<PAGE>
CONTINENTAL BANCORPORATION
1345 CHEWS LANDING ROAD
GLOUCESTER TOWNSHIP
LAUREL SPRINGS, NEW JERSEY 08021
TO OUR SHAREHOLDERS:
The 1996 Annual Meeting of Shareholders of Continental Bancorporation (the
"Company") will be held on Wednesday, August 28, 1996 at 9:00 A.M. local time
at the principal offices of the Company, 1345 Chews Landing Road, Gloucester
Township, Laurel Springs, New Jersey. In addition to electing eight
directors, you will be asked to consider and approve an Agreement and Plan of
Merger and a related Plan of Merger under which the Company's wholly-owned
subsidiary bank, Continental Bank of New Jersey ("Continental"), would become
a subsidiary of Collective Bancorp, Inc., the savings and loan holding
company for Collective Bank headquartered in Cologne, New Jersey. If the
proposed merger is consummated, shareholders of the Company will receive
$5.00 in cash for each of their shares of the Common Stock of the Company.
Attached is a Notice of Annual Meeting and Proxy Statement of the Company.
The Proxy Statement describes the material features of the proposed
transaction and other important information. I urge all of our shareholders
to read it closely.
Your Board of Directors has carefully considered all of the terms and
conditions of the proposed merger and has received a favorable opinion from
Berwind Financial Group, L.P., an independent investment banking firm that,
from a financial point of view, the cash to be received by you in the merger
is fair. Your Board of Directors each believe that the proposed merger is in
the best interests of, and is fair to, the shareholders of the Company, and
unanimously recommend that you vote "FOR" the proposed merger. In addition to
approval by Company shareholders, the merger is subject to approval by
certain governmental agencies.
Whether or not you are planning to attend the 1996 Annual Meeting of
Shareholders of the Company, it is important that your shares be represented.
Approval of the proposed merger will require the affirmative vote of the
holders of at least a majority of the shares of the common stock of the
Company voting. Please complete, sign and date the enclosed proxy and mail it
promptly in the return envelope provided.
Sincerely,
/S/ WILLIAM STEINBERG
---------------------
WILLIAM STEINBERG
Chairman of the Board
July 24, 1996
<PAGE>
CONTINENTAL BANCORPORATION
1345 CHEWS LANDING ROAD
GLOUCESTER TOWNSHIP
LAUREL SPRINGS, NEW JERSEY 08021
------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
AUGUST 28, 1996
------
The 1996 Annual Meeting of Shareholders of Continental Bancorporation (the
"Company") will be held on Wednesday, August 28, 1996 at 9:00 A.M. local time
at the principal offices of the Company, 1345 Chews Landing Road, Gloucester
Township, Laurel Springs, New Jersey, to consider and vote on the following
matters as more fully described in the accompanying Proxy Statement:
1. A proposal to approve and adopt an Agreement and Plan of Merger and
a related Plan of Merger, pursuant to which, among other things, (a) CBAC
Corp., a newly formed subsidiary of Collective Bancorp, Inc., will be
merged with and into the Company and immediately thereafter the Company
will be merged with and into Collective Bancorp, Inc. and, as a result
thereof, the Company's bank subsidiary, Continental Bank of New Jersey,
will become a subsidiary of Collective Bancorp, Inc., and (b) each
outstanding share of the Common Stock of the Company (other than shares
held by Collective Bancorp, Inc. and its affiliates) will be converted
into the right to receive $5.00 in cash, all as more fully described in
the accompanying Proxy Statement;
2. The election of eight directors, all as more fully described in the
accompanying Proxy Statement; and
3. Any other business that may properly come before the Annual Meeting
or any adjournments or postponements thereof.
The close of business on July 12, 1996 has been fixed as the record date
for the 1996 Annual Meeting of Shareholders of the Company (the "Annual
Meeting") and only holders of record of the common stock of the Company on
that date will be entitled to notice of, and to vote at, the Annual Meeting
or any adjournments or postponements thereof.
By Order of the Board of Directors
/S/ WILLIAM STEINBERG
---------------------
WILLIAM STEINBERG,
Chairman of the Board
July 24, 1996
<PAGE>
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. AN AFFIRMATIVE
VOTE OF THE HOLDERS OF AT LEAST A MAJORITY OF THE OUTSTANDING SHARES OF THE
COMMON STOCK OF THE COMPANY VOTING IS REQUIRED FOR APPROVAL OF THE PROPOSED
MERGER. IN ORDER TO ASSURE THAT YOUR VOTE WILL BE COUNTED, YOU ARE URGED TO
SIGN, DATE AND MAIL THE ENCLOSED PROXY PROMPTLY IN THE ACCOMPANYING
POSTAGE-PREPAID ENVELOPE. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY REVOKE
YOUR PROXY AND VOTE IN PERSON. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO
ITS EXERCISE IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT.
THE MERGER TO BE CONSIDERED AT THE ANNUAL MEETING IS OF GREAT IMPORTANCE
TO THE SHAREHOLDERS OF THE COMPANY. IF THE MERGER IS APPROVED AND
CONSUMMATED, A CASH PAYMENT OF $5.00 PER SHARE OF COMMON STOCK WILL BE MADE
AND THE SHAREHOLDERS' EQUITY INVESTMENT IN THE COMPANY WILL CEASE.
ACCORDINGLY, SHAREHOLDERS ARE URGED TO READ AND CAREFULLY CONSIDER THE
INFORMATION PRESENTED IN THE PROXY STATEMENT.
<PAGE>
TABLE OF CONTENTS
Page
------
SUMMARY .................................................................. 1
SELECTED FINANCIAL DATA .................................................. 5
INTRODUCTORY STATEMENT ................................................... 7
Proposals Presented ................................................. 7
Voting Rights ....................................................... 7
Proxies ............................................................. 8
Solicitation of Proxies; Expenses ................................... 8
THE MERGER ............................................................... 8
Background of the Merger ............................................ 8
Recommendation of the Board of Directors; Reasons for the Merger .... 10
Opinion of Independent Investment Banker ............................ 10
Interests of Certain Persons in the Merger .......................... 13
Stock Option Agreement .............................................. 13
THE MERGER AGREEMENT ..................................................... 15
Principal Terms ..................................................... 15
Effective Date ...................................................... 15
Stock Options ....................................................... 15
Debentures .......................................................... 15
Payment for Shares .................................................. 16
The Payment Fund .................................................... 16
Conditions and Covenants ............................................ 16
Regulatory Approvals ................................................ 17
Termination and Amendment ........................................... 18
FEDERAL INCOME TAX CONSEQUENCES TO SHAREHOLDERS .......................... 19
MARKET INFORMATION ....................................................... 19
ELECTION OF DIRECTORS .................................................... 20
SHAREHOLDER PROPOSALS .................................................... 23
DESCRIPTION OF THE CAPITAL STOCK OF THE COMPANY .......................... 23
RELATIONSHIP WITH INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ............... 24
AVAILABLE INFORMATION .................................................... 24
INCORPORATION BY REFERENCE ............................................... 24
i
<PAGE>
APPENDICES
Agreement and Plan of Merger ................................ Appendix A
Plan of Merger .............................................. Appendix B
Opinion of Berwind Financial Group, L.P. .................... Appendix C
Stock Option Agreement ...................................... Appendix D
ii
<PAGE>
SUMMARY
The following is a brief summary of certain information contained
elsewhere in this Proxy Statement. This summary is included to assist the
shareholders of the Company in their review of this Proxy Statement and is
qualified in its entirety by reference to the more detailed information
appearing elsewhere in this Proxy Statement, including the Appendices hereto.
Shareholders are urged to read this Proxy Statement and the Appendices hereto
in their entirety.
THE ANNUAL MEETING
DATE, PLACE AND TIME OF ANNUAL MEETING
The Annual Meeting will be held on August 28, 1996 at 9:00 A.M. local time
at the principal offices of the Company, 1345 Chews Landing Road, Gloucester
Township, Laurel Springs, New Jersey.
PURPOSES OF ANNUAL MEETING
At the Annual Meeting, the shareholders of the Company will be asked to
(i) consider and vote upon a proposal to approve and adopt an Agreement and
Plan of Merger, dated as of May 21, 1996 (the "Reorganization Agreement"), by
and among the Company, CBAC Corp. ("CBAC") and Collective Bancorp, Inc.
("Collective"), and a related Plan of Merger (the "Plan of Merger")
(hereinafter, the Reorganization Agreement and the Plan of Merger are
sometimes collectively referred to as the "Merger Agreement"), pursuant to
which, among other things, (a) CBAC will be merged with and into the Company
(the "Merger") and immediately thereafter the Company will be merged with and
into Collective and, as a result thereof, the Company's bank subsidiary,
Continental Bank of New Jersey, will become a subsidiary of Collective, and
(b) each outstanding share of the common stock, par value $2.00 per share, of
the Company (the "Common Stock") (other than shares held by Collective and
its affiliates) will be converted into the right to receive $5.00 in cash;
and (ii) elect eight directors of the Company. See "THE MERGER," "THE MERGER
AGREEMENT" and "ELECTION OF DIRECTORS."
SHARES ENTITLED TO VOTE AND SHARES OUTSTANDING
The Board of Directors of the Company has determined that holders of
record of the Common Stock at the close of business on Friday, July 12, 1996
(the "Record Date") are entitled to notice of, and to vote at, the Annual
Meeting or any adjournments or postponements thereof. At the close of
business on the Record Date, there were 4,712,408 shares of the Common Stock
outstanding and approximately 600 holders of record of the shares of Common
Stock. Shareholders will have one vote for each share of the Common Stock
held. See "INTRODUCTORY STATEMENT -- Voting Rights."
VOTE REQUIRED
Approval of the Merger Agreement will require the affirmative vote of the
holders of at least a majority of the outstanding shares of Common Stock
voting at the Annual Meeting. The shares of Common Stock which the directors
and executive officers of the Company are entitled to vote will be counted as
outstanding for this purpose. The directors and executive officers of the
Company, as a group (nine persons), are entitled to vote an aggregate of
approximately 59.6% of the outstanding shares of Common Stock as of the
Record Date. Each of the members of the Board of Directors believes that the
proposed Merger is in the best interests of, and is fair to, the shareholders
of the Company and has recommended that the shareholders of the Company vote
for the Merger Agreement. See "THE MERGER -- Recommendation of the Board of
Directors; Reasons for the Merger." All of the directors and executive
officers of the Company have indicated that they intend to vote in favor of
the Merger Agreement. Consequently, the affirmative vote of none of the
shares of Common Stock outstanding as of the Record Date, other than those
held by the directors and executive officers of the Company, will be required
for the approval of the Merger.
Directors of the Company will be elected by a plurality of the votes cast
for such election by holders of Common Stock, and such holders have no
cumulative rights in voting for directors. See "ELECTION OF DIRECTORS."
1
<PAGE>
THE MERGER
PARTIES TO THE MERGER
The Company. The Company is a New Jersey business corporation and a
registered bank holding company for Continental Bank of New Jersey, a state
chartered commercial bank. At March 31, 1996, the Company had total assets in
excess of $187 million. The mailing address of the Company's principal
offices is 1345 Chews Landing Road, Gloucester Township, Laurel Springs, New
Jersey 08021 and its telephone number is (609) 227-8000.
Collective. Collective is a Delaware business corporation which is the
savings and loan holding company for Collective Bank. At March 31, 1996,
Collective had total assets in excess of $5.05 billion. The mailing address
of Collective's principal executive offices is P.O. Box 316, Egg Harbor, New
Jersey 08215, and its telephone number is (609) 625-1110.
CBAC. CBAC is a Delaware business corporation that was organized by
Collective solely for the purpose of effecting the Merger. The mailing
address of CBAC's principal executive offices is P.O. Box 316, Egg Harbor,
New Jersey 08215, and its telephone number is (609) 625-1110.
PRINCIPAL TERMS OF THE MERGER
CBAC is to be merged with and into the Company and immediately thereafter
the Company will be merged with and into Collective, which will be the
surviving corporation. Upon completion of the Merger, the Company's bank
subsidiary, Continental Bank of New Jersey, will become a subsidiary of
Collective and each outstanding share of Common Stock (other than shares held
by Collective and its affiliates) will be converted into the right to receive
$5.00 per share in cash.
Copies of the Reorganization Agreement and the Plan of Merger are attached
to this Proxy Statement as Appendices "A" and "B", respectively. See "THE
MERGER AGREEMENT."
EFFECTIVE DATE
Subject to the terms and conditions specified in the Merger Agreement and
upon satisfaction of all requirements of law including the receipt of all
shareholder and other approvals required by federal and state governmental
agencies (including the expiration of any applicable waiting periods), the
Merger will become effective upon the filing of Articles of Merger with the
Departments of State of the States of New Jersey and Delaware (the "Effective
Date"). It is currently anticipated that the Merger will be consummated in
the latter part of the third quarter or in the fourth quarter of 1996. See
"THE MERGER AGREEMENT -- Effective Date."
PAYMENT FOR SHARES
All shareholders of the Company will be required to surrender their Common
Stock certificates in order to receive the cash payments to which they will
be entitled as a result of the Merger. Promptly after the Effective Date,
instructions with regard to the surrender of certificates, together with a
letter of transmittal to be used for that purpose, will be mailed to each
shareholder. Arrangements will also be made for Company shareholders to
surrender their Common Stock certificates in person immediately after the
Effective Date and receive immediate payment therefor. See "THE MERGER
AGREEMENT -- Payment for Shares."
HOLDERS OF SHARES OF COMMON STOCK SHOULD NOT SEND IN THEIR CERTIFICATES
UNTIL THEY RECEIVE FURTHER WRITTEN INSTRUCTIONS AND THE LETTER OF
TRANSMITTAL. HOLDERS OF SHARES OF COMMON STOCK ARE URGED TO PROMPTLY NOTIFY
THE COMPANY OF LOST, STOLEN OR DESTROYED CERTIFICATES OR CERTIFICATES NOT
PROPERLY REGISTERED IN ORDER TO BEGIN THE PROCESS OF ISSUANCE OF REPLACEMENT
CERTIFICATES.
RECOMMENDATIONS OF THE BOARD OF DIRECTORS; REASONS FOR THE MERGER
The Board of Directors believes that the Merger is in the best interests
of, and is fair to, the shareholders of the Company and unanimously
recommends that shareholders vote "FOR" the approval and adoption of the
Merger Agreement.
2
<PAGE>
The principal reason for the decision of the Board of Directors to
approve, and recommend shareholder approval of, the Merger Agreement is that
the Merger will enable all Company shareholders to realize in cash a
significant premium over the prices at which the Common Stock has
historically traded. See "MARKET INFORMATION."
In arriving at their recommendation, the members of the Board of Directors
considered, among other things, the recent and historical market prices of
the Common Stock, the net book value of the Common Stock (which, as of March
31, 1996, was $2.42 per share), their knowledge of the business, operations,
properties, assets and earnings of the Company, as well as their assessment
of the earnings potential, prospects and future value of the Company and the
prices and premiums paid in recent acquisitions of other companies in
comparable businesses. The Board of Directors also considered the taxable
nature of the Merger to the shareholders of the Company. Furthermore, the
Board of Directors placed special importance on the favorable opinion of
Berwind Financial Group, L.P., an independent investment banking firm
retained by the Board of Directors to evaluate the consideration to be paid
to the shareholders of the Company in the Merger. See "THE MERGER --
Background of the Merger."
