior to the issuance of any Sovereign Preferred Stock
which possesses voting rights (see "Preferred Stock" below), the
holders of shares of Sovereign Common Stock will possess
exclusive voting rights in Sovereign. Each holder of shares of
Sovereign Common Stock will be entitled to one vote for each
share held on matters upon which shareholders have the right to
vote. Sovereign shareholders are not entitled to cumulate votes
in the election of directors.
The Sovereign Board of Directors is divided into three
classes, each serving three-year terms, so that approximately
one-third of the directors of Sovereign are elected at each
annual meeting of shareholders of Sovereign. Classification of
the Sovereign Board of Directors has the effect of decreasing the
number of directors that could be elected in a single year by any
person who seeks to elect its designees to a majority of the
seats on the Sovereign Board of Directors and thereby could
impede a change in control of Sovereign.
The holders of Sovereign Common Stock have no
preemptive rights to acquire any additional shares of Sovereign.
In addition, the Sovereign Common Stock is not subject to
redemption.
Sovereign's Articles of Incorporation authorize the
Sovereign Board of Directors to issue authorized shares of
Sovereign Common Stock without shareholder approval. Sovereign
Common Stock is included for quotation on the Nasdaq/NMS. As a
result, in order to maintain such inclusion, approval of
Sovereign's shareholders is required for the issuance of
additional shares of Sovereign Common Stock or securities
convertible into Sovereign Common Stock if the issuance of such
securities (1) is in connection with the acquisition of a
company, is not in connection with a public offering for cash,
and the securities issued have or will have voting power equal to
or in excess of 20% of the voting power outstanding before such
issuance; (2) is in connection with the acquisition of a company
in which a director, officer or substantial shareholder of
Sovereign has a 5% or greater interest and the issuance of the
securities could result in an increase in outstanding common
stock or voting power of 5% or more; (3) is in connection with a
transaction, other than a public offering, at a price less than
the greater of book or market value in which the shares issued
will equal 20% or more of the shares of Sovereign Common Stock or
20% or more of the voting power outstanding before issuance; or
(4) would result in a change in control of Sovereign. Under
Nasdaq/NMS rules, shareholder approval is also required for the
establishment of a stock option or purchase plan in which stock
may be acquired by officers and directors other than a
broadly-based plan in which other security holders of Sovereign
or employees of Sovereign participate. For a discussion of
whether the approval of Sovereign shareholders is required for
the issuance of the shares of Sovereign Common Stock issuable to
WJB stockholders in the Merger, see "THE MEETING -- Votes
Required; Quorum."
In the event of liquidation, dissolution or winding-up
of Sovereign, whether voluntary or involuntary, holders of
Sovereign Common Stock will be entitled to share ratably in any
of its assets or funds that are available for distribution to its
shareholders after the satisfaction of its liabilities (or after
adequate provision is made therefor) and after payment of any
liquidation preferences of any outstanding Sovereign Preferred
Stock.
Preferred Stock
General
Sovereign's Board of Directors is authorized to approve
the issuance of Sovereign Preferred Stock, without any required
approval of shareholders. The rights, qualifications,
limitations and restrictions on each series of Sovereign
Preferred Stock issued will be determined by the Board of
Directors at the time of issuance and may include, among other
things, rights to participating dividends, voting and
convertibility into shares of Common Stock. Shares of Sovereign
Preferred Stock may be issued with dividend, redemption, voting,
and liquidation rights taking priority over Common Stock, and may
be convertible into common stock, as determined by the Board of
Directors at the time of issuance.
On May 17, 1995, Sovereign issued 2,000,000 shares of
6-1/4% Cumulative, Convertible Preferred Stock, Series B (the
"Series B Preferred Stock").
Description of Series B Preferred Stock
Ranking. The Series B Preferred Stock will rank prior
to Sovereign Common Stock and Series A Junior Participating
Preferred Stock, and on a parity with all other preferred stock
of Sovereign (unless such other preferred stock is expressly made
junior to the Series B Preferred Stock), with respect to the
payment of dividends and amounts payable upon any voluntary or
involuntary liquidation, dissolution or winding up of Sovereign.
Dividends. Holders of shares of Series B Preferred
Stock are entitled to receive, when and as declared by the Board
of Directors, cash dividends payable quarterly at the rate of
6-1/4% per annum. Dividends on the Series B Preferred Stock,
calculated as a percentage of the liquidation preference, are
payable quarterly on February 15, May 15, August 15 and
November 15 of each year. Dividends will be cumulative from the
date of issue of the Series B Preferred Stock. So long as any
Series B Preferred Stock is outstanding, Sovereign may not
declare any dividends on the Sovereign Common Stock or any other
stock ranking as to dividends or distribution of assets junior to
the Series B Preferred Stock (the Common stock and any such other
stock being herein referred to as "Junior Stock"), or make any
payment on account of, or set apart money for, a sinking or other
analogous fund for the purchase, redemption or other retirement
of any shares of Junior Stock, or make any distribution in
respect thereof, whether in cash or property or in obligations or
stock of Sovereign, other than Junior Stock, unless (i) full
cumulative dividends shall have been paid or declared and set
apart for payment upon all outstanding shares of Sovereign
Preferred Stock other than Junior Stock, and (ii) Sovereign is
not in default or in arrears with respect to any sinking or other
analogous fund or any call for tenders, obligation or other
agreement for the purchase, redemption or other retirement of any
shares of Sovereign Preferred Stock other than Junior Stock. If
dividends on shares of the Series B Preferred Stock are in
arrears, and there shall be outstanding shares of any other
series of Sovereign Preferred Stock ranking on a parity as to
dividends with the shares of the Series B Preferred Stock,
Sovereign in making any dividend payment on account of such
arrears, is required to make payments ratably upon all
outstanding shares of the Series B Preferred Stock and shares of
such other series of Sovereign Preferred Stock in proportion to
the respective amounts of dividends in arrears on such shares of
Series B Preferred Stock and shares of other series of Sovereign
Preferred Stock.
Conversion Rights. Holders of shares of Series B
Preferred Stock have the right, at their option, to convert
shares of Series B Preferred Stock into shares of Sovereign
Common Stock at any time at an initial conversion rate of 4.989
(adjusted to reflect the Sovereign Stock Dividend) shares of
Common Stock for each share of Series B Preferred Stock provided
that if any of the Preferred Stock is called for redemption, the
conversion rights pertaining thereto will terminate at the close
of business on the date fixed for redemption. The conversion
rate is subject to adjustment in certain events, including:
(i) the issuance of capital stock as a dividend or distribution
on the Sovereign Common Stock; (ii) subdivisions and combinations
of the Sovereign Common Stock; (iii) the issuance to all holders
of Sovereign Common Stock of certain rights or warrants entitling
them to subscribe for or purchase Sovereign Common Stock (or
securities convertible into Sovereign Common Stock) within
45 days after the date fixed for the determination of the
shareholders entitled to receive such rights or warrants, at less
than the current market price; and (iv) the distribution to all
holders of Sovereign Common Stock of evidences of indebtedness or
assets of Sovereign (excluding those referred to above).
In the case of (i) any reclassification or change of
the Common Stock, or (ii) a consolidation or merger involving
Sovereign, or (iii) a sale or conveyance to another corporation
of the property and assets of Sovereign as an entirety or
substantially as an entirety, in each case as a result of which
holders of Sovereign Common Stock will be entitled to receive
stock, securities, other property or assets (including cash) with
respect to or in exchange for such Sovereign Common Stock, the
holders of the Series B Preferred Stock then outstanding will be
entitled thereafter to convert such Series B Preferred Stock into
the kind and amount of shares of stock and other securities or
property which they would have received upon such
reclassification, change, consolidation, merger, combination,
sale or conveyance had such Series B Preferred Stock been
converted into Sovereign Common Stock immediately prior to such
reclassification, change, consolidation, merger, combination,
sale or conveyance.
Liquidation Rights. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of Sovereign,
the holders of shares of Series B Preferred Stock are entitled to
receive out of assets of Sovereign available for distribution to
shareholders, before any distribution of assets is made to
holders of Sovereign Common Stock or of any other stock of
Sovereign ranking as to such distribution junior to the Series B
Preferred Stock, liquidating distributions in the amount of $50
per share plus accrued and unpaid dividends. If upon any
voluntary or involuntary liquidation, dissolution or winding up
of Sovereign, the amounts payable with respect to the Series B
Preferred Stock and any other shares of stock of Sovereign
ranking as to any such distribution on a parity with the Series B
Preferred Stock are not paid in full, the holders of the Series B
Preferred Stock and of each other share will share ratably in any
such distribution of assets of Sovereign in proportion to the
full respective preferential amounts to which they are entitled.
After payment of the full amount of the liquidating distribution
to which they are entitled, the holders of shares of Series B
Preferred Stock will not be entitled to any further participation
in any distribution of assets by Sovereign. A consolidation or
merger of Sovereign with or into any other corporation or
corporations or a sale of all or substantially all of the assets
of Sovereign will not be deemed to be a liquidation, dissolution
or winding up of Sovereign.
Redemption. The shares of Series B Preferred Stock are
not redeemable prior to May 15, 1998. On or after May 15, 1998,
at any time or from time to time, each share of Series B
Preferred Stock will be redeemable in whole or in part at the
option of Sovereign, upon not less than 30 nor more than 60 days'
notice, at a redemption price as set forth below plus, in each
case, accrued and unpaid dividends to the redemption date.
If Redeemed During the
Twelve Months Beginning May 15, Redemption Price
1998........................... $52.188
1999........................... 51.875
2000........................... 51.563
2001........................... 51.250
2002........................... 50.938
2003........................... 50.625
2004........................... 50.313
and at $50 per share thereafter
The Series B Preferred Stock may not be redeemed and
Sovereign may not otherwise purchase or acquire any shares of the
Series B Preferred Stock unless full cumulative dividends on the
Series B Preferred Stock or on any series of Sovereign Preferred
Stock ranking on a parity with or senior to the Series B
Preferred Stock have been paid or declared and set apart for
payment and unless all matured obligations of Sovereign with
respect to all sinking funds or purchase funds applicable to any
other series of Sovereign Preferred Stock then outstanding have
been met.
Voting Rights. Except as indicated below, or except as
expressly required by applicable law, the holders of the Series B
Preferred Stock are not entitled to vote.
If the equivalent of six quarterly dividends payable on
any series of Sovereign Preferred Stock of Sovereign are in
default (whether or not declared consecutive), the holders of all
outstanding series of Sovereign Preferred Stock, voting as a
single class without regard to series, will be entitled to elect
two directors until all dividends in default have been paid or
declared and set apart for payment. The affirmative vote or
consent of the holders of at least two-thirds of the outstanding
shares of Series B Preferred Stock and any other series of
Sovereign Preferred Stock, voting as a single class without
regard to series, will be required (i) for any amendment to
Sovereign's Articles of Incorporation (or any certificate
supplemental thereto providing for the capital stock of
Sovereign) or Bylaws which will materially and adversely change
the preferences, privileges, rights or powers of the Sovereign
Preferred Stock, but, in any case in which one or more, but not
all, series of preferred stock would be affected as to their
preferences, privileges, rights or powers, only the consent of
holders of at least two-thirds of the shares of all such series
that would be so affected, voting separately as a class, will be
required; or (ii) to issue any class of stock which shall have
preference as to dividends or distribution of assets over any
outstanding series of Sovereign Preferred stock.
Shareholder Rights Plan
Sovereign maintains a Shareholder Rights Plan (the
"Rights Plan") designed to protect shareholders from attempts to
acquire control of Sovereign at an inadequate price. Under the
Rights Plan, each outstanding share of Sovereign Common Stock has
attached to it one right to purchase one one-hundredth of a share
of a series of junior participating preferred stock at an initial
exercise price of $40. The rights are not currently exercisable
or transferable, and no separate certificates evidencing such
rights will be distributed, unless certain events occur.
The rights become exercisable to purchase shares of the
junior participating preferred stock if a person, group or other
entity acquires or commences a tender offer or an exchange offer
for 19.9% or more of total voting power. They can also be
exercised if a person or group who has become a beneficial owner
of at least 4.9% of Sovereign Common Stock or total voting power
is declared by Sovereign's Board of Directors to be an "adverse
person," as defined in the Rights Plan.
After the rights become exercisable, under certain
circumstances, the rights (other than rights held by a 19.9%
beneficial owner or an "adverse person") will entitle the holders
to purchase either Sovereign Common Stock or the common stock of
the potential acquiror, in lieu of the junior participating
preferred stock, at a substantially reduced price.
Sovereign is generally entitled to redeem the rights at
$.001 per right at any time until the tenth business day
following public announcement that a 19.9% position has been
acquired. At any time prior to the date the rights have become
nonredeemable, the Sovereign Board of Directors can extend the
redemption period. Rights are not redeemable following an
"adverse person" determination.
Special Charter and Pennsylvania Corporate Law Provisions
Sovereign's Articles of Incorporation and Bylaws
contain certain provisions which may have the effect of deterring
or discouraging, among other things, a nonnegotiated tender or
exchange offer for Sovereign stock, a proxy contest for control
of Sovereign, the assumption of control of Sovereign by a holder
of a large block of Sovereign's stock and the removal of
Sovereign's management. These provisions: (1) empower the
Sovereign Board of Directors, without shareholder approval, to
issue Sovereign Preferred Stock the terms of which, including
voting power, are set by the Sovereign Board of Directors;
(2) divide the Sovereign Board of Directors into three classes
serving staggered three-year terms; (3) restrict the ability of
shareholders to remove directors; (4) require that shares with at
least 80% of total voting power approve mergers and other similar
transactions with a person or entity holding stock with more than
5% of Sovereign's voting power, if the transaction is not
approved, in advance, by the Sovereign Board of Directors;
(5) prohibit shareholders' actions without a meeting; (6) require
that shares with at least 80%, or in certain instances a
majority, of total voting power approve the repeal or amendment
of Sovereign's articles of incorporation; (7) require any person
who acquires stock of Sovereign with voting power of 25% or more
to offer to purchase for cash all remaining shares of Sovereign's
voting stock at the highest price paid by such person for shares
of Sovereign's voting stock during the preceding year;
(8) eliminate cumulative voting in elections of directors;
(9) require an affirmative vote of at least two-thirds of
Sovereign's total voting power in order for shareholders to
repeal or amend Sovereign's bylaws; (10) require advance notice
of nominations for the election of directors and the presentation
of shareholder proposals at meetings of shareholders; and
(11) provide that officers, directors, employees, agents and
persons who own 5% or more of the voting securities of any other
corporation or other entity that owns 66-2/3% or more of
Sovereign's outstanding voting stock cannot constitute a majority
of the members of Sovereign's Board of Directors.
The Pennsylvania Business Corporation Law of 1988 (the
"PaBCL") also contains certain provisions applicable to Sovereign
which may have the effect of impeding a change in control of
Sovereign. These provisions, among other things: (1) require
that, following any acquisition by any person or group of 20% of
a public corporation's voting power, the remaining shareholders
have the right to receive payment for their shares, in cash, from
such person or group in an amount equal to the "fair value" of
the shares, including an increment representing a proportion of
any value payable for control of the corporation; and
(2) prohibit for five years, subject to certain exceptions, a
"business combination" (which includes a merger or consolidation
of the corporation or a sale, lease or exchange of assets) with a
shareholder or group of shareholders beneficially owning 20% or
more of a public corporation's voting power.
In 1990, Pennsylvania adopted legislation further
amending the PaBCL. To the extent applicable to Sovereign at the
present time, this legislation generally (1) expands the factors
and groups (including shareholders) which the Sovereign Board of
Directors can consider in determining whether a certain action is
in the best interests of the corporation; (2) provides that the
Sovereign Board of Directors need not consider the interests of
any particular group as dominant or controlling; (3) provides
that Sovereign's directors, in order to satisfy the presumption
that they have acted in the best interests of the corporation,
need not satisfy any greater obligation or higher burden of proof
with respect to actions relating to an acquisition or potential
acquisition of control; (4) provides that actions relating to
acquisitions of control that are approved by a majority of
"disinterested directors" are presumed to satisfy the directors'
standard, unless it is proven by clear and convincing evidence
that the directors did not assent to such action in good faith
after reasonable investigation; and (5) provides that the
fiduciary duty of Sovereign's directors is solely to the
corporation and may be enforced by the corporation or by a
shareholder in a derivative action, but not by a shareholder
directly.
The 1990 amendments to the PaBCL explicitly provide
that the fiduciary duty of directors shall not be deemed to
require directors (1) to redeem any rights under, or to modify or
render inapplicable, any shareholder rights plan; (2) to render
inapplicable, or make determinations under, provisions of the
PaBCL relating to control transactions, business combinations,
control-share acquisitions or disgorgement by certain controlling
shareholders following attempts to acquire control; or (3) to act
as the board of directors, a committee of the board or an
individual director solely because of the effect such action
might have on an acquisition or potential or proposed acquisition
of control of the corporation or the consideration that might be
offered or paid to shareholders in such an acquisition. One of
the effects of the 1990 fiduciary duty statutory provisions may
be to make it more difficult for a shareholder to successfully
challenge the actions of the Sovereign Board of Directors in a
potential change in control context. Pennsylvania case law
appears to provide that the fiduciary duty standard under the
1990 amendments to the PaBCL grants directors the statutory
authority to reject or refuse to consider any potential or
proposed acquisition of the corporation.
Sovereign opted out of coverage by the "disgorgement"
and "control-share acquisition" statutes included in the 1990
legislation, pursuant to a Bylaw amendment as permitted by the
legislation; Sovereign can reverse this action under certain
circumstances.
<PAGE>
COMPARISON OF SHAREHOLDER RIGHTS
General
Sovereign is a Pennsylvania corporation subject to the
provisions of the PaBCL. WJB is a New Jersey corporation subject
to the provisions of the New Jersey Business Corporation Act
("NJBCA"). Stockholders of WJB, whose rights are governed by
WJB's Certificate of Incorporation, WJB's Bylaws and the NJBCA
will, upon completion of the Merger, become shareholders of
Sovereign and, on the Effective Date, their rights as
shareholders of Sovereign will be determined by Sovereign's
Articles of Incorporation, Sovereign's Bylaws and the PaBCL.
The following is a summary of the material differences in
the rights of stockholders of WJB under WJB's Certificate of
Incorporation and Bylaws and the NJBCA, on the one hand, and the
rights of shareholders of Sovereign under Sovereign's Articles of
Incorporation and Bylaws and the PaBCL, on the other hand. The
following discussion does not purport to be a complete discussion
of, and is qualified in its entirety by reference to, the
governing law and the Articles or Certificate of Incorporation
and Bylaws of each corporation.
Authorized Capital
Sovereign's Articles of Incorporation authorize the issuance
of 100,000,000 shares of Sovereign Common Stock, no par value,
and 7,500,000 shares of preferred stock, no par value. As of
September 30, 1995, there were 48,365,124 shares of Sovereign
Common Stock and 2,000,000 shares of Series B Preferred Stock
outstanding.
WJB's Certificate of Incorporation authorizes the
issuance 10,000,000 shares of WJB Common Stock, no par value, of
which 1,958,196 shares were issued and outstanding as of the
Record Date, and 5,000,000 shares of preferred stock, no par
value (the "WJB Preferred Stock"), none of which were issued and
outstanding as of the Record Date. WJB Preferred Stock is
issuable in series, each having such rights, and preferences as
the Board of Directors of WJB may, by adoption of an amendment of
WJB's Certificate of Incorporation, fix and determine.
Directors
Removal
Pursuant to Sovereign's Articles of Incorporation, Sovereign
directors may be removed from office without cause by the
affirmative vote of a majority of outstanding voting shares.
WJB's Certificate of Incorporation provides for the removal of
directors only with cause. Under the NJBCA and WJB's Certificate
of Incorporation, WJB's directors, may not be removed without
cause.
Nomination
Sovereign's Bylaws provide that nominations for the election
of directors may be made by the Board of Directors or any
shareholder entitled to vote for the election of directors.
Written notice of a shareholder's intent to nominate a director
at the meeting must be delivered to the Secretary of Sovereign
not less than 90 days nor more than 120 days prior to the date of
the annual meeting of shareholders. However, if less than 21
days' notice of the meeting is given to shareholders, written
notice of a shareholder's intent to nominate a director is
required to be delivered to the Secretary of Sovereign not later
than the seventh day following the day on which notice of the
meeting was first mailed to shareholders. The notice is required
to be in writing and contain or be accompanied by certain
information about such shareholder, as described in Sovereign's
Bylaws. The chairman of the meeting may, if the facts warrant,
determine and declare to the meeting that any nomination made at
the meeting was not made in accordance with the foregoing
procedures and, in such event, the nomination will be
disregarded.
WJB's Bylaws contain similar provisions regarding
stockholder nominations for the election of directors, except
that nominations submitted by stockholders of WJB must be
received by the Secretary of WJB 60 days prior to the anniversary
date of the mailing of WJB's proxy materials in connection with
the immediately preceding annual meeting of stockholders
regardless of when notice of the meeting is given to
stockholders.
Election of Directors
Sovereign's Articles of Incorporation and Bylaws provide
that the Sovereign Board of Directors shall be composed of not
less than six nor more than twenty-five directors, the number of
which may be determined by the Sovereign Board of Directors.
Currently, the Sovereign Board of Directors is composed of nine
members. The Sovereign Board of Directors is divided into three
classes, each serving three-year terms, so that approximately
one-third of the directors of Sovereign are elected at each
annual meeting of shareholders of Sovereign. Classification of
the Sovereign Board of Directors has the effect of decreasing the
number of directors that could be elected in a single year by any
person who seeks to elect its designees to a majority of the
seats on the Sovereign Board of Directors and thereby could
impede a change in control of Sovereign.
WJB's Certificate of Incorporation and Bylaws provide that
the WJB Board of Directors shall be composed of not less than 5
nor more than fifteen directors, the number of which may be
determined by the WJB Board of Directors. The WJB Board of
Directors is divided into five classes, each serving five year
terms. Classification of the WJB Board of Directors has the
effect of decreasing the number of directors that could be
elected in a single year by any person who seeks to elect its
designees to a majority of the seats on the WJB Board of
Directors and thereby could impede a change of control of WJB.
Cumulative Voting
Neither Sovereign's shareholders nor WJB's stockholders are
permitted to cumulate votes in the election of directors.
Limited Liability
As permitted by the PaBCL, Sovereign's Bylaws provide that
directors of Sovereign are not personally liable for taking or
failing to take any action unless the director breached or failed
to perform the duties of his or her office as set forth under
Pennsylvania law and such breach or failure constitutes self-
dealing, willful misconduct or recklessness; provided, however,
that there is no such elimination of liability arising under any
criminal statute or with respect to the payment of taxes pursuant
to local, state or federal law.
As permitted by the NJBCA, WJB's Certificate of
Incorporation provides that directors of WJB are not personally
liable for breach of any duty owed to WJB or its stockholders,
unless such breach of duty is the result of an act or omission
(i) in breach of such director's duty of loyalty to WJB 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.
Indemnification
As permitted by the PaBCL, Sovereign's Bylaws provide for
indemnification of directors, officers and agents for certain
litigation-related liabilities and expenses unless the
individual's conduct is determined by a court to have constituted
willful misconduct or reckless conduct.
As permitted by the NJBCA, WJB's Certificate of
Incorporation provides for indemnification of directors,
officers, employees and agents of WJB, and any other person
serving in such capacity with any other entity at the request of
WJB, for certain litigation-related liabilities and expenses to
the full extent permitted under the NJBCA. No indemnification
shall be made to an individual of a judgment establishes that the
individual's acts (i) were in breach of his duty of loyalty to
WJB or its stockholders, (ii) were not in good faith or involved
a knowing violation of law, or (iii) resulted in the receipt of
an improper personal benefit.
Shareholders' Meeting
Sovereign's Bylaws provide that the Board of Directors may
fix the date and time of the annual meeting of shareholders, but
if no such date is fixed, the meeting for any calendar year is to
be held on the third Thursday of April in such year. Notice of
the annual meeting of shareholders must be given not less than 10
days before the date of the meeting. The presence, in person or
by proxy, of shareholders entitled to cast at least a majority of
the votes that all shareholders are entitled to cast constitutes
a quorum for the transaction of business at the meeting.
Sovereign's Bylaws provide that special meetings of shareholders
may be called at any time by any of the following: (1) the Board
of Directors at a duly called and held meeting or upon the
unanimous written consent of the members of the Board of
Directors or (2) the Chairman of the Board or the Chief Executive
Officer of Sovereign, upon receiving written direction of at
least a majority of directors then in office. Notice of special
meetings of shareholders must be given not less than 10 days
before the date of the meeting.
WJB's Bylaws provide that the annual meeting of stockholders
of WJB shall be held on the third Wednesday of April or on such
other date as may be determined by the WJB Board of Directors.
Notice of the annual meeting of stockholders must be given at
least 10 days and not more than 60 days prior to the date of the
meeting. The presence, in person or by proxy, of the holders of
shares entitled to cast a majority of the votes at the meeting
shall constitute a quorum for the transaction of business at the
meeting. A special meeting of WJB's stockholders may be called
at any time (1) by the affirmative vote of a majority of the
Board of Directors; (2) by the Chairman of the Board of Directors
of WJB; (3) by the President of WJB; or (4) as otherwise required
by the NJBCA. The NJBCA provides that holders of 10% or more of
all the shares entitled to vote may apply to the Superior Court
of New Jersey to order that a special meeting of stockholders be
held. Notice of a special meeting of stockholders must be given
at least 10 days and not more than 60 days prior to the date of
the meeting.
The respective Bylaws of Sovereign and WJB set forth
procedures pursuant to which any business, including the
nomination of directors by a shareholder, may be properly brought
by a shareholder before an annual meeting of shareholders.
Shareholder Rights Plan
Sovereign has adopted a shareholder rights plan pursuant to
which holders of Sovereign Common Stock are entitled, under
certain circumstances generally involving an accumulation of
Sovereign Common Stock, to purchase Sovereign Common Stock or
common stock of the potential acquiror at a substantially reduced
price. See "DESCRIPTION OF SOVEREIGN CAPITAL SECURITIES --
Shareholder Rights Plan." WJB has not adopted a shareholder
rights plan.
Antitakeover Provisions
Sovereign is subject to some, but not all, of various
provisions of the PaBCL which are triggered, in general, if any
person or group acquires, or discloses an intent to acquire, 20%
or more of the voting power of a covered corporation, other than
pursuant to a registered firm commitment underwriting or, in
certain cases, pursuant to the approving vote of the board of
directors. The relevant provisions are contained in Subchapters
25E-H of the PaBCL.
Subchapter 25E of the PaBCL (relating to control
transactions) provides that if any person or group acquires 20%
or more of the voting power of a covered corporation, the
remaining shareholders may demand from such person or group the
fair value of their shares, including a proportionate amount of
any control premium.
Subchapter 25F of the PaBCL (relating to business
combinations) delays for five years and imposes conditions upon
"business combinations" between an "interested shareholder" and
the corporation. The term "business combination" is defined
broadly to include various transactions utilizing a corporation's
assets for purchase price amortization or refinancing purposes.
For this purpose, an "interested shareholder" is defined
generally as the beneficial owner of at least 20% of a
corporation's voting shares.
Subchapter 25G of the PaBCL (relating to control-share
acquisitions) prevents a person who has acquired 20% or more of
the voting power of a covered corporation from voting such shares
unless the "disinterested" shareholders approve such voting
rights. Failure to obtain such approval exposes the owner to the
risk of a forced sale of the shares to the issuer. Even if
shareholder approval is obtained, the corporation is also subject
to Subchapters 25I and J of the PaBCL. Subchapter 25I provides
for a minimum severance payment to certain employees terminated
within two years of the approval. Subchapter 25J prohibits the
abrogation of certain labor contracts prior to their stated date
of expiration.
Subchapter 25H of the PaBCL (relating to disgorgement)
applies in the event that (i) any person or group publicly
discloses that the person or group may acquire control of the
corporation or (ii) a person or group acquires (or publicly
discloses an offer or intent to acquire) 20% or more of the
voting power of the corporation and, in either case, sells shares
within 18 months thereafter. Any profits from sales of equity
securities of the corporation by the person or group during the
18-month period belong to the corporation if the securities that
were sold were acquired during the 18-month period or within 24
months prior thereto.
Subchapters 25E-H of the PaBCL contain a wide variety of
transactional and status exemptions, exclusions and safe harbors.
As permitted under the PaBCL, Sovereign has opted out of the
provisions of Subchapters 25G and H but is subject to the
provisions of Subchapters 25E and F. Such action can be reversed
under certain circumstances.
In addition, the fiduciary duty standards applicable to the
Board of Directors of Sovereign under the PaBCL and certain
provisions of Sovereign's Articles of Incorporation and Bylaws
may have the effect of deterring or discouraging, among other
things, a nonnegotiated tender or exchange offer for Sovereign
stock, a proxy contest for control of Sovereign, the assumption
of control of Sovereign by a holder of a large block of
Sovereign's stock and the removal of Sovereign's management. See
"DESCRIPTION OF SOVEREIGN CAPITAL SECURITIES -- Special Charter
and Pennsylvania Corporation Law Provisions."
The New Jersey Shareholders Protection Act ("NJSPA")
provides that no corporation organized under the laws of New
Jersey with its principal executive offices or significant
operations located in New Jersey (a "New Jersey Resident Domestic
Corporation") may engage in any "business combination" (as
defined in the NJSPA, a "Business Combination") with any
interested stockholder (as defined in the NJSPA, an "Interested
Stockholder") of that New Jersey Resident Domestic Corporation
for a period of five years following that Interested
Stockholder's stock acquisition unless that Business Combination
is approved by the board of directors of that New Jersey Resident
Domestic Corporation prior to that Interested Stockholder's stock
acquisition. The term Business Combination as defined in the
NJSPA includes, among other things, certain mergers,
consolidations, asset transfers, stock issuances, plans of
liquidation and recapitalizations. Interested Stockholder, as
defined in the NJSPA, includes certain holders of 10% or more of
the voting power of the outstanding voting stock of that New
Jersey Resident Domestic Corporation and certain affiliates of
the New Jersey Resident Domestic Corporation that at any time
within the five year period immediately prior to the date in
question were the beneficial owners, directly or indirectly, of
10% or more of the voting power of the then outstanding stock of
the New Jersey Resident Domestic Corporation.
