_________________________________________________________________
_________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 26,
1996
SOVEREIGN BANCORP, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 0-16533 23-2453088
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Ident. No.)
1130 Berkshire Boulevard, Wyomissing, Pennsylvania 19610
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (610) 320-8400
N/A
(Former name or former address, if changed since last report.)
_________________________________________________________________
_________________________________________________________________
<PAGE>
Item 5. Other Events.
The press release of Sovereign Bancorp, Inc. ("Sovereign"),
dated November 26, 1996, attached hereto as Exhibit 99.1 is
incorporated herein by reference. The press release relates to
an amendment to the Agreement and Plan of Merger, dated as of
June 24, 1996 (the "Agreement"), between Sovereign and First
State Financial Services, Inc. ("First State"). The description
in the press release is qualified in its entirety by reference to
the terms of the Agreement which is incorporated herein by
reference, and to the terms of the Amendment to Agreement and
Plan of Merger, dated as of November 26, 1996, between Sovereign
and First State, which is attached as Exhibit 99.3 hereto and is
incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
(a) Exhibits.
The following exhibits are filed herewith:
99.1 Press Release, dated November 26, 1996, of
Sovereign Bancorp, Inc.
99.2 Agreement and Plan of Merger, dated as of June 24,
1996, between Sovereign Bancorp, Inc. and First
State Financial Services, Inc., incorporated
herein by reference to Exhibit 4.1 of the
Schedule 13D of Sovereign Bancorp, Inc. dated
July 10, 1996.
99.3 Amendment to Agreement and Plan of Merger, dated
as of November 26, 1996, between Sovereign
Bancorp, Inc. and First State Financial Services,
Inc.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
SOVEREIGN BANCORP, INC.
Dated: November 27, 1996
By/s/ Mark R. McCollom
Mark R. McCollom
Chief Accounting Officer
<PAGE>
EXHIBIT INDEX
Exhibit Number
99.1 Press Release, dated November 26, 1996,
of Sovereign Bancorp, Inc.
99.3 Amendment to Agreement and Plan of Merger,
dated as of November 26, 1996, between
Sovereign Bancorp, Inc. and First State Financial
Services, Inc.
Exhibit 99.1
SOVEREIGN BANCORP - News Release
November 26, 1996
SOVEREIGN & FIRST STATE
MERGER TO CLOSE FIRST QUARTER 1997
EXCHANGE RATIO LOWERED
WYOMISSING, PA.....Sovereign Bancorp, Inc.
("Sovereign") (NASDAQ/NMS:SVRN), parent company of Sovereign
Bank, and First State Financial Services ("First State")
(NASDAQ/NMS:FSFI), parent company of First DeWitt Bank, jointly
announced today the signing of an amendment (the "Amendment") to
their previously executed Definitive Agreement dated June 24,
1996 under which Sovereign would acquire First State. The
Amendment follows completion of Sovereign's detailed review of
First State's asset quality, and provides for a price adjustment
in exchange for Sovereign's agreement to eliminate certain
termination rights in the Definitive Agreement.
Under the terms of the Amendment, First State
shareholders would receive the greater of $14.75 in Sovereign
common stock or 1.225 shares of Sovereign common stock for each
outstanding share of First State. Previously, the exchange ratio
was fixed at 1.29 shares if Sovereign's stock price was greater
than $11.45. First State shareholders retain the right to
terminate the Definitive Agreement if the average price of
Sovereign is below $8.00 per share. The Amendment also
eliminates certain termination rights previously held by
Sovereign which were specific as to the asset quality of First
State.
Jay S. Sidhu, Sovereign's President and Chief Executive
Officer stated, "The addition of First State customers will add
meaningful size to Sovereign's core businesses and First State's
existing franchise will fit very well with our current retail
network."
"Our loyal customer base will be well-served by the
Sovereign franchise and we are looking forward to becoming a part
of this dynamic company," added Michael J. Quigley, III,
Chairman, President and Chief Executive Officer of First State.
Quigley further commented, "We believe that the merger Amendment,
which was approved unanimously by First State's Board of
Directors, is in the best interests of First State's
shareholders."
The merger is subject to approval of various regulatory
agencies and the shareholders of First State. Sovereign
anticipates that the transaction will close early in the first
quarter of 1997 and will be accounted for as a pooling-of-
interests.
Sovereign is a $9.4 billion holding company based in
Wyomissing, Pennsylvania and is the fourth largest financial
institution headquartered in Pennsylvania with 122 Community
Banking Offices operating in eastern Pennsylvania, northern
Delaware and New Jersey. First State is a $660 million financial
institution headquartered in West Caldwell, New Jersey with 14
branch offices located in Essex and four other central and
northern New Jersey counties. On Monday, November 25, 1996,
Sovereign's common stock closed at $13.625, its convertible
preferred stock closed at $70.375 and First State's common stock
closed at $14.75.
THE END
Exhibit 99.3
AMENDMENT TO AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT TO AGREEMENT AND PLAN OF MERGER, dated
as of November 26, 1996, 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 FIRST STATE FINANCIAL
SERVICES, INC., a Delaware corporation, having its principal
place of business at 1120 Bloomfield Avenue, CN 2449, West
Caldwell, New Jersey 07007-2449 (FSFS").