The Board of Directors recognized that, while consummation of the Merger
will result in the Company's shareholders being entitled to receive $5.00 in
cash for each of their shares, it will also eliminate the opportunity for the
Company's current shareholders to participate in the future growth, if any,
of the business of the Company. Accordingly, the Board of Directors gave
consideration to the Company's future prospects as well as its historical
results of operations. See "MARKET INFORMATION."
The Board of Directors did not attach relative weights to the factors they
considered in reaching their decision but did place particular emphasis upon
the receipt of the opinion of Berwind and, considering all factors discussed
above, determined that the Merger is in the best interests of, and is fair
to, all Company shareholders. See "THE MERGER -- Recommendation of the Board
of Directors, Reasons for the Merger; Opinion of Independent Investment
Banker" and "MARKET INFORMATION."
OPINION OF INDEPENDENT INVESTMENT BANKER
Berwind Financial Group, L.P. ("Berwind") was retained by the Board of
Directors to evaluate the financial terms of the Merger. On May 21, 1996,
Berwind delivered to the Board of Directors its written fairness opinion
stating that based on its review, the terms of the Merger are fair to the
shareholders of the Company from a financial point of view. On July 24,
Berwind delivered to the Board of Directors another written fairness opinion
stating that based on the review described therein, the terms of the Merger
are fair to the shareholders of the Company from a financial point of view. A
copy of Berwind's July 24, 1996 written fairness opinion is attached as
Appendix C to this Proxy Statement and should be read in its entirety. See
"THE MERGER -- Opinion of Independent Investment Banker" and "Appendix C."
STOCK OPTIONS
All options owned by the officers and employees of the Company will be
canceled in connection with the Merger and each person will receive the
difference in cash between $5.00 and the option's exercise price. The
aggregate payments are anticipated to be approximately $868,810. See "THE
MERGER AGREEMENT -- Stock Options."
INTEREST OF CERTAIN PERSONS IN THE MERGER
Certain officers and a director of the Company will be entitled to receive
additional cash compensation on the Effective Date of the Merger as a result
of employment and/or severance agreements with the Company. The aggregate
payments are anticipated to be approximately $468,000. See "THE MERGER --
Interests of Certain Persons in the Merger."
CONDITIONS TO THE MERGER
The obligations of the parties to the Merger Agreement to consummate the
Merger are subject to the satisfaction of a number of conditions, including
the approval and adoption of the Merger Agreement by the share-
3
<PAGE>
holders of the Company and compliance with certain other terms and
conditions, including the receipt of all necessary regulatory approvals. See
"THE MERGER AGREEMENT -- Conditions and Covenants" and "Regulatory
Approvals." Under applicable Delaware law, the Merger is not required to be
approved by the shareholders of Collective.
REGULATORY APPROVALS
The Merger is subject to prior approval by the Board of Governors of the
Federal Reserve System ("FRB") and the New Jersey Department of Banking.
Applications for such approvals have been filed, but no assurance can be
given that such regulatory approvals will be obtained. See "THE MERGER --
Regulatory Approvals."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The receipt of cash for shares of Common Stock pursuant to the Merger will
be a taxable transaction for Federal income tax purposes to shareholders
receiving such cash and may also be a taxable transaction for state, local
and foreign tax purposes. See "FEDERAL INCOME TAX CONSEQUENCES TO
SHAREHOLDERS." IT IS RECOMMENDED THAT EACH SHAREHOLDER CONSULT HIS OR HER OWN
PERSONAL TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES TO HIM OR HER
RESULTING FROM THE MERGER.
MARKET PRICE OF THE COMMON STOCK
On May 21, 1996 the last full trading day prior to the Company's public
announcement of the signing of the Merger Agreement, the closing sales price
per share of the Company Common Stock on Bloomberg Financial Services was
$2.23. See "MARKET INFORMATION."
STOCK OPTION AGREEMENT/TERMINATION FEE
In connection with execution of the Plan of Merger, Collective and the
Company executed a Stock Option Agreement (the "Stock Option Agreement")
pursuant to which the Company gave Collective an option (the "Option") to
purchase up to 956,704 shares of Company Common Stock at an exercise price of
$4.00 per share, subject to adjustment in accordance with the terms of the
Stock Option Agreement. The Option is exercisable only upon the occurrence
and continuance of certain events that might jeopardize consummation of the
Merger pursuant to the terms of the Merger Agreement. See "THE MERGER-- Stock
Option Agreement" and the text of the Stock Option Agreement, attached hereto
as Appendix D and incorporated herein by reference.
The Merger Agreement provides that if Collective terminates the Merger
Agreement under certain circumstances the Company is required to pay
Collective a $500,000 termination fee. See "THE MERGER AGREEMENT --
Termination and Amendment."
DEBENTURES
Prior to the Effective Date of the Merger, the Company intends to redeem
all outstanding convertible debentures. Based on the fact that pursuant to
the Merger Agreement each share of Company Common Stock will be convertible
into $5.00 in cash, it will be in all convertible debenture holders' interest
to convert their convertible debentures into Company Common Stock prior to
the Effective Date of the Merger (i.e. 390 shares of Common Stock per $1,000
debenture based on the current conversion ratio of $2.56 per share) rather
than accept the redemption price of $1,030 per $1,000 debenture. See "THE
MERGER AGREEMENT -- Debentures."
ELECTION OF DIRECTORS
Directors are elected at each Annual Meeting of shareholders. The Bylaws
of the Company provide that the Board of Directors is to consist of not less
than two and not more than 25 directors, each holding office for one year and
until their respective successor shall have been duly elected and qualified.
The Bylaws further provide that the exact number of directors to be elected
will be determined from time to time by the Board of Directors. The Board of
Directors has fixed the number of persons to serve on the Company's Board of
Directors at eight and has designated the nominees set forth herein for
election as directors. See "ELECTION OF DIRECTORS."
4
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth, in summary form, certain consolidated
financial data for the Company as of and for the years ended December 31,
1995, 1994, 1993, 1992 and 1991, and as of and for the three months ended
March 31, 1996 and 1995. This table is qualified in its entirety by the more
detailed information and financial statements which accompany this Proxy
Statement, and should be read in conjunction with such financial statements
and related notes thereto and the "Management's Discussion and Analysis of
Financial Condition and Results of Operations," of the Company which are
contained in the documents which accompany this Proxy Statement. For
additional financial information regarding the Company, please refer to the
1995 Annual Report to Shareholders and the Company's Quarterly Report on Form
10-Q for the Quarter Ended March 31, 1996, copies of which accompany this
Proxy Statement.
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
-------------------------- -----------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
----------- ----------- ---------- ---------- ---------- ---------- -------
(in thousands, except per share data and ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets .......................... $187,132 $189,913 $191,763 $181,131 $145,166 $111,953 $102,115
Total loans (net) ..................... 74,288 84,250 77,689 82,506 82,421 85,127 77,036
Federal funds sold .................... 1,000 0 2,975 0 4,500 5,350 0
Investments(1) ........................
Available for sale ................. 73,482 57,272 65,765 50,438 16,312 0 0
Held to maturity ................... 24,753 34,881 29,424 35,203 32,577 11,921 254
Total deposits ........................ 124,413 109,857 128,596 113,324 114,788 104,350 87,931
FHLB advances ......................... 49,173 39,479 50,180 54,388 22,165 0 0
Stockholders' equity .................. 11,419 11,249 11,146 11,447 6,538 5,725 5,248
Summary of Operations:
Interest income ....................... $ 3,364 $ 3,303 $ 14,049 $ 10,579 $ 8,634 $ 8,323 $ 8,824
Net interest income before credit loss
provision .......................... 1,615 1,558 6,396 6,066 5,819 5,244 4,782
Provision for credit losses ........... 60 75 1,353 0 150 286 270
Non-interest income(2) ................ 230 189 980 874 859 428 626
Non-interest expense .................. 1,362 1,521 6,468 5,969 5,272 4,709 4,569
Income (loss) before income taxes ..... 423 151 (445) 971 1,256 677 569
Provision for income taxes(3) ......... 161 54 (18) 384 509 262 233
Income (loss) before extraordinary item
and cumulative effect of accounting
change(3) .......................... 262 97 (427) 587 747 415 336
Cumulative effect of accounting change -- -- -- -- 244 -- --
Extraordinary item .................... -- -- -- -- -- 62 130
Net income (loss) ..................... 262 97 (427) 587 991 477 466
Selected Operating Ratios:
Return on average assets .............. .14% .05% (.23)% .35% .82% .47% .51%
Return on average stockholders' equity 2.32 0.85 (3.73) 6.01 16.09 8.90 9.25
Net loans to deposits ................. 59.71 76.69 60.41 72.81 71.80 81.58 87.61
Net interest margin(4). ............... 3.64 3.57 3.51 3.95 5.14 5.56 5.64
Selected Capital and Asset Quality Ratios:
Non-performing assets to total assets(5) 1.67% 1.68% 1.78% 1.71% 1.16% 1.61% .98%
Non-performing loans to gross loans ... 3.10 3.53 3.27 3.65 1.80 1.70 1.05
Allowance for credit losses to gross
loans ............................... 1.83 1.09 1.77 1.13 1.48 1.07 1.05
Allowance for credit losses to non-
performing loans(6) ................ 59.15 30.66 54.14 30.86 81.83 63.03 100.37
Provision for credit losses to gross
loans ............................... .08 .09 1.71 0.00 .18 .33 .35
Net (charge offs) recoveries to average
loans .............................. (.09) (0.1) (1.1) (0.4) 0.2 (0.2) (0.2)
Stockholders' equity to assets ........ 6.10 5.92 5.81 6.32 4.50 5.11 5.14
Tier 1 capital to risk-weighted assets. 12.99 11.71 13.01 11.56 6.81 6.41 6.06
Total capital to risk-weighted assets . 15.49 13.73 15.52 13.53 9.25 8.73 8.33
Leverage capital ratio ................ 5.86 6.16 6.04 6.59 4.78 5.20 5.16
Per Share Data:
Income (loss) before extraordinary item
and cumulative effect of accounting
change ............................. $ 0.06 $ 0.02 $ (0.09) $ 0.14 $ 0.27 $ 0.15 $ .12
Cumulative effect of accounting
change(s) ........................... -- -- -- -- .09 -- --
Extraordinary item(8) ................. -- -- -- -- -- .02 .05
Net income ............................ 0.06 0.02 (0.09) 0.14 0.36 0.17 0.17
Book value(7) ......................... 2.42 2.36 2.35 2.40 2.35 2.04 1.82
Cash dividend paid .................... 0 0.06 0.06 0.05 0.05 0 0
Dividend payout ratio ................. 0% 294.47% (66.74)% 23.00% 13.62% 0% 0%
</TABLE>
5
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(1) Effective December 31, 1993, the Company adopted SFAS No. 115 "Accounting
For Certain Investments in Debt and Equity Securities."
(2) Includes net gains on securities of $0 and $12,000 for the three months
ended March 31, 1996 and 1995, respectively, and $46,000 in 1995, $0 in
1994, $42,000 in 1993, and net losses of $153,000 in 1993 and $142,000 in
1991.
(3) Effective January 1, 1993, the Company adopted SFAS No. 109 "Accounting
for Income Taxes." The cumulative effect of the method of Accounting for
Income Taxes was $244,000. Under the deferred method used in 1992, the
Company recorded an extraordinary item for the utilization of tax loss
carryforwards of $62,000.
(4) Represents net interest income as a percentage of average
interest-earning assets.
(5) Non-performing assets is comprised of non-performing loans and of other
real estate owned.
(6) Non-performing loans consist of non-accrual loans, loans past due ninety
days or more, which are still accruing interest and troubled debt
restructured loans. Effective January, 1995, the Company adopted SFAS No.
114, "Accounting for Impairment of a Loan," as amended by SFAS No. 118,
"Accounting by Creditors for Impairment of a Loan -- Income Recognition
and Disclosure." The effect of adoption was not significant to the
Company's financial position or results of operations.
(7) Represents Stockholders' Equity divided by the number of shares
outstanding at period end.
(8) Represents the utilization of net operating loss carryforward prior to
the adoption of SFAS No. 109.
6
<PAGE>
CONTINENTAL BANCORPORATION
1345 CHEWS LANDING ROAD
GLOUCESTER TOWNSHIP
LAUREL SPRINGS, NEW JERSEY 08021
------
PROXY STATEMENT
------
1996 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 28, 1996
INTRODUCTORY STATEMENT
This Proxy Statement is being furnished to the shareholders of the Company
in connection with the solicitation of proxies by the Board of Directors of
the Company for use at the 1996 Annual Meeting of Shareholders be held on
Wednesday, August 28, 1996, 9:00 A.M., local time, at the Company's principal
offices, 1345 Chews Landing Road, Gloucester Township, Laurel Springs, New
Jersey, and any adjournments or postponements thereof.
PROPOSALS PRESENTED
At the Annual Meeting, shareholders of the Company will be asked to
consider and vote on the following matters:
1. A proposal to approve and adopt the Agreement and Plan of Merger and
the related Plan of Merger, pursuant to which, among other things, (a)
CBAC will be merged with and into the Company and, immediately thereafter,
the Company will be merged with and into Collective and, as a result
thereof, the Company's bank subsidiary, Continental Bank of New Jersey,
will become a subsidiary of Collective, and (b) each outstanding share of
Common Stock (other than shares held by Collective and its affiliates)
will be converted into the right to receive $5.00 in cash;
2. The election of eight directors of the Company; and
3. Any other business that may properly come before the Annual Meeting
or any adjournments or postponements thereof.
With respect to the information set forth in this Proxy Statement, you
should also refer to the preceding summary beginning on page 1.
This Proxy Statement, the attached Notice and the enclosed Proxy are first
being mailed to shareholders of the Company on or about July 26, 1996.
VOTING RIGHTS
Only holders of record of shares of the Common Stock at the close of
business on Friday, July 12, 1996 will be entitled to notice of, and to vote
at, the Annual Meeting. At the close of business on such date, there were
4,712,408 shares of Common Stock outstanding and approximately 600 holders of
record of the shares of Common Stock.
Shareholders of record on the Record Date are entitled to one vote per
share on any matter that may properly come before the Annual Meeting. The
presence, either in person or by proxy, of shareholders entitled to cast at
least a majority of the votes which all shareholders are entitled to cast is
necessary to constitute a quorum at the Annual Meeting.
Approval of the Merger will require the affirmative vote, either in person
or by proxy, of the holders of at least a majority of the outstanding shares
of Common Stock voting at the Annual Meeting. The shares of Common Stock
which the directors and executive officers of the Company are entitled to
vote will be counted as outstanding shares for this purpose. The directors
and executive officers of the Company, as a group (nine persons), are
entitled to vote an aggregate of approximately 59.6% of the shares of Common
Stock outstanding as of the
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<PAGE>
Record Date. Each of the members of the Board of Directors believes that the
proposed Merger is in the best interests of, and is fair to, the shareholders
of the Company and has recommended that the shareholders of the Company vote
for the Merger Agreement. See "THE MERGER -- Recommendation of the Board of
Directors; Reasons for the Merger." All of the directors and executive
officers of the Company have indicated that they intend to vote in favor of
the Merger Agreement. Consequently, the affirmative vote of none of the
shares of Common Stock outstanding as of the Record Date, other than those
held by the directors and executive officers of the Company, will be required
for approval of the Merger.