Pursuant to the NJSPA, no New Jersey Resident Domestic
Corporation may engage, at any time, in any Business Combination
with any Interested Stockholder of that New Jersey Resident
Domestic Corporation other than: (i) a Business Combination
approved by the board of directors of that New Jersey Resident
Domestic Corporation prior to that Interested Stockholder's stock
acquisition, (ii) a Business Combination approved by the
affirmative vote of the holders of two-thirds of the voting stock
not beneficially owned by that Interested Stockholder at a
meeting called for such purpose, or (iii) a Business Combination
where, among other things, the Interested Stockholder pays a
formula price designed to ensure that all holders (other than the
Interested Stockholder) of stock of the New Jersey Resident
Domestic Corporation receive at least the highest price per share
paid by that Interested Stockholder. The NJSPA does not apply
to, among other things, certain inadvertent acquisitions,
provided the shareholder divests itself or himself of a
sufficient number of shares in accordance with the NJSPA. A New
Jersey Resident Domestic Corporation may not opt-out of the
NJSPA.
In addition to the NJSPA, Article 9 of WJB's Certificate of
Incorporation also contains provisions restricting (and requires
that, under certain circumstances, 80% of the outstanding voting
stock of WJB approve) certain business combinations such as
mergers, consolidations, asset transfers, stock acquisitions and
recapitalizations with related persons and their affiliates.
Related persons include, among others, persons who beneficially
own 10% or more of the voting stock of WJB and certain affiliates
of WJB that at any time within the five year period immediately
prior to the announcement of any business combination were the
beneficial owners, directly or indirectly, of 10% or more of the
voting stock of WJB.
The existence of the foregoing provisions could result in
WJB being less attractive to a potential acquiror, and WJB's
stockholders receiving less for their shares of WJB Common Stock
then otherwise might be available in a takeover attempt.
Under the NJBCA, the director of a New Jersey corporation
may consider, in discharging his or her duties to the corporation
and in determining what he or she reasonably believes to be in
the best interest of the corporation, any of the following (in
addition to the effects of any action on shareholders): (i) the
effects of the action on the corporation's employees, suppliers,
creditors and customers, (ii) the effects of the action on the
community in which the corporation operates and (iii) the long-
term as well as the short-term interests of the corporation and
its shareholders, including the possibility that these interests
may be best served by the continued independence of the
corporation. If, on the basis of the foregoing factors, the
board of directors determines that any proposal or offer to
acquire the corporation is not in the best interest of the
corporation, it may reject such proposal or offer, in which event
the board of directors will have no duty to remove any obstacles
to, or refrain from impeding, such proposal or offer.
Required Shareholder Vote
General
Subject to the voting rights of any series of Sovereign
Preferred Stock then outstanding, the holders of Sovereign Common
Stock possess exclusive voting rights of Sovereign. Each holder
of Sovereign Common Stock is entitled to one vote for each share
owned of record. There are no cumulative voting rights in the
election of directors. For general corporate action of the
shareholders of Sovereign, the affirmative vote of a majority of
the votes represented, in person or by proxy, at a shareholders'
meeting is required for approval.
The holders of WJB Common Stock possess exclusive voting
rights of WJB. Each holder of WJB Common Stock is entitled to
one vote for each share owned of record. There are no cumulative
voting rights in the election of directors. For general
corporate action of the shareholders of WJB, the affirmative vote
of the majority in interest of those present, in person or by
proxy, at any stockholders' meeting is required for approval.
Fundamental Changes
Sovereign's Articles of Incorporation require that a plan of
merger, consolidation, share exchange, division, conversion or
asset transfer (in respect of a sale, lease, exchange or other
disposition of all, or substantially all, the assets of Sovereign
other than in the usual and regular course of business) must be
approved by the affirmative vote of shareholders entitled to cast
at least a majority of the votes which all shareholders are
entitled to cast, except that shareholder approval of any such
transaction which is approved in advance by at least 66-2/3% of
the members of Sovereign's Board of Directors requires only the
affirmative vote of a majority of the votes cast. In the absence
of prior approval by Sovereign's Board of Directors, Sovereign's
Articles of Incorporation require a vote of shareholders with at
least 80% of Sovereign's total voting power to approve any
merger, consolidation, share exchange, asset transfer (in respect
of a sale, lease, exchange or other disposition of all, or
substantially all, the assets of Sovereign) or similar
transactions involving a shareholder holding 5% or more of
Sovereign's voting power.
Under the NJBCA, a business combination (such as the
Merger), other than a business combination governed by the NJSPA
or Article 9 of WJB's Certificate of Incorporation, must be
approved by the affirmative vote of a majority of the votes cast
by the holders of shares entitled to vote thereon at a meeting of
stockholders at which a quorum is present.
Amendment of Articles or Certificate of Incorporation
Sovereign's Articles of Incorporation contain various
provisions that require a supermajority vote of shareholders to
amend or repeal particular sections of such Articles. Amendment
or repeal of the provisions of Sovereign's Articles of
Incorporation relating to noncumulative voting, the
classification of directors, the requirement of holding meetings
for shareholder action, the amendment of Bylaws generally, and
the consideration of non-economic factors by Sovereign's Board of
Directors if evaluating a tender offer, all require (i) the
affirmative vote of 80% of the shares entitled to vote or
(ii) the affirmative vote of 80% of the members of Sovereign's
Board of Directors and the affirmative vote of shareholders
entitled to cast at least a majority of votes when all
shareholders are entitled to cast.
The NJBCA provides that a corporation's certificate of
incorporation generally may be amended upon approval of such
corporation's board of directors and the affirmative vote of a
majority of the votes cast by stockholders entitled to vote,
subject to any supermajority requirements set forth in such
certificate of incorporation. WJB's Certificate of Incorporation
requires the affirmative vote of a majority the shares entitled
to vote to amend any provision of WJB's Certificate of
Incorporation, except that the affirmative vote of 66-2/3% of the
shares entitled to vote to amend any of the provisions set forth
in Articles 6, 7, 8, 9 (the affirmative vote of 80% of the shares
entitled to vote and the affirmative vote of an independent
majority of stockholders (as defined in WJB's Certificate of
Incorporation) is required under certain circumstances to amend
certain provisions of Article 9 regarding business combinations),
10 and 11 of WJB's Certificate of Incorporation.
Amendment of Bylaws
The authority to amend or repeal Sovereign's Bylaws is
vested in Sovereign's Board of Directors, subject always to the
power of the shareholders of Sovereign to change such action by
the affirmative vote of shareholders entitled to cast at least
66-2/3% of the votes that all shareholders are entitled to cast
(except that any amendment to the indemnification provisions set
forth in the Bylaws requires the affirmative vote of 66-2/3% of
the Board of Directors or shareholders entitled to cast at least
80% of the votes that all shareholders are entitled to cast).
WJB's Bylaws may be amended by the Board of Directors of WJB
or by the affirmative vote of at least 66-2/3% of the shares
entitled to vote on such amendment.
Mandatory Tender Offer Provision
Sovereign's Articles of Incorporation provide that any
person or entity acquiring Sovereign capital stock with 25% or
more of Sovereign's total voting power is required to offer to
purchase, for cash, all shares of Sovereign's voting stock, at a
price per share equal to the highest price paid by such person
for each respective class of Sovereign's voting stock within the
preceding twelve months. WJB's Certificate of Incorporation
contains no equivalent provision. The PaBCL also provides that
following any acquisition by a person or group of more than 20%
of a publicly-held corporation's voting stock, the remaining
shareholders have the right to receive payment, in cash, for
their shares from such person or group of an amount equal to the
"fair value" of their shares, including a proportionate amount
for any control premium. The NJBCA contains no equivalent
provision.
Dissenters' Rights
Under the PaBCL, a shareholder of a corporation is generally
entitled to receive payment for the fair value of such
shareholder's shares if such shareholder duly exercises
dissenters' rights with respect to a plan of merger or
consolidation, share exchange or asset transfer, to which such
corporation is a party, except if the shares are (i) listed on a
national securities exchange, or (ii) held by more than 2,000
shareholders. The foregoing market exceptions do not apply, and
dissenters' rights generally are available in respect of,
(i) shares that are not converted solely into shares or shares
and money in lieu of fractional shares, (ii) shares of any
preferred or special class unless the shareholders of the class
are entitled to vote on the plan and such class vote is required
for the adoption of the plan or to effectuate the transaction and
(iii) shares which under the plan are treated differently from
shares of the same class or series and which are not entitled to
vote as a special class under Section 1906(c) of the PaBCL. The
PaBCL allows a corporation to provide for dissenters' rights in
its articles of incorporation or bylaws notwithstanding the
statutory exceptions, but Sovereign's Articles of Incorporation
and Bylaws do not require such optional dissenters' rights.
Under the PaBCL, if a plan of merger or consolidation, share
exchange, asset transfer, division or conversion is adopted by
the directors only, without any shareholder approvals required,
the shareholders have no statutory dissenters' rights in respect
of the plan other than optional dissenters' rights, if any. In
respect of the Merger, as permitted under the PaBCL, the plan has
been adopted by the Sovereign Board of Directors, no action is
required by Sovereign shareholders and no optional dissenters'
rights have been granted to Sovereign shareholders.
The NJBCA generally provides for dissenters' rights in
connection with any merger or consolidation or any sale, lease,
exchange, or other disposition of all or substantially all of the
assets of the corporation not in the usual or ordinary course of
business. However, no such rights exist with respect to (i) any
class or series of shares that is listed on a national securities
exchange or is held of record by not less than 1,000 holders on
the record date fixed to determine the stockholders entitled to
vote on the transaction, or, generally, (ii) any transaction in
connection with which the stockholders of the corporation will
receive only (a) cash, (b) securities that, upon completion of
the transaction, will be listed on a national securities exchange
or held by record by not less than 1,000 holders, or (c) cash and
such securities. A stockholder of a corporation may, under
certain circumstances, also dissent from any acquisition of
shares owned by such stockholder in connection with the
acquisition by another New Jersey corporation, in exchange for
its shares, of all the shares of a class or series of securities
of such corporation. Any stockholder that perfects dissenters'
rights under the NJBCA is entitled to receive the "fair value" of
such shares as determined either by agreement between such
stockholder and the corporation or by a court of competent
jurisdiction. WJB stockholders have no dissenters' rights with
respect to the Merger.
Dividends
Under the PaBCL, a corporation may pay dividends unless,
after giving effect thereto, (i) the corporation would be unable
to pay its debts as they come due in the usual course of business
or (ii) the total assets of the corporation would be less than
the sum of its total liabilities plus the amount that would be
needed, if the corporation were to be dissolved at the time as of
which the distribution is measured, to satisfy the preferential
rights upon dissolution of shareholders whose preferential rights
are superior to those receiving the distribution.
Subject to any restrictions contained in a corporation's
certificate of incorporation, the NJBCA provides that a
corporation may pay cash dividends unless, after giving effect
thereto, (i) the corporation would be unable to pay its debts as
they become due in the usual course of its business or (ii) the
corporation's total assets would be less than its total
liabilities.
Voluntary Dissolution
Under the PaBCL and Sovereign's Articles of Incorporation,
if at least 66-2/3% of Sovereign's Board of Directors approves
the dissolution of Sovereign, Sovereign may be dissolved upon the
affirmative vote of a majority of the votes cast by all
shareholders entitled to vote thereon and, if any class of shares
is entitled to vote thereon as a class, the affirmative vote of a
majority of the votes cast in each class vote. Under Sovereign's
Articles of Incorporation, if at least 66-2/3% of Sovereigns'
Board of Directors has not recommended that Sovereign be
dissolved, Sovereign may be dissolved upon the affirmative vote
of shareholders entitled to cast at least 80% of the votes which
all shareholders are entitled to cast.
Under the NJBCA, WJB may be dissolved upon the consent of
all its stockholders entitled to vote thereon or, alternatively,
if the WJB Board recommends that WJB be dissolved and directs
that the question be submitted to a vote at a meeting of
shareholders, WJB may be dissolved upon the affirmative vote of a
majority of the votes cast by the stockholders entitled to vote
thereon and, if any class or series of securities of WJB is
entitled to vote on such motion as a class, upon the affirmative
vote of a majority of the votes cast by each such class. If the
dissolution is proposed by, on behalf of or pursuant to any
agreement, arrangement or understanding with an Interested
Stockholder, the NJSPA and/or Article 9 of WJB's Certificate of
Incorporation may apply. See "Antitakeover Provisions" above.
Preemptive Rights
Neither the holders of Sovereign Common Stock nor WJB Common
Stock are entitled to preemptive rights.
<PAGE>
ADJOURNMENT OF SPECIAL MEETING
In the event that there are not sufficient votes to
constitute a quorum or approve the adoption of the Merger
Agreement at the time of the Special Meeting, such proposal could
not be approved unless the Special Meeting were adjourned in
order to permit further solicitation of proxies. In order to
allow proxies which have been received by WJB at the time of the
Special Meeting to be voted for such adjournment, if necessary,
WJB has submitted the question of adjournment under such
circumstances to its stockholders as a separate matter for their
consideration. A majority of the votes cast by the holders of
the outstanding shares of WJB Common Stock entitled to vote
thereon at the Special Meeting is required in order to approve
the Adjournment Proposal.
The Board of Directors of WJB recommends that
stockholders vote their proxies in favor of the Adjournment
Proposal so that their proxies may be used for such purposes in
the event it becomes necessary. Properly executed proxies will
be voted in favor of the Adjournment Proposal unless otherwise
indicated thereon. If it is necessary to adjourn the Special
Meeting, no notice of the time and place of the adjourned meeting
is required to be given to stockholders other than an
announcement of such time and place at the Special Meeting.
<PAGE>
EXPERTS
The consolidated financial statements of Sovereign
Bancorp, Inc., at December 31, 1994 and 1993 and for each of the
three years in the period ended December 31, 1994, incorporated
by reference in Sovereign Bancorp, Inc.'s Annual Report on
Form 10-K for the year ended December 31, 1994, have been audited
by Ernst & Young LLP, independent auditors, as set forth in their
report thereon and incorporated herein by reference which, as to
the years 1993 and 1992, is based in part on the report of BDO
Seidman LLP, independent auditors. Such consolidated financial
statements are incorporated herein by reference in reliance upon
such report given upon the authority of such firms as experts in
accounting and auditing.
The consolidated financial statements of WJB at
December 31, 1994 and 1993 and for each of the three years in the
period ended December 31, 1994 incorporated by reference in WJB's
Annual Report on Form 10-K for the year ended December 31, 1994,
have been audited by Deloitte & Touche LLP, independent auditors,
as stated in their report which is incorporated by reference
herein, and have been so incorporated in reliance upon the report
of such firm given upon their authority as experts in accounting
and auditing. Deloitte & Touche LLP will have a representative
at the Special Meeting who will have an opportunity to make a
statement if such representative desires, and who will be
available to respond to appropriate questions.
LEGAL MATTERS
The validity of the Sovereign Common Stock to be
issued in the Merger, certain federal income tax consequences of
the Merger, and certain other legal matters relating to the
Merger are being passed upon by the law firm of Stevens & Lee,
counsel to Sovereign. Joseph E. Lewis, a director of Sovereign
Bank, is a principal of the firm of Stevens & Lee. Stevens & Lee
and its attorneys own an aggregate of approximately 215,000
shares of Sovereign Common Stock.
SHAREHOLDER PROPOSALS
Any Sovereign shareholder who desires to submit a
proposal to be considered for inclusion in Sovereign's proxy
materials relating to its 1996 annual meeting of shareholders
must submit such proposal in writing, addressed to Sovereign
Bancorp, Inc. at 1130 Berkshire Boulevard, Wyomissing,
Pennsylvania 19610 (Attention: Secretary), on or before
January 18, 1996.
If the Merger has not been consummated prior to
WJB's 1996 Annual Meeting of Stockholders, which is usually held
on the third Wednesday of April, any proposal which a WJB
stockholder intends to have included in the proxy solicitation
materials of WJB to be used in connection with the 1996 Annual
Meeting must be presented to WJB no later than March 1, 1996.
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER BETWEEN SOVEREIGN BANCORP, INC.
AND WEST JERSEY BANCSHARES, INC.
<PAGE>
AGREEMENT AND PLAN
OF MERGER
between
SOVEREIGN BANCORP, INC.
and
WEST JERSEY BANCSHARES, INC.
September 29, 1995
<PAGE>
AGREEMENT
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGERS
Section 1.01 Definitions .................................. A-7
Section 1.02 The Merger ................................... A-11
Section 1.03 The Bank Merger .............................. A-18
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF WJB
Section 2.01 Organization ................................. A-18
Section 2.02 Capitalization ............................... A-19
Section 2.03 Authority; No Violation ...................... A-20
Section 2.04 Consents ..................................... A-21
Section 2.05 Financial Statements ......................... A-22
Section 2.06 Taxes ........................................ A-22
Section 2.07 No Material Adverse Change ................... A-23
Section 2.08 Contracts .................................... A-23
Section 2.09 Ownership of Property; Insurance Coverage .... A-24
Section 2.10 Legal Proceedings ............................ A-25
Section 2.11 Compliance With Applicable Law ............... A-26
Section 2.12 ERISA ........................................ A-27
Section 2.13 Brokers, Finders and Professionals ........... A-28
Section 2.14 Environmental Matters ........................ A-28
Section 2.15 Loan Portfolio ............................... A-28
Section 2.16 Information to be Supplied ................... A-28
Section 2.17 Securities Documents ......................... A-29
Section 2.18 Related Party Transactions ................... A-29
Section 2.19 Quality of Representations ................... A-29
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SOVEREIGN
Section 3.01 Organization ................................. A-30
Section 3.02 Capital Structure ............................ A-31
Section 3.03 Authority; No Violation ...................... A-31
Section 3.04 Consents ..................................... A-33
Section 3.05 Financial Statements ......................... A-33
Section 3.06 Taxes ........................................ A-34
Section 3.07 No Material Adverse Change ................... A-34
Section 3.08 Legal Proceedings ............................ A-34
Section 3.09 Ownership of Property; Insurance Coverage .... A-34
Section 3.10 Compliance With Applicable Law ............... A-35
Section 3.11 Information to be Supplied ................... A-35
Section 3.12 ERISA ........................................ A-35
Section 3.13 Securities Documents ......................... A-36
Section 3.14 Quality of Representations ................... A-37
ARTICLE IV
COVENANTS OF THE PARTIES
Section 4.01 Conduct of WJB's Business .................... A-37
Section 4.02 Access; Confidentiality ...................... A-39
Section 4.03 Regulatory Matters and Consents .............. A-40
Section 4.04 Taking of Necessary Action ................... A-41
Section 4.05 Certain Agreements ........................... A-42
Section 4.06 No Other Bids and Related Matters ............ A-44
Section 4.07 Duty to Advise; Duty to Update
Disclosure Schedules ......................... A-44
Section 4.08 Conduct of Sovereign's Business .............. A-45
Section 4.09 Board and Committee Minutes .................. A-45
Section 4.10 Undertakings by Sovereign and WJB ............ A-45
Section 4.11 Employee Benefits and Severance .............. A-47
ARTICLE V
CONDITIONS
Section 5.01 Conditions to WJB's Obligations under this
Agreement .................................... A-48
Section 5.02 Conditions to Sovereign's Obligations under
this Agreement ............................... A-50
ARTICLE VI
TERMINATION, WAIVER AND AMENDMENT
Section 6.01 Termination .................................. A-51
Section 6.02 Effect of Termination ........................ A-53
ARTICLE VII
MISCELLANEOUS
Section 7.01 Expenses ..................................... A-53
Section 7.02 Non-Survival of Representations and
Warranties ................................... A-53
Section 7.03 Amendment, Extension and Waiver .............. A-53
Section 7.04 Entire Agreement ............................. A-54
Section 7.05 No Assignment ................................ A-54
Section 7.06 Notices ...................................... A-54
Section 7.07 Captions ..................................... A-55
Section 7.08 Counterparts ................................. A-55
Section 7.09 Severability ................................. A-55
Section 7.10 Governing Law
Exhibit 1 WJB Affiliate Agreement
Exhibit 2 Stock Option Agreement
Exhibit 3 Bank Plan of Merger
Exhibit 4 Form of Opinion of Sovereign's Counsel
Exhibit 5 Form of Tax Opinion of Sovereign's
Counsel
Exhibit 6 Form of Opinion of WJB's Counsel
<PAGE>
AGREEMENT
THIS AGREEMENT AND PLAN OF MERGER, dated as of
September 29, 1995, is made by and between SOVEREIGN BANCORP,
INC. ("Sovereign"), a Pennsylvania corporation, having its
principal place of business at 1130 Berkshire Boulevard,
Wyomissing, Pennsylvania 19610, and WEST JERSEY BANCSHARES, INC.
("WJB"), a New Jersey corporation, having its principal place of
business at 165 Passaic Avenue, Fairfield, New Jersey 07004.
BACKGROUND
1. Sovereign and WJB desire for WJB to merge with and
into Sovereign, with Sovereign surviving such merger, in
accordance with the applicable laws of the Commonwealth of
Pennsylvania and the State of New Jersey, and in accordance with
the plan of merger set forth herein.
2. At or prior to the execution and delivery of this
Agreement, and as a condition and inducement to Sovereign's
execution of this Agreement (a) certain directors and officers of
WJB executed, in favor of Sovereign, a Letter Agreement dated
September 29, 1995, in the form attached hereto as Exhibit 1, and
(b) WJB granted to Sovereign an option to acquire, under certain
circumstances, WJB's common stock (the "Sovereign Option")
pursuant to a Stock Option Agreement between Sovereign and WJB
dated September 29, 1995, attached hereto as Exhibit 2.
3. Sovereign desires to merge West Jersey Community
Bank, a state commercial bank and a wholly-owned subsidiary of
WJB ("WJCB"), into and with Sovereign Bank, FSB, a federal
savings bank and a wholly-owned subsidiary of Sovereign
("Sovereign Bank"), with Sovereign Bank surviving such merger in
accordance with the Bank Plan of Merger in the form attached
hereto as Exhibit 3. Sovereign and WJB desire that following the
Effective Date of the Merger WJCB will be operated as a separate
and autonomous commercial bank division of Sovereign Bank for at
least three years.
4. Sovereign and WJB desire to provide the terms and
conditions governing the transactions contemplated herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of
the mutual covenants, agreements, representations and warranties
herein contained, the parties hereto, intending to be legally
bound, do hereby agree as follows:
ARTICLE I
THE MERGERS
Section 1.01 Definitions. As used in this Agreement,
the following terms shall have the indicated meanings (such
meanings to be equally applicable to both the singular and plural
forms of the terms defined):
Affiliate means, with respect to any Person, any
Person who directly, or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under
common control with, such Person and, without limiting the
generality of the foregoing, includes any executive officer,
director or 5% equity owner of such Person and any Affiliate
of such executive officer, director or 5% equity owner.
Agreement means this agreement, and any amendment
or supplement hereto, which constitutes a "plan of merger"
between Sovereign and WJB.
Applicable Exchange Ratio means (i) 0.7938 as
adjusted in accordance with Sections 1.02(e)(v) and 1.02(f)
or (ii) if the Sovereign Market Value is less than $9.52 or
greater than $11.64, the exchange ratio determined in
accordance with Sections 1.02(e)(iv), 1.02(e)(v) and
1.02(f).
Applications means the applications for regulatory
approval which are required by the transactions contemplated
hereby.
Articles of Merger means the articles of merger to
be executed by Sovereign and WJB and to be filed in the PDS
and the NJDS, in accordance with the applicable laws of the
Commonwealth of Pennsylvania and the State of New Jersey.
Bank Merger means the merger of WJCB with and into
Sovereign Bank, with Sovereign Bank surviving such merger,
contemplated by Section 1.03 of this Agreement.
Bank Plan of Merger has the meaning given to that
term in Section 1.03 of this Agreement.
BCL means the Pennsylvania Business Corporation
Law of 1988, as amended.
BHC Act means the Bank Holding Company Act of
1956, as amended.
Closing Date means the date determined by
Sovereign with the approval of WJB (which approval shall not
be unreasonably withheld), in its sole discretion, upon five
(5) days prior written notice to WJB, but in no event later
than thirty (30) days after the last condition precedent
pursuant to this Agreement has been fulfilled or waived, or
such other date as Sovereign and WJB shall agree.
Effective Date means the date upon which the
Articles of Merger shall be filed in the PDS and the NJDS,
and shall be the same as the Closing Date.
Environmental Law means any federal, state, local
or foreign law, statute, ordinance, rule, regulation, code,
license, permit, authorization, approval, consent, order,
judgment, decree, injunction or agreement with any
Regulatory Authority relating to (i) the protection,
preservation or restoration of the environment (including,
without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface
soil, plant and animal life or any other natural resource),
and/or (ii) the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling,
production, release or disposal of any substance presently
listed, defined, designated or classified as hazardous,
toxic, radioactive or dangerous, or otherwise regulated,
whether by type or by quantity, including any material
containing any such substance as a component.
ERISA means the Employee Retirement Income
Security Act of 1974, as amended.
Exchange Act means the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated
from time to time thereunder.
FDIC means the Federal Deposit Insurance
Corporation.
FFIEC means the Federal Financial Institutions
Examination Council.
FRB means the Federal Reserve Board.
GAAP means generally accepted accounting
principles as in effect at any particular time.
HOLA means the Home Owners' Loan Act of 1933, as
amended.
IRC means the Internal Revenue Code of 1986, as
amended.
IRS means the Internal Revenue Service.
Material Adverse Effect shall mean, with respect
to Sovereign or WJB, any adverse effect on assets, business,
financial condition or results of operations which is
material on a consolidated basis.
Merger means the merger of WJB with and into
Sovereign, with Sovereign surviving such merger,
contemplated by this Agreement.
NJBCA means the New Jersey Business Corporation
Act, as amended.
NJDB means the Department of Banking of the State
of New Jersey.
NJDS means the New Jersey Department of State.
OTS means the Office of Thrift Supervision.
PDB means the Department of Banking of the
Commonwealth of Pennsylvania.
PDS means the Department of State of the
Commonwealth of Pennsylvania.
Person means any individual, corporation,
partnership, joint venture, association, trust or "group"
(as that term is defined under the Exchange Act).
Prospectus/Proxy Statement means the
prospectus/proxy statement, together with any supplements
thereto, to be transmitted to holders of WJB Common Stock in
connection with the transactions contemplated by this
Agreement.
Registration Statement means the registration
statement on Form S-4, including any pre-effective or
post-effective amendments or supplements thereto, as filed
with the SEC under the Securities Act with respect to the
Sovereign Common Stock and Sovereign Stock Purchase Rights
to be issued in connection with the transactions
contemplated by this Agreement.
Regulatory Agreement has the meaning given to that
term in Section 2.11 of this Agreement.
Regulatory Authority means any banking agency or
department of any federal or state government, including
without limitation the OTS, the FRB, the FDIC, the PDB, the
NJDB or the respective staffs thereof.
Rights means warrants, options, rights,
convertible securities and other capital stock equivalents
which obligate an entity to issue its securities.
SEC means the Securities and Exchange Commission.
Securities Act means the Securities Act of 1933,
as amended, and the rules and regulations promulgated from
time to time thereunder.
Securities Documents means all registration
statements, schedules, statements, forms, reports, proxy
material, and other documents required to be filed under the
Securities Laws.
Securities Laws means the Securities Act and the
Exchange Act and the rules and regulations promulgated from
time to time thereunder.
Sovereign Bank means Sovereign Bank, FSB, a
federal savings bank, all the outstanding capital stock of
which is owned by Sovereign.
Sovereign Common Stock has the meaning given to
that term in Section 3.02(a) of this Agreement.
Sovereign Disclosure Schedule means a disclosure
schedule delivered by Sovereign to WJB pursuant to
Article III of this Agreement.
Sovereign Financials means (i) the audited
consolidated financial statements of Sovereign as of
December 31, 1994 and 1993 and for the three years ended
December 31, 1994, and (ii) the unaudited interim
consolidated financial statements of Sovereign as of each
calendar quarter thereafter included in Securities Documents
filed by Sovereign.
Sovereign Market Value has the meaning given to
such term in Section 1.02(e)(iii).
Sovereign Option means the option granted to
Sovereign to acquire shares of WJB Common Stock referenced
in the recitals to this Agreement.
Sovereign Rights Agreement means the Rights
Agreement dated as of September 19, 1989 between Sovereign
and Sovereign Bank, as rights agent, relating to Sovereign's
Series A Junior Participating Preferred Stock.
Sovereign Stock Purchase Rights means Rights to
purchase a unit of Sovereign's Series A Junior Participating
Preferred Stock in accordance with the terms of the
Sovereign Rights Agreement.
Sovereign Subsidiaries means any corporation or
bank, 50% or more of the capital stock of which is owned,
either directly or indirectly, by Sovereign, except any
corporation the stock of which is held in the ordinary
course of the lending activities of a bank.
Subsidiary means any corporation or bank, 50% or
more of the capital stock of which is owned, either directly
or indirectly, by another entity, except any corporation the
stock of which is held in the ordinary course of the lending
activities of a bank.
WJB Common Stock means the common stock of WJB
described in Section 2.02(a).
WJB Disclosure Schedule means a disclosure
schedule delivered by WJB to Sovereign pursuant to
Article II of this Agreement.
WJB Financials means (i) the audited consolidated
financial statements of WJB as of December 31, 1994 and 1993
and for the three years ended December 31, 1994, and
(ii) the unaudited interim consolidated financial statements
of WJB as of each calendar quarter thereafter included in
Securities Documents filed by WJB.
WJB Regulatory Reports means the Call Reports,
consolidated reports of condition and income, and
accompanying schedules, filed by WJCB with any Regulatory
Authority for each calendar quarter, beginning with the
quarter ended March 31, 1993, through the Closing Date.
WJB Subsidiaries means any corporation or bank,
50% or more of the capital stock of which is owned, either
directly or indirectly, by WJB, except any corporation the
stock of which is held in the ordinary course of the lending
activities of WJCB.
Section 1.02 The Merger.