BACKGROUND
1. Sovereign and FSFS are parties to a certain
Agreement and Plan of Merger, dated as of June 24, 1996 (the
"Merger Agreement"), providing for, among other things, the
merger (the "Merger") of FSFS with and into Sovereign, with
Sovereign surviving the merger.
2. As of the date of this Agreement, stockholders of
FSFS have not yet approved the Merger Agreement.
3. Sovereign and FSFS desire to amend the Merger
Agreement as set forth herein.
AGREEMENT
1. The date specified in the third sentence of
Section 1.02(d)(iii) of the Merger Agreement is hereby amended
from "1997" to "1998."
2. Section 1.02(e)(ii) of the Merger Agreement is
hereby amended to read in its entirety as follows:
"(ii) FSFS Common Stock.
(A) Subject to the provisions of
subparagraphs (B), (C) and (D) of this
Section 1.02(e)(ii), each share of FSFS Common Stock
issued and outstanding immediately prior to the
Effective Date (other than shares of FSFS Common Stock,
if any, then owned by Sovereign or FSFS or any FSFS
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:
(i) if the Sovereign Market Value
determined as of the Effective Date is greater
than or equal to $8.00 and less than or equal to
$12.04, then that number of shares of fully paid
and nonassessable shares of Sovereign Common
Stock, and the corresponding percentage of
Sovereign Stock Purchase Rights pursuant to the
Sovereign Rights Agreement, equal to $14.75
divided by the Sovereign Market Value determined
as of the Effective Date;
(ii) if the Sovereign Market Value
determined as of the Effective Date is less than
$8.00, then 1.84 shares of fully paid and
nonassessable shares of Sovereign Common Stock,
and the corresponding percentage of Sovereign
Stock Purchase Rights pursuant to the Sovereign
Rights Agreement; or
(iii) if the Sovereign Market
Value determined as of the Effective Date is
greater than $12.04, then 1.225 shares of fully
paid and nonassessable shares of Sovereign Common
Stock, and the corresponding percentage of
Sovereign Stock Purchase Rights pursuant to the
Sovereign Rights Agreement (as determined pursuant
to either Sections 1.02(e)(ii)(A)(i),
1.02(e)(ii)(A)(ii) or 1.02(e)(ii)(A)(iii), the
"Applicable Exchange Ratio")."
3. Section 5.02(f) of the Merger Agreement is hereby
amended to read in its entirety as follows:
(f) No Material Adverse Effect. Since
March 31, 1996, there shall not have occurred any Material
Adverse Effect with respect to FSFS; provided, however, that
neither (i) an increase in the provision for loan losses by
FSFS for the period ended June 30, 1996 in an amount not to
exceed $5,000,000, (ii) the existence of nonperforming
assets of FSFS in an amount up to $26,100,000, (iii) the
incurrence by FSFS of aggregate losses on the sale, exchange
or other disposition of nonperforming assets up to
$1,000,000 (for purposes of this subsection, loss will be
identified net of any portion of the allowance for loan
losses allocable to the nonperforming asset which is sold,
exchanged or otherwise disposed of by FSFS) or
(iv) provisions for loan losses taken or recognized by FSFS
after the date of this Agreement in aggregate amounts up to
$7,250,000 shall be considered a Material Adverse Effect for
purposes of this subsection (the term "nonperforming
assets," for purposes of this subsection, means (i) loans
that are "troubled debt restructurings" as defined in
Statement of Financial Accounting Standards No. 15,
"Accounting by Debtors and Creditors for Troubled Debt
Restructurings," excluding restructured loans the terms and
conditions of which were approved in writing in advance by
Sovereign, (ii) loans on nonaccrual, including loans placed
on nonaccrual that may have been previously restructured
with Sovereign's approval, (iii) real estate owned, and
(iv) all loans 90 days or more past due, except that the
term "nonperforming assets" shall not include loans
originated to finance the purchase of any one-to-four-family
residential property);
4. Section 6.01(c) of the Merger agreement is hereby
amended to read in its entirety as follows:
"(c) By FSFS if, on the Closing Date, the
Sovereign Market Value is less than $8.00 (as adjusted for
any stock splits or stock dividends); provided, however,
that if Sovereign delivers to FSFS on the Closing Date a
written notice increasing the Applicable Exchange Ratio to
an amount which, when multiplied by the Sovereign Market
Value determined as of the Closing Date, equals $14.75, then
no termination of this Agreement shall occur and the Merger
shall be completed pursuant to the terms hereof."
5. Sections 5.02(q), 6.01(d), and 6.01(e) of the
Merger Agreement are hereby deleted in their entirety.
6. Except as amended hereby, the Merger Agreement is
ratified and confirmed in all respects. All references in the
Merger Agreement to the "Merger Agreement" shall be deemed to be
references to the Merger Agreement as amended hereby.
7. This Agreement and the Merger Agreement contain
the entire agreement and understanding of the parties with
respect to the transactions contemplated herein and therein and
supersede all prior agreements or understandings with respect
hereto and thereto, whether written or oral.
8. 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.
9. This Agreement shall be governed and construed in
accordance with the domestic, internal law of the Commonwealth of
Pennsylvania without regard to its conflicts of laws principles.
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/ Jay s. Sidhu
(SEAL) Attest: /s/ Lawrence M. Thompson, Jr.
FIRST STATE FINANCIAL SERVICES, INC.
By /s/ Michael J. Quigley, III
(SEAL) Attest: /s/ Marie G. Martino