Directors of the Company will be elected at the Annual Meeting by a
plurality of the votes cast for such election by the holders of Common Stock.
Holders of Common Stock have no cumulative rights in voting for directors.
PROXIES
A Proxy is enclosed. Each properly executed, dated and returned Proxy
(which has not been revoked) will be voted at the Annual Meeting in
accordance with the instructions thereon. If no instructions to the contrary
are given, such Proxy will be voted in favor of the proposal for the (i)
approval of the Merger and Merger Agreement, and (ii) election of the eight
nominees for directors of the Company named herein.
At the date of the mailing of this Proxy Statement, the Company knows of
no other business that will be considered at the Annual Meeting. However, the
enclosed proxy confers discretionary authority to vote with respect to any
and all of the following matters that may come before the Annual Meeting: (i)
matters which the Company does not know a reasonable time before the Annual
Meeting are to be presented at the Annual Meeting; (ii) approval of the
minutes of the prior meeting if such approval does not amount to ratification
of the action taken at that meeting; (iii) the election of any person to any
office for which a bona fide nominee is named herein but is unable to serve
or for good cause will not serve; and (iv) matters incident to the conduct of
the Annual Meeting. In connection with such matters, the person designated as
proxy will vote in accordance with their best judgment.
Any shareholder of the Company giving a proxy may revoke it at any time
before it is exercised by, among other methods, giving written notice of such
revocation to the Secretary of the Company. The presence at the Annual
Meeting of any shareholder who has given a proxy will not revoke the proxy
unless the shareholder files written notice of revocation with the Secretary
of the Company prior to the voting of the proxy.
SOLICITATION OF PROXIES; EXPENSES
The expense of the proxy solicitation will be borne by the Company. In
addition to solicitation by mail, proxies may be solicited in person or by
telephone, telegraph or teletype by directors, officers or employees of the
Company and/or Continental Bank of New Jersey (the "Bank"), the Company's
predecessor, now a wholly-owned subsidiary of the Company, without
additional compensation. The Company is required to pay the reasonable
expenses incurred by record holders of the Company's Common Stock, who are
brokers, dealers, banks or voting trustees, or their nominees, for mailing
proxy material and annual shareholder reports to any beneficial owners of the
Common Stock they hold of record, upon request of such record holders.
THE MERGER
BACKGROUND OF THE MERGER
In the fall of 1995, the Board of Directors of the Company concluded,
among other things, that increasing competition and costs and minimal
liquidity of the corporation's Common Stock, as well as other factors,
precluded the Company from maximizing its shareholders' return through a
strategy of internal growth. The Board of Directors of the Company therefore
considered the relative merits of maintaining the independence of the Company
and of merging the Company with a larger financial institution. The Board
also considered the desirability of increasing the liquidity of the stock
held by the Company's shareholders by exchanging it for stock of a larger
banking organization that would be listed on the National Securities Exchange
in a tax-free transaction
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<PAGE>
and/or exchanging the shares of the Company's Common Stock in an all-cash
merger in a taxable transaction. The Board's primary considerations in
selecting an acquiror were to provide a fair financial return to the
Company's shareholders. As described below, the Company eventually selected
Collective as its merger partner because of the superior cash consideration
offered.
In December, 1995, the Company retained Berwind Financial Group, L.P.
("Berwind"), an investment banking firm located at 3000 Centre Square West,
1500 Market Street, Philadelphia, Pennsylvania, to find an acquiror which
would provide a fair financial return to the Company's shareholders. The
Company selected Berwind because of its familiarity with the
Philadelphia/South Jersey banking market and because of Berwind's experience
in evaluating financial strategies and fundamental transactions for banking
institutions.
In December, 1995, the Board instructed Berwind to explore courses of
action (including the sale of the Company) which would be in the best
interests of the Company's shareholders in connection with, among other
considerations, maximizing the value of the investment of the Company's
shareholders. Berwind presented to the Company's Board of Directors certain
information Berwind had assembled regarding several potential merger
partners, including Collective.
In early 1996, Berwind assembled packages for potential merger partners
containing extensive information about the Company. The Chairman of the Board
of the Company selected 14 potential merger partners and instructed Berwind
to contact those parties. Berwind then contacted all 14 parties on a
confidential and preliminary basis and, subject to each potential merger
partner executing a confidentiality agreement, provided them with information
about the Company. Ten potential merger partners executed confidentiality
agreements with the Company, and during March and April, 1996, Berwind met
with and/or spoke to each of these potential merger partners to discuss the
potential acquisition of the Company. Certain of the potential merger
partners met with Company management and/or requested additional information
on the Company. One potential merger partner conducted an on site due
diligence review of the Company. After such meetings and/or discussions,
Berwind requested expressions of interest in a possible transaction from each
party.
On April 19, 1996, Berwind presented information regarding five potential
acquirors to the Chairman. This information included expressions of interest
from the five potential acquirors, summary financial information concerning
the potential acquirors, their stock trading prices and volumes over the past
five years, certain pro forma financial information, the recent earnings
releases of the potential acquirors, and certain additional information. The
information also contained a comparison of the terms of the various
expressions of interest. On April 25, 1996, the Chairman updated the full
Board of Directors as to the progress and status of the discussions. Based
upon the fact that the cash consideration offered by Collective was in excess
of that offered by any of the other potential acquirors, the Board of
Directors determined that Collective's offer was preferable, and after
discussion and upon motion duly made, the Board agreed, by the unanimous vote
of the Directors present, to enter into negotiations for a definitive Merger
Agreement with Collective. Such negotiations were conducted by the Company
and Collective and their representatives during the ensuing days.
Based on these preliminary indications of interest, Collective was granted
permission to do its due diligence review of the Company and confirm its
expression of interest. Additionally, Berwind held further discussions with
each of the remaining potential merger partners to further discuss issues
(including price) relating to their expressions of interest.
On May 6, 1996, Berwind obtained a revised expression of interest from
Collective, and based on the proposed price to be paid by Collective, the
Chairman decided to recommend to the full Board of Directors that the Company
attempt to consummate a transaction with Collective.
At a Special Meeting of the Board of Directors on May 20, 1996, the Merger
Agreement, along with the related Stock Option Agreement, were presented to
the Board of Directors of the Company. Berwind also presented a form of its
written fairness opinion stating that the merger was fair to the shareholders
of the Company from a financial point of view. Berwind's opinion is more
fully described in the section below entitled "THE MERGER - Opinion Of
Financial Advisor." Believing it desirable and in the best interests of the
Company and its shareholders to merge with and into Collective in accordance
with the terms of the Merger Agreement and the Stock Option Agreement, the
Board of Directors, adopted by unanimous vote of the Directors present, the
resolutions necessary to approve the merger with Collective. The Merger
Agreement and the Stock Option Agreement were signed on May 21, 1996, and
both the Company and Collective issued a joint press release the following
day.
9
<PAGE>
For the reasons set forth below in the section immediately following this
section of the Proxy Statement, the Board of Directors of the Company has
concluded that the merger is in the best interests of the Company's
shareholders.
RECOMMENDATION OF THE BOARD OF DIRECTORS; REASONS FOR THE MERGER
The Board of Directors believes that the Merger is in the best interests
of, and is fair to, the shareholders of the Company and unanimously
recommends that the shareholders vote FOR the approval and adoption of the
Merger Agreement. For a description of the interests of a director and
certain officers of the Company in the Merger which may present them with
certain potential conflicts of interest, see "THE MERGER -- Interests of
Certain Persons in the Merger."
The principal reason for the decision of the Board of Directors to
approve, and recommend shareholder approval of, the Merger Agreement is that
the Merger will enable all shareholders of the Company to realize in cash a
significant premium over the prices at which the Common Stock has
historically traded. See "MARKET INFORMATION."
In arriving at its recommendation, the members of the Board of Directors
considered, among other things, the recent and historical market prices of
the Common Stock, the net book value of the Common Stock (which, as of March
31, 1996, was $2.42 per share), the Board of Directors' knowledge of the
business, operations, properties, assets and earnings of the Company, as well
as their assessment of the earnings potential, and future value of the
Company and the prices and premiums paid in recent acquisitions of other
companies in comparable businesses. The Board of Directors also considered
the taxable nature of the Merger to the shareholders of the Company.
Furthermore, the Board of Directors placed special importance on the
favorable opinion of Berwind as to the fairness, from a financial point of
view, of the cash consideration to be paid to the shareholders of the Company
in the Merger. The Board of Directors felt that the proposed Merger,
including the $5.00 per share cash price to be received by the shareholders
of the Company, was in the best interests of the shareholders of the Company.
The Merger Agreement provides that subject to the Company's and its
Directors' fiduciary duties as determined by counsel for the Company, the
Company agreed that it will not, directly or indirectly through others,
solicit any other person with respect to the purchase of the Company's or any
of its subsidiaries' business, assets or capital stock, or engage in or
continue discussions with any other person or firm concerning the purchase of
such business, assets or stock, unless and until the Merger Agreement is
terminated in accordance with its terms.
The Board of Directors recognized that, while consummation of the Merger
will result in the Company's shareholders being entitled to receive $5.00 in
cash for each of their shares, it will also eliminate the opportunity for the
Company's current shareholders to participate in the future growth, if any,
of the business of the Company. Accordingly, the Board of Directors gave
consideration to the Company's future prospects, as well as its historical
results of operations. See "MARKET INFORMATION."
The Board of Directors did not attach relative weights to the factors they
considered in reaching their decision but did place particular emphasis upon
the receipt of the opinion of Berwind and, considering all factors discussed
above, determined that the Merger is in the best interests of, and is fair
to, all Company shareholders.
The Merger has not been structured so that approval of at least a majority
of unaffiliated shareholders is required because there is no legal
requirement for the Merger to be so structured. See "INTRODUCTORY STATEMENT
- -- Voting Rights." The Board of Directors believes that the Board's receipt
of the favorable opinion of Berwind as to the fairness, from a financial
point of view, of the cash consideration to be paid to the shareholders of
the Company in the Merger, provides reasonable safeguards with respect to the
procedural fairness of the proposed Merger and that the proposed Merger is
procedurally fair to the shareholders of the Company.
OPINION OF INDEPENDENT INVESTMENT BANKER
The Company retained Berwind to act as its financial advisor and to render
a fairness opinion in connection with the Merger. Berwind rendered its
opinion to the Board of Directors of the Company that, based upon and subject
to the various considerations set forth therein, as of May 21, 1996 and as of
the date of this Proxy Statement, the consideration to be received in the
Merger is fair, from a financial point of view, to the holders of Company
Common Stock.
10
<PAGE>
The full text of Berwind's Opinion, dated July 24, 1996, sets forth the
assumptions made, matters considered and limitations of the review
undertaken, is attached as Appendix C to this Proxy Statement, is
incorporated herein by reference, and should be read in its entirety in
connection with this Proxy Statement. The summary of the opinion of Berwind
set forth herein is qualified in its entirety by reference to the full text
of such opinion attached as Appendix C to this Proxy Statement.
Berwind was selected to act as the Company's financial advisor in
connection with the Merger based upon its qualifications, expertise and
experience. Berwind has knowledge of, and experience with, New Jersey banking
markets and banking organizations operating in those markets and was selected
by the Company because of its knowledge of, experience with, and reputation
in the financial services industry. Berwind, as part of its investment
banking business, is engaged regularly in the valuation of assets, securities
and companies in connection with various types of asset and security
transactions, including mergers, acquisitions, private placements, and
valuation for various other purposes and in the determination of adequate
consideration in such transactions.
On May 21, 1996, the Company's Board of Directors approved and executed
the Merger Agreement. Prior to such approval, Berwind delivered an opinion
(the "May Opinion") to the Company's Board stating that, as of such date, the
consideration to be received in the proposed Merger was fair to the
shareholders of the Company from a financial point of view. Berwind reached
the same opinion as of the date of this Proxy Statement (the "Proxy
Opinion"). The full text of the Proxy Opinion which sets forth assumptions
made, matters considered and limits on the review undertaken is attached as
Appendix C to this Proxy Statement. No limitations were imposed by the
Company's Board of Directors upon Berwind with respect to the investigations
made or procedures followed by Berwind in rendering the May Opinion or the
Proxy Opinion.
In rendering its Proxy Opinion, Berwind: (i) reviewed the historical
Company; (ii) reviewed the Merger Agreement, (iii) reviewed and analyzed
stock market performance of the Company; (iv) studied and analyzed the
financial and operating data of the Company; (v) considered the terms and
conditions of the Merger to the Company; (vi) met and/or communicated with
certain members of the Company's senior management to discuss its operations,
historical financial statements, and future prospects; (vii) reviewed this
Proxy Statement, and (viii) conducted such other financial analyses, studies
and investigations as Berwind deemed appropriate.
In delivering its May Opinion and Proxy Opinion, Berwind assumed that in
the course of obtaining the necessary regulatory and governmental approvals
for the Merger, no restriction will be imposed on Collective that would have
a material adverse effect on the contemplated benefits of the Merger.
Berwind relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by and
discussed with it for purposes of its opinion. With respect to the Company's
financial forecasts reviewed by Berwind in rendering its opinion, Berwind
assumed that such financial forecasts were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
management of the Company as to the future financial performance of the
Company. Berwind did not make an independent evaluation or appraisal of the
assets (including loans) or liabilities of the Company nor was it furnished
with any such appraisal. Berwind also did not independently verify and has
relied on and assumed that all allowances for loan and lease losses set forth
in the balance sheets of the Company were adequate and complied fully with
applicable law, regulatory policy and sound banking practice as of the date
of such financial statements.
The following is a summary of selected analyses prepared by Berwind and
presented to the Company's Board in connection with the May Opinion and
analyzed by Berwind in connection with the May and Proxy Opinions. In
connection with delivering its Proxy Opinion, Berwind updated certain
analyses to reflect current market conditions and events occurring since the
date of the May Opinion. Such reviews and updates led Berwind to conclude
that it was not necessary to change the conclusions it had reached in
connection with rendering the May Opinion.
Comparable Companies and Comparable Acquisition Transaction
Analyses. Berwind compared selected financial and operating data for the
Company with those of a peer group of selected banks and bank holding
companies with (i) assets between $100 and $350 million, as of the most
recent financial period publicly available, located in New Jersey and (ii)
assets between $100 million and $350 million, as of the most recent financial
period publicly available, located in the Southern New Jersey counties of
Burlington, Ocean, Camden,
11
<PAGE>
Gloucester, Atlantic, Salem, Cumberland and Cape May. Financial data and
operating ratios compared in the analysis of the Company peer group included
but was not limited to: return on average assets, return on average equity,
shareholders' equity to assets ratio and certain asset quality ratios.
Berwind also compared the multiples of book value, tangible book value and
latest twelve months' earnings inherent to the Merger with the multiples paid
in recent acquisitions of banks and bank holding companies that Berwind
deemed comparable. The transactions deemed comparable by Berwind included
both interstate and intrastate acquisitions announced during the twelve month
period ended July 24, 1996, in which the selling institution's assets were
between $100 and $200 million. No company or transaction, however, used in
this analysis is identical to the Company, Collective or the Merger.
Accordingly, an analysis of the result of the foregoing is not mathematical;
rather, it involves complex considerations and judgments concerning
differences in financial and operating characteristics of the companies and
other factors that would affect the public trading values of the companies or
company to which they are being compared.