(a) Closing. The closing will take place at
10:00 a.m. on the Closing Date at the offices of Stevens & Lee,
607 Washington Street, Reading, Pennsylvania, unless another time
and place are agreed to by the parties hereto; provided, in any
case, that all conditions to closing set forth in Article V have
been satisfied or waived at or prior to the Closing Date. On the
Closing Date, WJB and Sovereign shall cause the Articles of
Merger to be duly executed and to be filed in the PDS and the
NJDS.
(b) The Merger. Subject to the terms and
conditions of this Agreement, on the Effective Date: WJB shall
merge with and into Sovereign; the separate existence of WJB
shall cease; Sovereign shall be the surviving corporation in the
Merger; and all of the property (real, personal and mixed),
rights, powers and duties and obligations of WJB shall be taken
and deemed to be transferred to and vested in Sovereign, as the
surviving corporation in the Merger, without further act or deed;
all debts, liabilities and duties of each of WJB and Sovereign
shall thereafter be the responsibility of Sovereign as the
surviving corporation; all in accordance with the applicable laws
of the Commonwealth of Pennsylvania and the State of New Jersey.
Following the Effective Date, WJCB will be operated as a separate
and autonomous commercial bank division of Sovereign Bank for at
least three years.
(c) Sovereign's Articles of Incorporation and
Bylaws. On and after the Effective Date, the Articles of
Incorporation and the Bylaws of Sovereign, as in effect
immediately prior to the Effective Date, shall automatically be
and remain the Articles of Incorporation and Bylaws of Sovereign,
as the surviving corporation in the Merger, until thereafter
altered, amended or repealed.
(d) Board of Directors and Officers of Sovereign
and Sovereign Bank.
(i) On the Effective Date, the Board of
Directors of Sovereign, as the surviving corporation in
connection with the Merger, shall consist of those persons
holding such office immediately prior to the Effective Date.
(ii) On the Effective Date, the officers of
Sovereign duly elected and holding office immediately prior to
the Effective Date shall be the officers of Sovereign, as the
surviving corporation in the Merger, existing on such Effective
Date.
(iii) On the effective date of the Bank
Merger, the officers of Sovereign Bank duly elected and holding
office immediately prior to such effective date shall be the
officers of Sovereign Bank, as the surviving corporation in the
Bank Merger, except for any other officers of WJB or WJCB as
Sovereign may designate as officers of Sovereign Bank. Each
shall hold office until his or her successor is elected and
qualified or otherwise in accordance with the Charter and Bylaws
of Sovereign Bank and the policies of Sovereign and Sovereign
Bank.
(iv) On the effective date of the Bank
Merger, the directors of Sovereign Bank as the surviving
institution in connection with the Bank Merger shall consist of
those persons holding such office immediately prior to the
Effective Date.
(v) On the effective date of the Bank
Merger, the officers of Sovereign Bank duly elected and holding
office immediately prior to such effective date shall be the
officers of the commercial bank division of Sovereign Bank,
except that John A. Van Voorhis and Gerard Riker shall be
designated and elected as the Chief Executive Officer and the
Chief Financial Officer of the commercial bank division of
Sovereign Bank, respectively, and except that such other officers
of WJB or WJCB as Sovereign and WJB shall mutually agree shall be
designated and elected as officers of the commercial bank
division of Sovereign Bank.
(vi) On the effective date of the Bank
Merger, Sovereign will create an autonomous board of directors
for the commercial bank division of Sovereign Bank which shall
consist of seven individuals selected by WJB. Sovereign shall
cause such persons to be elected as directors of the commercial
bank division of Sovereign Bank effective as of the effective
date of the Bank Merger, and each shall hold office for at least
a period of three years from the Effective Date and until his
successor is elected and qualified, and each shall continue to
receive the same per meeting Board fees for service on the board
as such persons were receiving immediately prior to September 19,
1995.
(e) Conversion of Shares.
(i) Sovereign Common Stock.
(A) Each share of Sovereign Common
Stock issued and outstanding immediately prior to the
Effective Date shall, on and after the Effective Date,
continue to be issued and outstanding as an identical share
of Sovereign Common Stock.
(B) Each share of Sovereign Common
Stock issued and held in the treasury of Sovereign as of the
Effective Date, if any, shall, on and after the Effective
Date, continue to be issued and held in the treasury of
Sovereign.
(ii) WJB Common Stock.
(A) Subject to the provisions of
subparagraphs (B), (C) and (D) of this Section 1.02(e)(ii),
each share of WJB Common Stock issued and outstanding
immediately prior to the Effective Date (other than shares
of WJB Common Stock, if any, then owned by Sovereign or WJB
or any WJB Subsidiary) shall, on the Effective Date, by
reason of the Merger and without any action on the part of
the holder thereof, be converted into and become a right to
receive, subject to adjustment as provided in Sections
1.02(e)(iv), 1.02(e)(v) and 1.02(f), 0.7938 fully paid and
nonassessable shares of Sovereign Common Stock and the
corresponding percentage of Sovereign Stock Purchase Rights
pursuant to the Sovereign Rights Agreement.
(B) Each share of WJB Common Stock
owned by Sovereign or a Sovereign Subsidiary on the
Effective Date, if any, shall be cancelled.
(C) Each share of WJB Common Stock
issued and held in the treasury of WJB or owned by any WJB
Subsidiary as of the Effective Date, if any, shall be
cancelled, and no cash, stock or other property shall be
delivered in exchange therefor.
(D) No fraction of a whole share of
Sovereign Common Stock and no scrip or certificates therefor
shall be issued in connection with the Merger, including in
connection with an election made pursuant to Section
1.02(e)(ii)(E)(ii). Any former holder of WJB Common Stock
who would otherwise be entitled to receive a fraction of a
share of Sovereign Common Stock shall receive, in lieu
thereof, cash in an amount equal to such fraction of a share
multiplied by the market value of Sovereign Common Stock
(determined in accordance with the provisions of
Section 1.02(e)(iii) hereof).
(E) (i) Subject to the limitations set
forth in paragraph (iv) of this Section 1.02(e)(ii)(E),
each holder of an option to acquire WJB Common Stock
granted under the WJB 1989 Stock Option and Stock
Appreciation Rights Program (the "WJB Stock Option
Plan"), and each holder of a warrant to acquire WJB
Common Stock issued in connection with WJB's initial
public offering (the "IPO Warrants") shall be entitled
(and must elect, in a written notice delivered to
Sovereign at least five (5) business days before the
initial filing of the Registration Statement) to either
(A) receive an amount of shares of Sovereign common
stock equal to the difference between $8.40 and the
exercise price ("Sovereign Stock Election") or
(B) exchange his option or warrant to acquire WJB
Common Stock for an option to acquire Sovereign Common
Stock ("Sovereign Option Election"). Failure to
deliver the written notice required by this Section
1.02(e)(ii)(E)(i) shall be deemed an election to
exchange an option or warrant to acquire WJB Common
Stock for an option to acquire Sovereign Common Stock.
(ii) If an option or warrant
holder makes a Sovereign Stock Election, such option or
warrant holder will receive Sovereign Common Stock with
a market value in an amount equal to the product of
(A) the difference between (i) the Sovereign Market
Value multiplied by the Applicable Exchange Ratio, and
(ii) the exercise price of the option or warrant,
multiplied by (B) the number of shares of WJB Common
Stock covered by the option or warrant. For purposes
of this Section 1.02(e)(ii)(E)(ii), the "market value"
of the Sovereign Common Stock shall equal the Sovereign
Market Value.
(iii) If an option or warrant
holder makes a Sovereign Option Election, each option
or warrant shall be converted into and become an option
to acquire that number of shares of Sovereign Common
Stock equal to the number of shares of WJB Common Stock
covered by the option or warrant multiplied by the
Applicable Exchange Ratio and the exercise price shall
be the present stated exercise price of such option or
warrant divided by the Applicable Exchange Ratio.
(iv) No holder of an option to
acquire WJB Common Stock shall be entitled to make a
Sovereign Stock Election, if the effect would be to
prevent Sovereign from accounting for the Merger as a
pooling of interests.
(iii) Valuation of Sovereign Common Stock.
For purposes of this Agreement, the market value of a share
of Sovereign Common Stock shall be deemed to be the weighted
average, based on daily trading volume, of the closing sale
price of a share of Sovereign Common Stock, as reported on
the National Association of Securities Dealers Automated
Quotation System (Nasdaq) National Market System, for the
20 consecutive trading days immediately prior to the
Effective Date ("Sovereign Market Value").
(iv) Exchange Ratio Adjustment.
Notwithstanding the provisions of Section 1.02(e)(ii)
hereof: (i) if the Sovereign Market Value is less than
$9.52, then each share of WJB Common Stock issued and
outstanding immediately prior to the Effective Date to be
converted into Sovereign Common Stock shall be converted
into and become such number of shares of Sovereign Common
Stock, as shall equal the amount obtained by dividing $7.56
by the Sovereign Market Value; and (ii) if the Sovereign
Market Value is greater than $11.64, then each share of WJB
Common Stock issued and outstanding immediately prior to the
Effective Date to be converted into Sovereign Common Stock
shall be converted into and become such number of shares of
Sovereign Common Stock, as shall equal the amount obtained
by dividing $9.24 by the Sovereign Market Value.
(v) Anti-Dilution Provisions. If Sovereign
shall, at any time before the Effective Date, (A) issue a
dividend in shares of Sovereign Common Stock, (B) combine
the outstanding shares of Sovereign Common Stock into a
smaller number of shares, (C) subdivide the outstanding
shares of Sovereign Common Stock, or (D) reclassify the
shares of Sovereign Common Stock, then, in any such event,
(i) if the Applicable Exchange Ratio is determined pursuant
to Section 1.02(e)(ii), the Applicable Exchange Ratio shall
be adjusted by multiplying the Applicable Exchange Ratio by
a fraction the numerator of which is equal to the number of
shares of Sovereign Common Stock outstanding immediately
after the happening of such event and the denominator of
which is equal to the number of shares of Sovereign Common
Stock outstanding immediately prior to the happening of such
event; or (ii) if the Applicable Exchange Ratio is
determined pursuant to Section 1.02(e)(iv), the Sovereign
Market Values at which the Applicable Exchange Ratio is to
be adjusted under Section 1.02(e)(iv) shall each be adjusted
by multiplying such Sovereign Market Values by a fraction
the numerator of which is equal to the number of shares of
Sovereign Common Stock outstanding immediately prior to the
happening of such event and the denominator of which is
equal to the number of shares of Sovereign Common Stock
outstanding immediately after the happening of such event.
(f) Effective Date After June 30, 1996. If the
Effective Date occurs after June 30, 1996 and the book value of
WJB Common Stock on June 30, 1996 is less than the book value of
WJB Common Stock on the Effective Date, then the exchange ratio
shall be increased by an amount equal to (i) the difference
between the fully diluted tangible book value of WJB Common Stock
as of the last day of the month preceding the Effective Date and
the tangible book value of WJB Common Stock as of June 30, 1996,
divided by (ii) the Sovereign Market Value.
(g) Surrender and Exchange of WJB Stock
Certificates.
(i) Exchange of Certificates. Each holder
of shares of WJB Common Stock who surrenders to Sovereign
the certificate or certificates representing such shares
will be entitled to receive, as soon as practicable after
the Effective Date, in exchange therefor a certificate or
certificates for the number of whole shares of Sovereign
Common Stock into which such holder's shares of WJB Common
Stock have been converted by the Merger, together with a
check for cash in lieu of any fractional share in accordance
with Section 1.02(e)(ii)(D) hereof.
(ii) Rights Evidenced by Certificates. Each
certificate for shares of Sovereign Common Stock issued in
exchange for certificates for WJB Common Stock pursuant to
Section 1.02(g)(i) hereof will be dated the Effective Date
and be entitled to dividends and all other rights and
privileges pertaining to such shares of stock from the
Effective Date. Until surrendered, each certificate
theretofore evidencing shares of WJB Common Stock will, from
and after the Effective Date, evidence solely the right to
receive certificates for shares of Sovereign Common Stock
pursuant to Section 1.02(g)(i) hereof and a check for cash
in lieu of any fractional share in accordance with
Section 1.02(e)(ii)(D) hereof. If certificates for shares
of WJB Common Stock are exchanged for Sovereign Common Stock
at a date following one or more record dates for the payment
of dividends or of any other distribution on the shares of
Sovereign Common Stock, Sovereign will pay cash in an amount
equal to dividends theretofore payable on such Sovereign
Common Stock and pay or deliver any other distribution to
which holders of shares of Sovereign Common Stock have
theretofore become entitled. No interest will accrue or be
payable in respect of dividends or cash otherwise payable
under this Section 1.02(g) upon surrender of certificates
for shares of WJB Common Stock. Notwithstanding the
foregoing, no party hereto will be liable to any holder of
WJB Common Stock for any amount paid in good faith to a
public official or agency pursuant to any applicable
abandoned property, escheat or similar law. Until such time
as certificates for shares of WJB Common Stock are
surrendered by a WJB shareholder to Sovereign for exchange,
Sovereign shall have the right to withhold dividends or any
other distributions on the shares of Sovereign Common Stock
issuable to such shareholder.
(iii) Exchange Procedures. Each certificate
for shares of WJB Common Stock delivered for exchange under
this Section 1.02(g) must be endorsed in blank by the
registered holder thereof or be accompanied by a power of
attorney to transfer such shares endorsed in blank by such
holder. If more than one certificate is surrendered at one
time and in one transmittal package for the same shareholder
account, the number of whole shares of Sovereign Common
Stock for which certificates will be issued pursuant to this
Section 1.02(g) will be computed on the basis of the
aggregate number of shares represented by the certificates
so surrendered. If shares of Sovereign Common Stock or
payments of cash are to be issued or made to a person other
than the one in whose name the surrendered certificate is
registered, the certificate so surrendered must be properly
endorsed in blank, with signature(s) guaranteed, or
otherwise in proper form for transfer, and the person to
whom certificates for shares of Sovereign Common Stock is to
be issued or to whom cash is to be paid shall pay any
transfer or other taxes required by reason of such issuance
or payment to a person other than the registered holder of
the certificate for shares of WJB Common Stock which are
surrendered. As promptly as practicable after the Effective
Date, Sovereign shall send or cause to be sent to each
shareholder of record of WJB Common Stock transmittal
materials for use in exchanging certificates representing
WJB Common Stock for certificates representing Sovereign
Common Stock into which the former have been converted in
the Merger.
(iv) Closing of Stock Transfer Books;
Cancellation of WJB Certificates. Upon the Effective Date,
the stock transfer books for WJB Common Stock will be closed
and no further transfers of shares of WJB Common Stock will
thereafter be made or recognized. All certificates for
shares of WJB Common Stock surrendered pursuant to this
Section 1.02(g) will be cancelled by Sovereign.
(h) Payment Procedures. As soon as practicable
after the Effective Date, Sovereign shall make payment of the
cash consideration provided for in Section 1.02(e)(ii)(D) to each
person entitled thereto.
Section 1.03 The Bank Merger. Sovereign and WJB shall
use their best efforts to cause WJCB to merge with and into
Sovereign Bank, with Sovereign Bank surviving such merger,
simultaneously with or as soon as practicable after the Effective
Date. Concurrently with the execution and delivery of this
Agreement, Sovereign shall cause Sovereign Bank, and WJB shall
cause WJCB, to execute and deliver the Bank Plan of Merger
attached hereto as Exhibit 3.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF WJB
WJB hereby represents and warrants to Sovereign that,
except as specifically set forth in the WJB Disclosure Schedule
delivered to Sovereign by WJB within thirty (30) days of the date
hereof:
Section 2.01 Organization.
(a) WJB is a corporation duly organized, validly
existing and in good standing under the laws of the State of
New Jersey. WJB is a bank holding company duly registered under the
BHC Act. WJB has the corporate power and authority to carry on
its business and operations as now being conducted and to own and
operate the properties and assets now owned and being operated by
it. WJB is not qualified or licensed to do business as a foreign
corporation in any jurisdiction and is not required to be so
qualified or licensed as the result of the ownership or leasing
of property or the conduct of its business except where the
failure to be so qualified or licensed would not have a Material
Adverse Effect.
(b) WJCB is a banking corporation duly organized
and validly existing under the laws of the State of New Jersey.
WJCB has the corporate power and authority to carry on its
business and operations as now being conducted and to own and
operate the properties and assets now owned and being operated by
it. Neither WJCB nor any WJB subsidiary is qualified or licensed
to do business as a foreign corporation in any jurisdiction and
are not required to be so qualified or licensed as the result of
the ownership or leasing of property or the conduct of its
business except where the failure to be so qualified or licensed
would not have a Material Adverse Effect.
(c) There are no WJB Subsidiaries other than WJCB
and those identified in the WJB Disclosure Schedule. There are
no WJCB Subsidiaries other than those identified in the WJB
Disclosure Schedule.
(d) WJCB is a commercial bank the deposits of
which are insured by the Bank Insurance Fund of the FDIC to the
extent provided in the Federal Deposit Insurance Act.
(e) The respective minute books of WJB and WJCB
and each other WJB Subsidiary accurately record, in all material
respects, all material corporate actions of their respective
shareholders and boards of directors (including committees)
through the date of this Agreement, except actions taken at
meetings held within ten days of the date hereof, which actions
shall be accurately recorded in such minute books in due course.
(f) Prior to the date of this Agreement, WJB has
delivered to Sovereign true and correct copies of the Certificate
of Incorporation and Bylaws of WJB and the Charter and Bylaws of
WJCB as in effect on the date hereof.
Section 2.02 Capitalization.
(a) The authorized capital stock of WJB consists
of (a) 10,000,000 shares of common stock, par value $0.01 ("WJB
Common Stock"), of which (i) 1,958,196 shares are outstanding,
validly issued, fully paid and nonassessable and free of
preemptive rights and (ii) no shares are held by WJB as treasury
stock, and (b) 5,000,000 shares of preferred stock, par value
$0.01, none of which are issued or outstanding. Neither WJB nor
WJCB nor any other WJB Subsidiary has or is bound by any
subscription, option, warrant, call, commitment, agreement, plan
or other Right of any character relating to the purchase, sale or
issuance or voting of, or right to receive dividends or other
distributions on any shares of WJB Common Stock, WJB preferred
stock or any other security of WJB or any securities representing
the right to vote, purchase or otherwise receive any shares of
WJB Common Stock, WJB preferred stock or any other security of
WJB, other than for (i) shares issuable under the Sovereign
Option and (ii) 92,299 shares which WJB is obligated to issue, at
an average exercise price of $5.00, under the WJB Stock Option
Plan to its directors, officers and employees and officers and
employees of WJB Subsidiaries, including WJCB, and
(iii) 128,416 shares which are issuable pursuant to the IPO
Warrants. As of September 22, 1995, WJB had approximately 359
shareholders of record.
(b) The authorized capital stock of WJCB consists
of 5,000,000 shares of common stock, par value $2.00 per share
("WJCB Common Stock"), of which 1,000,000 shares are outstanding,
validly issued, fully paid, nonassessable, free of preemptive
rights and owned by WJB. Neither WJB nor any other WJB
Subsidiary has or is bound by any subscription, option, warrant,
call, commitment, agreement or other Right of any character
relating to the purchase, sale or issuance or voting of, or right
to receive dividends or other distributions on any shares of the
capital stock of any WJB Subsidiary or any other security of any
WJB Subsidiary or any securities representing the right to vote,
purchase or otherwise receive any shares of the capital stock or
any other security of any WJB Subsidiary. Except for WJCB, there
is no other WJB Subsidiary.
(c) Except as set forth in the WJB Disclosure
Schedule, neither (i) WJB, (ii) WJCB or (iii) any other WJB
Subsidiary, owns any equity interest, directly or indirectly, in
any other company or controls any other company, except for
equity interests held in the investment portfolios of WJB
Subsidiaries, equity interests held by WJB Subsidiaries in a
fiduciary capacity, and equity interests held in connection with
the commercial loan activities of WJB Subsidiaries. There are no
subscriptions, options, warrants, calls, commitments, agreements
or other Rights outstanding and held by WJB or WJCB with respect
to any other company's capital stock or the equity of any other
person.
(d) To the best of WJB's knowledge, no person or
"group" (as that term is used in Section 13(d)(3) of the Exchange
Act) is the beneficial owner (as defined in Section 13(d) of the
Exchange Act) of 5% or more of the outstanding shares of WJB
Common Stock, except as disclosed in WJB's proxy statement for
use in connection with its 1995 annual meeting of shareholders,
previously delivered to Sovereign or in the WJB Disclosure
Schedule.
Section 2.03 Authority; No Violation.
(a) WJB has full corporate power and authority to
execute and deliver this Agreement and to complete the
transactions contemplated hereby. WJCB has full corporate power
and authority to execute and deliver the Bank Plan of Merger and
to consummate the Bank Merger. The execution and delivery of
this Agreement by WJB and the completion by WJB of the
transactions contemplated hereby have been duly and validly
approved by the Board of Directors of WJB and, except for
approval by the shareholders of WJB as required under the NJBCA,
WJB's Certificate of Incorporation and Bylaws and Nasdaq
requirements applicable to it, no other corporate proceedings on
the part of WJB are necessary to complete the transactions
contemplated hereby. This Agreement has been duly and validly
executed and delivered by WJB, subject to approval of the
shareholders of WJB as required under the NJBCA, WJB's
Certificate of Incorporation and Bylaws and Nasdaq requirements
applicable to it, and subject to approvals from the Regulatory
Authorities referred to in Section 3.04 hereof, and constitutes a
valid and binding obligation of WJB, enforceable against WJB in
accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally
and subject, as to enforceability, to general principles of
equity. Subject to approval by the shareholders of WJB and to
approvals from the Regulatory Authorities referred to in
Section 3.04 hereof, the Bank Plan of Merger, upon its execution
and delivery by WJCB, will constitute a valid and binding
obligation of WJCB, enforceable against WJCB in accordance with
its terms, subject to applicable conservatorship, receivership,
insolvency and similar laws affecting creditors' rights generally
and institutions the deposits of which are insured by the FDIC,
and subject, as to enforceability, to general principles of
equity.
(b) (A) The execution and delivery of this
Agreement by WJB, (B) the execution and delivery of the Bank Plan
of Merger by WJCB, (C) subject to receipt of approvals from the
shareholders of WJB and WJCB and from the Regulatory Authorities
referred to in Section 3.04 hereof and WJB's and Sovereign's
compliance with any conditions contained therein, the completion
of the transactions contemplated hereby, and (D) compliance by
WJB or WJCB with any of the terms or provisions hereof or of the
Bank Plan of Merger, will not (i) conflict with or result in a
breach of any provision of the Certificate of Incorporation or
Bylaws of WJB or any WJB Subsidiary or the Charter and Bylaws of
WJCB; (ii) violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction
applicable to WJB or any WJB Subsidiary or any of their
respective properties or assets; or (iii) except as set forth in
the WJB Disclosure Schedule, violate, conflict with, result in a
breach of any provisions of, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a
default) under, result in the termination of, accelerate the
performance required by, or result in a right of termination or
acceleration or the creation of any lien, security interest,
charge or other encumbrance upon any of the properties or assets
of WJB or any WJB Subsidiary under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, deed of
trust, license, lease, agreement, commitment or other instrument
or obligation to which WJB or any WJB Subsidiary is a party, or
by which they or any of their respective properties or assets may
be bound or affected, except for such violations, conflicts,
breaches or defaults under clause (ii) or (iii) hereof which,
either individually or in the aggregate, will not have a material
adverse effect on the assets, business, financial condition,
results of operations or business prospects of WJB and the WJB
Subsidiaries taken as a whole or the ability of WJB to perform
any of its obligations under this Agreement.
Section 2.04 Consents. Except for the consents,
approvals, filings and registrations from or with the Regulatory
Authorities referred to in Section 3.04 hereof and compliance
with any conditions contained therein, and the approval of this
Agreement by the shareholders of WJB under the NJBCA, and of the
Bank Plan of Merger by WJB as sole shareholder of WJCB under the
BHC Act, and by the WJCB Board of Directors, no consents or
approvals of, or filings or registrations with, any public body
or authority are necessary, and, except as set forth in the WJB
Disclosure Schedule, no consents or approvals of any third
parties are necessary, or will be, in connection with (a) the
execution and delivery of this Agreement by WJB or the Bank Plan
of Merger by WJCB, and (b) the completion by WJB of the
transactions contemplated hereby or by WJCB of the Bank Merger.
Section 2.05 Financial Statements.
(a) WJB has previously delivered, or will
deliver, to Sovereign the WJB Regulatory Reports. The WJB
Regulatory Reports have been, or will be, prepared in all
material respects in accordance with applicable regulatory
accounting principles and practices applied on a consistent basis
throughout the periods covered by such statements, and fairly
present, or will fairly present in all material respects, the
financial position, results of operations and changes in
shareholders' equity of WJB as of and for the periods ending on
the dates thereof, in accordance with applicable regulatory
accounting principles.
(b) WJB has previously delivered its audited
consolidated financial statements as of December 31, 1994 and
1993 and for the three years ended December 31, 1994. The WJB
Financials have been, or will be, prepared in accordance with
generally accepted accounting principles and practices throughout
the periods covered by such statements, and fairly present, or
will fairly present, the consolidated financial position, results
of operations and cash flows of WJB as of and for the periods
ending on the dates thereof, in accordance with generally
accepted accounting principles.
(c) At the date of each balance sheet included in
the WJB Financials or the WJB Regulatory Reports, neither WJB nor
WJCB nor any other prior banking subsidiary of WJCB (as the case
may be) had, or will have any liabilities, obligations or loss
contingencies of any nature (whether absolute, accrued,
contingent or otherwise) of a type required to be reflected in
such WJB Financials or WJB Regulatory Reports or in the footnotes
thereto which are not fully reflected or reserved against therein
or fully disclosed in a footnote thereto, except for liabilities,
obligations and loss contingencies which are not material in the
aggregate and which are incurred in the ordinary course of
business, consistent with past practice and except for
liabilities, obligations and loss contingencies which are within
the subject matter of a specific representation and warranty
herein and subject, in the case of any unaudited statements, to
normal, recurring audit adjustments and the absence of footnotes.
Section 2.06 Taxes.
(a) WJB and the WJB Subsidiaries are members of
the same affiliated group within the meaning of IRC
Section 1504(a). WJB has duly filed, and will file, all federal,
state and local tax returns required to be filed by or with
respect to WJB and all WJB Subsidiaries on or prior to the
Closing Date (all such returns being accurate and correct in all
material respects) and has duly paid or will pay, or made or will
make, provisions for the payment of all federal, state and local
taxes which have been incurred by or are due or claimed to be due
from WJB and any WJB Subsidiary by any taxing authority or
pursuant to any tax sharing agreement or arrangement (written or
oral) on or prior to the Closing Date other than taxes which
(i) are not delinquent or (ii) are being contested in good faith.
(b) No consent pursuant to IRC Section 341(f) has
been filed (or will be filed prior to the Closing Date) by or
with respect to WJB or any WJB Subsidiary.
Section 2.07 No Material Adverse Change.
WJB has not suffered any Material Adverse Effect since
June 30, 1995.
Section 2.08 Contracts.
(a) Except as described in WJB's proxy statement
for its 1995 annual meeting of shareholders and Annual Reports on
Form 10-K for the fiscal years ended December 31, 1992, 1993 and
1994, previously delivered to Sovereign, in the footnotes to the
audited consolidated financial statements of WJB as of
December 31, 1994 and 1993 and for the three years ended
December 31, 1994 or in the WJB Disclosure Schedule, neither WJB
nor any WJB Subsidiary is a party to or subject to: (i) any
employment, consulting or severance contract or arrangement with
any past or present officer, director or employee of WJB or any
WJB Subsidiary, except for "at will" arrangements; (ii) any plan,
arrangement or contract providing for bonuses, pensions, options,
deferred compensation, retirement payments, profit sharing or
similar arrangements for or with any past or present officers,
directors or employees of WJB or any WJB Subsidiary; (iii) any
collective bargaining agreement with any labor union relating to
employees of WJB or any WJB Subsidiary; (iv) any agreement which
by its terms limits the payment of dividends by any WJB
Subsidiary; (v) any instrument evidencing or related to
indebtedness for borrowed money whether directly or indirectly,
by way of purchase money obligation, conditional sale, lease
purchase, guaranty or otherwise, in respect of which WJB or any
WJB Subsidiary is an obligor to any person, which instrument
evidences or relates to indebtedness other than deposits,
repurchase agreements, bankers acceptances, letters of credit and
"treasury tax and loan" accounts established in the ordinary
course of business and transactions in "federal funds" or which
contains financial covenants or other restrictions (other than
those relating to the payment of principal and interest when due)
which would be applicable on or after the Closing Date to
Sovereign or any Sovereign Subsidiary; or (vi) any contract
(other than this Agreement) limiting the freedom of any WJB
Subsidiary to engage in any type of banking or bank-related
business permissible under law.
(b) True and correct copies of agreements, plans,
arrangements and instruments referred to in Section 2.08(a) or
described in the WJB proxy statement for its 1995 annual meeting
of shareholders or in a footnote to such audited consolidated
financial statements, including without limitation, the
employment contracts of Messrs. John A. Van Voorhis, Gerard Riker
and Michael J. McGrath, Jr. and the severance agreement of
Mr. Michael J. McGrath, Sr., have been provided to Sovereign on
or before the date hereof and are in full force and effect on the
date hereof and neither WJB nor any WJB Subsidiary (nor, to the
knowledge of WJB, any other party to any such contract, plan,
arrangement or instrument) has breached any provision of, or is
in default in any material respect under any term of, any such
contract, plan, arrangement or instrument. Except as set forth
in the WJB Disclosure Schedule or in the employment contracts or
severance agreement specifically referred to in the first
sentence of this paragraph (b), no party to any material
contract, plan, arrangement or instrument that requires annual
payments in excess of $250,000 will have the right to terminate
any or all of the provisions of any such contract, plan,
arrangement or instrument as a result of the transactions
contemplated by this Agreement. None of the employees (including
officers) of WJB or any WJB Subsidiary, other than
Messrs. Van Voorhis, Riker and McGrath, Jr., possesses the right
to terminate his or her employment as a result of the execution
of this Agreement. Except as set forth in the WJB Disclosure
Schedule, no plan, employment agreement, termination agreement,
or similar agreement or arrangement to which WJB or any WJB
Subsidiary is a party or under which WJB or any WJB Subsidiary
may be liable contains provisions which permit an employee or
independent contractor to terminate it without cause and continue
to accrue future benefits thereunder. Except as set forth in the
WJB Disclosure Schedule or the employment contracts or severance
agreement specifically referred to in the first sentence of this
paragraph (b), no such agreement, plan or arrangement
(x) provides for acceleration in the vesting of benefits or
payments due thereunder upon the occurrence of a change in
ownership or control of WJB or any WJB Subsidiary absent the
occurrence of a subsequent event, (y) provides for benefits which
may cause the disallowance of a federal income tax deduction
under IRC Section 280G; or (z) requires WJB or any WJB Subsidiary
to provide a benefit in the form of WJB Common Stock or
determined by reference to the value of WJB Common Stock.