Discounted Dividend Analyses. Using discounted dividend analyses, Berwind
estimated the present value of the future dividend streams that the Company
could produce over a five-year period under various earnings growth
assumptions. Berwind also estimated the terminal value for the Company's
Common Stock after the five year period by applying a range of earnings
multiples to the Company's terminal year earnings. The range of multiples
used reflected a variety of scenarios regarding the growth and profitability
prospects of the Company. The dividend streams and terminal values were then
discounted to present value using discount rates, reflecting different
assumptions regarding the rates of return required by holders or prospective
buyers of the Company's Common Stock.
In connection with rendering its May Opinion and Proxy Opinion, Berwind
performed a variety of financial analyses. Although the evaluation of the
fairness, from a financial point of view, of the consideration to be paid in
the Merger was to some extent a subjective one based on the experience and
judgment of Berwind and not merely the result of mathematical analysis of
financial data, Berwind principally relied on the previously discussed
financial valuation methodologies in its determinations. Berwind believes its
analyses must be considered as a whole and that selecting portions of such
analyses and factors considered by Berwind without considering all such
analyses and factors could create an incomplete view of the process
underlying Berwind's opinion. In its analysis, Berwind made numerous
assumptions with respect to business, market, monetary and economic
conditions, industry performance and other matters, many of which are beyond
the Company's and Collective's control. Any estimates contained in Berwind's
analyses are not necessarily indicative of future results or values, which
may be significantly more or less favorable than such estimates.
In reaching its opinion as to fairness, none of the analyses performed by
Berwind was assigned a greater or lesser weighting by Berwind than any other
analysis. As a result of its consideration of the aggregate of all factors
present and analyses performed, Berwind reached the conclusion, and opined,
that the consideration to be received in the Merger as set forth in the
Merger Agreement, is fair from a financial point of view, to the Company and
its shareholders.
Berwind's Proxy Opinion was based solely upon the information available to
it and the economic, market and other circumstances as they existed as of the
date its Proxy Opinion was delivered; events occurring after the date of its
Proxy Opinion could materially affect the assumptions used in preparing its
Proxy Opinion. Berwind has not undertaken to reaffirm and revise its Proxy
Opinion or otherwise comment upon any events occurring after the date
thereof.
Pursuant to the terms of the engagement letter dated December 6, 1995 the
Company has paid Berwind $35,000 for acting as financial advisor in
connection with the Merger including delivering its May and Proxy Opinions.
In addition, the Company has also agreed to pay Berwind $500,175 upon the
consummation of the Merger and to reimburse Berwind up to $10,000 for its
reasonable out-of-pocket expenses. Whether or not the Merger is consummated,
the Company has also agreed to indemnify Berwind and certain related persons
against certain liabilities relating to or arising out of its engagement.
The full text of the Proxy Opinion of Berwind dated as of the date of this
Proxy Statement, which sets forth assumptions made and matters considered, is
attached hereto as Appendix C. The Company's shareholders are
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<PAGE>
urged to read the Proxy Opinion in its entirety. Berwind's Proxy Opinion is
directed only to the consideration to be received by the Company's
shareholders in the Merger and does not constitute a recommendation to any
holder of the Company Common Stock as to how such holder should vote at the
Company's Annual Meeting.
THE FOREGOING PROVIDES ONLY A SUMMARY OF THE PROXY OPINION OF BERWIND AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THAT OPINION,
WHICH IS SET FORTH IN APPENDIX C TO THIS PROXY STATEMENT.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Board of Directors with respect
to the Merger, shareholders should be aware that certain persons have
interests which may present them with potential conflicts of interest in
connection with the Merger. The Board of Directors was aware of these
potential conflicts in considering the Merger.
The following officers and a director of the Company will be entitled to
receive the following additional cash compensation on the Effective Date of
the Merger as a result of employment and/or severance agreements with the
Company:
<TABLE>
<CAPTION>
Position Additional Cash
Name with the Bank Compensation
---- ------------- ---------------
<S> <C> <C>
David F. Dierker Director, President and Chief Executive Officer $360,000
Jeffrey Steinberg Vice President and Branch Administrator $37,800
Norman Mullock Vice President and Treasurer $37,800
Edward Petrosky Executive Vice President and Chief Credit Officer $22,500
Other Officers -- $10,000
</TABLE>
STOCK OPTION AGREEMENT
Under the Stock Option Agreement, the Company has granted the Option to
Collective to purchase up to 956,704 authorized but unissued shares of the
Company Common Stock (or approximately 19.9% of the Company's issued and
outstanding Common Stock on May 21, 1996, prior to giving effect to the
issuance of Common Stock upon exercise of the Option) at a price of $4.00 per
share. In the event of any change in Company Common Stock by reason of stock
dividends, split-ups or the like, the type and number of shares subject to
the Option and the purchase price therefor shall be adjusted appropriately.
The purpose of the Option is to increase the likelihood that the Merger
will be consummated by making it more difficult and more expensive for a
third party to acquire control of the Company. Accordingly, certain aspects
of the Stock Option Agreement may have the effect of discouraging persons who
might be interested in acquiring the Company from considering or proposing
such an acquisition, even if such persons were prepared to offer higher
consideration per share for the Company Common Stock. The Option is
exercisable only upon the occurrence and continuance of the following events
(a "Triggering Event"):
(i)(a) The Company or any of its subsidiaries (each a "Company
Subsidiary"), without having received Collective's prior written consent,
shall have entered into an agreement to engage in an Acquisition
Transaction (as hereinafter defined) with any person other than Collective
or any of its Subsidiaries (each a "Collective Subsidiary") or (b) the
Board of Directors of Company shall have recommended that the stockholders
of Company approve or accept any Acquisition Transaction other than as
contemplated by the Merger Agreement. An "Acquisition Transaction" means
(x) a merger or consolidation, or any similar transaction, involving
Company or any of its subsidiaries, (y) a purchase, lease or other
acquisition representing 10% or more of the consolidated assets of Company
and its subsidiaries, or (z) a purchase or other acquisition (including by
way of merger, consolidation, share exchange or otherwise) of securities
representing 10% or more of the voting power of Company or any of its
subsidiaries;
(ii) The Company or any Company Subsidiary, without having received
Collective's prior written consent, shall have authorized, recommended,
proposed or publicly announced its intention to authorize, rec-
13
<PAGE>
ommend or propose, an agreement to engage in an Acquisition Transaction
with any person other than Collective or a Collective Subsidiary, or the
Board of Directors of Company shall have withdrawn or modified, or
publicly announced its interest to withdraw or modify, its recommendation
that the stockholders of Company approve the transactions contemplated by
the Merger Agreement;
(iii) Any person, other than Collective, any Collective Subsidiary or
any Company Subsidiary acting in a fiduciary capacity, shall have acquired
beneficial ownership or the right to acquire beneficial ownership of 10%
or more of the outstanding shares of Common Stock; and the Company's
shareholders shall not approve the Merger, or the Company shall not have
called a meeting of shareholders, or the Company shall not have held a
meeting of shareholders to vote on the Merger no later than September 30,
1996, or the Company shall have called a meeting of shareholders or shall
have distributed a proxy statement or other solicitation materials in
connection with such Acquisition Transaction;
(iv) After a proposal is made by a third party to the Company or its
stockholders to engage in an Acquisition Transaction, the Company shall
have breached any representation, warranty, covenant or obligation
contained in the Merger Agreement and such breach (x) would entitle
Collective to terminate the Merger Agreement and (y) shall not have been
cured prior to the Notice Date; or
(v) The holders of Company Common Stock shall not have approved the
Merger Agreement and the transactions contemplated thereby at the meeting
of such stockholders held for the purpose of voting on such agreement, or
such meeting shall not have been held or shall have been cancelled prior
to termination of the Merger Agreement, in each case after it shall have
been publicly announced that any person (other than Collective or any
affiliate of Collective or any person acting in concert in any respect
with Collective) shall have made, or disclosed an intention to make, a
proposal to engage in an Acquisition Transaction; or
(vi) The Company's Board of Directors shall not have recommended to the
stockholders of Collective that such stockholders vote in favor of the
approval of the Merger Agreement and the transactions contemplated thereby
or shall have withdrawn or modified such recommendation in a manner
adverse to Collective.
The Option would terminate upon the earlier of (i) the Effective Date of
the Merger; (ii) termination of the Merger Agreement in accordance with the
provisions thereof if such termination occurs prior to the occurrence of a
Triggering Event; (iii) the passage of 18 months after termination of the
Merger Agreement if such termination follows the occurrence of a Triggering
Event; or (iv) the passage of 12 months after termination of the Merger
Agreement, if such termination is pursuant to Sections 6.01(b), 6.01(e) or
6.01(f) of the Merger Agreement and a Triggering Event shall not have
occurred during such time.
Upon the occurrence of a Triggering Event, at the request of Collective,
the Company is required to repurchase the Option from Collective at a price
set forth in the Stock Option Agreement.
Collective has certain rights to require the preparation of a registration
statement to be used in connection with a sale of all or a portion of the
Option or shares acquired upon exercise thereof.
This summary of the Stock Option Agreement is qualified in its entirety by
a copy of the Stock Option Agreement, which is attached hereto as Appendix D
and is hereby incorporated by reference.
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<PAGE>
THE MERGER AGREEMENT
PRINCIPAL TERMS
The descriptions of the terms and conditions of the Merger and of the
Merger Agreement included in this Proxy Statement are qualified in their
entirety by reference to the Reorganization Agreement and the Plan of Merger,
copies of which are attached hereto as Appendices A and B, respectively.
The Merger Agreement provides that, subject to the approval and adoption
of the Merger Agreement by the shareholders of the Company, and the
satisfaction of certain other conditions contained therein, CBAC will be
merged with and into the Company and, immediately thereafter, the Company
shall be merged with and into Collective, as the surviving corporation. In
the Merger, on the Effective Date, each outstanding share of Common Stock
(other than shares held by Collective and its affiliates) will, by virtue of
the Merger and without any action on the part of the holder thereof, no
longer be outstanding and will be canceled and converted into the right to
receive $5.00 in cash. Each share of the common stock of Collective will not
be affected by the Merger.
Under applicable New Jersey law, Shareholders who object to the Merger
will not have the right to have the "fair value" of their shares judicially
determined and paid to them in cash.
After the Merger, current holders of Common Stock will possess no interest
in or rights as shareholders of the Company. On the Effective Date, CBAC and
the Company will cease to exist and Continental Bank of New Jersey will
become a subsidiary of Collective.
Collective has informed the Company that the proposed Merger will be
accounted for as a "purchase."
EFFECTIVE DATE
Subject to the terms and conditions specified in the Merger Agreement, and
upon satisfaction of all requirements of law, including, among other
conditions, receipt of the approval of the FRB and the New Jersey Department
of Banking, and the expiration of all waiting periods prescribed by law, the
"Effective Date" will occur within the tenth business day immediately
following the later of (i) the approval of the Merger by Company shareholders
or (ii) the approval of the Merger by all regulatory authorities and the
expiration of all applicable waiting periods, or such other date as is
mutually agreed to by Collective and the Company. On the Effective Date, the
Company and Collective will file appropriate Articles of Merger with the
States of New Jersey and Delaware to effect the Merger. The Merger shall
become effective upon the last of the filings of the Articles of Merger (the
"Effective Date"). It is currently anticipated that the Merger will be
consummated in the later part of the third quarter or in the fourth quarter
of 1996.
The Merger Agreement provides for an outside Effective Date of December
31, 1996. See "THE MERGER AGREEMENT -- Termination and Amendment."
STOCK OPTIONS
As of the Record Date, an aggregate of 486,600 shares of Common Stock were
subject to outstanding options. The options are held by five individuals,
including executive officers. The Merger Agreement provides that the Company
will take all steps necessary to cause all options outstanding thereunder to
be canceled, exercised or terminated prior to the Effective Date. The Company
will use its best efforts to obtain the consent of each holder of outstanding
options which are to be canceled to the cancellation of such options
immediately prior to the Effective Date in exchange for a cash payment from
the Company equal to the excess of $5.00 over the per share exercise price.
The aggregate payments are anticipated to be approximately $868,810.
DEBENTURES
In February 1991, the Company authorized the issuance of up to $1,100,000
of 11% convertible debentures due March 4, 2001. The debentures are
convertible to common stock of the Company at any time prior to maturity at
$2.56 per share, subject to adjustment in certain events. The debentures are
redeemable at the option of the Company at any time after March 4, 1994 at a
redemption price of 105% of the principal amount in 1994,
15
<PAGE>
reduced by 1% each year to a minimum of 100% of the principal amount. In
addition, the debentures subject the Company to certain restrictive
covenants, primarily regarding limitations on dividends and stock purchases.
As of March 31, 1996, the Company had $1,096,000 of convertible debentures
outstanding.
The Company intends to redeem prior to the Effective Date of the Merger
all outstanding convertible debentures. Based on the fact that pursuant to
the Merger Agreement each share of Company Common Stock will be convertible
into $5.00 in cash, it will be in all convertible debenture holders' interest
to convert their convertible debentures into Company Common Stock prior to
the Effective Date of the Merger (i.e. 390 shares of Common Stock per $1,000
debenture based on the current conversion ratio of $2.56 per share) rather
than accept the redemption price of $1,030 for each $1,000 debenture.
PAYMENT FOR SHARES
In order to receive the cash payments which shareholders will be entitled
to receive as a result of the Merger, each holder of Common Stock will be
required to surrender his stock certificates after the Effective Date,
together with a duly completed and executed letter of transmittal, to
Midlantic Bank, N.A. (the "Exchange Agent"). Upon receipt of such stock
certificates and letter of transmittal, the Exchange Agent will pay to the
registered holder or his transferee an amount equal to $5.00 for each share
represented by such certificates. No interest will be paid or accrued on the
amounts payable upon the surrender of stock certificates. Instructions with
regard to the surrender of certificates, together with a letter of
transmittal to be used for this purpose, will be forwarded to shareholders as
promptly as practicable following the Effective Date. SHAREHOLDERS SHOULD NOT
SURRENDER THEIR STOCK CERTIFICATES UNTIL SUCH LETTER OF TRANSMITTAL AND
INSTRUCTIONS ARE RECEIVED. In addition, the Exchange Agent will have
available immediately after the Effective Date letters of transmittal for use
by the shareholders of the Company who wish to surrender their stock
certificates in person and receive immediate payment therefor.
THE PAYMENT FUND
At or after the Effective Date, Collective will deposit with the Exchange
Agent all of the funds necessary to make the cash payments of $5.00 per share
of Common Stock (the "Payment Fund").
CONDITIONS AND COVENANTS
In addition to the approval and adoption of the Merger Agreement by the
shareholders of the Company, the respective obligations of the Company, CBAC
and Collective to consummate the Merger are subject to the satisfaction or,
where permitted, waiver of certain conditions, including, among others: (a)
the correctness in all material respects, at and as of the Closing, of the
representations and warranties of the respective parties contained in the
Reorganization Agreement; (b) the performance by the respective parties of
all obligations contained in the Reorganization Agreement required to be
performed or complied with by them at or prior to the Closing; (c) the
absence of any injunction or other legal prohibition against the Merger; (d)
the exchange of certain legal opinions and closing certificates; and (e) the
receipt on or before the mailing of the Proxy Statement of an opinion of an
independent investment banker selected by the Company to the effect that
based on the review described therein, the price to be paid to the
shareholders of the Company is fair to the shareholders of the Company from a
financial point of view and that such opinion not be withdrawn or revoked on
or prior to the Effective Date.
The obligations of Collective and CBAC to consummate the Merger are also
subject to certain additional conditions, including the termination, exercise
or cancellation of all options or rights to acquire shares of the Common
Stock of the Company. See "Stock Options."
The Company has agreed that, pending the Closing, it will carry on its
business in substantially the same manner as heretofore, keep in full force
and effect insurance comparable in scope and coverage to that now maintained
by it and use its best efforts to maintain and preserve its business
organization intact. The Company has agreed that during this period it will
not, other than in the ordinary course of business: (a) enter into any
transaction or incur or agree to incur any obligation or liability, except
for the issuance by a subsidiary of the Company of certain commercial paper;
which will be guaranteed by the Company; (b) incur or commit to any
16
<PAGE>
capital expenditures; (c) alter the interest rate or fees charged in relation
to loan service operations; (d) grant any general or uniform increase in the
rates of pay of employees, except as consistent with past practice; (e) other
than the merger of subsidiaries of the Company, merge into or consolidate, or
sell its assets to any other corporation or person, or permit any other
corporation to be merged or consolidated with it, or acquire all of the
assets of any other corporation or person; (f) issue, sell, grant any option
for, or acquire for value any shares of its capital stock or otherwise effect
any change in connection with its capitalization, other than shares of its
capital stock issued in connection with the exercise of employee stock
options: (g) or change any of its methods of reporting income and deductions
for Federal income tax purposes.
The Company has also agreed that neither the Company nor its subsidiaries
will declare or pay any dividends or make any distributions.
The Company has also agreed that, pending the Closing or the earlier
termination of the Merger Agreement and subject to the Company's and its
directors' fiduciary duties as determined by counsel to the Company, it will
not directly or indirectly through others, nor will it permit any of its
officers, directors or other representatives to solicit any other person with
respect to the purchase of the Company's or any of its subsidiaries'
business, assets or capital stock, or, engage in or continue discussions with
any other person or firm concerning the purchase of such business, assets or
stock.
REGULATORY APPROVALS
The obligations of the Company to consummate the Merger are subject to the
additional condition that the Company, CBAC and Collective have obtained all
necessary consents, waivers and approvals required by agreements to which
either the Company, CBAC and Collective may be a party or required by any law
or regulation of any government or governmental authority, and any applicable
waiting period has expired, prior to the Effective Date.
The consummation of the Merger is conditioned, among other things, on the
approval by the FRB under the Bank Holding Company Act of 1956, as amended.
This approval is required by law and must be obtained before the Merger can
be consummated. An application for such approval has been filed with the FRB.
The Bank Holding Company Act provides that the FRB may not approve any
transaction: (1) if such transaction would result in a monopoly or would be
in furtherance of any combination or conspiracy to monopolize or to attempt
to monopolize the business of banking in any part of the United States; or
(2) if the effect of such transaction, in any section of the country, may be
to substantially lessen competition, or to tend to create a monopoly, or in
any other manner to restrain trade, in each case unless the FRB finds that
the anti-competitive effects of the proposed transaction are clearly
outweighed in the public interest by the probable effect of the transaction
in meeting the convenience and needs of the community to be served. In
conducting its review of any application for approval, the FRB is required to
consider the financial and managerial resources and future prospects of the
company or companies and the banks concerned and the convenience and needs of
the communities to be served. As interpreted by the FRB and the courts, the
FRB may deny an application if it determines that the financial or managerial
resources of the acquiring bank holding company are inadequate.
The Bank Holding Company Act provides that a transaction approved by the
FRB generally may not be consummated until thirty days (fifteen days if
requested and granted by the FRB) after FRB approval. During such period, the
U.S. Department of Justice may commence a legal action challenging the
transaction under the antitrust laws. A commencement of an action would stay
the effectiveness of the FRB's approval unless a court specifically orders
otherwise. If, however, the Justice Department does not commence a legal
action during such thirty day period, it may not thereafter challenge the
transaction except in an action commenced under Section 2 of the Sherman
Antitrust Act.
The Bank Holding Company Act provides for the publication of notice and
the opportunity for administrative hearings relating to the application for
approval of the FRB noted above and authorizes the FRB to permit interested
parties to intervene in the proceedings. If an interested party is permitted
to intervene, such intervention could substantially delay the FRB approval
required for consummation of the Merger.
The approval of the New Jersey Department of Banking must also be obtained
before the Merger can be consummated. The New Jersey Department of Banking is
required to approve or disapprove a proposed acqui-
17
<PAGE>
sition within sixty days after receipt of an application or within thirty
days after receipt of additional information submitted in response to a
request by the Department. The Department of Banking must evaluate factors
similar to those considered by the FRB in determining whether to approve the
Merger. An application for approval has been filed with the New Jersey
Department of Banking.
The management of Collective and the Company have no reason to believe
that the required governmental approvals will not be obtained. There can be
no assurance, however, that any regulatory authority will approve the Merger
and, if approved, there can be no assurance as to the date of such approval
or that the Department of Justice will not object to the Merger. It is
anticipated that the decisions of the above governmental agencies will not be
rendered until after the shareholders of the Company have voted on the
Merger.
TERMINATION AND AMENDMENT
The Reorganization Agreement may be terminated and the Plan of Merger
abandoned at any time prior to the Closing (whether before or after its
approval by the shareholders of the Company): (a) by mutual consent of the
parties authorized by their respective Boards of Directors; (b) by written
notice from one party to the other party if the Closing does not occur by
December 31, 1996; (c) by written notice from one party to the other party
stating that the party giving such notice elects to terminate the
Reorganization Agreement and abandon the Plan of Merger, as of a stated date,
which will not be less than ten business days after the date on which such
notice is given, because (i) the party receiving such notice will be unable,
by December 31, 1996, to meet or satisfy one or more specified conditions
precedent to the obligation of the party sending such notice to close under
the Reorganization Agreement, and (ii) the party sending such notice does not
intend to waive the satisfaction of such conditions precedent; or (d) in the
event of termination of the Plan of Merger pursuant to the terms thereof.
The Merger Agreement provides that in the event the Merger Agreement is
terminated subsequent to the occurrence of a Triggering Event (as such term
is defined in the Stock Option Agreement) or by Collective under certain
circumstances as set forth in more detail in the Merger Agreement and within
twelve months after such termination by Collective a Triggering Event shall
occur, then in addition to any other amount payable or stock issuable by the
Company pursuant to the Merger Agreement and/or the Stock Option Agreement,
as the case may be, the Company shall pay to Collective a termination fee of
$500,000.
The Merger Agreement may be amended at any time, either before or after
its approval by the shareholders of the Company, by written agreement of the
Boards of Directors of the Company, CBAC and Collective, except that, after
such shareholder approval, no amendment may be made which reduces or changes
in form or time of payment the consideration to be received by the
shareholders of the Company in the Merger or result in a materially adverse
tax or other effect to the shareholders of the Company.
18
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES TO SHAREHOLDERS
The receipt of cash for shares of Common Stock in the Merger or pursuant
to the exercise of dissenters' rights will be a taxable transaction for
federal income tax purposes to the shareholders receiving such cash and may
be a taxable transaction for state and local tax purposes as well. A holder
of Common Stock will recognize gain or loss measured by the difference
between such shareholder's adjusted tax basis for the shares of Common Stock
owned by him at the time of the Merger and the amount of cash received
therefor. In general, any gain or loss will be capital gain or loss if the
shares of Common Stock are capital assets in the hands of the shareholder.
Such gain or loss will be long-term capital gain or loss if such
shareholder's holding period is more than six months, if the shares of Common
Stock were acquired on or before January 1, 1988; or more than one year, if
the shares of Common Stock were acquired after January 1, 1988.
No ruling has been or will be requested from the Internal Revenue Service,
and no opinion of counsel has been or will be given to the Company as to any
of the tax consequences of the Merger.
THE FOREGOING IS ONLY A GENERAL DESCRIPTION OF CERTAIN OF THE FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER TO SHAREHOLDERS, WITHOUT REGARD TO THE
PARTICULAR FACTS AND CIRCUMSTANCES OF EACH SHAREHOLDER'S TAX SITUATION.
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE MERGER TO THEM.
MARKET INFORMATION
The following table sets forth the high and low bid prices of the
Company's Common Stock for each of the first two quarters of 1996 and for
each quarter during 1995 and 1994, based upon information obtained from
either Janney Montgomery Scott, Inc., Haddonfield, New Jersey and/or
Bloomberg Financial Services. These quotations may represent prices between
dealers, may not include retail mark-ups, mark-downs, or commissions, and do
not necessarily represent actual transactions. There was no substantial
trading market in the Company's Common Stock in the first two quarters of
1996 and in either 1995 or 1994.
<TABLE>
<CAPTION>
1996 High Bid Low Bid
-------------- ---------- ---------
<S> <C> <C>
Second Quarter $4.500 $2.125
First Quarter 2.125 2.000
</TABLE>
<TABLE>
<CAPTION>
1995 High Bid Low Bid 1994 High Bid Low Bid
-------------- ---------- --------- -------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Fourth Quarter $2.125 $1.750 Fourth Quarter $1.875 $1.875
Third Quarter 2.125 1.750 Third Quarter 2.000 2.000
Second Quarter 2.250 2.000 Second Quarter 1.500 1.500
First Quarter 2.250 1.750 First Quarter 1.500 1.500
</TABLE>
On May 21, 1996, the last full trading day prior to the Company's public
announcement of the signing of the Merger Agreement, the closing sales price
per share of the Common Stock on the Bloomberg Financial Services was $2.23.
As of the Record Date there were approximately 600 holders of record of
the Company's Common Stock.
On July 1, 1989, all of the outstanding capital stock of Continental Bank
of New Jersey (the "Bank") was acquired by Continental Bancorporation (the
"Company"), a company formed to serve as a holding company for the Bank. Each
share of common stock of the Bank was exchanged for one share of common stock
of the Company, and each share of convertible preferred stock of the Bank was
exchanged for five shares of common stock of the holding company plus $0.75
paid by the Bank in cash. The cash payments which amounted to $344,768
represented three full quarterly cash dividends, which would have resulted in
the conversion of the preferred stock of the Bank to common stock, consistent
with the automatic conversion provision contained in the Bank's Restated
Certificate of Incorporation. The Company paid a $.06 per share cash dividend
on March 17, 1995.
Cash available for dividend distribution to the holders of the Company's
Common Stock must initially come from dividends paid to the Company by the
Bank. Accordingly, restrictions on the Bank's cash dividend payments directly
affect the payment of cash dividends by the Company.
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<PAGE>
State banking statutes restrict the amount of dividends paid on capital
stock of the Bank to an amount which, following the payment of such dividend,
will not reduce surplus and undivided profits of the Bank to an amount less
than 50 percent of capital stock. Dividends from the Bank and investment
income earned on short term investments held by the Company are the only
source of funds from which the Company currently can pay dividends to its
stockholders.
The Merger Agreement provides certain restrictions on the ability of the
Company to declare and pay dividends prior to the time the Merger becomes
effective. See "MERGER AGREEMENT -- Conditions and Covenants." If the Merger
is not consummated for any reason, the payment of future cash dividends will
be determined by the Board of Directors of the Company and will be dependent
upon the earnings, financial condition and capital requirements of the
Company and other factors.
ELECTION OF DIRECTORS
The Bylaws of the Company provide that the Board of Directors is to
consist of not less than two and not more than 25 directors, each holding
office for one year and until their respective successor shall have been duly
elected and qualified. The Bylaws further provide that the exact number of
directors to be elected will be determined from time to time by the Board of
Directors. The Board of Directors has fixed the number of persons to serve on
the Company's Board of Directors at eight and recommends the election of the
eight nominees named in this Proxy Statement.
The following table sets forth information as of the Record Date
concerning the Company's nominees for election to the Board of Directors. All
nominees (other than David F. Dierker) for election to the Board of Directors
were elected to the Board at the last Annual Meeting and all of the director
nominees named below also serve on the Board of Directors of the Bank. If any
of the nominees become unable to or for good cause will not serve, either (i)
the current Board of the Company may nominate a substitute nominee, in which
event the persons named in the enclosed proxy card will vote in accordance
with their best judgment, or (ii) no new nominee may be nominated to fill
such a vacancy, in which event the number of directors to be elected will be
reduced accordingly. The Company expects all nominees to be willing and able
to serve. Unless otherwise specified, all persons listed below have sole
voting and investment power with respect to their shares of Common Stock.
20
<PAGE>
The following table and narrative set forth certain information with
respect to the Company's nominees:
<TABLE>
<CAPTION>
Number of
Shares of
Director of Common Stock Percent of
the Bank Beneficially Common
Name Since Age Owned(1) Stock(1)
------------------------------------------- ------------- ----- -------------- ------------
<S> <C> <C> <C> <C>
Stanley W. Adleman, President 1982 69 143,033 3.0%
International Film, Services, Inc.
(Warehouse/Trucking)
Camden, NJ(2)
Ira Albom 1993 67 60,124 1.3%
Senior Vice President
Telefex, Inc.
New Wales, PA(3)
David F. Dierker 1995 38 200 *
President, Continental Bancorporation
and Continental Bank of New Jersey(4)
F. Budd Hineline Jr. 1985 72 465,925 9.9%
Self-Employed
Cherry Hill, NJ(5)
Richard H. Hineline 1978 71 326,192 6.9%
Retired
Haddonfield, NJ(5)(6)
Mark Rosen, President 1987 48 35,031 *
Garage Equipment Sales & Service, Inc.
(Sales and Service of Automotive
Parts and Equipment)
Camden, NJ(7)
William Steinberg 1985 50 1,941,734 37.9%
Chairman of the Board
Continental Bancorporation and
Continental Bank of New Jersey(8)
Vito A. Valecce, M.D., Physician 1982 64 127,016 2.7%
Runnemede, NJ(9)
All Directors and Officers of the Company
as a Group (9 persons)(10) 3,099,555 59.6%
</TABLE>
- ------
* Less than one percent
(1) The securities "beneficially owned" by an individual are determined in
accordance with the definition of "beneficial ownership" set forth in
the regulations of the SEC and, accordingly, may include securities
owned by or for, among others, the wife and/or minor children of the
individual and any other relative who has the same home as such
individual, as well as other securities as to which the individual has
or shares voting or investment power or has the right to acquire within
60 days after the Record Date. Beneficial ownership may be disclaimed as
to certain of the securities. Shares subject to outstanding stock
options which an individual has the right to acquire within 60 days
after the Record Date and shares which may be acquired upon conversion
of the Subordinated Debentures are deemed to be outstanding for the
purpose of computing the percentage of outstanding securities of the
class owned by such individual, or any group including such individual,
but are not deemed outstanding for the purpose of computing the
percentage of the class owned by any other individual. Individual
percentages have been rounded to the nearest tenth of a percentage
point.
21
<PAGE>
(2) Includes 1,025 shares owned jointly by Mr. Adleman and his wife, 23,887
shares of Common Stock owned of record by Mr. Adleman's brother, sister
and children, 7,093 shares owned by Sea Associates, a partnership in
which Mr. Adleman serves as general partner, 9,792 shares owned by
International Film Service, a company of which Mr. Adleman is the
principal shareholder, 256 shares owned by Mr. Adleman's wife, and 9,766
shares of Common Stock which may be acquired by Mr. Adleman upon
conversion of the Subordinated Debentures.