Section 2.09 Ownership of Property; Insurance
Coverage.
(a) Except as disclosed in the WJB Disclosure
Schedule, WJB and the WJB Subsidiaries have, or will have as to
property acquired after the date hereof, good and, as to real
property, marketable title to all assets and properties owned by
WJB or any WJB Subsidiary in the conduct of their businesses,
whether such assets and properties are real or personal, tangible
or intangible, including assets and property reflected in the
balance sheets contained in the WJB Regulatory Reports and in the
WJB Financials or acquired subsequent thereto (except to the
extent that such assets and properties have been disposed of for
fair value, in the ordinary course of business, since the date of
such balance sheets), subject to no encumbrances, liens,
mortgages, security interests or pledges, except (i) those items
that secure liabilities that are reflected in such balance sheets
or the notes thereto or that secure liabilities incurred in the
ordinary course of business after the date of the last such
balance sheet, (ii) statutory liens for amounts not yet
delinquent or which are being contested in good faith and
(iii) items permitted under Article IV and encumbrances, liens,
mortgages, security interests and pledges that do not in the
aggregate have a Material Adverse Effect on WJB. WJB and the WJB
Subsidiaries, as lessee, have the right under valid and
subsisting leases of real and personal properties used by WJB and
its Subsidiaries in the conduct of their businesses to occupy or
use all such properties as presently occupied and used by each of
them. Except as disclosed in the WJB Disclosure Schedule, WJB
believes that such existing leases and commitments to lease
constitute or will constitute operating leases for both tax and
financial accounting purposes and the lease expense and minimum
rental commitments with respect to such leases and lease
commitments are as disclosed in the Notes to the WJB financial
statements as of December 31, 1994 and 1993 and for the periods
ended December 31, 1992, 1993 and 1994.
(b) With respect to all agreements pursuant to
which WJB or any WJB Subsidiary has purchased securities subject
to an agreement to resell, if any, WJB or such WJB Subsidiary, as
the case may be, has a valid, perfected first lien or security
interest in the securities or other collateral securing the
repurchase agreement, and the value of such collateral equals or
exceeds the amount of the debt secured thereby.
(c) WJB and the WJB Subsidiaries currently
maintain insurance considered by WJB to be reasonable for their
respective operations and similar in scope and coverage to that
maintained by other businesses similarly engaged. Neither WJB
nor any WJB Subsidiary has received notice from any insurance
carrier that (i) such insurance will be cancelled or that
coverage thereunder will be reduced or eliminated, or
(ii) premium costs with respect to such policies of insurance
will be substantially increased. There are presently no material
claims pending under such policies of insurance and no notices
have been given by WJB or WJCB under such policies. All such
insurance is valid and enforceable and in full force and effect,
and within the last three years WJB has received each type of
insurance coverage for which it has applied and during such
periods has not been denied indemnification for any material
claims submitted under any of its insurance policies.
Section 2.10 Legal Proceedings. Except as set forth
in the WJB Disclosure Schedule, neither WJB nor any WJB
Subsidiary is a party to any, and there are no pending or, to the
best of WJB's knowledge, threatened legal, administrative,
arbitration or other proceedings, claims (whether asserted or
unasserted), actions or governmental investigations or inquiries
of any nature (i) against WJB or any WJB Subsidiary, (ii) to
which WJB or any WJB Subsidiary's assets are or may be subject,
(iii) challenging the validity or propriety of any of the
transactions contemplated by this Agreement, or (iv) which could
reasonably be expected to materially and adversely affect the
ability of WJB to perform under this Agreement, except for any
proceedings, claims, actions, investigations or inquiries
referred to in clauses (i) or (ii) which, if adversely
determined, individually or in the aggregate, could not be
reasonably expected to have a Material Adverse Effect.
Section 2.11 Compliance With Applicable Law.
(a) WJB and WJB Subsidiaries hold all licenses,
franchises, permits and authorizations necessary for the lawful
conduct of their businesses under, and have complied in all
material respects with, applicable laws, statutes, orders, rules
or regulations of any federal, state or local governmental
authority relating to them, other than where such failure to hold
or such noncompliance will neither result in a limitation in any
material respect on the conduct of their businesses nor otherwise
have a material adverse effect on the assets, business, financial
condition, the results of operations or business prospects of WJB
and its Subsidiaries taken as a whole.
(b) Except as set forth in the WJB Disclosure
Schedule, neither WJB nor any WJB Subsidiary has received any
notification or communication from any Regulatory Authority
(i) asserting that WJB or any WJB Subsidiary is not in
substantial compliance with any of the statutes, regulations or
ordinances which such Regulatory Authority enforces;
(ii) threatening to revoke any license, franchise, permit or
governmental authorization which is material to WJB or any WJB
Subsidiary; (iii) requiring or threatening to require WJB or any
WJB Subsidiary, or indicating that WJB or any WJB Subsidiary may
be required, to enter into a cease and desist order, agreement or
memorandum of understanding or any other agreement restricting or
limiting, or purporting to restrict or limit, in any manner the
operations of WJB or any WJB Subsidiary, including without
limitation any restriction on the payment of dividends; or
(iv) directing, restricting or limiting, or purporting to direct,
restrict or limit, in any manner the operations of WJB or any WJB
Subsidiary, including without limitation any restriction on the
payment of dividends (any such notice, communication, memorandum,
agreement or order described in this sentence is hereinafter
referred to as a "Regulatory Agreement"). Except as set forth in
the WJB Disclosure Schedule, neither WJB nor any WJB Subsidiary
has consented to or entered into any Regulatory Agreement, except
as heretofore disclosed to Sovereign.
Section 2.12 ERISA. WJB has previously delivered, or
will deliver, to Sovereign true and complete copies of all
employee pension benefit plans within the meaning of ERISA
Section 3(2), profit sharing plans, stock purchase plans,
deferred compensation and supplemental income plans, supplemental
executive retirement plans, employment agreements, annual or long
term incentive plans, settlement plans, policies and agreements,
group insurance plans, and all other employee welfare benefit
plans within the meaning of ERISA Section 3(1) (including
vacation pay, sick leave, short-term disability, long-term
disability, and medical plans) and all other employee benefit
plans, policies, agreements and arrangements, all of which are
set forth in the WJB Disclosure Schedule, maintained or
contributed to for the benefit of the employees or former
employees (including retired employees) and any beneficiaries
thereof or directors or former directors of WJB or any WJB
Subsidiary, together with (i) the most recent actuarial (if any)
and financial reports relating to those plans which constitute
"qualified plans" under IRC Section 401(a), (ii) the most recent
annual reports relating to such plans filed by them,
respectively, with any government agency, and (iii) all rulings
and determination letters which pertain to any such plans.
Neither WJB nor any WJB Subsidiary, and no pension plan
maintained by WJB or any WJB Subsidiary, has incurred, directly
or indirectly, within the past six (6) years any liability under
Title IV of ERISA (including to the Pension Benefit Guaranty
Corporation) or to the IRS with respect to any pension plan
qualified under IRC Section 401(a), except liabilities to the
Pension Benefit Guaranty Corporation pursuant to ERISA
Section 4007, all of which have been fully paid, nor has any
reportable event under ERISA Section 4043(b) occurred with
respect to any such pension plan. Except as set forth on the WJB
Disclosure Schedule, with respect to each of such plans that is
subject to Title IV of ERISA, the present value of the accrued
benefits under such plan, based upon the actuarial assumptions
used for funding purposes in the plan's most recent actuarial
report dated December 31, 1994, did not, as of its latest
valuation date, exceed the then current value of the assets of
such plan allocable to such accrued benefits. Neither WJB nor
any WJB Subsidiary has incurred or is subject to any liability
under ERISA Section 4201 for a complete or partial withdrawal
from a multi-employer plan. All "employee benefit plans," as
defined in ERISA Section 3(3), comply and within the past six (6)
years have complied in all material respects with (i) relevant
provisions of ERISA and (ii) in the case of plans intended to
qualify for favorable income tax treatment, provisions of the IRC
relevant to such treatment. Except as disclosed in the WJB
Disclosure Schedule, neither WJB nor any WJB Subsidiary has a
material liability under any such plan which pursuant to GAAP is
required to be reflected on or disclosed in (pursuant to a
footnote or otherwise) the WJB Financials and which is not so
reflected or disclosed thereon. To the knowledge of WJB, except
as disclosed in the WJB Disclosure Schedule, no prohibited
transaction, breach of fiduciary duty or other transaction has
occurred within the past six (6) years with respect to any
employee benefit plan maintained by WJB or any WJB Subsidiary
which would result in the imposition, directly or indirectly, of
an excise tax or other penalty under ERISA or the IRC. WJB and
the WJB Subsidiaries provide continuation coverage under group
health plans for separating employees and "qualified
beneficiaries" in accordance with the provisions of IRC
Section 4980B(f). Such group health plans are in compliance with
Section 1862(b)(1) of the Social Security Act.
Section 2.13 Brokers, Finders and Professionals .
Except for WJB's engagement of Ryan, Beck & Co., Inc., neither
WJB nor any WJB Subsidiary, nor any of their respective officers,
directors, employees or agents, has employed any broker, finder
or financial advisor, or, except for a commitment to pay Ryan,
Beck & Co., Inc., incurred any liability or commitment for any
fees or commissions to any such person in connection with the
transactions contemplated by this Agreement. The WJB Disclosure
Schedule shall contain as an exhibit the engagement letter
between WJB and Ryan, Beck & Co., Inc. Except as disclosed on
the WJB Disclosure Schedule, neither WJB nor any WJB Subsidiary,
nor any of their respective officers, directors, employees or
agents has engaged any third party or entered into any written or
oral agreement or contract, express or implied, with any third
party pursuant to which WJB or any WJB Subsidiary will be
obligated to pay such third party any fees for professional
services provided in connection with the Merger or the Bank
Merger.
Section 2.14 Environmental Matters. To the knowledge
of WJB, neither WJB nor any WJB Subsidiary, nor any properties
owned or operated by WJB or any WJB Subsidiary has been or is in
violation of, or liable in, any material respect under any
Environmental Law. There are no actions, suits or proceedings,
or written demands, claims or notices, or investigations
(including without limitation notices, demand letters or requests
for information from any environmental agency) instituted or
pending, or to the knowledge of WJB, threatened, relating to the
liability of any property owned or operated by WJB or any WJB
Subsidiary under any Environmental Law.
Section 2.15 Loan Portfolio. The allowance for loan
losses reflected, or to be reflected, in the WJB Regulatory
Reports, and shown, or to be shown, on the balance sheets
contained in the WJB Financials have been, or will be,
established in accordance with the requirements of generally
accepted accounting principles and all applicable regulatory
criteria.
Section 2.16 Information to be Supplied. The
information to be supplied by WJB and WJCB for inclusion in the
Registration Statement will not, to WJB's knowledge, at the time
the Registration Statement is declared effective pursuant to the
Securities Act, contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the
statements therein not misleading. The information supplied, or
to be supplied, by WJB for inclusion in the Applications will, to
WJB's knowledge, at the time such documents are filed with any
Regulatory Authority, be accurate in all material aspects.
Section 2.17 Securities Documents. WJB has delivered
to Sovereign copies of its (i) annual reports on SEC Form 10-K
for the years ended December 31, 1994, 1993 and 1992,
(ii) quarterly reports on SEC Form 10-Q for the quarters ended
March 31, 1995 and June 30, 1995, and (iii) proxy materials used
or for use in connection with its meetings of shareholders held
in 1995, 1994 and 1993. To WJB's knowledge, such reports and
such proxy materials complied, at the time filed with the SEC, in
all material respects, with the Exchange Act and all applicable
rules and regulations of the SEC.
Section 2.18 Related Party Transactions. Except as
disclosed in the proxy statement for use in connection with WJB's
1995 annual meeting of shareholders or in the footnotes to WJB's
consolidated financial statements as of December 31, 1994 and
1993 and for the three years ended December 31, 1994 or otherwise
disclosed in the WJB Disclosure Schedule, WJB is not a party to
any transaction (including any loan or other credit
accommodation) with any Affiliate of WJB (except a WJB
Subsidiary). All such transactions (a) were made in the ordinary
course of business, (b) were made on substantially the same
terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other
Persons, and (c) did not involve more than the normal risk of
collectability or present other unfavorable features. No loan or
credit accommodation to any Affiliate of WJB is presently in
default or, during the three year period prior to the date of
this Agreement, has been in default or has been restructured,
modified or extended. Neither WJB nor WJCB has been notified
that principal and interest with respect to any such loan or
other credit accommodation will not be paid when due or that the
loan grade classification accorded such loan or credit
accommodation by WJCB is inappropriate.
Section 2.19 Quality of Representations. The
representations made by WJB in this Agreement are true, correct
and complete in all material respects.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SOVEREIGN
Sovereign hereby represents and warrants to WJB that,
except as set forth in the Sovereign Disclosure Schedule
delivered by Sovereign to WJB on or prior to the date hereof:
Section 3.01 Organization.
(a) Sovereign is a corporation duly organized,
validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania. Each Sovereign Subsidiary is duly
organized, validly existing, and in good standing under the laws
of the jurisdiction of its incorporation and each possesses full
corporate power and authority to carry on its respective business
and to own, lease and operate its properties as presently
conducted. Neither Sovereign nor any Sovereign Subsidiary is
required by the conduct of its business or the ownership or
leasing of its assets to qualify to do business as a foreign
corporation in any jurisdiction other than the Commonwealth of
Pennsylvania and the states of Delaware and New Jersey, except
where the failure to be so qualified would not have a Material
Adverse Effect. Sovereign is a savings and loan holding company
duly registered under the HOLA.
(b) Sovereign Bank is a federal savings bank,
duly organized and validly existing under the laws of the United
States of America. Sovereign Bank has the corporate power and
authority to carry on its business and operations as now being
conducted and to own and operate the properties and assets now
owned and being operated by it.
(c) Except for certain deposits formerly held by
Harmonia Savings Bank which are insured by the Bank Insurance
Fund of the FDIC to the extent provided in the Federal Deposit
Insurance Act, the deposits of Sovereign Bank are insured by the
Savings Association Insurance Fund of the FDIC to the extent
provided in the Federal Deposit Insurance Act.
(d) Prior to the execution of this Agreement,
Sovereign has delivered to WJB true and correct copies of the
Articles of Incorporation and Bylaws of Sovereign and the Charter
and Bylaws of Sovereign Bank, respectively, as in effect on the
date hereof.
(e) There are no Sovereign Subsidiaries other
than Sovereign Bank and the other Subsidiaries set forth in
Sovereign's Annual Report on Form 10-K for the year ended
December 31, 1994.
(f) The respective minute books of Sovereign and
Sovereign Bank accurately record in all material respects all
material corporate action of their respective shareholders and
boards of directors (including committees) through the date of
this Agreement.
Section 3.02 Capital Structure.
(a) Sovereign is authorized, by its Articles of
Incorporation, to issue (a) 100,000,000 shares of common stock,
no par value ("Sovereign Common Stock"), of which, at the date of
this Agreement, no shares were issued and held by Sovereign as
treasury stock and 46,733,000 shares are issued and outstanding,
and (b) 7,500,000 shares of preferred stock, no par value
("Sovereign Preferred Stock"), of which, at the date of this
Agreement, 200,000 shares of 6 1/4% Cumulative, Series B, are
issued and outstanding. All shares of Sovereign Common Stock and
Preferred Stock issued and outstanding are fully paid and
nonassessable and none were issued in violation of any preemptive
rights. Sovereign has no Rights authorized, issued or
outstanding, other than (i) the Sovereign Stock Purchase Rights,
and (ii) as authorized under Sovereign's employee benefit plans,
stock option plans, employee stock ownership plan, employee stock
purchase plan, and dividend reinvestment and stock purchase plan.
As of June 30, 1995, Sovereign had approximately
7400 shareholders of record. On the Effective Date all shares of
Sovereign Common Stock to be issued pursuant to the terms of
Section 1.02(e), when so issued, shall be fully paid and
nonassessable, shall not be issued in violation of any preemptive
rights and shall be free and clear of all liens, encumbrances and
restrictions created by or through Sovereign.
(b) To the best of Sovereign's knowledge, except
as disclosed in Sovereign's proxy statement dated March 17, 1995,
no person or "group" (as that term is used in Section 13(d)(3) of
the Exchange Act) is the beneficial owner of 5% or more of the
outstanding shares of Sovereign Common Stock.
(c) Except for a pledge of 15% of the outstanding
shares of the capital stock of Sovereign Bank to Mutual of New
York to secure certain indebtedness of Sovereign to Mutual of New
York more fully described in Note 9 of the Sovereign Financials
for the year ended December 31, 1994, Sovereign owns all of the
capital stock of Sovereign Bank and its other subsidiaries, free
and clear of any lien or encumbrance. Except for the Sovereign
Subsidiaries, neither Sovereign nor its subsidiaries possess,
directly or indirectly, any material equity interest in any
corporation, except for equity interests held in the investment
portfolios of Sovereign Subsidiaries, equity interests held by
Sovereign Subsidiaries in a fiduciary capacity, and equity
interests held in connection with the commercial loan activities
of Sovereign Subsidiaries.
Section 3.03 Authority; No Violation.
(a) Sovereign has full corporate power and
authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. Sovereign Bank has full
corporate power and authority to execute and deliver the Bank
Plan of Merger and to consummate the Bank Merger. The execution
and delivery of this Agreement by Sovereign and the consummation
by Sovereign of the transactions contemplated hereby have been
duly and validly approved by the Board of Directors of Sovereign
and no other corporate proceedings (including the approval of
Sovereign shareholders) on the part of Sovereign are necessary to
consummate the transactions contemplated hereby. The execution
and delivery of the Bank Plan of Merger by Sovereign Bank and the
consummation by Sovereign Bank of the Bank Merger have been duly
and validly approved by the Board of Directors of Sovereign Bank
and by Sovereign as sole shareholder of Sovereign Bank, and no
other corporate proceedings on the part of Sovereign Bank are
necessary to consummate the transactions contemplated by the Bank
Plan of Merger (including the approval of Sovereign
shareholders). This Agreement has been duly and validly executed
and delivered by Sovereign and, subject to receipt of the
required approvals of Regulatory Authorities described in
Section 3.04 hereof, constitutes the valid and binding obligation
of Sovereign, enforceable against Sovereign in accordance with
its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally and subject,
as to enforceability, to general principles of equity. The Bank
Plan of Merger, upon its execution and delivery by Sovereign Bank
concurrently with the execution and delivery of this Agreement,
will constitute the valid and binding obligation of Sovereign
Bank, enforceable against Sovereign Bank in accordance with its
terms, subject to applicable conservatorship and receivership
provisions of the Federal Deposit Insurance Act, or insolvency
and similar laws affecting creditors' rights generally and
subject, as to enforceability, to general principles of equity.
(b) (A) The execution and delivery of this
Agreement by Sovereign, (B) the execution and delivery of the
Bank Plan of Merger by Sovereign Bank, (C) subject to receipt of
approvals from the Regulatory Authorities referred to in
Section 3.04 hereof and WJB's and Sovereign's compliance with any
conditions contained therein, the consummation of the
transactions contemplated hereby, and (D) compliance by Sovereign
or Sovereign Bank or any other subsidiary with any of the terms
or provisions hereof or of the Bank Plan of Merger will not
(i) conflict with or result in a breach of any provision of the
articles of incorporation or bylaws of Sovereign or the charter
and bylaws of Sovereign Bank; (ii) violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to Sovereign or Sovereign Bank or any other
subsidiary or any of their respective properties or assets; or
(iii) violate, conflict with, result in a breach of any
provisions of, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default),
under, result in the termination of, accelerate the performance
required by, or result in a right of termination or acceleration
or the creation of any lien, security interest, charge or other
encumbrance upon any of the properties or assets of Sovereign or
Sovereign Bank or any other subsidiary under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement, commitment or other
instrument or obligation to which Sovereign or Sovereign Bank or
any other subsidiary is a party, or by which they or any of their
respective properties or assets may be bound or affected, except
for such violations, conflicts, breaches or defaults under
clause (ii) or (iii) hereof which, either individually or in the
aggregate, will not have a material adverse effect on the assets,
business, financial condition, business prospects or results of
operations of Sovereign and its Subsidiaries taken as a whole or
the ability of Sovereign to perform any of its obligations under
this Agreement.
Section 3.04 Consents. Except for consents and
approvals of or filings with the OTS, the PDB, the NJDB, the SEC,
the FDIC, the FRB, and state "blue sky" authorities, no consents
or approvals of, or filings or registrations with, any public
body or authority are necessary and no consents or approvals of
any third parties are necessary in connection with the execution
and delivery of this Agreement by Sovereign or the Bank Plan of
Merger by Sovereign Bank, or the consummation by Sovereign of the
transactions contemplated hereby or by Sovereign Bank of the Bank
Merger. To the best of Sovereign's knowledge, no fact or
condition exists which Sovereign has reason to believe will
prevent it or Sovereign Bank from obtaining the foregoing
consents and approvals.
Section 3.05 Financial Statements.
(a) Sovereign has previously delivered, or will
deliver, to WJB the Sovereign Financials. The Sovereign
Financials are, or will be, prepared in accordance with generally
accepted accounting principles and practices applied on a
consistent basis throughout the periods covered by such
statements, and fairly present, or will fairly present, the
consolidated financial position, results of operations and cash
flows of Sovereign as of and for the periods ending on the dates
thereof, in accordance with generally accepted accounting
principles. Sovereign will make its regulatory reports available
to WJB for inspection.
(b) At the date of any balance sheet included in
the Sovereign Financials, Sovereign or its subsidiaries did not
have any liabilities or obligations of any nature (whether
absolute, accrued, contingent or otherwise) of a type required to
be reflected in such Sovereign Financials or in the footnotes
thereto which are not fully reflected or reserved against therein
or disclosed in a footnote thereto, except for liabilities and
obligations which are not material in the aggregate and which are
incurred in the ordinary course of business, consistent with past
practice, and except for liabilities and obligations which are
within the subject matter of a specific representation and
warranty herein.
Section 3.06 Taxes. Sovereign and the Sovereign
Subsidiaries are members of the same affiliated group within the
meaning of IRC Section 1504(a). Sovereign has duly filed in
correct form all federal, state and local tax returns required to
be filed by or with respect to Sovereign and all Sovereign
Subsidiaries on or prior to the date hereof (all such returns
being accurate and correct in all material respects) and has duly
paid or made provisions for the payment of all federal, state and
local taxes which have been incurred by or are due or claimed to
be due from Sovereign and any Sovereign Subsidiary by any taxing
authority or pursuant to any tax sharing agreement or arrangement
(written or oral) on or prior to the date hereof other than taxes
which (i) are not delinquent or (ii) are being contested in good
faith.
Section 3.07 No Material Adverse Change. Sovereign
has not suffered any Material Adverse Effect since June 30, 1995.
Section 3.08 Legal Proceedings. Neither Sovereign nor
any Sovereign Subsidiary is a party to any, and there are no
pending or, to the best of Sovereign's knowledge, threatened
legal, administrative, arbitration or other proceedings, claims
(whether asserted or unasserted), actions or governmental
investigations or inquiries of any nature (i) against Sovereign
or any Sovereign Subsidiary, (ii) to which Sovereign's or any
Sovereign Subsidiary's assets are or may be subject,
(iii) challenging the validity or propriety of any of the
transactions contemplated by this Agreement, or (iv) which could
adversely affect the ability of Sovereign to perform under this
Agreement, except for any proceedings, claims, actions,
investigations or inquiries referred to in clauses (i) or (ii)
which, individually or in the aggregate, could not be reasonably
expected to materially and adversely affect the assets, business,
financial condition or results of operations of Sovereign and its
Subsidiaries taken as a whole.
Section 3.09 Ownership of Property; Insurance
Coverage.
(a) Sovereign and the Sovereign Subsidiaries have
good and, as to real property, marketable title to all assets and
properties owned by Sovereign or any of its Subsidiaries, whether
real or personal, tangible or intangible, including assets and
property reflected in the balance sheets contained in the
Sovereign Financials or acquired subsequent thereto (except to
the extent that such assets and properties have been disposed of
for fair value, in the ordinary course of business, since the
date of such balance sheets), subject to no encumbrances, liens,
mortgages, security interests or pledges, except (i) those items
that secure liabilities for borrowed money and that are described
in the Sovereign Disclosure Schedule or permitted under
Article IV hereof, and (ii) statutory liens for amounts not yet
delinquent or which are being contested in good faith. Sovereign
and the Sovereign Subsidiaries, as lessee, have the right under
valid and subsisting leases of real and personal properties used
by Sovereign and its Subsidiaries in the conduct of their
businesses to occupy and use all such properties as presently
occupied and used by each of them.
(b) Sovereign and the Sovereign Subsidiaries
currently maintain insurance in amounts considered by Sovereign
to be reasonable for their respective operations, and such
insurance is similar in scope and coverage to that maintained by
other businesses similarly engaged. Neither Sovereign nor any
Sovereign Subsidiary has received notice from any insurance
carrier that (i) such insurance will be cancelled or that
coverage thereunder will be reduced or eliminated or (ii) premium
costs with respect to such insurance will be substantially
increased. There are presently no material claims pending under
such policies of insurance and no notices have been given by
Sovereign or Sovereign Bank under such policies. All such
insurance is valid and enforceable and in full force and effect,
and within the last three years Sovereign has received each type
of insurance coverage for which it has applied and during such
periods has not been denied indemnification for any material
claims submitted under any of its insurance policies.
Section 3.10 Compliance With Applicable Law.
Sovereign and the Sovereign Subsidiaries hold all licenses,
franchises, permits and authorizations necessary for the lawful
conduct of their businesses under, and have complied in all
material respects with, applicable laws, statutes, orders, rules
or regulations of any federal, state or local governmental
authority relating to them, other than where such failure to hold
or such noncompliance will neither result in a limitation in any
material respect on the conduct of their businesses nor otherwise
have a material adverse effect on the assets, business, financial
condition, business prospects or results of operations of
Sovereign and its Subsidiaries taken as a whole.
Section 3.11 Information to be Supplied. The
information to be supplied by Sovereign for inclusion in the
Registration Statement will not, at the time the Registration
Statement is declared effective pursuant to the Securities Act,
contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements
therein not misleading. The information supplied, or to be
supplied, by Sovereign for inclusion in the Applications will, at
the time such documents are filed with any Regulatory Authority,
be accurate in all material aspects.
Section 3.12 ERISA. Sovereign has previously
delivered to WJB true and complete copies of all employee pension
benefit plans within the meaning of ERISA Section 3(2), profit
sharing plans, stock purchase plans, deferred compensation and
supplemental income plans, supplemental executive retirement
plans, annual incentive plans, group insurance plans, and all
other employee welfare benefit plans within the meaning of ERISA
Section 3(1) (including vacation pay, sick leave, short-term
disability, long-term disability, and medical plans), all of
which are set forth on the Sovereign Disclosure Schedule,
maintained for the benefit of the employees or former employees
(including retired employees) and any beneficiaries thereof or
directors or former directors of Sovereign or any Sovereign
Subsidiary, together with (i) the most recent actuarial (if any)
and financial reports relating to those plans which constitute
"qualified plans" under IRC Section 401(a), (ii) the most recent
annual reports relating to such plans filed by them,
respectively, with any government agency, and (iii) all rulings
and determination letters which pertain to any such plans.
Neither Sovereign nor any Sovereign Subsidiary, and no pension
plan maintained by Sovereign or any Sovereign Subsidiary, has
incurred within the past six (6) years any liability to the
Pension Benefit Guaranty Corporation or to the IRS with respect
to any pension plan qualified under IRC Section 401(a), except
liabilities to the Pension Benefit Guaranty Corporation pursuant
to ERISA Section 4007, all of which have been fully paid, nor has
any reportable event under ERISA Section 4043(b) occurred with
respect to any such pension plan. Neither Sovereign nor any
Sovereign Subsidiary has incurred any liability under ERISA
Section 4201 for a complete or partial withdrawal from a multi-
employer plan. All "employee benefit plans," as defined in ERISA
Section 3(3), comply and within the past six (6) years have
complied in all material respects with ERISA. Except as
disclosed in the Sovereign Disclosure Schedule, neither Sovereign
nor any Sovereign Subsidiary has a material liability under any
such plan which is not reflected on the Sovereign Financials. To
the knowledge of Sovereign, except as disclosed in the Sovereign
Disclosure Schedule, no prohibited transaction (which shall mean
any transaction prohibited by ERISA Section 406 and not exempt
under ERISA Section 408), breach of fiduciary duty or other
transaction has occurred within the past six (6) years with
respect to any employee benefit plan maintained by Sovereign or
any Sovereign Subsidiary that would result in the imposition,
directly or indirectly, of an excise tax under IRC Section 4975.
Sovereign and the Sovereign Subsidiaries provide continuation
coverage under group health plans for separating employees in
accordance with the provisions of IRC Section 4980B(f). Such
group health plans are in compliance with Section 1862(b)(1) of
the Social Security Act.