(3) Includes 59,242 shares of Common Stock owned jointly with spouse.
(4) Does not include 350,000 shares of Common Stock subject to outstanding
stock options which were granted in 1995. Mr. Dierker became the
President and Chief Executive Officer of the Bank and the Company in
July 1995. From 1980 to June 1995, Mr. Dierker was employed at BancOne
Corporation, Columbus, Ohio. Just prior to joining the Company and the
Bank, he was Senior Vice President and Manager of Community Banking at
Bank One, Cincinnati, N.A.
(5) F. Budd Hineline, Jr. and Richard H. Hineline are brothers. Each of the
Hinelines disclaims beneficial ownership of the shares of Common Stock
held by the other.
(6) Includes 48,828 shares of Common Stock which may be acquired by Mr.
Hineline upon conversion of Subordinated Debentures. In June of 1990,
Mr. Hineline retired from the consulting position he held with Atlas
Corporation, a mineral mining company located in Denver, Colorado. Prior
to that date, he served as President of Atlas Building Systems, Marlton,
New Jersey.
(7) Includes 26,322 shares owned jointly by Mr. Rosen and his wife and 7,813
shares of Common Stock which Mr. Rosen and his children may acquire upon
conversion of Subordinated Debentures. Does not include 284,437 shares
of Common Stock owned by the Nathan Rosen Trust for which Mr. Rosen's
mother and sister serve as co-trustees and as to which Mr. Rosen
disclaims beneficial ownership. From June 1986 to March 1991, Mr. Rosen
was employed by Mechanics Auto Parts, Camden, New Jersey. From January
1984 to May 1986, Mr. Rosen was employed by Philips Equipment and
Supply, Camden, New Jersey.
(8) Includes 106,600 shares of Common Stock subject to outstanding stock
options which Mr. Steinberg has the right to acquire within 60 days
after the Record Date and 301,171 shares of Common Stock which may be
acquired upon conversion of the Subordinated Debentures, all of which
are deemed to be outstanding for the purpose of computing the percentage
of outstanding securities of the class owned by Mr. Steinberg but are
not deemed outstanding for the purpose of computing the percentage of
the class owned by any other individual. Also includes 1,087,478 shares
of Common Stock held jointly by Mr. Steinberg and his wife and 307,505
shares of Common Stock held in trust for the benefit of Mr. Steinberg's
minor child. Does not include the shares of Common Stock owned by
Jeffrey Steinberg (580,326 shares) his adult child who is also an
officer of the Bank and as to which Mr. Steinberg disclaims beneficial
ownership. Mr. Steinberg joined the Bank in February 1985 and became
Chairman of the Board in April 1986. Mr. Steinberg has been Chairman of
the Company since March 1989. For more than five years prior to 1993,
Mr. Steinberg was the President of Coordinated Health Services, Inc.
(9) Includes 12,812 shares held by Dr. Valecce's wife in trust for their
children and 71,350 shares held by the Vito A. Valecce, M.D. Pension
Plan Trust. Also includes 9,766 shares which may be acquired by Dr.
Valecce upon conversion of the Subordinated Debentures.
(10) Included are 106,600 shares of Common stock subject to outstanding stock
options which the directors and officers, as a group, have the right to
acquire within 60 days after the Record Date and 377,344 shares of
Common Stock which may be acquired upon conversion of Subordinated
Debentures owned by the officers and directors in the group.
Except as otherwise indicated, each of the directors and nominees has had
the same principal occupation or employment for at least the past five years.
COMMITTEES OF THE BOARD AND ATTENDANCE
During 1995, the Company's Board of Directors held twelve meetings. The
Bank's Board of Directors (the "Bank's Board") held sixteen meetings. The
Company's Board of Directors does not have any standing commit-
22
<PAGE>
tees. The Bank's Board, however, does have a number of standing committees,
including, among others, an Audit Committee, Human Resources (Personnel)
Committee and Nominating Committee. To the extent necessary, the committees
of the Bank's Board also serve as committees of the Company's Board of
Directors.
The Audit Committee is responsible for reviewing and considering actions
of the Bank's Board and the Company's Board of Directors in matters relating
to audit functions, selecting the Company's independent accountants,
reviewing with the Company's independent accountants the scope and results of
their audit, and reviewing the internal audits and the effectiveness of
procedures. The current members of the Audit Committee who are directors
and/or nominees for director are Ira Albom, Mark Rosen and William Steinberg.
The committee held two meetings during 1995.
The Human Resources (Personnel) Committee is responsible for the Company's
two stock option plans. The members of the Human Resources (Personnel)
Committee who are directors and nominees for director are Stanley W. Adleman,
Richard H. Hineline, Mark Rosen, William Steinberg and Vito A. Vallecce. This
committee did not meet during 1995.
The Nominating Committee is responsible for submitting to the Board of
Directors the names of potential nominees for director. The Nominating
Committee will consider nominees for directorships recommended by
shareholders if such recommendations are submitted in writing to the
Nominating Committee a reasonable time prior to the Annual Meeting. The
members of the Nominating Committee who are directors and nominees for
director are F. Budd Hineline, Jr., William Steinberg, Vito A. Valecce and
Mark Rosen. This committee did not meet during 1995.
During 1995, all of the Company's directors who are currently standing for
reelection attended more than 75% of the aggregate of the total number of
meetings held by the Board of Directors and all committees thereof of which
they were members. Through March, 1995, Directors who were not also employees
of the Company received $150 for each Board meeting attended and members of
the Loan Committee and Executive Committee who were not also employees of the
Company received $150 for each such committee meeting attended. Since March,
1995, no director fees have been paid.
Unless authority has been withheld, the proxy agents intend to vote FOR
the election of both of the Company's nominees. Under the law of the
Company's state of incorporation, the election of directors is by a plurality
vote so that the eight nominees who receive the most "FOR" votes shall be
elected. An abstention, broker non-vote or withholding authority to vote will
not have the same legal effect as a vote "against" a director and is not
counted in determining whether the nominee has received the required
shareholder vote.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF
THE ABOVE NAMED EIGHT NOMINEES TO HOLD OFFICE UNTIL THE NEXT ELECTION AND
UNTIL THEIR SUCCESSORS ARE DULY ELECTED AND QUALIFIED.
SHAREHOLDER PROPOSALS
Assuming the Merger is not consummated, Shareholder proposals regarding
the 1997 Annual Meeting must be submitted to the Company by February 1, 1997
to receive consideration for inclusion in the Company's 1997 Proxy Statement.
DESCRIPTION OF THE CAPITAL STOCK OF THE COMPANY
The Company is authorized to issue 10,000,000 shares of Common Stock, par
value $2.00 per share and 1,000,000 shares of preferred stock. As of the
Record Date, 4,712,408 shares of Common Stock were outstanding and no shares
of preferred stock were issued or outstanding.
The holders of Common Stock are entitled to dividends when and as declared
by the Board of Directors, subject to applicable legal restrictions, and to
participate equally in the net assets of the Company available for
distribution in the event of the liquidation of the Company, after payment of
any amounts due to creditors. The
23
<PAGE>
holders of the Common Stock have one vote per share, have no preemptive,
subscription or conversion rights, and are not entitled to cumulative voting
in the election of directors. The Common Stock is not subject to any
liability for further assessments. The Transfer Agent and Registrar for the
Common Stock is Continental Bank of New Jersey.
RELATIONSHIP WITH INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Company's independent certified public accountants during the most
recent year was Grant Thornton LLP. The Board of Directors has selected Grant
Thorton LLP to be the Company's independent certified public accountants for
1996. The selection of the Company's independent certified public accountants
is not being submitted to shareholders because there is no legal requirement
to do so. A representative of Grant Thorton LLP is expected to be present at
the Annual Meeting and to have the opportunity to make a statement, if he
desires to do so, and to be available to respond to appropriate questions.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by the Company pursuant to the
informational requirements of the Exchange Act, can be inspected and copied
at the public reference facilities maintained by the Commission at Judiciary
Plaza, 450 Fifth Street N.W., Room 1024, Washington, D.C. 20549, and at the
following regional offices of the Commission: New York Regional Office, Seven
World Trade Center, 13th Floor, New York, New York 10048; Los Angeles
Regional Office, 5757 Wilshire Blvd., Suite 500 East, Los Angeles, California
90036-3648; and Chicago Regional Office, Northwest Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60621. Copies of such material
can also be obtained from the public reference section of the Commission,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates.
After the Effective Date of the Merger, registration of the Common Stock
under the Exchange Act will be terminated.
The Proxy Statement incorporates by reference information from documents
which are not presented herein or delivered herewith. These documents (not
including exhibits thereto, unless such exhibits are specifically
incorporated by reference into the information incorporated herein) are
available free of charge to any shareholder of the Company, including any
beneficial owner, upon written or oral request directed to David F. Dierker,
President (telephone number 609-227-8000). Responses to any such request will
be made within one business day by sending the requested documents by first
class mail or other equally prompt means. In order to ensure timely delivery
of the documents in advance of the Annual Meeting to which this Proxy
Statement relates, any request should be made by Wednesday, August 21, 1996.
The Company is furnishing to each person whose proxy is being solicited a
copy of the 1995 Annual Report to Shareholders and the Company's Quarterly
Report on Form 10-Q for the Quarter ended March 31, 1996.
INCORPORATION BY REFERENCE
Certain other documents previously filed by the Company with the
Commission pursuant to the Exchange Act are hereby incorporated by reference
in the Proxy Statement. The documents are (i) the Annual Report on Form 10-K
for the fiscal year ended December 31, 1995, as amended by Report on Form
10-K/A dated April 25, 1996; and (ii) the Quarterly Report on Form 10-Q for
the quarter ended March 31, 1996.
By Order of the Board of Directors,
WILLIAM STEINBERG
Chairman of the Board
24
<PAGE>
APPENDIX A
- -----------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
COLLECTIVE BANCORP, INC.,
CBAC CORP.
AND
CONTINENTAL BANCORPORATION
Dated as of the 21st day of May, 1996
- -----------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE MERGER
Page
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Section 1.01 Structure of the Merger A-1
Section 1.02 Effect on Outstanding Shares A-1
Section 1.03 Exchange Procedures A-2
Section 1.04 Options A-3
Section 1.05 Secondary Merger A-3
Section 1.06 Modification of Structure A-3
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.01 Representations and Warranties of the Seller A-3
Section 2.02 Representations and Warranties of the Purchaser and
Acquisition Corp. A-13
ARTICLE III
CONDUCT PENDING THE MERGER
Section 3.01 Conduct of the Seller's Business Prior to the Effective
Time A-16
Section 3.02 Forbearance by the Seller A-16
Section 3.03 Conduct of the Purchaser's Business Prior to the
Effective Time A-19
ARTICLE IV
COVENANTS
Section 4.01 No Solicitation A-19
Section 4.02 Certain Policies of the Seller; Balance Sheet A-20
Section 4.03 Access and Information A-20
Section 4.04 Certain Filings, Consents and Arrangements A-21
Section 4.05 Additional Agreements A-21
Section 4.06 Publicity A-21
Section 4.07 Notification of Certain Matters A-21
Section 4.08 Indemnification A-22
Section 4.09 Shareholders' Meeting A-23
Section 4.10 Proxy Statement A-23
Section 4.11 Stock Option Agreement A-23
Section 4.12 Dissenters' Rights A-23
Section 4.13 Operating Transition A-23
ARTICLE V
CONDITIONS TO CONSUMMATION
Section 5.01 Conditions to Each Party's Obligations A-24
Section 5.02 Conditions to the Obligations of the Purchaser under
this Agreement A-24
Section 5.03 Conditions to the Obligations of the Seller A-26
i
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ARTICLE VI
TERMINATION
Page
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Section 6.01 Termination A-26
Section 6.02 Effect of Termination A-27
ARTICLE VII
CLOSING, EFFECTIVE DATE AND EFFECTIVE TIME
Section 7.01 Effective Date and Effective Time A-27
ARTICLE VIII
OTHER MATTERS
Section 8.01 Certain Definitions; Interpretation A-28
Section 8.02 Non-Survival of Representations, Warranties,
Covenants and Agreements A-28
Section 8.03 Amendment A-28
Section 8.04 Waiver A-28
Section 8.05 Counterparts A-28
Section 8.06 Governing Law A-28
Section 8.07 Expenses A-28
Section 8.08 Notices A-28
Section 8.09 Entire Agreement; Etc. A-29
Section 8.10 Assignment A-29
Section 8.11 Schedules Not Admissions A-29
List of Exhibits
Exhibit A Plan of Merger
Exhibit B Stock Option Agreement
ii
<PAGE>
This is an AGREEMENT AND PLAN OF MERGER, dated as of the 21st day of May,
1996 (this "Agreement"), by and among COLLECTIVE BANCORP, INC., a Delaware
corporation (the "Purchaser"), CBAC CORP., a Delaware corporation and a
wholly owned subsidiary of the Purchaser (the "Acquisition Corp."), and
CONTINENTAL BANCORPORATION, a New Jersey chartered corporation (the
"Seller").
INTRODUCTORY STATEMENT
The Boards of Directors of the Purchaser, the Acquisition Corp. and the
Seller have approved, and deem it advisable and in the best interests of
their respective companies and their shareholders to consummate the business
combination transaction provided for herein.
The Purchaser, the Acquisition Corp. and the Seller desire to make certain
representations, warranties and agreements in connection with the business
combination transaction provided for herein and to prescribe various
conditions to such transaction.
In consideration of their mutual promises and obligations hereunder, the
parties hereto adopt and make this Agreement and prescribe the terms and
conditions hereof and the manner and basis of carrying it into effect, which
shall be as follows:
ARTICLE I
THE MERGER
Section 1.01 Structure of the Merger. On the Effective Date (as defined in
Section 7.01), Acquisition Corp. shall merge (the "Merger") with and into the
Seller pursuant to a Plan of Merger substantially in the form attached as
Exhibit A and which qualifies as a reorganization under Section 368 of the
Internal Revenue Code of 1986, as amended; the separate existence of
Acquisition Corp. shall cease; Seller shall be the surviving corporation in
the Merger (the "Surviving Corporation") and a wholly owned subsidiary of
Purchaser; and all of the property (real, personal and mixed), rights, powers
and duties and obligations of Acquisition Corp. shall be taken and deemed to
be transferred to and vested in Seller, as the Surviving Corporation in the
Merger, without further act or deed; all in accordance with the applicable
laws of the State of Delaware and, to the extent applicable, the laws of the
State of New Jersey. At the Effective Time (as defined in Section 7.01), the
Certificate of Incorporation and Bylaws of the Seller shall be amended in
their entirety to conform to the Certificate of Incorporation and Bylaws of
Acquisition Corp. in effect immediately prior to the Effective Time and shall
become the Certificate of Incorporation and Bylaws of the Surviving
Corporation. At the Effective Time, the directors and officers of Acquisition
Corp. shall become the directors and officers of the Surviving Corporation.
Section 1.02 Effect on Outstanding Shares.