Section 3.13 Securities Documents. Sovereign has
delivered, or will deliver, to WJB copies of its (i) annual
reports on SEC Form 10-K for the years ended December 31, 1994,
1993, and 1992, (ii) quarterly reports on SEC Form 10-Q for the
quarters ended March 31, 1995 and June 30, 1995, and (iii) proxy
statement dated March 17, 1995 used in connection with its annual
meeting of shareholders held in April 1995. To Sovereign's
knowledge, such reports and such proxy materials complied, at the
time filed with the SEC, in all material respects, with the
Exchange Act and the applicable rules and regulations of the SEC.
Section 3.14 Quality of Representations. The
representations made by Sovereign in this Agreement are true,
correct and complete in all material respects.
ARTICLE IV
COVENANTS OF THE PARTIES
Section 4.01 Conduct of WJB's Business.
(a) From the date of this Agreement to the
Closing Date, WJB and each WJB Subsidiary will conduct its
business and engage in transactions, including extensions of
credit, only in the ordinary course and consistent with past
practice and policies, except as otherwise required by this
Agreement or with the written consent of Sovereign. Sovereign
understands that WJB's business primarily consists of attracting
retail deposits and originating loans. WJB will use its best
efforts, and will cause WJCB to use its best efforts, to
(i) preserve its business organizations intact, (ii) maintain
good relationships with employees, and (iii) preserve for itself
the good will of customers of WJB and WJB Subsidiaries and others
with whom business relationships exist, provided that neither WJB
nor any WJB Subsidiary shall be required to take any unreasonable
or extraordinary action or any action that would conflict with
the terms hereof. From the date hereof to the Closing Date,
except as otherwise consented to or approved by Sovereign in
writing or as permitted or required by this Agreement, WJB will
not, and WJB will not permit any WJB Subsidiary to:
(i) amend or change any provision of its
Certificate of Incorporation or Bylaws;
(ii) change the number of authorized or
issued shares of its capital stock or issue or grant any
option, warrant, call, commitment, subscription, Right or
agreement of any character relating to its authorized or
issued capital stock or any securities convertible into
shares of such stock, or split, combine or reclassify any
shares of capital stock, or declare, set aside or pay any
dividend or other distribution in respect of capital stock,
or redeem or otherwise acquire any shares of capital stock,
except that (A) WJB may issue shares of WJB Common Stock
upon the valid exercise, subject to the terms of the letter
agreement attached hereto as Exhibit 1, of presently
outstanding options to acquire WJB Common Stock under the
WJB Stock Option Plan, and (B) WJB may issue shares of WJB
Common Stock upon the valid exercise, subject to the terms
of the letter agreement attached hereto as Exhibit 1, of
presently outstanding IPO Warrants; and WJB, consistent with
past practice, may not pay any cash dividend on any share of
WJB Common Stock outstanding. Subject to applicable
regulatory restrictions, if any, WJCB may pay a cash
dividend, in the aggregate, sufficient to fund any dividend
by WJB permitted hereunder;
(iii) grant any severance or termination pay
(other than pursuant to written policies or written
agreements of WJB or WJB Subsidiaries in effect on the date
hereof and provided to Sovereign prior to the date hereof)
to, or enter into any new or amend any existing employment
agreement with, or increase the compensation of, any
employee, officer or director of WJB or any WJB Subsidiary,
except for (A) routine periodic increases, individually and
in the aggregate, in accordance with past practice and
(B) normal bonuses paid in the ordinary course, except that
bonuses paid to Messrs. Van Voorhis, Riker and McGrath shall
be paid in accordance with their employment agreements;
(iv) merge or consolidate WJB or any WJB
Subsidiary with any other corporation; sell or lease all or
any substantial portion of the assets or business of WJB or
any WJB Subsidiary; make any acquisition of all or any
substantial portion of the business or assets of any other
person, firm, association, corporation or business
organization other than in connection with the collection of
any loan or credit arrangement between any WJB Subsidiary
and any other person; enter into a purchase and assumption
transaction with respect to deposits and liabilities; permit
the revocation or surrender by any WJB Subsidiary of its
certificate of authority to maintain, or file an application
for the relocation of, any existing branch office, or file
an application for a certificate of authority to establish a
new branch office, provided that nothing contained herein
shall prohibit WJCB from pursuing its existing application
to open a full branch office in Caldwell, New Jersey;
(v) sell or otherwise dispose of the capital
stock of WJCB or sell or otherwise dispose of any asset of
WJB or of any WJB Subsidiary other than in the ordinary
course of business consistent with past practice; subject
any asset of WJB or of any WJB Subsidiary to a lien, pledge,
security interest or other encumbrance (other than in
connection with deposits, repurchase agreements, bankers
acceptances, "treasury tax and loan" accounts established in
the ordinary course of business and transactions in "federal
funds" and the satisfaction of legal requirements in the
exercise of trust powers) other than in the ordinary course
of business consistent with past practice; incur any
indebtedness for borrowed money (or guarantee any
indebtedness for borrowed money), except in the ordinary
course of business consistent with past practice;
(vi) take any action which would result in
any of the representations and warranties of WJB set forth
in this Agreement becoming untrue as of any date after the
date hereof or in any of the conditions set forth in
Article V hereof not being satisfied;
(vii) change any method, practice or
principle of accounting except for implementation of any new
SFAS standard;
(viii) waive, release, grant or transfer any
rights of value or modify or change in any material respect
any existing agreement to which WJB or any WJB Subsidiary is
a party, other than in the ordinary course of business,
consistent with past practice;
(ix) implement any pension, retirement,
profit sharing, bonus, welfare benefit or similar plan or
arrangement that was not in effect on the date of this
Agreement, or materially amend any existing plan or
arrangement except to the extent such amendments do not
result in an increase in cost;
(x) purchase any security for its investment
portfolio not rated "A" or higher by either Standard &
Poor's Corporation or Moody's Investor Services, Inc.;
(xi) except consistent with past practice,
make any loan or other credit facility commitment (including
without limitation, lines of credit and letters of credit)
to any Affiliate or compromise, extend, renew or modify any
such commitment outstanding;
(xii) except consistent with past practice,
enter into, renew, extend or modify any other transaction
with any Affiliate;
(xiii) enter into any swap or similar
commitment, agreement or arrangement;
(xiv) except for the execution of this
Agreement, take any action that would give rise to a right
of payment to any individual under any employment agreement;
(xv) intentionally and knowingly take any
action that would preclude satisfaction of the condition to
closing contained in Section 5.02(j) relating to financial
accounting treatment of the Merger; or
(xvi) agree to do any of the foregoing.
Section 4.02 Access; Confidentiality.
(a) From the date of this Agreement through the
Closing Date, WJB or Sovereign, as the case may be, shall afford
to, and shall cause each WJB Subsidiary or Sovereign Subsidiary
to afford to, the other party and its authorized agents and
representatives, complete access to their respective properties,
assets, books and records and personnel, at reasonable hours and
after reasonable notice; and the officers of WJB and Sovereign
will furnish any person making such investigation on behalf of
the other party with such financial and operating data and other
information with respect to the businesses, properties, assets,
books and records and personnel as the person making such
investigation shall from time to time reasonably request.
Notwithstanding the foregoing, neither Sovereign nor WJB shall be
required to provide access to or disclose information where such
access or disclosure would violate or prejudice the rights of any
customer or would contravene any law, rule, regulation, order or
judgment. The parties will use their best efforts to obtain
waivers of any such restriction and in any event make appropriate
substitute disclosure arrangements under circumstances in which
the restrictions of the preceding sentence apply.
(b) WJB and Sovereign each agree to conduct such
investigation and discussions hereunder in a manner so as not to
interfere unreasonably with normal operations and customer and
employee relationships of the other party.
(c) If the transactions contemplated by this
Agreement shall not be consummated, WJB and Sovereign will each
destroy or return all documents and records obtained from the
other party or its representatives, during the course of its
investigation and will not directly or indirectly use such
information for any competitive or commercial purpose or for any
other purpose not expressly permitted hereby. Sovereign or WJB
will cause all information with respect to the other party and
its Subsidiaries obtained pursuant to this Agreement or
preliminarily thereto to be used solely for the purpose of
evaluating the Merger and the Bank Merger contemplated hereby and
to be treated as the sole property of the party delivering the
information until the consummation of the Merger contemplated
hereby, and will cause all such information to be kept
confidential, except to the extent such information is or becomes
public through no fault of the party to whom the information was
provided or any of its representatives or agents and except to
the extent disclosure of any such information is legally
required. WJB and Sovereign shall each give prompt notice to the
other party of any contemplated disclosure where such disclosure
is so legally required.
Section 4.03 Regulatory Matters and Consents.
(a) Sovereign and WJB will prepare all
Applications and make all filings for, and use their best efforts
to obtain as promptly as practicable after the date hereof, all
necessary permits, consents, approvals, waivers and
authorizations of all Regulatory Authorities necessary or
advisable to consummate the transactions contemplated by this
Agreement.
(b) Each party will furnish the other party with
all information concerning such party and its Subsidiaries as may
be necessary or advisable in connection with any Application or
filing made by or on behalf of the other party to any Regulatory
Authority in connection with the transactions contemplated by
this Agreement.
(c) Each party will promptly furnish the other
party with copies of written communications to, or received by
such party or any of its Subsidiaries from, any Regulatory
Authority in respect of the transactions contemplated hereby,
except information which is filed by such party which is
designated as confidential or contains an earnings projection.
(d) Each party will cooperate with the other
party in the foregoing matters and will furnish the other party
with all information concerning such party and its Subsidiaries
as may be necessary or advisable in connection with any filing
(including the Registration Statement (including the Prospectus/
Proxy Statement) and any report filed with the SEC) made, or
written material submitted, by or on behalf of such party to any
Regulatory Authority in connection with the transactions
contemplated by this Agreement, and such information will be
accurate and complete in all material respects. In connection
therewith, each party will provide certificates and other
documents reasonably requested by the other party.
(e) The parties shall each have the right to
review in advance and comment on all information relating to it
which appears in any filing made by the other party with, or
written material submitted by the other party to, any Regulatory
Authority in connection with the transactions contemplated
hereby.
Section 4.04 Taking of Necessary Action.
(a) Sovereign and WJB shall each use its best
efforts in good faith, and each of them shall cause its
Subsidiaries to use their best efforts in good faith, to
(i) furnish such information as may be required in connection
with the preparation of the documents referred to in Section 4.03
of this Agreement, and (ii) take or cause to be taken all action
necessary or desirable on its part using its best efforts so as
to permit completion of the Merger and the Bank Merger by
June 30, 1996, including, without limitation, (1) obtaining the
consent or approval of each individual, partnership, corporation,
association or other business or professional entity whose
consent or approval is required for consummation of the
transactions contemplated hereby, provided that neither WJB nor
any WJB Subsidiary shall agree to make any material payments or
modifications to agreements in connection therewith without the
prior written consent of Sovereign (which shall not be
unreasonably withheld), and further provided that nothing
contained herein shall be deemed to require WJB to obtain an
affiliate letter similar to the form attached hereto as
Exhibit 1, or any similar letter, from any shareholder who is not
an executive officer or director of WJB or WJCB, and
(2) requesting the delivery of appropriate opinions, consents and
letters from its counsel and independent auditors. No party
hereto shall take, or cause, or to the best of its ability permit
to be taken, any action that would substantially impair the
prospects of completing the Merger and the Bank Merger pursuant
to this Agreement and the Bank Plan of Merger; provided that
nothing herein contained shall preclude Sovereign or WJB or from
exercising its rights under this Agreement or the Option
Agreement.
(b) WJB and Sovereign shall promptly prepare a
Prospectus/Proxy Statement to be mailed to shareholders of WJB in
connection with the meeting of WJB shareholders and transactions
contemplated hereby, and to be filed by Sovereign with the SEC in
the Registration Statement, which Prospectus/Proxy Statement
shall conform to all applicable legal requirements. Sovereign
shall, as promptly as practicable following the preparation
thereof, file the Registration Statement with the SEC and WJB and
Sovereign shall use all reasonable efforts to have the
Registration Statement declared effective under the Securities
Act as promptly as practicable after such filing. Sovereign will
advise WJB, promptly after Sovereign receives notice thereof, of
the time when the Registration Statement has become effective or
any supplement or amendment has been filed, of the issuance of
any stop order or the suspension of the qualification of the
shares of capital stock issuable pursuant to the Registration
Statement, or the initiation or threat of any proceeding for any
such purpose, or of any request by the SEC for the amendment or
supplement of the Registration Statement or for additional
information. Sovereign shall use its best efforts to obtain,
prior to the effective date of the Registration Statement, all
necessary state securities laws or "Blue Sky" permits and
approvals required to carry out the transactions contemplated by
this Agreement. Sovereign will provide WJB with as many copies
of such Registration Statement and all amendments thereto
promptly upon the filing thereof as WJB may reasonably request.
Section 4.05 Certain Agreements.
(a) Subject to Section 4.11 hereof, as soon as
practicable after the Effective Date, all employees of WJB and
WJB Subsidiaries whose employment is continued shall be employed
upon their existing terms and conditions with appropriate changes
in title to be consistent with Sovereign's management structure
and the operation of WJCB as a division of Sovereign Bank.
(b) (i) Except for any liability for trading in
WJB Common Stock while in possession of material nonpublic
information or disclosing material nonpublic information,
directly or indirectly, to any party who trades in WJB
Common Stock, for a period of six years from and after the
Effective Date, Sovereign shall indemnify, and advance
expenses in matters that may be subject to indemnification
to, persons who served as directors and officers of WJB or
any WJB Subsidiary on or before the Effective Date with
respect to liabilities and claims (and related expenses)
made against them resulting from their service as such prior
to the Effective Date in accordance with and subject to the
requirements and other provisions of Sovereign's articles of
incorporation and bylaws in effect on the date of this
Agreement and applicable provisions of law to the same
extent as Sovereign is obliged thereunder to indemnify and
advance expenses to its own directors and officers with
respect to liabilities and claims made against them
resulting from their service as such for Sovereign.
(ii) Sovereign shall maintain WJB's existing
directors' and officers' liability insurance policy (or a
policy providing comparable coverage amount on terms no less
favorable, including Sovereign's existing policy if it meets
the foregoing standard) covering (A) persons who are
currently covered by such insurance for costs set forth in
(i) above arising in connection with events prior to the
Effective Date for a period of six (6) years after the
Effective Date and (B) for all officers and directors of WJB
for service in such capacity with Sovereign after the
Effective Date.
(iii) Any Indemnified Party wishing to claim
indemnification under Section 4.05(b), upon learning of any
claim, action, suit, proceeding or investigation described
above, shall promptly notify Sovereign thereof; provided
that the failure so to notify shall not affect the
obligations of Sovereign under Section 4.05(b).
(iv) Sovereign shall pay all reasonable
costs, including attorney's fees, that may be incurred by an
Indemnified Party in enforcing the indemnity and other
obligations provided for in this Section 4.05(b). The
rights of each Indemnified Party hereunder shall be in
addition to any other rights such Indemnified Party may have
under applicable law.
(c) Sovereign agrees to honor all terms and
conditions of the employment contracts of Messrs. Van Voorhis and
Riker and to extend the term of such contracts on the same terms
and conditions (including without limitation equivalent employee
benefits) (except as otherwise provided herein) at the then
current salaries (subject to adjustment as provided therein) so
that they expire no earlier than the date three (3) years after
the Effective Date. Sovereign agrees to (i) amend the terms of
the employment agreements of Messrs. Van Voorhis and Riker to
provide that if either employee's employment is terminated
without cause or for good reason (each as defined in such
employment agreements except that the definition of good reason
shall be appropriately amended to be consistent with the post-
merger structure contemplated by this Agreement), the terminated
employee shall have the right to receive all payments which would
have been due under his employment agreement through the
remainder of the full term as amended pursuant hereto, and
(ii) amend any section thereof relating to incentive compensation
to account for the changes in the operation of WJB resulting from
the Merger so as to provide Messrs. Van Voorhis and Riker with
benefits equivalent to those that they would have received under
such sections had the Merger not occurred. Sovereign agrees to
honor all terms and conditions of the employment contract of
Mr. McGrath, Jr. and the severance agreement of Mr. McGrath, Sr.
(d) Following the Effective Date, WJCB will be
operated as a separate autonomous commercial bank division of
Sovereign Bank for at least three years.
Section 4.06 No Other Bids and Related Matters. So
long as this Agreement remains in effect, WJB shall not, nor
shall it permit any WJB Subsidiary or any other Affiliate of WJB
or any officer, director or employee of any of them, or any
investment banker, attorney, accountant or other representative
retained by WJB, any WJB Subsidiary or any other WJB Affiliate
to, directly or indirectly, solicit, encourage, initiate or
engage in discussions or negotiations with, or respond to
requests for information, inquiries, or other communications
from, any person other than Sovereign concerning the fact of, or
the terms and conditions of, this Agreement, or concerning any
acquisition of WJB, any WJB Subsidiary, or any substantial
portion of the assets or business thereof (except that WJB's
officers may respond to inquiries from analysts, Regulatory
Authorities and holders of WJB Common Stock in the ordinary
course of business); provided, however, that the Board of
Directors of WJB, on behalf of WJB, may respond to any offer or
request for information, inquiries, proposals or communications
through its representatives if such Board of Directors, after
having consulted with and considered the advice of outside
counsel, has determined that the failure to provide such
information or participate in such negotiations and discussions
would cause the members of such Board of Directors to breach
their fiduciary duties under applicable laws. WJB shall notify
Sovereign immediately if any such discussions or negotiations are
sought to be initiated with WJB by any person other than
Sovereign or if any such requests for information, inquiries,
proposals or communications are received from any person other
than Sovereign.
Section 4.07 Duty to Advise; Duty to Update Disclosure
Schedules. Each party shall promptly advise the other party of
any change or event having a Material Adverse Effect on it or on
any of its Subsidiaries, which it believes would or would be
reasonably likely to (a) cause or constitute a material breach of
any of its representations, warranties or covenants set forth
herein or (b) prevent or materially delay the consummation of the
transactions contemplated by this Agreement. Each party shall
update its Disclosure Schedule as promptly as practicable after
the occurrence of an event of fact which, if such event or fact
had occurred prior to the date of this Agreement, would have been
disclosed in such Disclosure Schedule. The delivery of such
updated Schedule shall not relieve either party from any breach
or violation of this Agreement and shall not have any effect for
the purposes of determining the satisfaction of the condition set
forth in Sections 5.01(b) or 5.02(b) hereof.
Section 4.08 Conduct of Sovereign's Business. From
the date of this Agreement to the Closing Date, Sovereign will
use its best efforts to (x) preserve its business organizations
intact, (y) maintain good relationships with employees, and
(z) preserve for itself the goodwill of customers of Sovereign
and Sovereign Subsidiaries and others with whom business
relationships exist.
Section 4.09 Board and Committee Minutes. WJB shall
provide to Sovereign, within 20 days after any meeting of the
Board of Directors of WJB or any WJB Subsidiary, or any committee
thereof, or any senior management committee, a copy of the
minutes of such meeting, except that with respect to any meeting
held within 20 days of the Closing Date, such minutes shall be
provided to Sovereign prior to the Closing Date.
Section 4.10 Undertakings by Sovereign and WJB.
(a) WJB shall:
(i) Voting by Directors. Use its best
efforts to cause all members of WJB's Board of Directors to
vote all shares of WJB's Common Stock over which they hold
sole voting power, and to cause all shares over which they
hold shared voting power to be voted, in favor of this
Agreement;
(ii) Phase I Environmental Audit. Permit
Sovereign, if Sovereign elects to do so, at its own expense,
to cause a "phase I environmental audit" to be performed at
any physical location owned or occupied by WJB or any WJB
Subsidiary on the date hereof;
(iii) Approval of Bank Plan of Merger.
Approve the Bank Plan of Merger as sole shareholder of WJB
(subject to receipt of all required consents and approvals)
and obtain the approval of, and cause the execution and
delivery of, the Bank Plan of Merger by WJCB;
(iv) Proxy Solicitor. If Sovereign requests
and agrees to bear the expense thereof, retain a proxy
solicitor in connection with the solicitation of WJB
shareholder approval of this Agreement;
(v) Timely Review. If requested by
Sovereign at Sovereign's sole expense, cause its independent
certified public accountants to perform a review of its
unaudited consolidated financial statements as of the end of
any calendar quarter, in accordance with Statement of
Auditing Standards No. 36, and to issue their report on such
financial statements as soon as is practicable thereafter;
(vi) Outside Service Bureau Contracts. If
requested to do so by Sovereign, use its best efforts to
obtain an extension of any contract with an outside service
bureau or other vendor of services to WJB or any WJB
Subsidiary, on terms and conditions mutually acceptable to
WJB and Sovereign;
(vii) Committee Meetings. Subject to
Section 4.02, permit a representative of Sovereign to attend
all committee meetings of WJB and WJCB management including,
without limitation, any loan committee or asset/liability
committee. Subject to Section 4.02, WJB shall respond
reasonably and in good faith to any request of Sovereign to
permit a representative of Sovereign to attend any meeting
of WJB's Board of Directors or the Executive Committee
thereof;
(viii) Shareholders' Meeting. Submit this
Agreement to its shareholders for approval at a meeting to
be held as soon as practicable, and, subject to
Section 4.06, use its best efforts to cause its Board of
Director to unanimously recommend approval of this Agreement
to its shareholders.
(b) Sovereign and WJB shall each:
(i) Filings and Approvals. Cooperate with
the other in the preparation and filing, as soon as
practicable, of (A) the Applications, (B) the Registration
Statement and related filings under state securities laws
covering the Sovereign Common Stock and related Sovereign
Stock Purchase Rights to be issued pursuant to the Merger,
(C) all other documents necessary to obtain any other
approvals and consents required to effect the completion of
the Merger and the Bank Merger, and (D) all other documents
contemplated by this Agreement;
(ii) Identification of WJB's Affiliates.
Cooperate with the other and use its best efforts to
identify those persons who may be deemed to be Affiliates of
WJB;
(iii) Public Announcements. Cooperate and
cause its respective officers, directors, employees and
agents to cooperate in good faith, consistent with their
respective legal obligations, in the preparation and
distribution of, and agree upon the form and substance of,
any press release related to this Agreement and the
transactions contemplated hereby, and any other public
disclosures related thereto, including without limitation
communications to WJB shareholders, WJB's internal
announcements and customer disclosures, but nothing
contained herein shall prohibit either party from making any
disclosure which its counsel deems necessary or from making
any such public disclosure after using its best efforts to
discuss such public disclosure with the other party in
advance.
(iv) Maintenance of Insurance. Maintain,
and cause their respective Subsidiaries to maintain,
insurance in such amounts as are reasonable to cover such
risks as are customary in relation to the character and
location of its properties and the nature of its business;
(v) Maintenance of Books and Records.
Maintain, and cause their respective Subsidiaries to
maintain, books of account and records in accordance with
generally accepted accounting principles applied on a basis
consistent with those principles used in preparing the
financial statements heretofore delivered;
(vi) Delivery of Securities Documents.
Deliver to the other, copies of all Securities Documents
simultaneously with the filing thereof;
(vii) Taxes. File all federal, state, and
local tax returns required to be filed by them or their
respective Subsidiaries on or before the date such returns
are due (including any extensions) and pay all taxes shown
to be due on such returns on or before the date such payment
is due, except to the extent such taxes are being contested
in good faith.
Section 4.11 Employee Benefits and Severance.
(a) Employee Benefits. On and after the
Effective Date, the employee pension and welfare benefit plans of
Sovereign and WJB may, at Sovereign's election, continue to be
maintained separately or consolidated, provided, however, that
WJB employees shall receive benefits at least as favorable, in
the aggregate, as the benefits to which they were entitled on
September 19, 1995. In the event of a consolidation of any or
all of such plans, WJB and WJCB employees shall receive credit
for service with WJB or WJCB under any Sovereign benefit plan, or
new Sovereign benefit plan in which such employees would be
eligible to enroll for purposes of eligibility and vesting
determination. Employees of WJB and WJCB who are retained as
employees of Sovereign or Sovereign Bank after the Effective Date
will be permitted to participate in Sovereign's 401(k) Plan and
Employee Stock Ownership Plan to the extent permitted by the
terms of such plans.
(b) Severance. Sovereign shall maintain employee
benefits (including, without limitation, life, health and
disability) for WJB and WJCB employees at levels which, in the
aggregate, are at least as favorable as such benefits which
existed as of September 19, 1995. Any employee of WJB or WJCB
that is terminated by Sovereign or Sovereign Bank after the
Effective Date, will receive severance benefits in accordance
with Sovereign's severance policy (employees of WJB and WJCB will
be given credit for prior years of service to WJB and WJCB).
(c) Directors. If Sovereign adopts a stock
option plan for the benefit of the directors of Sovereign Bank,
the members of the Board of Directors of the commercial bank
division of Sovereign Bank will be permitted to participate in
such plan until a date no later than three years from the
Effective Date.
(d) Combined Operating Results. Sovereign agrees
to file with the SEC a Current Report on Form 8-K containing
combined operating results of Sovereign and WJB for the one month
period ended on the last day of the first full calendar month
after the Effective Date. Sovereign shall make such filing
within thirty (30) days after the end of the such month period.
ARTICLE V
CONDITIONS
Section 5.01 Conditions to WJB's Obligations under
this Agreement. The obligations of WJB hereunder shall be
subject to satisfaction at or prior to the Closing Date of each
of the following conditions, unless waived by WJB pursuant to
Section 7.03 hereof:
(a) Corporate Proceedings. All action required
to be taken by, or on the part of, Sovereign and Sovereign Bank
to authorize the execution, delivery and performance of this
Agreement and the Bank Plan of Merger, respectively, and the
consummation of the transactions contemplated by this Agreement
and the Bank Plan of Merger, shall have been duly and validly
taken by Sovereign and Sovereign Bank; and WJB shall have
received certified copies of the resolutions evidencing such
authorizations;
(b) Covenants; Representations. The obligations
of Sovereign required by this Agreement to be performed by
Sovereign at or prior to the Closing Date shall have been duly
performed and complied with in all material respects; and the
representations and warranties of Sovereign set forth in this
Agreement shall be true and correct in all material respects, as
of the date of this Agreement, and as of the Closing Date as
though made on and as of the Closing Date, except as to any
representation or warranty which (i) specifically relates to an
earlier date or (ii) where the facts which cause the failure of
any representation or warranty to be so true and correct would
not, either individually or in the aggregate, constitute a
Material Adverse Effect with respect to Sovereign;
(c) Approvals of Regulatory Authorities. The
parties shall have received all required approvals of Regulatory
Authorities of the Merger, and delivered copies thereof to each
other; and all conditions thereof and notice and waiting periods
required thereunder shall have expired or been terminated;
(d) No Injunction. There shall not be in effect
any order, decree or injunction of a court or agency of competent
jurisdiction which enjoins or prohibits consummation of the
transactions contemplated hereby;
(e) No Material Adverse Effect. Since June 30,
1995, there shall not have occurred any Material Adverse Effect
with respect to Sovereign.
(f) Officer's Certificate. Sovereign shall have
delivered to WJB a certificate, dated the Closing Date and
signed, without personal liability, by its chairman or president,
to the effect that the conditions set forth in subsections (a)
through (e) of this Section 5.01 have been satisfied, to the best
knowledge of the officer executing the same;
(g) Opinion of Sovereign's Counsel. WJB shall
have received an opinion of Stevens & Lee, counsel to Sovereign,
dated the Closing Date, in form and substance reasonably
satisfactory to WJB and its counsel to the effect set forth on
Exhibit 4 attached hereto;
(h) Registration Statement. The Registration
Statement shall be effective under the Securities Act and no
proceedings shall be pending or threatened by the SEC to suspend
the effectiveness of the Registration Statement; and all required
filings with the National Association of Securities Dealers and
all required approvals by state securities or "blue sky"
authorities with respect to the transactions contemplated by this
Agreement, shall have been obtained;
(i) Tax Opinion. The Merger shall qualify as a
reorganization within the meaning of Section 368(a)(1)(A) of the
IRC and WJB shall have received an opinion of Stevens & Lee,
substantially to the effect set forth on Exhibit 5 attached
hereto; and
(j) Approval of WJB's Shareholders. This
Agreement and the transactions contemplated hereby shall have
been approved by the holders of at least the requisite number of
the outstanding shares of WJB's Common Stock entitled to vote
thereon.
(k) Investment Banking Opinion. WJB shall have
received an oral opinion from Ryan, Beck & Co., Inc., received on
or before the date of this Agreement and updated in writing as of
a date within five (5) days of mailing the Prospectus/Proxy
Statement, to the effect that the consideration to be received by
WJB's shareholders pursuant to this Agreement is fair, from a
financial point of view, to WJB's shareholders.
Section 5.02 Conditions to Sovereign's Obligations
under this Agreement. The obligations of Sovereign hereunder
shall be subject to satisfaction at or prior to the Closing Date
of each of the following conditions, unless waived by Sovereign
pursuant to Section 7.03 hereof:
(a) Corporate Proceedings. All action required
to be taken by, or on the part of, WJB and WJCB to authorize the
execution, delivery and performance of this Agreement and the
Bank Plan of Merger, respectively, and the consummation of the
transactions contemplated by this Agreement and the Bank Plan of
Merger, shall have been duly and validly taken by WJB and WJCB;
and Sovereign shall have received certified copies of the
resolutions evidencing such authorizations;
(b) Covenants; Representations. The obligations
of WJB, required by this Agreement to be performed by it at or
prior to the Closing Date shall have been duly performed and
complied with in all material respects; and the representations
and warranties of WJB set forth in this Agreement shall be true
and correct in all material respects as of the date of this
Agreement, and as of the Closing Date as though made on and as of
the Closing Date, except as to any representation or warranty
which (i) specifically relates to an earlier date or (ii) where
the facts which cause the failure of any representation or
warranty to be so true and correct would not, either individually
or in the aggregate, constitute a Material Adverse Effect with
respect to WJB;
(c) Approvals of Regulatory Authorities. The
parties shall have received all required approvals of Regulatory
Authorities for the Merger, without the imposition of any term or
condition that would have a Material Adverse Effect on Sovereign
upon completion of the Merger; and all conditions thereof and
notice and waiting periods required thereunder shall have expired
or been terminated;
(d) No Injunction. There shall not be in effect
any order, decree or injunction of a court or agency of competent
jurisdiction which enjoins or prohibits consummation of the
transactions contemplated hereby;
(e) No Material Adverse Effect. Since June 30,
1995, there shall not have occurred any Material Adverse Effect
with respect to WJB;
(f) Officer's Certificate. WJB shall have
delivered to Sovereign a certificate, dated the Closing Date and
signed, without personal liability, by its chairman of the board
or president, to the effect that the conditions set forth in
subsections (a) through (e) of this Section 5.02 have been
satisfied, to the best knowledge of the officer executing the
same;
(g) Opinions of WJB's Counsel. Sovereign shall
have received an opinion of Sills Cummis Zuckerman Radin Tischman
Epstein & Gross, P.A., counsel to WJB, dated the Closing Date, in
form and substance reasonably satisfactory to Sovereign and its
counsel to the effect set forth on Exhibit 6 attached hereto;
(h) Registration Statement. The Registration
Statement shall be effective under the Securities Act and no
proceedings shall be pending or threatened by the SEC to suspend
the effectiveness of the Registration Statement; and all required
approvals by state securities or "blue sky" authorities with
respect to the transactions contemplated by this Agreement, shall
have been obtained;
(i) Tax Opinion. Sovereign shall have received
an opinion of Stevens & Lee, its counsel, substantially to the
effect set forth on Exhibit 5 attached hereto;
(j) Pooling Letter. Sovereign shall have
received an opinion from Ernst & Young to the effect that the
Merger will be treated as a "pooling of interests" for financial
accounting purposes.