(a) By virtue of the Merger, automatically and without any action on the
part of the holder thereof, each share of the Seller's common stock, par
value $2.00 per share (the "Seller Common Stock") issued and outstanding at
the Effective Time, other than (i) shares held directly or indirectly by the
Purchaser (other than shares held in a fiduciary capacity or in satisfaction
of a debt previously contracted) (ii) shares held as treasury stock of the
Seller (iii) shares underlying unexercised stock options and (iv) shares as
to which dissenters' rights have been asserted and duly perfected in
accordance with the provisions of the laws of the State of New Jersey, shall
become and be converted into the right to receive $5.00 in cash without
interest (the "Merger Consideration"). As of the Effective Time, each share
of Seller Common Stock held directly or indirectly by the Purchaser (other
than shares held in a fiduciary capacity or in satisfaction of a debt
previously contracted), each share of Seller Common Stock held as treasury
stock of the Seller, other than shares underlying unexercised stock options
and shares as to which dissenters' rights have been asserted and duly
perfected in accordance with the provisions of the laws of the State of New
Jersey, shall be cancelled and retired and cease to exist, and no exchange or
payment shall be made with respect thereto. Each option to purchase Seller
Common Stock (other than options granted to Purchaser pursuant to the
attached Stock Option Agreement identified as Exhibit B) outstanding
immediately prior to the Effective Time, shall be cancelled in exchange for
the right to receive cash payments as set forth in Section 1.04.
A-1
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(b) The shares of common stock of Acquisition Corp. issued and outstanding
immediately prior to the Effective Time shall become shares of the Surviving
Corporation after the Merger and shall thereafter constitute all of the
issued and outstanding shares of the capital stock of the Surviving
Corporation.
Section 1.03 Exchange Procedures.
(a) At and after the Effective Time, each certificate previously
representing shares of Seller Common Stock (the "Certificate") (except as
specifically set forth in Section 1.02) shall represent only the right to
receive the Merger Consideration in cash without interest.
(b) At or before the Effective Time, the Purchaser shall deposit, or shall
cause to be deposited, with Midlantic Bank (or such other bank or trust
company as selected by the Purchaser and reasonably acceptable to the Seller)
as exchange agent (the "Exchange Agent"), for the benefit of the holders of
shares of Seller Common Stock, for exchange in accordance with this Section
1.03, an amount of cash sufficient to pay the aggregate Merger Consideration
to be paid pursuant to Section 1.02.
(c) As soon as practicable after the Effective Time, but no later than 10
calendar days after the Effective Time, the Purchaser shall cause the
Exchange Agent to mail or deliver to each holder of record of a Certificate
or Certificates (other than holders of dissenting shares) the following: (i)
a letter of transmittal specifying that delivery shall be effected, and risk
of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent, which shall be in a customary form; and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration. Upon the proper surrender of a
Certificate or Certificates to the Exchange Agent, together with a properly
completed and duly executed letter of transmittal, the holder of such
Certificate or Certificates shall be entitled to receive in exchange therefor
a check in an amount equal to the product of the Merger Consideration and the
number of shares of Seller Common Stock represented by the Certificate or
Certificates surrendered pursuant to the provisions hereof, and the
Certificate or Certificates so surrendered shall forthwith be cancelled. The
Purchaser shall direct the Exchange Agent to make payment of the Merger
Consideration with respect to the Certificates so surrendered as soon as
practicable and, in any event, within five (5) business days of the receipt
of all required documentation. No interest will be paid or accrued on the
Merger Consideration. In the event of a transfer of ownership of any shares
of Seller Common Stock not registered in the transfer records of the Seller,
a check for the Merger Consideration may be issued to the transferee if the
Certificate representing such Seller Common Stock is presented to the
Exchange Agent, accompanied by documents sufficient, in the reasonable
discretion of the Purchaser and the Exchange Agent, (i) to evidence and
effect such transfer and (ii) to evidence that all applicable stock transfer
taxes have been paid.
(d) From and after the Effective Time, there shall be no transfers on the
stock transfer records of the Seller of any shares of Seller Common Stock
that were outstanding immediately prior to the Effective Time. If after the
Effective Time Certificates are presented to the Purchaser, they shall be
cancelled and exchanged for the Merger Consideration deliverable in respect
thereof pursuant to this Agreement in accordance with the procedures set
forth in this Section 1.03.
(e) Any portion of the aggregate Merger Consideration or the proceeds of
any investments thereof that remains unclaimed by the shareholders of the
Seller for 18 months after the Effective Time shall be repaid by the Exchange
Agent to the Purchaser. Any shareholders of the Seller who have not
theretofore complied with this Section 1.03 shall thereafter look only to the
Purchaser for payment of their Merger Consideration deliverable in respect of
each share of Seller Common Stock such shareholder holds as determined
pursuant to this Agreement without any interest thereon. Notwithstanding the
foregoing, none of the Purchaser, the Surviving Corporation, the Exchange
Agent or any other person shall be liable to any former holder of Seller
Common Stock for any amount delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(f) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Exchange Agent, the posting by such person of a bond in such amount as
the Exchange Agent may reasonably direct as indemnity against any claim that
may be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate the
Merger Consideration deliverable in respect thereof pursuant to this
Agreement.
A-2
<PAGE>
Section 1.04 Options.
(a) At the Effective Time, Seller shall pay to each holder of an option
which has been granted by the Seller to purchase shares of Seller Common
Stock (other than options granted to Purchaser pursuant to the attached Stock
Option Agreement identified as Exhibit B) which is outstanding and
exercisable but unexercised immediately prior to the Effective Time ("Seller
Options"), an amount in cash computed by multiplying (i) any positive
difference obtained by subtracting from (x) the per share amount of the
Merger Consideration and (y) the per share exercise price applicable to such
option by (ii) the number of shares of Seller Common Stock subject to such
option, subject, with respect to each such holder, to the receipt by the
Purchaser of an acknowledgment from such holder that such payment shall
constitute consideration for the termination and cancellation of such option.
The Seller agrees to take or cause to be taken all action necessary so that
each such option outstanding immediately after the Effective Time as a result
of the failure of the holder thereof to deliver the acknowledgment described
in the preceding sentence shall be converted into a right to receive the
amount described in the preceding sentence.
Section 1.05 Secondary Merger. The Surviving Corporation and the Purchaser
shall enter into a plan of merger (which shall be a plan of complete
liquidation and dissolution of the Surviving Corporation for purposes of
Sections 332(a) and 337(a) of the Internal Revenue Code of 1986, as amended
(the "Code") pursuant to which the Surviving Corporation will be merged with
and into the Purchaser immediately after the Effective Time (the "Secondary
Merger"). The documentation relating to the Secondary Merger shall provide
that the directors of the Purchaser as the surviving entity of the Secondary
Merger shall be all of the respective directors of the Purchaser immediately
prior to such merger.
Section 1.06 Modification of Structure. Notwithstanding any provision of
this Agreement to the contrary, Purchaser may elect to modify the structure
of the transactions contemplated hereby so long as (i) there are no material
adverse federal or state income tax consequences to the Seller and its
stockholders or to holders of options to purchase Seller Common Stock as a
result of such modification; (ii) the consideration to be paid to holders of
Seller Common Stock or Seller Options under this Agreement is not thereby
changed in kind or reduced in amount because of such modification; and (iii)
such modification will not be likely to delay materially or jeopardize
receipt of any required regulatory approvals.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.01 Representations and Warranties of the Seller. The Seller
represents and warrants to the Purchaser and Acquisition Corp. that, except
as specifically disclosed in a letter of the Seller delivered to the
Purchaser prior to the execution hereof (and making specific reference to the
Section or Sections of this Agreement for which an exception is taken) (such
letter, as amended from time to time in the manner provided for in Section
4.07 hereof, the "Disclosure Schedule"):
(a) Organization.
(i) The Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of New Jersey. Except for the
Seller Bank, Seller has no direct subsidiaries. The Seller and each of its
Subsidiaries is duly qualified to do business and is in good standing in
New Jersey and in each other jurisdiction in which the nature of the
business conducted or the properties or assets owned or leased by it makes
such qualification necessary and where the failure to be so qualified
would have a Material Adverse Effect. The minute books of the Seller and
each Subsidiary accurately record, in all material respects, all material
corporate actions of its stockholders and Board of Directors (including
Committees thereof). Prior to the execution of this Agreement, Seller has
delivered to Purchaser true and correct copies of the Charter and Bylaws
of Seller and of each Subsidiary. The Seller is a registered bank holding
company under the Bank Holding Company Act. The Seller and each of its
Subsidiaries has the corporate power and authority to carry on its
business as it is now conducted and to own, lease and operate its
properties. The Seller has the corporate power and authority to execute
and deliver this Agreement and the power to consummate the transactions
contemplated hereby.
A-3
<PAGE>
(ii) Seller Bank is a commercial bank, duly organized, validly existing
and in good standing under the laws of the State of New Jersey. Except for
Continental Investment Corporation, Seller Bank has no direct or indirect
subsidiaries. (Seller Bank and Continental Investment Corporation are
sometimes collectively referred to herein as the "Subsidiaries".) The
Subsidiaries each have the corporate power and authority to carry on its
business as it is now conducted and to own, lease and operate its
properties, and is duly qualified to do business and is in good standing
in each jurisdiction in which the nature of the business conducted or the
properties or assets owned or leased by it makes such qualification
necessary and where the failure to be so qualified would have a Material
Adverse Effect.
(iii) The Seller and the Subsidiaries hold all material licenses,
certificates, permits, franchises and rights from all appropriate federal,
state or other public authorities necessary for the conduct of its and
their business. The Seller and the Subsidiaries have each conducted its
business so as to comply in all material respects with all applicable
federal, state and local statutes, ordinances, regulations or rules, and
neither the Seller nor any of the Subsidiaries is presently charged with,
or, to the Seller's knowledge, under governmental investigation with
respect to, any actual or alleged material violations of any statute,
ordinance, regulation or rule; and neither the Seller nor either of the
Subsidiaries is the subject of any pending or, to the Seller's knowledge,
threatened material proceeding by any regulatory authority having
jurisdiction over its business, properties or operations.
(iv) The Disclosure Schedule 2.01(a)(iv) sets forth all of the
Subsidiaries of the Seller and all entities (whether corporations,
partnerships, or similar organizations), including the corresponding
percentage ownership, in which the Seller owns, directly or indirectly,
10% or more of the ownership interests ("Subsidiary") as of the date of
this Agreement and indicates for each Subsidiary, as of such date, its
jurisdiction of organization. Except as set forth in the Disclosure
Schedule 2.01(a)(iv), the Seller owns, either directly or indirectly, all
of the outstanding capital stock of each of its Subsidiaries. Except for
Seller Bank, no Subsidiary of the Seller is an "insured depository
institution" as defined in the Federal Deposit Insurance Act, as amended,
and applicable regulations thereunder. All of the shares of capital stock
of each of the Subsidiaries held by the Seller or by another Subsidiary of
the Seller are fully paid, nonassessable and not subject to any preemptive
rights and, except as set forth in the Disclosure Schedule 2.01(a)(iv),
are owned by the Seller or a Subsidiary of the Seller free and clear of
any claims, liens, encumbrances or restrictions (other than those imposed
by applicable federal and state securities laws) and there are no
agreements or understandings with respect to the voting or disposition of
any such shares so held.
(b) Capital Structure.
(i) The authorized capital stock of the Seller consists of Ten Million
(10,000,000) shares of Seller Common Stock, par value $2.00 per share (the
"Seller Common Stock") and Five Million (5,000,000) shares of preferred
stock (the "Seller Preferred Stock"). As of April 26, 1996: (A) 4,807,561
shares of Seller Common Stock were issued and outstanding, and no shares
of Seller Preferred Stock were issued or outstanding, (B) 486,600 shares
of Seller Common Stock were reserved for issuance pursuant to stock
options, (C) no shares of Seller Preferred Stock were reserved for
issuance and (D) 428,125 shares of Seller Common Stock were reserved for
issuance to retire the Seller's 11% Convertible Subordinated Debentures
(the "Debentures") and (E) 95,153 shares of Seller's Common Stock were
held by the Seller in its treasury. All outstanding shares of Seller
Common Stock are validly issued, fully paid and nonassessable and not
subject to any preemptive rights. The Disclosure Schedule 2.01(b)(i) sets
forth a complete and accurate list of all options to purchase Seller
Common Stock outstanding, including the dates of grant, exercise prices,
dates of vesting, dates of termination and shares subject to option for
each grant and a complete list of the outstanding Debentures.
(ii) As of the date of this Agreement, except for this Agreement and as
set forth in the Disclosure Schedule 2.01(b)(i), neither the Seller nor
any of its Subsidiaries is a party to or is bound by any outstanding
subscriptions, options, warrants, calls, rights, convertible securities,
commitments or agreements of any character obligating the Seller or any of
its Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, any additional shares of capital stock of the Seller or
any of its Subsidiaries or obligat-
A-4
<PAGE>
ing the Seller or any of its Subsidiaries to grant, extend or enter into
any such option, warrant, call, right, convertible security, commitment or
agreement. As of the date hereof, there are no outstanding contractual
obligations of the Seller or any of its Subsidiaries to repurchase, redeem
or otherwise acquire any shares of capital stock of the Seller or any of
its Subsidiaries.
(iii) To the best of Seller's knowledge, except as declared in
Disclosure Schedule 2.01(b)(iii), no person or "group" (as that term is
used in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") is the beneficial owner of 5% or more of the
outstanding shares of Seller Common Stock.
(c) Authority. The Seller has all requisite corporate power and authority
to enter into this Agreement and, subject to approval of this Agreement by
the requisite vote of the shareholders of the Seller and approval of
regulators, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement, and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of the Seller. This Agreement has been duly executed and
delivered by the Seller and, assuming due execution and delivery by each of
the Purchaser and the Acquisition Corp., constitutes a valid and binding
obligation of the Seller, enforceable in accordance with its terms subject to
applicable conservatorship, receivership, bankruptcy, insolvency and similar
laws affecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity (including without limitation
specific performance), whether applied in a court of law or a court of
equity.
(d) Shareholder Approvals. The Board of Directors of the Seller has
directed that this Agreement and the transactions contemplated hereby be
submitted to the Seller's shareholders for approval at a meeting of such
shareholders and, except for adoption of this Agreement by the requisite vote
of the Seller's shareholders, no other corporate proceedings on the part of
theSeller are necessary to approve this Agreement and to consummate the
transactions contemplated hereby. The approval of the majority of the shares
of Seller Common Stock present and voting at a duly called meeting of the
shareholders is required for approval of this Agreement and to consummate the
transactions contemplated hereby. The Board of Directors of the Seller has
received the written opinion of Berwind Financial Group, LP, to the effect
that the Merger Consideration to be received by the shareholders of the
Seller is fair, from a financial point of view, to such shareholders.