(k) Phase I Environmental Audit Results. The
results of any "phase I environmental audit" conducted pursuant
to Section 4.11(a)(ii) with respect to owned or occupied bank
premises shall be reasonably satisfactory to Sovereign.
(l) Employment Agreements. Any employees
entitled to receive any severance payments under any employment
contracts as a result of the transactions contemplated by this
Agreement shall have waived such rights.
ARTICLE VI
TERMINATION, WAIVER AND AMENDMENT
Section 6.01 Termination. This Agreement may be
terminated by written notice on or at any time prior to the
Closing Date:
(a) By the mutual written consent of the parties
hereto;
(b) By Sovereign or WJB:
(i) if the Closing Date shall not have
occurred on or before June 30, 1996, unless the failure of
such occurrence shall be due to the failure of the party
seeking to terminate this Agreement to perform or observe
its agreements set forth in this Agreement required to be
performed or observed by such party on or before the Closing
Date; or
(ii) if (A) either party has been informed
in writing by a Regulatory Authority whose approval or
consent has been requested that such approval or consent is
unlikely to be granted, or (B) a vote of the stockholders of
WJB is taken and such stockholders fail to approve this
Agreement and the transactions contemplated hereby, unless
the failure of any such occurrence shall be due to the
failure of the party seeking to terminate this Agreement to
perform or observe its agreements set forth herein required
to be performed or observed by such party on or before the
Closing Date.
(c) By Sovereign or WJB, if on the Closing Date,
the Sovereign Market Value is less than $7.94 or greater than
$13.23 (in each case as adjusted for any occurrence referred to
in Section 1.02(e)(v)); provided, however, that (A) in the event
the Sovereign Market Value is less than $7.94 and Sovereign has
elected to terminate the Agreement, WJB may deliver written
notice on the Closing Date of its election not to terminate this
Agreement and then, notwithstanding Sovereign's attempted
termination, no termination shall have occurred pursuant to this
Section and the Exchange Ratio shall be calculated as if the
Sovereign Market Value is $7.94, and (B) in the event the
Sovereign Market Value is greater than $13.23 and WJB has elected
to terminate the Agreement, Sovereign may deliver written notice
on the Closing Date of its election not to terminate this
Agreement and then, notwithstanding WJB's attempted termination,
no termination shall have occurred pursuant to this Section and
the Exchange Ratio shall be calculated as if the Sovereign Market
Value is $13.23. If either party elects to override the
termination of this Agreement by the other party under the terms
of this paragraph (c), this Plan shall remain in effect in
accordance with its terms, and any references in this Agreement
to "Exchange Ratio" shall thereafter be deemed to refer to the
Exchange Ratio as adjusted pursuant to this paragraph (c).
(d) Sovereign shall have received an opinion from
Ernst & Young that the Merger will not qualify as a "pooling of
interests" for financial accounting purposes; and
(e) By Sovereign or WJB if the other party has
breached any representation, warranty, covenant or agreement
contained herein in any material respect, and such breach (i) has
not been (or cannot be) cured by the earlier of 30 days after the
date on which written notice of such breach is given to the party
committing such breach or the Closing Date, and (ii) would
entitle the non-breaching party not to consummate the
transactions contemplated hereby under Article V;
Section 6.02 Effect of Termination. If this Agreement
is terminated pursuant to Section 6.01 hereof, this Agreement
shall forthwith become void (other than Section 4.02(c), Section
4.10(b)(iii) and Section 7.01 hereof, which shall remain in full
force and effect), and there shall be no further liability on the
part of Sovereign or WJB to the other, except for any liability
arising out of any uncured willful breach of any covenant or
other agreement contained in this Agreement or any fraudulent
breach of a representation or warranty.
ARTICLE VII
MISCELLANEOUS
Section 7.01 Expenses. Except for the cost of
printing and mailing the Proxy Statement/Prospectus which shall
be shared equally, Sovereign will reimburse WJB, on a monthly
basis and upon submission of customary documentation, for its
out-of-pocket expenses incurred in connection with the Merger
provided, however, that each party shall pay its own expenses,
including fees and expenses of its own financial consultants,
accountants and counsel, in the event that this Agreement shall
be terminated by Sovereign as a result of a material breach by
WJB of its obligations hereunder (provided that such breach is
not caused by a breach of Sovereign of its obligations hereunder)
and WJB shall reimburse Sovereign for all amounts Sovereign paid
to WJB in accordance with requirements of the first sentence of
this Section 7.01.
Section 7.02 Non-Survival of Representations and
Warranties. All representations, warranties and, except to the
extent specifically provided otherwise herein, agreements and
covenants, other than those covenants set forth in
Sections 4.05(b), (c) and (d) which will survive the Merger,
shall terminate on the Closing Date.
Section 7.03 Amendment, Extension and Waiver. Subject
to applicable law, at any time prior to the consummation of the
transactions contemplated by this Agreement, the parties may
(a) amend this Agreement, (b) extend the time for the performance
of any of the obligations or other acts of either party hereto,
(c) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto, or
(d) waive compliance with any of the agreements or conditions
contained in Articles IV and V hereof or otherwise. This
Agreement may not be amended except by an instrument in writing
authorized by the respective Boards of Directors and signed, by
duly authorized officers, on behalf of the parties hereto. Any
agreement on the part of a party hereto to any extension or
waiver shall be valid only if set forth in an instrument in
writing signed by a duly authorized officer on behalf of such
party, but such waiver or failure to insist on strict compliance
with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
Section 7.04 Entire Agreement. This Agreement,
including the documents and other writings referred to herein or
delivered pursuant hereto, contains the entire agreement and
understanding of the parties with respect to its subject matter.
This Agreement supersedes all prior arrangements and
understandings between the parties, both written or oral with
respect to its subject matter. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their
respective successors; provided, however, that nothing in this
Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto and their respective
successors, any rights, remedies, obligations or liabilities
other than pursuant to Sections 4.05(b), (c) and (d) and 4.11(c),
with respect to indemnification and directors and officers
liability insurance and certain other matters.
Section 7.05 No Assignment. Neither party hereto may
assign any of its rights or obligations hereunder to any other
person, without the prior written consent of the other party
hereto.
Section 7.06 Notices. All notices or other
communications hereunder shall be in writing and shall be deemed
given if delivered personally, mailed by prepaid registered or
certified mail (return receipt requested), or sent by telecopy,
addressed as follows:
(a) If to Sovereign, to:
Sovereign Bancorp, Inc.
1130 Berkshire Boulevard
Wyomissing, Pennsylvania 19610
Attention: Jay S. Sidhu, President and Chief
Executive Officer
Telecopy No.: (610) 320-8448
with a copy to:
Stevens & Lee
111 North Sixth Street
Reading, Pennsylvania 19601
Attention: Joseph M. Harenza, Esquire and
Jeffrey P. Waldron, Esquire
Telecopy No.: (610) 376-5610
(b) If to WJB, to:
West Jersey Bancshares, Inc.
165 Passaic Avenue
Fairfield, New Jersey 07004
Attention: John A. Van Voorhis, President
and Chief Executive Officer
Telecopy No.:
with copies to: Sills Cummis Zuckerman Radin
Tischman Epstein & Gross
One Riverfront Plaza
Newark, New Jersey 07102
Attention: Steve E. Gross, Esquire
Victor H. Boyajian, Esquire
Telecopy No.: (201) 643-6500
Section 7.07 Captions. The captions contained in this
Agreement are for reference purposes only and are not part of
this Agreement.
Section 7.08 Counterparts. This Agreement may be
executed in any number of counterparts, and each such counterpart
shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
Section 7.09 Severability. If any provision of this
Agreement or the application thereof to any person or
circumstance shall be invalid or unenforceable to any extent, the
remainder of this Agreement and the application of such
provisions to other persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent
permitted by law.
Section 7.10 Governing Law. This Agreement shall be
governed by and construed in accordance with the domestic
internal law (including the law of conflicts of law) of the
Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed by their duly authorized officers as of
the day and year first above written.
SOVEREIGN BANCORP, INC.
By: /s/ Richard A. Elko
Richard A. Elko
Corporate Controller
Attest:/s/Lawrence M. Thompson, Jr.
Lawrence M. Thompson, Jr.
Secretary
WEST JERSEY BANCSHARES, INC.
By: /s/ John A. Van Voorhis
John A. Van Voorhis,
President and Chief
Executive Officer
Attest: /s/ Geraldine L. Marchitto
Secretary
<PAGE>
Exhibit 1
September 29, 1995
Sovereign Bancorp, Inc.
1130 Berkshire Boulevard
Wyomissing, Pennsylvania 19610
Ladies and Gentlemen:
Sovereign Bancorp, Inc. ("Sovereign") and West Jersey
Bancshares, Inc. ("WJB") desire to enter into an agreement dated
September 29, 1995 ("Agreement"), pursuant to which, subject to
the terms and conditions set forth therein, (a) WJB will merge
with and into Sovereign with Sovereign surviving the merger, and
(b) shareholders of WJB will receive common stock of Sovereign in
exchange for common stock of WJB outstanding on the closing date
(the foregoing, collectively, referred to herein as the
"Merger").
Sovereign has required, as a condition to its execution and
delivery to WJB of the Agreement, that the undersigned, being
directors and executive officers of WJB, execute and deliver to
Sovereign this Letter Agreement.
Each of the undersigned, in order to induce Sovereign to
execute and deliver to WJB the Agreement, hereby irrevocably:
(a) Agrees to be present (in person or by proxy) at
all meetings of shareholders of WJB called to vote for approval
of the Merger so that all shares of common stock of WJB then
owned by him or her will be counted for the purpose of
determining the presence of a quorum at such meetings and to vote
all such shares (i) in favor of approval and adoption of the
Agreement and the transactions contemplated thereby (including
any amendments or modifications of the terms thereof approved by
the Board of Directors of WJB), and (ii) against approval or
adoption of any other merger, business combination,
recapitalization, partial liquidation or similar transaction
involving WJB;
(b) Agrees not to vote or execute any written consent
to rescind or amend in any manner any prior vote or written
consent, as a shareholder of WJB, to approve or adopt the
Agreement;
(c) Agrees to use his or her reasonable best efforts
to cause the Merger to be consummated;
(d) Agrees not to sell, transfer or otherwise dispose
of any common stock of WJB on or prior to the record date for the
meeting of WJB shareholders to vote on the Merger;
(e) Except as permitted by Section 4.06 of the
Agreement, agrees not to solicit, initiate or engage in any
negotiations or discussions with any party other than Sovereign
with respect to any offer, sale, transfer or other disposition
of, any shares of common stock of WJB now or hereafter owned by
him or her;
(f) Agrees not to offer, sell, transfer or otherwise
dispose of any shares of common stock of Sovereign received in
the Merger, except (i) at such time as a registration statement
under the Securities Act of 1933 ("Securities Act") covering
sales of such Sovereign common stock is effective and a
prospectus is made available under the Securities Act,
(ii) within the limits, and in accordance with the applicable
provisions of, Rule 145 under the Securities Act, or (iii) in a
transaction which, in the opinion of counsel satisfactory to
Sovereign or as described in a "no-action" or interpretive letter
from the staff of the Securities and Exchange Commission ("SEC"),
is not required to be registered under the Securities Act; and
acknowledges and agrees that Sovereign is under no obligation to
register the sale, transfer or other disposition of Sovereign
common stock by him or her or on his or her behalf, or to take
any other action necessary to make an exemption from registration
available;
(g) Notwithstanding the foregoing, agrees not to sell,
or in any other way reduce his or her risk relative to, any
shares of common stock of WJB or of common stock of Sovereign,
during the period commencing thirty days prior to the effective
date of the Merger and ending on the date on which financial
results covering at least thirty days of post-Merger combined
operations of Sovereign and WJB have been published within the
meaning of Section 201.01 of the SEC's Codification of Financial
Reporting Policies;
(h) Agrees that Sovereign shall not be bound by any
attempted sale of any shares of Sovereign common stock, and
Sovereign's transfer agent shall be given an appropriate stop
transfer order and shall not be required to register any such
attempted sale, unless the sale has been effected in compliance
with the terms of this Letter Agreement; and further agrees that
the certificate representing his or her shares of Sovereign
common stock may be endorsed with a restrictive legend consistent
with the terms of this Letter Agreement;
(i) Acknowledges and agrees that the provisions of
subparagraphs (f), (g) and (h) hereof also apply to shares of
Sovereign common stock received in the Merger (or any shares of
WJB common stock or of Sovereign common stock, whether or not
received in the Merger, for the period referred to in
subparagraph (g) above) owned by (i) his or her spouse, (ii) any
of his or her relatives or relatives of his or her spouse
occupying his or her home, (iii) any trust or estate in which he
or she, his or her spouse, or any such relative owns at least a
10% beneficial interest or of which any of them serves as
trustee, executor or in any similar capacity, and (iv) any
corporation or other organization in which he or she, his or her
spouse, or any such relative owns at least 10% of any class of
equity securities or of the equity interest;
(j) Represents that he or she has no plan or intention
to sell, exchange, or otherwise dispose of any shares of common
stock of Sovereign to be received in the Merger prior to
expiration of the time period referred to in subparagraph (g)
hereof; and
(k) Represents that he or she has the capacity to
enter into this Letter Agreement and that it is a valid and
binding obligation enforceable against him or her in accordance
with its terms, subject to bankruptcy, insolvency and other laws
affecting creditors' rights and general equitable principles.
The obligations set forth herein shall terminate
concurrently with any termination of the Agreement.
________________________
This Letter Agreement may be executed in two or more
counterparts, each of which shall be deemed to constitute an
original, but all of which together shall constitute one and the
same Letter Agreement.
________________________
This Letter Agreement shall terminate concurrently with any
termination of the Agreement in accordance with its terms.
________________________
The undersigned intend to be legally bound hereby.
Sincerely,
/s/ John A. Van Voorhis
John A. Van Voorhis
/s/ Michael J. McGrath, Sr.
Michael J. McGrath, Sr.
/s/ Gerard Riker
Gerard Riker
/s/ Raymond M. Durkin
Raymond M. Durkin
/s/ Edward R. McMahon
Edward R. McMahon
/s/ Nicholas Rizzo
Nicholas Rizzo
/s/ Peter G. Stewart
Peter G. Stewart
/s/ John A. Sullivan, III
John A. Sullivan, III
/s/ John E. Sullivan
John E. Sullivan
<PAGE>
Exhibit 2
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Stock Option Agreement")
dated September 29, 1995, is by and between SOVEREIGN BANCORP,
INC., a Pennsylvania corporation ("Sovereign") and WEST JERSEY
BANCSHARES, INC., a New Jersey corporation ("WJB").
BACKGROUND
1. Sovereign and WJB desire to enter into a Agreement
and Plan of Merger, dated September 29, 1995 (the "Agreement"),
providing, among other things, for the acquisition by Sovereign
of WJB through the merger of WJB with and into Sovereign, with
Sovereign surviving the merger (the "Merger").
2. As a condition to Sovereign to enter into the
Plan, WJB is granting to Sovereign an option to purchase up to
that number of shares of common stock of WJB as shall equal 19.9%
of WJB's shares of common stock issued and outstanding
immediately prior to such purchase, on the terms and conditions
hereinafter set forth.
AGREEMENT
In consideration of the foregoing and the mutual
covenants and agreements set forth herein, Sovereign and WJB,
intending to be legally bound hereby, agree:
1. Grant of Option. WJB hereby grants to Sovereign,
on the terms and conditions set forth herein, the option to
purchase (the "Option") up to that number of shares (the "Option
Shares") of common stock, no par value (the "Common Stock"), of
WJB as shall equal 19.9% of the shares of Common Stock issued and
outstanding immediately prior to such purchase, at a price per
share (the "Option Price") equal to the lower of (i) $8.40 or
(ii) the lowest price per share that a person or a group, other
than Sovereign or an affiliate of Sovereign, paid or offers to
pay after the date hereof for Common Stock in a transaction
constituting a Triggering Event under Section 2 hereof.
2. Exercise of Option. Provided that (i) Sovereign
shall not be in breach of the agreements or covenants contained
in this Agreement or the Plan, and (ii) no preliminary or
permanent injunction or other order against the delivery of
shares covered by the Option issued by any court of competent
jurisdiction in the United States shall be in effect, upon or
after the occurrence of a Triggering Event (as such term is
hereinafter defined) and until termination of this Stock Option
Agreement in accordance with the provisions of Section 20,
Sovereign may exercise the Option, in whole or in part, at any
time or one or more times, from time to time. As used herein,
the term "Triggering Event" means the occurrence of any of the
following events:
(a) a person or group (as such terms are defined
in the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations thereunder),
other than Sovereign or an affiliate of Sovereign, acquires
beneficial ownership (within the meaning of Rule 13d-3 under
the Exchange Act) of more than 9.9% of the then outstanding
shares of Common Stock;
(b) a person or group, other than Sovereign or an
affiliate of Sovereign, enters into an agreement or letter
of intent with WJB pursuant to which such person or group or
any affiliate of such person or group would (i) merge or
consolidate, or enter into any similar transaction, with
WJB, (ii) acquire all or substantially all of the assets or
liabilities of WJB or all or substantially all of the assets
or liabilities of West Jersey Community Bank ("WJCB"), or
(iii) acquire beneficial ownership of securities
representing, or the right to acquire beneficial ownership
or to vote securities representing, more than 9.9% of the
then outstanding shares of Common Stock or the then
outstanding shares of common stock of WJCB; or
(c) a person or group, other than Sovereign or an
affiliate of Sovereign, publicly announces a bona fide
proposal (including a written communication that is or
becomes the subject of public disclosure) for (i) any
merger, consolidation or acquisition of all or substantially
all the assets or liabilities of WJB or all or substantially
all the assets or liabilities of WJCB, or any other business
combination involving WJB or WJCB, or (ii) a transaction
involving the transfer of beneficial ownership of securities
representing, or the right to acquire beneficial ownership
or to vote securities representing, more than 9.9% of the
then outstanding shares of Common Stock or the then
outstanding shares of common stock of WJCB (collectively, a
"Proposal"), and thereafter, if such Proposal has not been
Publicly Withdrawn (as such term is hereinafter defined) at
least 30 days prior to the meeting of shareholders of WJB
called to vote on the Merger, WJB's shareholders fail to
approve the Merger by the vote required by applicable law at
the meeting of shareholders called for such purpose or such
meeting has been cancelled; or
(d) a person or group, other than Sovereign or an
affiliate of Sovereign, makes a bona fide Proposal and
thereafter, but before such Proposal has been Publicly
Withdrawn, WJB willfully takes any action in a manner which
would likely result in the failure of either party to
satisfy a material condition to the closing of the Merger or
materially reduce the value of the transaction to Sovereign;
or
(e) WJB breaches, in any material respect, any
binding term of the Agreement with respect to the Merger, or
this Stock Option Agreement after a Proposal is made and
before it is Publicly Withdrawn or publicly announces an
intention to authorize, recommend or accept any such
Proposal;
provided, however, that any purchase of shares upon exercise of
the Option shall be subject to compliance with applicable law.
If more than one of the transactions giving rise to a
Triggering Event under this Section is undertaken or effected,
then all such transactions shall give rise only to one Triggering
Event, which Triggering Event shall be deemed continuing for all
purposes hereunder until all such transactions are abandoned.
"Publicly Withdrawn" for purposes of this Section 2
shall mean an unconditional bona fide withdrawal of the Proposal
coupled with a public announcement of no further interest in
pursuing such Proposal or in acquiring any controlling influence
over WJB or in soliciting or inducing any other person (other
than Sovereign or an affiliate of Sovereign) to do so.
Notwithstanding the foregoing, the obligation of WJB to
issue Option Shares upon exercise of the Option shall be deferred
(but shall not terminate) (i) until the receipt of all required
governmental or regulatory approvals or consents necessary for
WJB to issue the Option Shares, or Sovereign to exercise the
Option, or until the expiration or termination of any waiting
period required by law, or (ii) so long as any injunction or
other order, decree or ruling issued by any federal or state
court of competent jurisdiction is in effect which prohibits the
sale or delivery of the Option Shares, and, in each case,
notwithstanding any provision to the contrary set forth herein,
the Option shall not expire or otherwise terminate.
WJB shall notify Sovereign promptly in writing of the
occurrence of any Triggering Event known to it, it being
understood that the giving of such notice by WJB shall not be a
condition to the right of Sovereign to exercise the Option. WJB
will not take any action which would have the effect of
preventing or disabling WJB from delivering the Option Shares to
Sovereign upon exercise of the Option or otherwise performing its
obligations under this Stock Option Agreement. In the event
Sovereign wishes to exercise the Option, Sovereign shall send a
written notice to WJB (the date of which is hereinafter referred
to as the "Notice Date") specifying the total number of Option
Shares it wishes to purchase and a place and date between two and
ten business days inclusive from the Notice Date for the closing
of such a purchase (a "Closing"); provided, however, that a
Closing shall not occur prior to two days after the later of
receipt of any necessary regulatory approvals or the expiration
of any legally required notice or waiting period, if any.
3. Payment and Delivery of Certificates. At any
Closing hereunder, (a) Sovereign will make payment to WJB of the
aggregate price for the Option Shares so purchased by wire
transfer of immediately available funds to an account designated
by WJB, (b) WJB will deliver to Sovereign a stock certificate or
certificates representing the number of Option Shares so
purchased, registered in the name of Sovereign or its designee,
in such denominations as were specified by Sovereign in its
notice of exercise, and (c) Sovereign will pay any transfer or
other taxes required by reason of the issuance of the Option
Shares so purchased.
A legend will be placed on each stock certificate
evidencing Option Shares issued pursuant to this Stock Option
Agreement, which legend will read substantially as follows:
"The shares of stock evidenced by this
certificate have not been the subject of a registration
statement filed under the Securities Act of 1933, as
amended (the "Act"), and declared effective by the
Securities and Exchange Commission. These shares may
not be sold, transferred or otherwise disposed of prior
to such time unless West Jersey Bancshares, Inc.
receives an opinion of counsel stating that an
exemption from the registration provisions of the Act
is available for such transfer."
4. Registration Rights. Upon or after the occurrence
of a Triggering Event and upon receipt of a written request from
Sovereign, WJB shall prepare and file as soon as practicable a
registration statement under the Securities Act of 1933, as
amended, with the Securities and Exchange Commission covering the
Option and such number of Option Shares as Sovereign shall
specify in its request, and WJB shall use its best efforts to
cause such registration statement to be declared effective in
order to permit the sale or other disposition of the Option and
the Option Shares, provided that Sovereign shall in no event have
the right to have more than one such registration statement
become effective, and provided further that WJB shall not be
required to prepare and file any such registration statement in
connection with any proposed sale with respect to which WJB's
counsel delivers to WJB and to Sovereign its opinion to the
effect that no such filing is required under applicable laws and
regulations with respect to such sale or disposition; provided,
however, that WJB may delay any registration of Option Shares
above for a period not exceeding 90 days provided WJB shall in
good faith determine that any such registration would adversely
affect an offering or contemplated offering of other securities
by WJB. Sovereign shall provide all information reasonably
requested by WJB for inclusion in any registration statement to
be filed hereunder. In connection with such filing, WJB shall
use its best efforts to cause to be delivered to Sovereign such
certificates, opinions, accountant's letters and other documents
as Sovereign shall reasonably request and as are customarily
provided in connection with registration of securities under the
Securities Act of 1933, as amended. WJB shall provide to
Sovereign such number of copies of the preliminary prospectus and
final prospectus and any amendments and supplements thereto as
Sovereign may reasonably request. All reasonable expenses
incurred by WJB in complying with the provisions of this
Section 4, including, without limitation, all registration and
filing fees, reasonable printing expenses, reasonable fees and
disbursements of counsel for WJB and blue sky fees and expenses,
shall be paid by WJB. Underwriting discounts and commissions to
brokers and dealers relating to the Option Shares, fees and
disbursements of counsel to Sovereign and any other expenses
incurred by Sovereign in connection with such filing shall be
borne by Sovereign. In connection with such filing, WJB shall
indemnify and hold harmless Sovereign against any losses, claims,
damages or liabilities, joint or several, to which Sovereign may
become subject, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of
any material fact contained in any preliminary or final
registration statement or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; and WJB
will reimburse Sovereign for any legal or other expense
reasonably incurred by Sovereign in connection with investigating
or defending any such loss, claim, damage, liability or action;
provided, however, that WJB will not be liable in any case to the
extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such
preliminary or final registration statement or such amendment or
supplement thereto in reliance upon and in conformity with
written information furnished by or on behalf of Sovereign
specifically for use in the preparation thereof. Sovereign will
indemnify and hold harmless WJB to the same extent as set forth
in the immediately preceding sentence but only with reference to
written information furnished by or on behalf of Sovereign for
use in the preparation of such preliminary or final registration
statement or such amendment or supplement thereto; and Sovereign
will reimburse WJB for any legal or other expense reasonably
incurred by WJB in connection with investigating or defending any
such loss, claim, damage, liability or action.
5. Adjustment Upon Changes in Capitalization. In the
event of any change in the Common Stock by reason of stock
dividends, split-ups, recapitalizations, combinations,
conversions, divisions, exchanges of shares or the like, then the
number and kind of Option Shares and the Option Price shall be
appropriately adjusted.
6. Filings and Consents. Each of Sovereign and WJB
will use its best efforts to make all filings with, and to obtain
consents of, all third parties and governmental authorities
necessary to the consummation of the transactions contemplated by
this Stock Option Agreement. Within 10 days from the date
hereof, Sovereign shall file a report of beneficial ownership on
Form 13D with the Securities and Exchange Commission under the
Exchange Act which discloses the rights of Sovereign hereunder.
7. Representations and Warranties of WJB. WJB hereby
represents and warrants to Sovereign as follows:
(a) Due Authorization. WJB has full corporate
power and authority to execute, deliver and perform this
Stock Option Agreement and all corporate action necessary
for execution, delivery and performance of this Stock Option
Agreement has been duly taken by WJB. This Stock Option
Agreement constitutes a legal, valid and binding obligation
of WJB, enforceable against WJB in accordance with its terms
(except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer
and similar laws of general applicability relating to or
affecting creditors' rights or by general equity
principles).
(b) Authorized Shares. WJB has taken all
necessary corporate action to authorize and reserve for
issuance all shares of Common Stock that may be issued
pursuant to any exercise of the Option.
8. Representations and Warranties of Sovereign.
Sovereign hereby represents and warrants to WJB that Sovereign
has full corporate power and authority to execute, deliver and
perform this Stock Option Agreement and all corporate action
necessary for execution, delivery and performance of this Stock
Option Agreement has been duly taken by Sovereign. This Stock
Option Agreement constitutes a legal, valid and binding
obligation of Sovereign, enforceable against Sovereign in
accordance with its terms (except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar laws of general applicability relating to or
affecting creditors' rights or by general equity principles).
9. Specific Performance. The parties hereto
acknowledge that damages would be an inadequate remedy for a
breach of this Stock Option Agreement and that the obligations of
the parties hereto shall be specifically enforceable.
10. Entire Agreement. This Stock Option Agreement and
the Agreement constitute the entire agreement between the parties
with respect to the subject matter hereof and supersede all other
prior agreements and understandings, both written and oral, among
the parties or any of them with respect to the subject matter
hereof.
11. Assignment or Transfer. Sovereign may not sell,
assign or otherwise transfer its rights and obligations
hereunder, in whole or in part, to any person or group of persons
other than to a subsidiary of Sovereign. Sovereign represents
that it is acquiring the Option for Sovereign's own account and
not with a view to, or for sale in connection with, any
distribution of the Option or the Option Shares. Sovereign is
aware that neither the Option nor the Option Shares is the
subject of a registration statement filed with, and declared
effective by, the Securities and Exchange Commission pursuant to
Section 5 of the Securities Act of 1933, as amended, but instead
each is being offered in reliance upon the exemption from the
registration requirement provided by Section 4(2) thereof and the
representations and warranties made by Sovereign in connection
therewith.
12. Amendment of Stock Option Agreement. By mutual
consent of the parties hereto, this Stock Option Agreement may be
amended in writing at any time, for the purpose of facilitating
performance hereunder or to comply with any applicable regulation
of any governmental authority or any applicable order of any
court or for any other purpose.
13. Validity. The invalidity or unenforceability of
any provision of this Stock Option Agreement shall not affect the
validity or enforceability of any other provisions of this Stock
Option Agreement, which shall remain in full force and effect.
14. Notices. All notices, requests, consents and
other communications required or permitted hereunder shall be in
writing and shall be deemed to have been duly given when
delivered personally, by telegram or telecopy, or by registered
or certified mail (postage prepaid, return receipt requested) to
the respective parties as follows:
(i) If to Sovereign, to:
Sovereign Bancorp, Inc.
1130 Berkshire Boulevard
Wyomissing, Pennsylvania 19610
Attention: Jay S. Sidhu, President
and Chief Executive Officer
Telecopy No.: (610) 320-8448
with a copy to:
Stevens & Lee
111 North Sixth Street
P.O. Box 679
Reading, Pennsylvania 19603
Attention: Joseph M. Harenza, Esquire
Jeffrey P. Waldron, Esquire
Telecopy No.: (610) 376-5610
(ii) If to WJB, to:
West Jersey Bancshares, Inc.
165 Passaic Avenue
Fairfield, New Jersey 07004
Attention: John A. Van Voorhis,
President and Check Executive
Officer
Telecopy No.:
with copies to: Sills Cummis Zuckerman Radin
Tischman Epstein & Gross
One Riverfront Plaza
Newark, New Jersey 07102
Attention: Steve E. Gross, Esquire
Victor H. Boyajian, Esquire
Telecopy No.: (201) 643-6500
or to such other address as the person to whom notice is to be
given may have previously furnished to the others in writing in
the manner set forth above (provided that notice of any change of
address shall be effective only upon receipt thereof).
15. Governing Law. This Stock Option Agreement shall
be governed by and construed in accordance with the domestic
internal law (but not the law of conflicts of law) of the
Commonwealth of Pennsylvania.
16. Captions. The captions in this Stock Option
Agreement are inserted for convenience and reference purposes,
and shall not limit or otherwise affect any of the terms or
provisions hereof.
17. Waivers and Extensions. The parties hereto may,
by mutual consent, extend the time for performance of any of the
obligations or acts of either party hereto. Each party may waive
(i) compliance with any of the covenants of the other party
contained in this Stock Option Agreement and/or (ii) the other
party's performance of any of its obligations set forth in this
Stock Option Agreement.
18. Parties in Interest. This Stock Option Agreement
shall be binding upon and inure solely to the benefit of each
party hereto, and, nothing in this Stock Option Agreement,
express or implied, is intended to confer upon any other person
any rights or remedies of any nature whatsoever under or by
reason of this Stock Option Agreement.
19. Counterparts. This Stock Option Agreement may be
executed in two or more counterparts, each of which shall be
deemed to be an original, but all of which shall constitute one
and the same agreement.
20. Expenses. Subject to the terms of the Plan and
except as otherwise provided herein, all costs and expenses
incurred by the parties hereto in connection with the
transactions contemplated by this Stock Option Agreement or the
Option shall be paid by the party incurring such cost or expense.
21. Termination. This Stock Option Agreement shall
terminate and be of no further force or effect upon the earliest
to occur of (A) the Effective Time or (B) termination of the Plan
in accordance with the terms thereof.
IN WITNESS WHEREOF, each of the parties hereto,
pursuant to resolutions adopted by its Board of Directors, has
caused this Stock Option Agreement to be executed by its duly
authorized officer and has caused its corporate seal to be
affixed hereunto and to be duly attested, all as of the day and
year first above written.
SOVEREIGN BANCORP, INC.
By /s/ Richard A. Elko
Richard A. Elko,
Corporate Controller
(CORPORATE SEAL)
Attest:/s/Lawrence M. Thompson, Jr.
Lawrence M. Thompson, Jr.,
Secretary
WEST JERSEY BANCSHARES, INC.
By /s/ John A. Van Voorhis
John A. Van Voorhis,
President and Chief Executive
Officer
(CORPORATE SEAL)
Attest: /s/ Geraldine L. Marchitto
<PAGE>
Exhibit 3
BANK PLAN OF MERGER
THIS BANK PLAN OF MERGER ("Plan of Merger") dated
September 29, 1995, is by and between SOVEREIGN BANK, a Federal
Savings Bank ("Sovereign Bank"), and WEST JERSEY COMMUNITY BANK
("WJCB").
BACKGROUND
1. Sovereign Bank is a federal savings bank and a
wholly-owned subsidiary of Sovereign Bancorp, Inc., a
Pennsylvania corporation ("Sovereign"). The authorized capital
stock of Sovereign Bank consists of 1,000 shares of common stock,
par value $1.00 per share ("Sovereign Bank Common Stock"), of
which at the date hereof 1,000 shares are issued and outstanding.
2. WJCB is a commercial bank and a wholly-owned
subsidiary of West Jersey Bancshares, Inc., a New Jersey
corporation ("WJB"). The authorized capital stock of WJCB
consists of 5,000,000 shares of common stock, par value $2.00 per
share ("WJCB Common Stock"), of which at the date hereof
1,093,900 shares are issued and outstanding.
3. The respective Boards of Directors of Sovereign
Bank and WJCB deem the merger of WJCB with and into Sovereign
Bank, pursuant to the terms and conditions set forth or referred
to herein, to be desirable and in the best interests of the
respective corporations and their respective shareholders.
4. The respective Boards of Directors of Sovereign
Bank and WJCB have adopted resolutions approving this Plan of
Merger. The respective Boards of Directors of Sovereign and WJB
have adopted resolutions approving an Agreement dated
September 29, 1995 (the "Agreement") between Sovereign and WJB,
pursuant to which this Plan of Merger is being executed by
Sovereign Bank and WJCB.
AGREEMENT
In consideration of the premises and of the mutual
covenants and agreements herein contained, and in accordance with
the applicable laws and regulations of the United States of
America, the State of New Jersey and the Commonwealth of
Pennsylvania, Sovereign Bank and WJCB, intending to be legally
bound hereby, agree:
ARTICLE I
MERGER
Subject to the terms and conditions of this Plan of
Merger and in accordance with the applicable laws and regulations
of the United States of America and the State of New Jersey on
the Effective Date (as that term is defined in Article V hereof):
WJCB shall merge with and into Sovereign Bank; the separate
existence of WJCB shall cease; and Sovereign Bank shall be the
surviving corporation (such transaction referred to herein as the
"Merger" and Sovereign Bank, as the surviving corporation in the
Merger, referred to herein as the "Surviving Bank"). Sovereign
Bank will have its home office at 1130 Berkshire Boulevard,
Wyomissing, Pennsylvania 19610 and its branch offices at the
locations listed on Exhibit "A." Following the Effective Date,
WJCB will be operated as a separate and autonomous commercial
bank division of Sovereign Bank for at least three years.
ARTICLE II
CHARTER AND BYLAWS
On and after the Effective Date, the Charter and Bylaws
of Sovereign Bank, as in effect immediately prior to the
Effective Date, shall automatically be and remain the Charter and
Bylaws of the Surviving Bank, until altered, amended or repealed.
ARTICLE III
BOARD OF DIRECTORS AND OFFICERS
3.1 Board of Directors. On and after the Effective
Date, the directors of the Surviving Bank shall consist of the
directors of Sovereign Bank duly elected and holding office
immediately prior to the Effective Date. The names and residence
addresses of the directors are:
Name Residence Address
Joseph M. Conroy 4475 Charles Street
Easton, Pennsylvania 18042
James N. Esbenshade 218 Overland Lane
Lancaster, Pennsylvania 17601
Stewart B. Kean Liberty Hall, Morris Avenue
Union, New Jersey 07083
Harry Kraft Claridge House One
Apartment 928
Verona, New Jersey 07044
Joseph E. Lewis 819 Apple Drive, Drexelwood
Wyomissing, Pennsylvania 19610
Howard D. Mackey 191 North Main Street
Boonton, New Jersey 07005
Richard E. Mohn 2630 Old Orchard Road
Lancaster, Pennsylvania 17601
Rhoda S. Oberholtzer 807 Lititz Pike
Lititz, Pennsylvania 17543
Patrick J. Petrone 27 Harold Place
Clifton, New Jersey 07013
Daniel K. Rothermel R.D. #11, Box 359C
Reading, Pennsylvania 19610
Elizabeth B. Rothermel Four Trent Place
Wyomissing, Pennsylvania 19610
Jay S. Sidhu 12 Quail Ridge
Reading, Pennsylvania 19607
Cameron C. Troilo Sandy Run and Afton Avenues
Yardley, Pennsylvania 19067
Ronald E. Vaughn 4 Morton Court
Lawrenceville, New Jersey 08648
G. Arthur Weaver 63 Heister Avenue
New Holland, Pennsylvania 17557
Samuel R. Willard, Jr. Taylorville Road
Washington Crossing, Pennsylvania
18977
Theodore Ziaylek, Jr. 140 Riverview Drive
Yardley, Pennsylvania 19067
3.2 Officers. On and after the Effective Date, the
officers of the Surviving Bank shall consist of the officers of
Sovereign Bank duly elected and holding office immediately prior
to the Effective Date. The names and titles of the officers are:
Name Title
Jay S. Sidhu President and Chief Executive
Officer
Karl D. Gerhart Treasurer and Chief Financial
Officer
Lawrence M. Thompson, Jr. Secretary
ARTICLE IV
CONVERSION OF SHARES
4.1 Stock of Sovereign Bank. Each share of Sovereign
Bank Common Stock issued and outstanding immediately prior to the
Effective Date shall, on and after the Effective Date, continue
to be issued and outstanding as a share of common stock of the
Surviving Bank. Immediately following the Merger, the authorized
capital stock of the Surviving Bank shall consist of 1,000 shares
of common stock, par value $1.00 per share, of which 1,000 shall
be issued and outstanding. Immediately following the Merger, the
surplus of the Surviving Bank shall be the sum of the surplus on
the books of WJCB and the surplus on the books of Sovereign Bank
on the Effective Date, which sum was $505,768 million at
September 30, 1995, and which surplus shall be at least equal to
20% of its capital stock.
4.2 Stock of WJCB. Each share of WJCB Common Stock
issued and outstanding immediately prior to the Effective Date,
and each share of WJCB Common Stock issued and held in the
treasury of WJB as of the Effective Date, if any, shall, on the
Effective Date, be cancelled, and no cash, stock or other
property shall be delivered in exchange therefor.
ARTICLE V
EFFECTIVE DATE OF THE MERGER
The Merger shall be effective on the date on which all
filings with government agencies, as may be required under
applicable laws and regulations for the Merger to become
effective, are made and accepted by the applicable agencies (the
"Effective Date").
ARTICLE VI
EFFECT OF THE MERGER
6.1 Separate Existence. On the Effective Date: the
separate existence of WJCB shall cease; and all of the property
(real, personal and mixed), rights, powers, duties and
obligations of WJCB shall be taken and deemed to be transferred
to and vested in the Surviving Bank, without further act or deed,
as provided by applicable laws and regulations. Following the
Effective Date, WJCB will be operated as a separate and
autonomous commercial bank division of Sovereign Bank for at
least three years. The commercial bank division of Sovereign
Bank will be permitted during such three-year period to (i) set
its own policies with respect to interest rates and the other
terms and conditions of its business provided, however, such
policies are coordinated with Sovereign's asset/liability
management policy and (ii) retain the loan origination division
of WJCB existing immediately prior to the Effective Date.
6.2 Savings Accounts. After the Effective Date,
Sovereign Bank will continue to issue savings accounts on the
same basis as immediately prior to the Effective Date.
ARTICLE VII
CONDITIONS PRECEDENT
The obligations of Sovereign Bank and WJCB to effect
the Merger shall be subject to satisfaction, unless duly waived
by the party permitted to do so, of the conditions precedent set
forth in the Agreement.
ARTICLE VIII
TERMINATION
This Plan of Merger shall terminate upon any
termination of the Agreement in accordance with its terms;
provided, however, that any such termination of this Plan of
Merger shall not relieve any party hereto from liability on
account of a breach by such party of any of the terms hereof or
thereof.
ARTICLE IX
AMENDMENT
Subject to applicable law, this Plan of Merger may be
amended, by action of the respective Boards of Directors of the
parties hereto, at any time prior to consummation of the Merger,
but only by an instrument in writing signed by duly authorized
officers on behalf of the parties hereto.
ARTICLE X
MISCELLANEOUS
10.1 Extensions; Waivers. Each party, by a written
instrument signed by a duly authorized officer, may extend the
time for the performance of any of the obligations or other acts
of the other party hereto and may waive compliance with any of
the covenants, or performance of any of the obligations, of the
other party contained in this Plan of Merger.
10.2 Notices. Any notice or other communication
required or permitted under this Plan of Merger shall be given,
and shall be effective, in accordance with the provisions of
Section 7.06 of the Agreement.
10.3 Captions. The headings of the several Articles
and Sections herein are inserted for convenience of reference
only and are not intended to be part of, or to affect the meaning
or interpretation of, this Plan of Merger.
10.4 Counterparts. For the convenience of the parties
hereto, this Plan of Merger may be executed in several
counterparts, each of which shall be deemed the original, but all
of which together shall constitute one and the same instrument.
10.5 Governing Law. This Plan of Merger shall be
governed by and construed in accordance with the laws of the
United States of America and, in the absence of controlling
Federal law, in accordance with the laws of the Commonwealth of
Pennsylvania.
IN WITNESS WHEREOF, Sovereign Bank and WJCB have caused
this Bank Plan of Merger to be executed by their duly authorized
officers and their corporate seals to be hereunto affixed on the
date first written above.
SOVEREIGN BANK, a Federal Savings
Bank
By /s/ Richard A. Elko
Richard A. Elko,
Senior Vice President
(CORPORATE SEAL)
Attest:/s/Lawrence M. Thompson, Jr.
Lawrence M. Thompson, Jr.
Secretary
WEST JERSEY COMMUNITY BANK
By /s/ John A. Van Voorhis
John A. Van Voorhis,
(CORPORATE SEAL) President and Chief
Executive Officer
Attest:/s/ Geraldine L. Marchitto
Secretary
<PAGE>
EXHIBIT "A"
to Plan of Merger
SOVEREIGN BANK
BRANCH LOCATIONS
<TABLE>
<CAPTION>
ADDRESS COUNTY MSA
PENNSYLVANIA
<S> <C> <C>
1. 61 Constitution Boulevard
Kutztown, Pennsylvania Berks Reading 6680
2. 3401 N. 5th Street Highway
at Elizabeth Avenue
Laureldale, Pennsylvania Berks Reading 6680
3. 840 Penn Avenue at Park Road
Wyomissing, Pennsylvania Berks Reading 6680
4. 15 North Sixth Street
Reading, Pennsylvania Berks Reading 6680
5. Reading Mall
4260 Perkiomen Avenue
Reading, Pennsylvania Berks Reading 6680
6. K-Mart Shopping Center
11 Parkside Avenue
Shillington, Pennsylvania Berks Reading 6680
7. Berkshire Mall
Wyomissing, Pennsylvania Berks Reading 6680
8. 329 South Main Street
Doylestown, Pennsylvania 18901 Bucks Philadelphia 6160
9. Rte. 532 & Taylorsville Road
Washington Crossing, Pennsylvania 18977 Bucks Philadelphia 6160
10. 95 S. Main Street
Yardley, Pennsylvania 19067 Bucks Philadelphia 6160
11. Pine Watson Plaza
Langhorne, Pennsylvania Bucks Philadelphia 6160
12. 131 Wilmington West Chester Pike
Glen Mills, Pennsylvania 19342 Delaware Philadelphia 6160
13. 23 East King Street
Lancaster, Pennsylvania Lancaster Lancaster 4000
14. 194 N. Reading Road at Grandview Drive
Ephrata, Pennsylvania Lancaster Lancaster 4000
15. 46 E. Main Street
Lititz, Pennsylvania Lancaster Lancaster 4000
16. 100 East Main Street
New Holland, Pennsylvania Lancaster Lancaster 4000
17. K-Mart Shopping Center
1846 Fruitville Pike
Lancaster, Pennsylvania Lancaster Lancaster 4000
18. 519-A Leaman Avenue
Millersville, Pennsylvania Lancaster Lancaster 4000
19. Sears Mall
Park City
Lancaster, Pennsylvania Lancaster Lancaster 40000
20. East Towne Mall
Lincoln Highway East
Lancaster, Pennsylvania Lancaster Lancaster 4000
21. 3147 College Heights Boulevard
Allentown, Pennsylvania Lehigh Allentown- 0240
Bethlehem
22. 2181 West Union Boulevard
Bethlehem, Pennsylvania Lehigh Allentown-0240
Bethlehem
23. 258 High Street
Pottstown, Pennsylvania Montgomery Philadelphia 6160
24. 800 East Willow Grove Avenue
Wyndomoor, Pennsylvania Montgomery Philadelphia 6160
25. 618 Germantown Pike
Lafayette Hill, Pennsylvania Montgomery Philadelphia 6160
26. 1401 Bruce Road
Oreland, Pennsylvania Montgomery Philadelphia 6160
27. Routes 309 and 63*
North Wales, Pennsylvania Montgomery Philadelphia 6160
28. Old York and Church Roads
Elkins Park, Pennsylvania Montgomery Philadelphia 6160
29. 1401 Easton Avenue
Bethlehem, Pennsylvania Northampton Allentown- 0240
Bethlehem
30. 2022 Lehigh Street
Easton, Pennsylvania Northampton Allentown- 0240
Bethlehem
31. 100 North Third Street
P.O. Box 230
Easton, Pennsylvania Northampton Allentown- 0240
Bethlehem
32. 3120 William Penn Highway
Easton, Pennsylvania Northampton Allentown- 0240
Bethlehem
33. 71 Bangor Junction Road
Bangor, Pennsylvania Northampton Allentown- 0240
Bethlehem
34. 8623 Germantown Avenue
Philadelphia, Pennsylvania Philadelphia Philadelphia 6160
35. 9856 Bustleton Avenue
Philadelphia, Pennsylvania Philadelphia Philadelphia 6160
36. 104 N. Centre Street*
Pottsville, Pennsylvania Schuylkill None
NEW JERSEY
37. 300 Broad Avenue*
Palisades Park, New Jersey Bergen Newark 5640
38. 707 Anderson Avenue**
Cliffside Park, New Jersey Bergen Newark 5640
39. 270 S. Livingston Avenue
Livingston, New Jersey Essex Newark 5640
40. 555 Milburn Avenue
Short Hills, New Jersey Essex Newark 5640
41. 165 Passaic Avenue
Fairfield, New Jersey*** Essex Newark 5640
42. 378 Bloomfield Avenue
Caldwell, New Jersey**** Essex Newark 5640
43. 121 Franklin Corner Road
Lawrenceville, New Jersey Mercer Trenton 8480
44. 952 Parkway Avenue
Trenton, New Jersey Mercer Trenton 8480
45. 2730 Nottingham Way
Mercerville, New Jersey Mercer Trenton 8480
46. 44 Hightstown Road
Princeton Junction, New Jersey Mercer Trenton 8480
47. 188 Nassau Street
Princeton, New Jersey Mercer Trenton 8480
48. 1700 Kuser Road
Hamilton, New Jersey Mercer Trenton 8480
49. 525 Inman Avenue
Colonia, New Jersey Middlesex Middlesex-
Somerset- 5015
Hunterdon
50. Applegarth & Cranbury Roads
Cranbury, New Jersey Middlesex Middlesex-
Somerset-
Hunterdon- 5015
51. 660 Plainsboro Road
Plainsboro, New Jersey Middlesex Middlesex-
Somerset-
Hunterdon- 5015
52. 712 Tenth Avenue
Belmar, New Jersey 07719 Monmouth Monmouth-Ocean 5190
53. 44 Main Street & Holmdel Road
Holmdel, New Jersey 07733 Monmouth Monmouth-Ocean 5190
54. 43 Main Street
Keyport, New Jersey 07735 Monmouth Monmouth-Ocean 5190
55. 3600 Rt. 9 South & Redwood Road
Howell, New Jersey Monmouth Monmouth-Ocean 5190
56. 57 Monmouth Road
Oakhurst, New Jersey 07755 Monmouth Monmouth-Ocean 5190
57. 1215 Highway 35 & New Monmouth Road
Middletown, New Jersey 07748 Monmouth Monmouth-Ocean 5190
58. 1 Schanck Road
Freehold, New Jersey Monmouth Monmouth-Ocean 5190
59. Broad Street & Bergen Place
Red Bank, New Jersey 07701 Monmouth Monmouth-Ocean 5190
60. Monmouth & Parker Roads
West Long Branch, New Jersey 07764 Monmouth Monmouth-Ocean 5190
61. Marlboro Mall
Route 79 & School Road West
Marlboro, New Jersey 07746 Monmouth Monmouth-Ocean 5190
62. Yorktowne Shopping Center
303 Gordons Corner Road
Manalapan, New Jersey 07726 Monmouth Monmouth-Ocean 5190
63. 600 Broadway
Long Branch, New Jersey 07740 Monmouth Monmouth-Ocean 5190
64. Covered Bridge
345 Union Hill Road
Manalapan, New Jersey 07726 Monmouth Monmouth-Ocean 5190
65. 18 Sycamore Avenue
Little Silver, New Jersey 07739 Monmouth Monmouth-Ocean 5190
66. 201 Harmony Road
Middleton, New Jersey Monmouth Monmouth-Ocean 5190
67. Highway 9 & Taylor Mills Road
Manalapan, New Jersey 07726 Monmouth Monmouth-Ocean 5190
68. 1600 Corlies Avenue
Neptune, New Jersey 07753 Monmouth Monmouth-Ocean 5190
69. Middlebrook Shopping Center
Deal Road and Highway 35
Ocean Township, New Jersey Monmouth Monmouth-Ocean 5190
70. 342 Lloyd Road
Aberdeen, New Jersey Monmouth Monmouth-Ocean 5190
71. 440 Cookman Avenue
Asbury Park, New Jersey 07712 Monmouth Monmouth-Ocean 5190
72. 110 East Main Street
Rockaway, New Jersey Morris Newark 5640
73. 430 Route 10
Randolph, New Jersey Morris Newark 5640
74. 1 Basset Highway
Dover, New Jersey Morris Newark 5640
75. 239 Littleton Road
Parsippany, New Jersey Morris Newark 5640
76. 73 Diamond Spring Road
Denville, New Jersey Morris Newark 5640
77. 405 Main Street
Boonton, New Jersey Morris Newark 5640
78. 977 Valley Road
Gillette, New Jersey Morris Newark 5640
79. 620 Main Road
Towaco, New Jersey Morris Newark 5640
80. 40 South Main Street
Wharton, New Jersey Morris Newark 5640
81. 434 Ridgedale Avenue
East Hanover, New Jersey Morris Newark 5640
82. 2560 Route 37 West
Lakehurst, New Jersey 08733 Ocean Monmouth-Ocean 5190
83. 36 Washington Street
Toms River, New Jersey 08753 Ocean Monmouth-Ocean 5190
84. 1071 Route 37 West
Toms River, New Jersey 08757 Ocean Monmouth-Ocean 5190
85. Town & Country Shopping Center
Route 70
Lakewood, New Jersey 08701 Ocean Monmouth-Ocean 5190
86. 940 Fischer Boulevard
Toms River, New Jersey 08753 Ocean Monmouth-Ocean 5190
87. 1850 Highway 35 North
Ortley Beach, New Jersey 08751 Ocean Monmouth-Ocean 5190
88. 69 Madison Avenue
Lakewood, New Jersey 08701 Ocean Monmouth-Ocean 5190
89. 1866 Hooper Avenue
Toms River, New Jersey 08753 Ocean Monmouth-Ocean 5190
90. Whiting Shopping Center, Unit #27
Lacey Road & Cherry Street
Whiting, New Jersey Ocean Monmouth-Ocean 5190
91. Route 9 & Motor Road
Pine Beach, New Jersey 08741 Ocean Monmouth-Ocean 5190
92. 190 Route 37 East
Toms River, New Jersey Ocean Monmouth-Ocean 5190
93. Brook Plaza Shopping Center
W. County Line Road & New Prospect Road
Jackson, New Jersey Ocean Monmouth-Ocean 5190
94. 1100 Burnt Tavern Road
Brick, New Jersey 08724 Ocean Monmouth-Ocean 5190
95. 490 Route 530
Whiting, New Jersey Ocean Ocean-Monmouth 5190
96. 2000 Route 70
Lakehurst, New Jersey Ocean Ocean-Monmouth 5190
97. 17 Beaverson Boulevard
Brick, New Jersey Ocean Ocean-Monmouth 5190
98. 1325 Route 206
Silkman, New Jersey 08558
Rocky Hill, New Jersey Somerset Middlesex-
Somerset- 5015
Hunterdon
99. 34 East Main Street
Somerville, New Jersey Somerset Middlesex- Somerset-
5015 Hunterdon
100. 2 Waterloo Road
Byram Township, New Jersey Sussex Newark 5640
101. 197 Main Street
Newton, New Jersey Sussex Newark 5640
102. 540 Morris Avenue
Elizabeth, New Jersey Union Newark 5640
103. 726 W. St. George Avenue
Linden, New Jersey Union Newark 5640
104. 1224 Stuyvesant Avenue
Union, New Jersey Union Newark 5640
105. 1 Union Square
Elizabeth, New Jersey Union Newark 5640
106. 2253 North Avenue
Scotch Plains, New Jersey Union Newark 5640
107. 18 North Avenue West
Cranford, New Jersey Union Newark 5640
108. 201 Chestnut Street
Roselle, New Jersey Union Newark 5640
109. 5 Westfield Avenue
Clark, New Jersey Union Newark 5640
110. 324 Chestnut Street
Union, New Jersey Union Newark 5640
DELAWARE
111. 1812 Marsh Road, Suite 401
Wilmington, Delaware New Castle Wilmington 9160
112. 281 E. Main & Tyre Streets
Newark, Delaware New Castle Wilmington 9160
113. 3812 Kirkwood Highway
Wilmington, Delaware New Castle Wilmington 9160
114. 201 West Ninth Street
Wilmington, Delaware New Castle Wilmington 9160
* After receipt of all regulatory approvals and pursuant to the Agreement dated July 13,
1995, between Sovereign Bank and Northwest Savings Bank, office will be sold on
November 10, 1995.
** To be acquired November 17, 1995, by Sovereign Bank upon receipt of all regulatory
approvals and consummation of the transaction contemplated by the Branch Purchase and
Deposit Assumption Agreement, dated August 11, 1995, between Sovereign Bank and Berkeley
Federal Bank & Trust FSB.
*** Presently a branch of WJCB.
**** WJCB has applied for regulatory approval to operate a branch at this location. The New
Jersey Department of Banking and has approved WJCB's application. The Federal Reserve
Bank of New York has also approved this branch. This branch has not yet been opened.
</TABLE>
<PAGE>
EXHIBIT 4
FORM OF OPINION OF COUNSEL TO SOVEREIGN
WJB shall have received from counsel to Sovereign, an
opinion, dated as of the Closing Date, substantially to the
effect that, subject to normal exceptions and qualifications:
(a) Sovereign and Sovereign Bank have full corporate
power to carry out the transactions contemplated in the Agreement
and the Plan, respectively. The execution and delivery of the
Agreement and the Plan and the consummation of the transactions
contemplated thereunder have been duly and validly authorized by
all necessary corporate action on the part of Sovereign and
Sovereign Bank, and the Agreement and the Plan constitute valid
and legally binding obligations of Sovereign and Sovereign Bank,
respectively, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium, receivership, conservatorship, and
other laws affecting creditors' rights generally and institutions
the deposits of which are insured by the FDIC, and as may be
limited by the exercise of judicial discretion in applying
principles of equity. Subject to satisfaction of the conditions
set forth in the Agreement, neither the transactions contemplated
in the Agreement or the Plan, nor compliance by Sovereign and
Sovereign Bank with any of the respective provisions thereof,
will (i) conflict with or result in a breach or default under
(A) the articles of incorporation or bylaws of Sovereign or the
charter or bylaws of Sovereign Bank, or, (B) to the knowledge of
such counsel, any note, bond, mortgage, indenture, license,
agreement or other material instrument or obligation to which
Sovereign or Sovereign Bank is a party; or (ii) based on
certificates of officers and without independent verification, to
the knowledge of such counsel, result in the creation or
imposition of any material lien or encumbrance upon the property
of Sovereign or Sovereign Bank, except such material lien,
instrument or obligation that has been disclosed pursuant to the
Agreement or the Plan; or (iii) violate in any material respect
any order, writ, injunction or decree known to such counsel, or
any federal or Pennsylvania statute, rule or regulation
applicable to Sovereign or Sovereign Bank.
(b) Sovereign Bank is a validly existing
federally-chartered savings bank organized and in good standing
under the laws of the United States of America. The deposits of
Sovereign Bank are insured to the maximum extent provided by law
by the Federal Deposit Insurance Corporation.
(c) There is, to the knowledge of such counsel, no
legal, administrative, arbitration or governmental proceeding or
investigation pending or threatened to which Sovereign or
Sovereign Bank is a party which would, if determined adversely to
Sovereign or Sovereign Bank, have a material adverse effect on
the financial condition or results of operation of Sovereign and
Sovereign Bank taken as a whole, or which presents a claim to
restrain or prohibit the transactions contemplated by the
Agreement and the Plan, respectively.
(d) No consent, approval, authorization or order of
any federal or state court or federal or state governmental
agency or body is required for the consummation by Sovereign or
Sovereign Bank of the transactions contemplated by the Agreement
and the Plan, except for such consents, approvals, authorizations
or orders as have been obtained.
(e) Upon the filing and effectiveness of the Articles
of Merger with the PDS, the Articles of Merger with the NJDS, and
Articles of Combination with the OTS in accordance with the
Agreement and the Plan, the mergers of Sovereign and WJB and of
Sovereign Bank and WJCB contemplated by the Agreement and the
Plan, respectively, will have been effected in compliance with
all applicable federal and Pennsylvania laws and regulations in
all material respects.
(f) The shares of Sovereign Common Stock to be issued
in connection with the merger of WJB and Sovereign contemplated
by the Agreement have been duly authorized and will, when issued
in accordance with the terms of the Agreement, be validly issued,
fully paid and nonassessable, free and clear of any mortgage,
pledge, lien, encumbrance or claim (legal or equitable).
(g) On the sole basis of such counsel's participation
in conferences with officers and employees of Sovereign in
connection with the Proxy Statement/Prospectus, and without other
independent investigation or inquiry, such counsel has no reason
to believe that the Proxy Statement/Prospectus, including any
amendments or supplements thereto (except for the financial
information, financial schedules and other financial or
statistical data contained therein and except for any information
supplied by WJB or WJCB for inclusion therein, as to which
counsel need express no belief), as of the date of mailing
thereof, contained any untrue statement of a material fact with
respect to Sovereign or omitted to state any material fact with
respect to Sovereign necessary to make any statement therein with
respect to Sovereign, in light of the circumstances under which
it was made, not misleading. Counsel may state in delivering
such opinion, that such counsel has not independently verified
and does not assume the responsibility for the accuracy,
completeness or fairness of any information or statements
contained in the Proxy Statement/Prospectus, except with respect
to identified statements of law or regulations or legal
conclusions relating to Sovereign or the transactions
contemplated in the Agreement and the Plan.
<PAGE>
EXHIBIT 5
FORM OF TAX OPINION OF STEVENS & LEE
Sovereign and WJB shall have received an opinion of
Stevens & Lee substantially to the effect that, under the
provisions of the IRC:
1. Provided the Merger qualifies as a statutory merger
under applicable law, the transfer by WJB of all of its assets to
Sovereign in exchange for Sovereign Common Stock (including
fractional share interests) and the assumption by Sovereign of
all of WJB's liabilities will constitute a reorganization within
the meaning of Section 368(a)(1)(A) of the IRC.
2. WJB and Sovereign will each be "a party to a
reorganization" within the meaning of Section 368(b) of the IRC.
3. Neither WJB nor Sovereign will recognize any gain or
loss upon the transfer of WJB's assets to Sovereign in exchange
solely for Sovereign Common Stock (including fractional share
interests) and the assumption by Sovereign of the liabilities of
WJB.
4. The basis of the WJB assets in the hands of Sovereign
will be the same as the basis of such assets in the hands of WJB
immediately prior to the Merger.
5. The holding period of the assets of WJB to be received
by Sovereign will include the period during which the assets were
held by WJB.
6. No gain or loss will be recognized by the shareholders
of WJB on the receipt of Sovereign Common Stock (including
fractional share interests) solely in exchange for their shares
of WJB Common Stock.
7. The basis of the Sovereign Common Stock (including
fractional share interests) to be received by the WJB
shareholders in the Merger will be the same as the basis of the
WJB Common Stock surrendered in exchange therefor.
8. The holding period of the Sovereign Common Stock
(including fractional share interests) to be received by the WJB
shareholders in the Merger will include the period during which
the WJB shareholders held their WJB Common Stock, provided the
shares of WJB Common Stock are held as a capital asset on the
Effective Date.
9. The payment of cash in lieu of fractional share
interests of Sovereign Common Stock will be treated as if the
fractional share interests were distributed as part of the Merger
and then redeemed by Sovereign. Such cash payments will be
treated as having been received as distribution in full payment
in exchange for the fractional share interests redeemed, as
provided in Section 302(a) of the IRC.
10. The Sovereign Stock Purchase Rights transferred with
the shares of Sovereign Common Stock will not constitute "other
property" within the meaning of Section 356(a)(1)(B) of the IRC.
11. As provided in Section 381(c)(2) of the IRC and related
Treasury regulations, Sovereign will succeed to and take into
account the earnings and profits, or deficit in earnings and
profits, of WJB as of the Effective Date. Any deficit in the
earnings and profits of Sovereign or WJB will be used only to
offset the earnings and profits accumulated after the Merger.
12. Pursuant to Section 381(a) of the IRC and related
Treasury regulations, Sovereign will succeed to and take into
account the items of WJB described in Section 381(c) of the IRC.
Such items will be taken into account by Sovereign subject to the
conditions and limitations of Sections 381, 382, 383, and 384 of
the IRC and the Treasury regulations thereunder.
13. Provided the Bank Merger constitutes a statutory merger
under applicable law, the Bank Merger will constitute a
reorganization within the meaning of Section 368(a)(1)(A) of the
IRC.
14. WJCB and Sovereign Bank will each be "a party to a
reorganization" within the meaning of Section 368(b) of the IRC.
15. Neither WJCB nor Sovereign Bank will recognize any gain
or loss upon the transfer of WJCB's assets to Sovereign Bank in
constructive exchange solely for Sovereign Bank common stock and
the assumption by Sovereign Bank of the liabilities of WJCB.
16. The basis of the WJCB assets in the hands of Sovereign
Bank will be the same as the basis of such assets in the hands of
WJCB immediately prior to the Bank Merger.
17. The holding period of the WJCB assets in the hands of
Sovereign Bank will include the period during which such assets
were held by WJCB.
18. No gain or loss will be recognized by Sovereign, as the
shareholder of WJCB, upon the constructive receipt of shares of
Sovereign Bank common stock in exchange for the WJCB common stock
surrendered in exchange therefor in the Bank Merger.
19. The basis of the Sovereign Bank common stock to be held
by Sovereign after the Bank Merger will equal the basis of such
stock immediately before the Bank Merger, increased by the basis
of the WJCB common stock surrendered in the constructive
exchange.
20. As provided in Section 381(c)(2) of the IRC and related
Treasury regulations, Sovereign Bank will succeed to and take
into account the earnings and profits, or deficit in earnings and
profits, of WJCB as of the effective date of the Bank Merger.
Any deficit in the earnings and profits of Sovereign Bank or WJCB
will be used only to offset the earnings and profits accumulated
after the Bank Merger.
21. Pursuant to Section 381(a) of the IRC and related
Treasury regulations, Sovereign Bank will succeed to and take
into account the items of WJCB described in Section 381(c) of the
IRC. Such items will be taken into account by Sovereign Bank
subject to the conditions and limitations of Sections 381, 382,
383, and 384 of the IRC and the Treasury regulations thereunder.
<PAGE>
EXHIBIT 6
FORM OF OPINION OF COUNSEL TO WJB
Sovereign shall have received from counsel to WJB, an
opinion, dated as of the Closing Date, substantially to the
effect that, subject to normal exceptions and qualifications:
(a) WJB and WJCB have full corporate power to carry
out the transactions contemplated in the Agreement and the Plan,
respectively. The execution and delivery of the Agreement and
the Plan and the consummation of the transactions contemplated
thereunder have been duly and validly authorized by all necessary
corporate action on the part of WJB and WJCB, and the Agreement
and the Plan constitute a valid and legally binding obligation,
in accordance with their respective terms, of WJB and WJCB,
respectively, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium, receivership, conservatorship, and
other laws affecting creditors' rights generally and institutions
the deposits of which are insured by the FDIC, and as may be
limited by the exercise of judicial discretion in applying
principles of equity. Subject to satisfaction of the conditions
set forth in the Agreement, neither the transactions contemplated
in the Agreement and the Plan, nor compliance by WJB and WJCB
with any of the respective provisions thereof, will (i) conflict
with or result in a breach or default under (A) the certificate
of incorporation or bylaws of WJB or the charter or bylaws of
WJCB, or (B) based on certificates of officers and without
independent verification, to the knowledge of such counsel, any
note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which WJB or WJCB is a party; or
(ii) to the knowledge of such counsel, result in the creation or
imposition of any material lien, instrument or encumbrance upon
the property of WJB or WJCB, except such material lien,
instrument or obligation that has been disclosed to Sovereign
pursuant to the Agreement and the Plan, or (iii) violate in any
material respect any order, writ, injunction, or decree known to
such counsel, or any statute, rule or regulation applicable to
WJB or WJCB.
(b) WJCB is a validly existing state-chartered
commercial bank organized and in good standing under the laws of
the state of New Jersey. The deposits of WJCB are insured to the
maximum extent provided by law by the Federal Deposit Insurance
Corporation.
(c) There is, to the knowledge of such counsel, no
legal, administrative, arbitration or governmental proceeding or
investigation pending or threatened to which WJB or WJCB is a
party which would, if determined adversely to WJB or WJCB, have a
material adverse effect on the business, properties, results of
operations, or condition, financial or otherwise, of WJB or WJCB
taken as a whole or which presents a claim to restrain or
prohibit the transactions contemplated by the Agreement and the
Plan, respectively.
(d) No consent, approval, authorization, or order of
any federal or state court or federal or state governmental
agency or body, or of any third party, is required for the
consummation by WJB or WJCB of the transactions contemplated by
the Agreement and the Plan, except for such consents, approvals,
authorizations or orders as have been obtained.
(e) On the sole basis of such counsel's participation
in conferences with officers and employees of WJB in connection
with the preparation of the Prospectus/Proxy Statement and
without other independent investigation or inquiry, such counsel
has no reason to believe that the Prospectus/Proxy Statement,
including any amendments or supplements thereto (except for the
financial information, financial statements, financial schedules
and other financial or statistical data contained therein and
except for any information supplied by Sovereign for inclusion
therein, as to which counsel need express no belief), as of the
date of mailing thereof and as of the date of the meeting of
shareholders of WJB to approve the merger, contained any untrue
statement of a material fact or omitted to state a material fact
necessary to make any statement therein, in light of the
circumstances under which it was made, not misleading. Counsel
may state in delivering such opinion, that such counsel has not
independently verified and does not assume any responsibility for
the accuracy, completeness or fairness of any information or
statements contained in the Prospectus/Proxy Statement, except
with respect to identified statements of law or regulations or
legal conclusions relating to WJB or WJCB or the transactions
contemplated in the Agreement and the Plan.
<PAGE>
ANNEX B
OPINION OF RYAN, BECK & CO., INC.
<PAGE>
[Letterhead of Ryan, Beck]
January 16, 1996
The Board of Directors
West Jersey Bancshares Inc.
165 Passaic Avenue
Fairfield, New Jersey 07004
Members of the Board:
You have requested our opinion as to the fairness, from a
financial point of view, to West Jersey Bancshares, Inc. ("WJB")
and its shareholders of the proposed merger (the "Merger")
between WJB and Sovereign Bancorp, Inc. ("Sovereign").
The terms of the Agreement and Plan of Merger ("Merger
Agreement") dated September 29, 1995 by and between WJB and
Sovereign indicate that the consummation of the Merger is subject
to receipt of approvals from the shareholders of WJB and from
various regulatory agencies, and is further subject to the
satisfaction of certain other conditions. The Merger Agreement
provides for a merger under which (i) WJB shall merge with and
into Sovereign; (ii) the separate existence of WJB shall cease;
and (iii) Sovereign shall be the surviving corporation in the
Merger. Under the terms of the Agreement, each of the
outstanding shares of WJB common stock will be converted into and
become the right to receive 0.8335 shares (such exchange ratio as
subject to possible adjustment as described below, the "Exchange
Ratio") of Sovereign common stock. The Exchange Ratio is subject
to adjustment if the Sovereign Market Value, as defined in the
Merger Agreement, is less than $9.07 or greater than $11.09 or in
the event that the Sovereign Market Value is less than $7.56 or
greater than $12.60 and Sovereign or WJB has attempted to
terminate the Merger Agreement as set forth below. If the
Sovereign Market Value is less than $9.07, then each share of WJB
common stock shall be converted into and become such number of
shares of Sovereign common stock as shall equal the amount
obtained by dividing $7.56 by the Sovereign Market Value. If the
Sovereign Market Value is greater than $11.09, then each share of
WJB common stock shall be converted into and become such number
of shares of Sovereign common stock as shall equal the amount
obtained by dividing $9.24 by the Sovereign Market Value. The
Merger may be terminated by Sovereign or WJB if on the Closing
Date the Sovereign Market Value is less than $7.56 or greater
than $12.60 per share. If the Sovereign Market Value is less
than $7.56 and Sovereign has elected to terminate the Merger
Agreement, WJB may deliver written notice on the Closing Date of
its election not to terminate the Merger Agreement and then,
notwithstanding Sovereign's attempted termination, no termination
shall have occurred and the Exchange Ratio shall be calculated by
dividing $7.56 by a Sovereign Market Value of $7.56. If the
Sovereign Market Value is greater than $12.60 and WJB has elected
to terminate the Merger Agreement, Sovereign may deliver written
notice on the Closing Date of its election not to terminate the
Merger Agreement and then, notwithstanding WJB's attempted
termination, no termination shall have occurred and the Exchange
Ratio shall be calculated by dividing $9.24 by a Sovereign Market
Value of $12.60.
Ryan, Beck & Co., as a customary part of its
investment banking business, is engaged in the valuation of
banking and savings institutions and their securities in
connection with mergers and acquisitions. In conducting our
investigation and analysis of this transaction, we have met
separately with members of senior management of WJB and Sovereign
to discuss their respective operations, historical financial
statements, strategic plans, and future prospects. We have
reviewed and analyzed material prepared in connection with the
Merger, including but not limited to, the following: (i) the
Merger Agreement and related documents; (ii) drafts of the Proxy
Statement/Prospectus prepared in connection with the Merger;
(iii) Sovereign's Annual Report to Shareholders and Annual Report
on Form 10-K for the years ended December 31, 1992 through 1994,
and Sovereign's Quarterly Reports on Form 10-Q for the periods
ended March 31, 1995, June 30, 1995 and September 30, 1995;
(iv) WJB's Annual Reports to Shareholders for the years ended
December 31, 1989 through 1994, and WJB's Quarterly Reports on
Form 10-Q for the periods ended March 31, 1995, June 30, 1995 and
September 30, 1995; (v) certain operating and financial
information provided to us by the management of WJB relating to
its business and prospects; (vi) the historical stock prices and
trading volume of Sovereign's common stock; (vii) the historical
stock prices and trading volume of WJB's common stock; (viii) the
terms of recent acquisitions of commercial banking institutions
which we deemed generally comparable to WJB; (ix) the publicly-
available financial data of commercial banking organizations
which we deemed generally comparable to WJB; and (x) the publicly
available financial data of thrift institutions which we deemed
generally comparable to Sovereign. We also conducted or reviewed
such other studies, analyses, inquiries and examinations as we
deemed appropriate. In addition, we considered the future
prospects of WJB in the event that it remained independent.
While we have taken care in our investigation and analyses, we
have relied upon and assumed the accuracy, completeness and
fairness of the financial and other information provided to us by
the respective institutions or which was publicly available and
have not assumed any responsibility for independently verifying
such information. We have also relied upon the managements of
WJB and Sovereign as to the reasonableness and achievability of
the financial and operating forecasts and projections (and the
assumptions and bases therefor) provided to us and in certain
instances we have made certain adjustments to such financial and
operating forecasts which in our judgment were appropriate under
the circumstances. In addition, we have assumed with your
consent that such forecasts and projections reflect the best
currently available estimates and judgments of the respective
managements. We are not experts in the evaluation of allowances
for loan losses. Therefore, we have not assumed any
responsibility for making an independent evaluation of the
adequacy of the allowances for loan losses set forth in the
balance sheets of WJB and Sovereign at September 30, 1995, and we
assumed such allowances were adequate and complied fully with
applicable law, regulatory policy and sound banking practice as
of the date of such financial statements. We also assumed that
the Merger in all respects is, and will be consummated in
compliance with all laws and regulations applicable to WJB and
Sovereign. We have not made or obtained any independent
evaluations or appraisals of the assets or liabilities of either
WJB or Sovereign or their respective subsidiaries, nor have we
reviewed any individual loan files of WJB or Sovereign.
In conducting our analysis and arriving at our opinion as
expressed herein, we have considered such financial and other
factors as we have deemed appropriate in the circumstances. In
rendering our opinion, we have assumed that in the course of
obtaining the necessary regulatory approvals for the Merger, no
conditions will be imposed that will have a material adverse
effect on the contemplated benefits of the Merger to WJB. Our
opinion is necessarily based on economic, market and other
conditions and projections as they exist and can be evaluated on
the date hereof.
We have been retained by the Board of Directors of WJB as
an independent contractor to act as financial advisor to WJB with
respect to the Merger and will receive a fee for our services.
We have, in the past, provided financial advisory services to
Sovereign and WJB and have received fees for the rendering of
such services. In addition, in the ordinary course of business,
we may actively trade debt and/or equity securities of Sovereign
and WJB and their respective affiliates for our own account and
the accounts of our customers, and we therefore may from time to
time hold a long or short position in such securities.
Our opinion is directed to the Board of Directors of WJB
and does not constitute a recommendation to any shareholder of
WJB as to how such shareholder should vote at any shareholder
meeting held in connection with the Merger.
Based upon and subject to the foregoing it is our opinion
as investment bankers that the Exchange Ratio in the Merger as
provided and described in the Merger Agreement is fair to the
holders of WJB common stock from a financial point of view.
Very truly yours,
RYAN, BECK & CO., INC.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Pennsylvania law provides that a Pennsylvania
corporation may indemnify directors, officers, employees and
agents of the corporation against liabilities they may incur in
such capacities for any action taken or any failure to act,
whether or not the corporation would have the power to indemnify
the person under any provision of law, unless such action or
failure to act is determined by a court to have constituted
recklessness or willful misconduct. Pennsylvania law also
permits the adoption of a bylaw amendment, approved by
shareholders, providing for the elimination of a director's
liability for monetary damages for any action taken or any
failure to take any action unless (1) the director has breached
or failed to perform the duties of his office and (2) the breach
or failure to perform constitutes self-dealing, willful
misconduct or recklessness.
The Bylaws of Sovereign provide for (1) indemnification
of directors, officers, employees and agents of the registrant
and its subsidiaries and (2) the elimination of a director's
liability for monetary damages, to the fullest extent permitted
by Pennsylvania law.
Directors and officers are also insured against certain
liabilities for their actions, as such, by an insurance policy
obtained by Sovereign.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits.
2.1 Agreement and Plan of Merger dated as of
September 29, 1995, between Sovereign Bancorp, Inc.
and West Jersey Bancshares, Inc. (included as Annex A
to the Proxy Statement/Prospectus). Schedules are
omitted; Sovereign Bancorp, Inc. agrees to furnish
copies of such schedules to the Commission upon
request.
2.2 Stock Option Agreement dated September 29, 1995,
between Sovereign Bancorp, Inc. and West Jersey
Bancshares, Inc. (included as Exhibit 2 to the Merger
Agreement included as Annex A to the Proxy
Statement/Prospectus).
3.1 Articles of Incorporation, as amended, of Sovereign
Bancorp, Inc. (Incorporated by reference to
Exhibit 3.1 of Sovereign's Annual Report on Form 10-K
for the year ended December 31, 1993.)
3.2 Bylaws of Sovereign Bancorp, Inc. (Incorporated by
reference to Exhibit 3.2 of Sovereign's Annual Report
on Form 10-K for the year ended December 31, 1993.)
4. Sovereign Bancorp, Inc. has outstanding long-term
debt which does not exceed 10% of the total assets of
Sovereign Bancorp, Inc. and its consolidated
subsidiaries; therefore, copies of the constituent
instruments defining the rights of the holders of
such debt are not included as exhibits to this
Registration Statement. Sovereign Bancorp, Inc.
agrees to furnish copies of such instruments to the
Commission upon request.
5. Opinion of Stevens & Lee re: Legality of Common
Stock.*
8. Opinion of Stevens & Lee re: Tax Matters.*
10.1 Sovereign Bancorp, Inc. Stock Option Plan, as amended
and restated. (Incorporated by reference to
Exhibit 10.1 to Sovereign's Annual Report on
Form 10-K for the fiscal year ended December 31.
1994.)
10.2 Sovereign Bancorp, Inc. 1993 Stock Option Plan.
(Incorporated by reference to Exhibit 10.23 to
Sovereign's Annual Report on Form 10-K for the year
ended December 31, 1992.)
10.3 Sovereign Bancorp, Inc. Employee Stock Purchase Plan.
(Incorporated by reference to Exhibit 4.1 to
Sovereign's Registration Statement No. 33-44108 on
Form S-8.)
10.4 Agreement dated as of September 15, 1992, between
Sovereign Bancorp, Inc., Sovereign Bank, a Federal
Savings Bank, and Jay S. Sidhu. (Incorporated by
reference to Exhibit 10.3 to Sovereign's Annual
Report on Form 10-K for the year ended December 31,
1992.)
10.5 Agreement dated as of September 15, 1992, between
Sovereign Bank, a Federal Savings Bank, and Karl D.
Gerhart. (Incorporated by Reference to Exhibit 10.4
of Sovereign's Annual Report on Form 10-K for the
year ended December 31, 1992.)
10.6 Agreement dated as of September 15, 1992, between
Sovereign Bank, a Federal Savings Bank, and
Lawrence M. Thompson, Jr. (Incorporated by reference
to Exhibit 10.5 of Sovereign's Annual Report on
Form 10-K for the year ended December 31, 1992.)
10.7 Penn Savings Bank Senior Officer Incentive Plan.
(Incorporated by reference to Exhibit 10.6 to
Sovereign's Annual Report on Form 10-K for the year
ended December 31, 1994.)
10.8 Rights agreement dated September 19, 1989, between
Sovereign Bancorp, Inc. and Harris Trust Company of
New York. (Incorporated by reference to Exhibit 4.3
to Sovereign's Registration Statement No. 33-89586 on
Form S-8.)
10.9 Sovereign Bancorp, Inc. Non-Employee Director
Incentive Compensation Plan. (Incorporated by
reference to Exhibit 10.12 to Sovereign's
Registration Statement No. 33-43195 on Form S-1.)
10.10 Indemnification Agreement dated December 21, 1993,
between Sovereign Bank and Jay S. Sidhu.
(Incorporated herein by reference to Exhibit 10.25 to
Sovereign's Annual Report on Form 10-K for the year
ended December 31, 1993).
23.1 Consent of Ernst & Young LLP.*
23.2 Consent of Deloitte & Touche LLP.*
23.3 Consent of BDO Seidman LLP.*
23.4 Consent of Stevens & Lee (contained in Exhibit 5).*
23.5 Consent of Stevens & Lee (contained in Exhibit 8).*
23.6 Consent of Ryan, Beck & Co.
24.1 Powers of Attorney of Directors and Officers
(included on signature page hereof).*
99.1 Opinion of Ryan, Beck & Co. dated January 16, 1996
(included as Annex B to Proxy Statement/Prospectus).
99.2 Form of Proxy for the Special Meeting of Stockholders
of West Jersey Bancshares, Inc.*
99.3 1994 Annual Report to Stockholders of West Jersey
Bancshares, Inc.*
99.4 Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995, of West Jersey Bancshares, Inc.*
_______________________________
* Previously filed.
(b) Financial Statement Schedules.
None required.
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by
section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any fact or
events arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes to deliver
or cause to be delivered with the prospectus, to each person to
whom the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the
prospectus and furnished pursuant to and meeting the requirements
of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be
presented by Article 3 of Regulation S-X are not set forth in the
prospectus, to deliver, or cause to be delivered to each person
to whom the prospectus is sent or given, the latest quarterly
report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
(c) (1) The undersigned registrant hereby undertakes as
follows: that prior to any public reoffering of the
securities registered hereunder through use of a prospectus
which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such
reoffering prospectus will contain the information called
for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other Items of
the applicable form.
(2) The registrant undertakes that every prospectus
(i) that is filed pursuant to paragraph (1) immediately
preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the registration statement and
will not be used until such amendment is effective, and
that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant to
the bylaws of the registrant, or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
(e) The undersigned registrant hereby undertakes to respond
to requests for information that is incorporated by reference
into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to
send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the
registration statement through the date of responding to the
request.
(f) The undersigned registrant hereby undertakes to supply
by means of a post-effective amendment all information concerning
a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration
statement when it became effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the registrant has duly caused this registration statement
to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Borough of Wyomissing, Commonwealth of
Pennsylvania, on January 5, 1996.
SOVEREIGN BANCORP, INC.
(Registrant)
By:/s/ Jay S. Sidhu
Jay S. Sidhu,
President and Chief Executive
Officer
Signature Title Date
/s/ Richard E. Mohn* Chairman and January 5, 1996
Richard E. Mohn Director
/s/ Jay S. Sidhu Director, January 5, 1996
Jay S. Sidhu President and
Chief Executive
Officer (Principal
Executive Officer)
/s/ Howard D. Mackey* Director January 5, 1996
Howard D. Mackey
/s/ Rhoda S. Oberholtzer* Director January 5, 1996
Rhoda S. Oberholtzer
/s/ Patrick J. Petrone* Director January 5, 1996
Patrick J. Petrone
/s/ Daniel K. Rothermel* Director January 5, 1996
Daniel K. Rothermel
/s/ G. Arthur Weaver* Director January 5, 1996
G. Arthur Weaver
/s/ S. Russel Willard* Director January 5, 1996
S. Russel Willard, Jr.
/s/ Theodore Ziaylek, Jr.* Director January 5, 1996
Theodore Ziaylek, Jr.
/s/ Karl D. Gerhart* Chief Financial January 5, 1996
Karl D. Gerhart Officer
(Principal
Financial and
Accounting
Officer)
*/s/ Jay S. Sidhu January 5, 1996
Jay S. Sidhu
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits.
2.1 Agreement and Plan of Merger dated as of
September 29, 1995, between Sovereign Bancorp, Inc.
and West Jersey Bancshares, Inc. (included as Annex A
to the Proxy Statement/Prospectus). Schedules are
omitted; Sovereign Bancorp, Inc. agrees to furnish
copies of such schedules to the Commission upon
request.
2.2 Stock Option Agreement dated September 29, 1995,
between Sovereign Bancorp, Inc. and West Jersey
Bancshares, Inc. (included as Exhibit 2 to the Merger
Agreement included as Annex A to the Proxy
Statement/Prospectus).
3.1 Articles of Incorporation, as amended, of Sovereign
Bancorp, Inc. (Incorporated by reference to
Exhibit 3.1 of Sovereign's Annual Report on Form 10-K
for the year ended December 31, 1993.)
3.2 Bylaws of Sovereign Bancorp, Inc. (Incorporated by
reference to Exhibit 3.2 of Sovereign's Annual Report
on Form 10-K for the year ended December 31, 1993.)
4. Sovereign Bancorp, Inc. has outstanding long-term
debt which does not exceed 10% of the total assets of
Sovereign Bancorp, Inc. and its consolidated
subsidiaries; therefore, copies of the constituent
instruments defining the rights of the holders of
such debt are not included as exhibits to this
Registration Statement. Sovereign Bancorp, Inc.
agrees to furnish copies of such instruments to the
Commission upon request.
5. Opinion of Stevens & Lee re: Legality of Common
Stock.*
8. Opinion of Stevens & Lee re: Tax Matters.*
10.1 Sovereign Bancorp, Inc. Stock Option Plan, as amended
and restated. (Incorporated by reference to
Exhibit 10.1 to Sovereign's Annual Report on
Form 10-K for the fiscal year ended December 31.
1994.)
10.2 Sovereign Bancorp, Inc. 1993 Stock Option Plan.
(Incorporated by reference to Exhibit 10.23 to
Sovereign's Annual Report on Form 10-K for the year
ended December 31, 1992.)
10.3 Sovereign Bancorp, Inc. Employee Stock Purchase Plan.
(Incorporated by reference to Exhibit 4.1 to
Sovereign's Registration Statement No. 33-44108 on
Form S-8.)
10.4 Agreement dated as of September 15, 1992, between
Sovereign Bancorp, Inc., Sovereign Bank, a Federal
Savings Bank, and Jay S. Sidhu. (Incorporated by
reference to Exhibit 10.3 to Sovereign's Annual
Report on Form 10-K for the year ended December 31,
1992.)
10.5 Agreement dated as of September 15, 1992, between
Sovereign Bank, a Federal Savings Bank, and Karl D.
Gerhart. (Incorporated by Reference to Exhibit 10.4
of Sovereign's Annual Report on Form 10-K for the
year ended December 31, 1992.)
10.6 Agreement dated as of September 15, 1992, between
Sovereign Bank, a Federal Savings Bank, and
Lawrence M. Thompson, Jr. (Incorporated by reference
to Exhibit 10.5 of Sovereign's Annual Report on
Form 10-K for the year ended December 31, 1992.)
10.7 Penn Savings Bank Senior Officer Incentive Plan.
(Incorporated by reference to Exhibit 10.6 to
Sovereign's Annual Report on Form 10-K for the year
ended December 31, 1994.)
10.8 Rights agreement dated September 19, 1989, between
Sovereign Bancorp, Inc. and Harris Trust Company of
New York. (Incorporated by reference to Exhibit 4.3
to Sovereign's Registration Statement No. 33-89586 on
Form S-8.)
10.9 Sovereign Bancorp, Inc. Non-Employee Director
Incentive Compensation Plan. (Incorporated by
reference to Exhibit 10.12 to Sovereign's
Registration Statement No. 33-43195 on Form S-1.)
10.10 Indemnification Agreement dated December 21, 1993,
between Sovereign Bank and Jay S. Sidhu.
(Incorporated herein by reference to Exhibit 10.25 to
Sovereign's Annual Report on Form 10-K for the year
ended December 31, 1993).
23.1 Consent of Ernst & Young LLP.*
23.2 Consent of Deloitte & Touche LLP.*
23.3 Consent of BDO Seidman LLP.*
23.4 Consent of Stevens & Lee (contained in Exhibit 5).*
23.5 Consent of Stevens & Lee (contained in Exhibit 8).*
23.6 Consent of Ryan, Beck & Co.
24.1 Powers of Attorney of Directors and Officers
(included on signature page hereof).*
99.1 Opinion of Ryan, Beck & Co. dated January 16, 1995
(included as Annex B to Proxy Statement/Prospectus).
99.2 Form of Proxy for the Special Meeting of Stockholders
of West Jersey Bancshares, Inc.*
99.3 1994 Annual Report to Stockholders of West Jersey
Bancshares, Inc.*
99.4 Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995, of West Jersey Bancshares, Inc.*
_______________________________
* Previously filed.
EXHIBIT 23.6
CONSENT OF RYAN, BECK & CO.
We hereby consent to the references in the Registration Statement
on Form S-4 dated January 16, 1996, (containing the Prospectus of
Sovereign Bancorp, Inc. and the Proxy Statement of West Jersey
Bancshares, Inc.) to our opinion to be included therein with
respect to the merger of Sovereign Bancorp, Inc. and West Jersey
Bancshares, Inc., and to our firm, respectively, and to the
inclusion of such opinion as an annex to the Proxy Statement. By
giving such consent, we do not thereby admit that we come within
the category of persons whose consent is required under Section 7
of the Securities Act of 1933 or the rules and regulations of the
Securities and Exchange Commission thereunder.
RYAN, BECK & CO., INC.
By /s/ James T. Hill
James T. Hill
Senior Vice President
Bala Cynwyd, PA
January 16, 1996