(e) No Violations. Subject to approval of this Agreement by the regulatory
agencies referred to in Section 2.01(g)(ii), the execution, delivery and
performance of this Agreement by the Seller do not, and the consummation of
the transactions contemplated hereby by the Seller will not, constitute (i) a
breach or violation of, or a default under, any law, including any
Environmental Law (as defined in Section 2.01(s), rule or regulation or any
judgment, decree, order, governmental permit or license, or agreement,
indenture or instrument of the Seller or any Subsidiary of the Seller or to
which the Seller or any of its Subsidiaries (or any of their respective
properties) is subject, (ii) a breach or violation of, or a default under,
the certificate or articles of incorporation or Bylaws of the Seller or any
Subsidiary of the Seller or (iii) a breach or violation of, or a default
under (or an event which with due notice or lapse of time or both would
constitute a default under), or result in the termination of, accelerate the
performance required by, or result in the creation of any lien, pledge,
security interest, charge or other encumbrance (a "Lien") upon any of the
properties or assets of the Seller or any Subsidiary of the Seller under, any
of the terms, conditions or provisions of any note, bond, indenture, deed of
trust, loan agreement or other agreement, instrument or obligation to which
the Seller or any Subsidiary of the Seller is a party, or to which any of
their respective properties or assets may be bound or affected.
(f) Consents. Except as set forth in Disclosure Schedule 2.01(f) or
referred to herein or in connection, or in compliance, with the provisions of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), the
Bank Holding Company Act, the Securities Act of 1933, as amended (the
"Securities Act"), the Exchange Act, the Home Owners' Loan Act of 1933, as
amended (the "HOLA"), the Bank Merger Act, as amended (the "BMA"), N.J.S.A.
17:9A-344, et seq., (the "NJSA"), the rules and regulations of the Office of
Thrift Supervision (the "OTS"), and the environmental, corporation,
securities or blue sky laws or regulations of the various states, no filing
or registration with, or authorization, consent or approval of, any public
body or authority or any other party is necessary for the consummation by the
Seller of the Merger or the other transactions contemplated by this Merger
Agreement.
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<PAGE>
(g) Reports.
(i) As of their respective dates, neither the Seller's Annual Report on
Form 10-K for the fiscal year ended December 31, 1991, nor any other
document filed subsequent to December 31, 1991, under Section 13(a),
13(c), 14 or 15(d) of the Exchange Act, each in the form (including any
documents specifically incorporated by reference therein) filed with the
Securities and Exchange Commission (collectively, the "Reports"),
contained or will contain any untrue statement of a material fact or
omitted or will omit to state a material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading, provided,
however, that Seller's amendment of any Reports, in and of itself, in
response to SEC comments will not be violative of this section. Each of
the balance sheets of the Seller or its Subsidiaries contained or
specifically incorporated by reference in the Seller's Reports (including
in each case any related notes and schedules) fairly presented the
financial position of the entity or entities to which it relates as of its
date and each of the statements of income and of changes in shareholders'
equity and of cash flows of the Seller or its Subsidiaries, contained or
specifically incorporated by reference in its Reports (including in each
case any related notes and schedules) (collectively the "Financial
Statements"), fairly presented the results of operations, shareholders'
equity and cash flows, as the case may be, of the entity or entities to
which it relates for the periods set forth therein (subject, in the case
of unaudited interim statements, to normal year-end audit adjustments), in
each case in accordance with generally accepted accounting principles
("GAAP") consistently applied during the periods involved, except as may
be noted therein.
(ii) The Seller and each of its Subsidiaries have each filed all
material reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were
required to file since December 31, 1993 with (A) the SEC, (B) the Federal
Deposit Insurance Corporation (the "FDIC"), (C) the Department of Banking
and Insurance of the State of New Jersey (the "Department") or other
banking regulatory authority (collectively, the "Regulatory Agencies") and
(E) the National Association of Securities Dealers, Inc. and any other
self-regulatory organization ("SRO"), and have paid all fees and
assessments due and payable in connection therewith, except for those fees
and assessments that would not be material.
(h) Absence of Certain Changes or Events. From December 31, 1995, to the
date hereof: (i) the Seller and its Subsidiaries have not, except as set
forth in the Disclosure Schedule 2.01(h), incurred any material liability,
other than in the ordinary course of their business consistent with past
practice, and (ii) there has not been any condition, event, change or
occurrence that, individually or in the aggregate, has had, or is reasonably
likely to have, a Material Adverse Effect on the Seller. "Material Adverse
Effect," with respect to a person, means a material adverse effect upon the
business, assets, financial condition or results of operations, in each case,
of the Seller or its Subsidiaries, either individually or taken as a whole,
except for any material adverse effect caused by any change occurring after
the date hereof in any federal or state law rule or regulation or in GAAP,
which change affects state-chartered commercial banks generally and except
that any changes in the aggregate value of the securities or loan portfolios
held by the Seller or Seller Bank or by Purchaser as of the date hereof as a
result of changes in generally prevailing market interest rates shall not be
deemed a Material Adverse Effect.
(i) Business of Seller. Since December 31, 1995, Seller has conducted its
business only in the ordinary course. For purposes of the foregoing, Seller
has not, since December 31, 1995, controlled expenses through (i) elimination
of employee benefits, (ii) deferral of routine maintenance of real property
or leased premises, (iii) elimination of reserves where the liability related
to such reserve has remained, (iv) reduction of capital improvements from
previous levels, (v) failure to depreciate capital assets in accordance with
past practice or to eliminate capital assets which are no longer used in the
business of Seller, (vi) capitalized loan production expenses other than in
accordance with Statement of Financial Accounting Standard No. 91, or (vii)
extraordinary reduction or deferral of ordinary or necessary expenses.
(j) Taxes. All federal, state, local and foreign tax returns, as defined
below, required to be filed by or on behalf of the Seller or any of its
Subsidiaries have been duly and timely filed or requests for extensions have
been timely filed (and any such extension shall have been granted and not
have expired). All taxes, as defined below, shown on such returns, and all
taxes required to be shown on returns for which extensions have been granted,
have been paid in full or adequate provision has been made for any such taxes
on the Seller's balance sheet as of December 31, 1995 (in accordance with
GAAP). Since January 1, 1991, there has been no audit or
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examination of the Seller by the Internal Revenue Service ort an audit or
examination of the Seller by the applicable taxing authority of the State of
New Jersey. As of the date of this Agreement, there is no audit examination,
deficiency, claim or assessment, or refund litigation with respect to any
taxes of the Seller or any of its Subsidiaries that could reasonably be
expected to result in a Material Adverse Effect on the Seller, and no claim
or assessment has been made by any authority in a jurisdiction where the
Seller or any of its Subsidiaries do not file tax returns and the Seller or
any such Subsidiary is subject to taxation. All taxes, interest, additions,
and penalties due with respect to completed and settled examinations or
concluded litigation relating to the Seller or any of its Subsidiaries have
been paid in full or adequate provision has been made for any such taxes on
the Seller's balance sheet as of December 31, 1995 (in accordance with GAAP).
Except as set forth in Disclosure Schedule 2.01(j), the Seller and its
Subsidiaries have complied with the Tax Identification Number reporting
requirements and have not executed an extension or waiver of any statute of
limitations on the assessment or collection of any material tax due that is
currently in effect. Except as set forth in Disclosure Schedule 2.01(j), the
Seller and each of its Subsidiaries have withheld and paid all taxes required
to have been withheld and paid in connection with amounts paid or owing to
any employee, independent contractor, creditor, shareholder or other third
party, and the Seller and each of its Subsidiaries have timely complied with
all applicable information reporting requirements under Part III, Subchapter
A of Chapter 61 of the Code and similar applicable state and local
information reporting requirements, except in each case for such failure to
withhold, pay or comply that would not, individually or in the aggregate,
result in a Material Adverse Effect on the Seller.
"Taxes" shall mean all taxes, charges, fees, levies, penalties or other
assessments imposed by any United States federal, state, local, or foreign
taxing authority, including, but not limited to, income, excise, property,
sales, transfer, franchise, payroll, withholding, social security or other
taxes, including any interest, penalties or additions attributable thereto.
"Tax Return" shall mean any return, report, information return or other
documents (including any related or supporting information) with respect to
Taxes.
(k) Absence of Claims. Except as set forth in Disclosure Schedule 2.01(k),
Seller is not a party to any pending litigation, legal, administrative,
arbitration or other proceeding, claims, actions, investigations or inquiries
or controversy before any court or governmental agency ("Claim"), and Seller
is not aware of any pending Claim against Seller, any of its Subsidiaries, or
to which Seller or any of its Subsidiaries' assets are subject, in either
case which is reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect on the Seller or to materially hinder or delay
consummation of the transactions contemplated hereby, and, to the Seller's
knowledge, no such Claim has been threatened.
(l) Absence of Regulatory Actions. Except as set forth in Disclosure
Schedule 2.01(l), neither the Seller nor any of its Subsidiaries is a party
to any cease and desist order, written agreement or memorandum of
understanding with, or a party to any commitment letter or similar written
undertaking to, or is subject to any order or directive by, or is a recipient
of any extraordinary supervisory letter from, federal or state governmental
authorities charged with the supervision or regulation of depository
institutions or depository institution holding companies or engaged in the
insurance of bank and/or savings and loan deposits ("Regulatory Agency") nor
has it been advised by any Regulatory Agency that it is contemplating issuing
or requesting (or is considering the appropriateness of issuing or
requesting) any such order, directive, written agreement, memorandum of
understanding, extraordinary supervisory letter, commitment letter or similar
written undertaking. In connection with the most recent examinations of the
Seller and/or Seller Bank, Seller and Seller Bank have not been informed or
ordered by any Regulatory Agency, whether by written communication or
otherwise, to amend or change in any material way Seller's or Seller Bank's
Reports, accounting methods, methods of operation, or business practices, or
to classify any loans not previously classified or to charge-off any loans,
or increase Seller Bank's allowance for loan losses, or to take or
discontinue any activity or action.
(m) Agreements.
(i) Except for this Agreement and except as disclosed in Disclosure
Schedule 2.01(m)(i), neither the Seller nor any of its Subsidiaries is a
party to a written or, to the Seller's knowledge, oral (A) consulting
agreement (other than data processing, software programming and licensing
contracts entered into in the ordinary course of business and customary
real estate brokerage commissions in connection with the sale of REO) not
terminable on thirty (30) days' or less notice, and providing for payments
in excess of $5,000 per annum, (B) agreement with any director, executive
officer or other key employee of the Seller or any
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of its Subsidiaries the benefits of which are contingent, or the terms of
which are materially altered, upon the occurrence of a transaction
involving the Seller or any of its Subsidiaries of the nature contemplated
by this Agreement, (C) agreement with respect to any director, executive
officer or key employee of the Seller or any of its Subsidiaries providing
for other than at-will employment, (D) agreement or plan, including any
stock option plan, stock appreciation rights plan, restricted stock plan,
stock purchase plan, or any other non-qualified compensation plan, any of
the benefits of which will be increased, or the vesting of the benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of
which will be calculated on the basis of any of the transactions
contemplated by this Agreement, (E) agreement containing covenants that
limit the ability of the Seller or any of its Subsidiaries to compete in
any line of business or with any person, or that involve any restriction
on the geographic area in which or method by which, the Seller (including
any successor thereof) or any of its Subsidiaries may carry on its
business (other than as may be required by law or any Regulatory Agency),
(F) agreement which by its terms limits the payment of dividends by Seller
or any Subsidiaries, (G) 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 Seller or any of its Subsidiaries is an obligor to any
person, which instrument evidences or relates to indebtedness (other than
deposits, repurchase agreements, bankers acceptances, 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 Effective
Time to Purchaser, or any of Purchaser's subsidiaries; (H) contract (other
than this Agreement) limiting the freedom of Seller or Seller Bank to
engage in any type of banking or bank-related business permissible under
law; (I) contract, plan or arrangement which provides for payments of
benefits payable to any participant therein or party thereto, and which
might render any portion of any such payments or benefits subject to
disallowance of deduction therefor as a result of the application of Code
Section 280G; or (J) agreement for investment banking services or services
related to the sale, merger or acquisition of the Seller or its
Subsidiaries.
(ii) All the contracts, plans, arrangements and instruments listed in
Disclosure Schedule 2.01(m)(i) are in full force and effect on the date
hereof and neither Seller nor, to the knowledge of Seller, any other party
to any such contract, plan, arrangement or instrument, has breached any
provisions of, or is in material default in any respect under any term of,
any such contract, plans, arrangement or instrument. Except as otherwise
described in Disclosure Schedule 2.01(m)(ii), no plan, employment
agreement, termination agreement, or similar agreement or arrangement to
which Seller or any of its Subsidiaries may be liable (i) contains
provisions which permit an employee or independent contractor to terminate
it without cause and continue to accrue benefits thereunder; (ii) provides
for acceleration in the vesting of benefits thereunder upon the occurrence
of a change in ownership or control of Seller or its Subsidiaries; (iii)
provides for benefits which may cause the disallowance of a federal income
tax deduction under the Code Section 280G; or (iv) requires Seller or any
of its Subsidiaries to provide a benefit in the form of Seller Common
Stock or determined by reference to the value of Seller Common Stock.
(iii) Neither the Seller nor any of its Subsidiaries is in default
under or in violation of any provision, and is not aware of any fact or
circumstance that has been or could be alleged to constitute a material
default or violation, of any note, bond, indenture, mortgage, deed of
trust, loan agreement or other agreement to which it is a party or by
which it is bound or to which any of its respective properties or assets
is subject.
(iv) Disclosure Schedule 2.01(m)(iv) contains all contracts relating to
data processing services. Under such disclosed contracts, Seller shall
give no notice of termination unless there has been prior written approval
by the Purchaser.
(n) Labor Matters. Neither the Seller nor any of its Subsidiaries is a
party to, or is bound by, any collective bargaining agreement, contract, or
other agreement or understanding with a labor union or labor organization
with respect to its employees. Neither the Seller nor any of its Subsidiaries
is the subject of any proceeding
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asserting that it has committed an unfair labor practice or seeking to compel
it or any such Subsidiary to bargain with any labor organization as to wages
and conditions of employment, nor is the management of the Seller aware of
any strike, other labor dispute or organizational effort involving the Seller
or any of its Subsidiaries that is pending or threatened.
(o) Employee Benefit Plans. Disclosure Schedule 2.01(o) contains a
complete list of all employee, retiree or director pension, retirement, stock
option, stock purchase, restricted stock, stock ownership, savings, stock
appreciation right, profit sharing, deferred compensation, supplemental
income, supplemental retirement, consulting, bonus, group insurance, key
executive officer insurance, vacation, sick leave, severance and any other
benefit plans, employment contracts (providing termination, change in
control, or severance payments), agreements, arrangements, or policies
including, but not limited to, employee benefit plans, as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), incentive and welfare policies, contracts, plans and arrangements
and all trust agreements related thereto, maintained with respect to any
present or former directors, officers, or other employees of the Seller or
any of its Subsidiaries (hereinafter referred to collectively as the
"Employee Plans"). All of the Employee Plans comply in all material respects
with all applicable requirements of ERISA, the Code and other applicable
laws; neither the Seller nor any of its Subsidiaries has engaged in a
prohibited transaction (as defined in Section 406 of ERISA or Section 4975 of
the Code) with respect to any Employee Plan which is likely to result in any
material penalties or taxes to the Seller or its Subsidiaries under Section
502(i) of ERISA or Section 4975 of the Code. No material liability to the
Pension Benefit Guaranty Corporation has been incurred and, except as
described on Disclosure Schedule 2.01(o), there exists no fact or
circumstance which would cause the Seller to expect to incur any such
liability with respect to any Employee Plan which is subject to Title IV of
ERISA ("Pension Plan"), or with respect to any "single-employer plan" (as
defined in Section 4001(a)(15) of ERISA) currently or formerly maintained by
the Seller or any entity which is considered one employer with the Seller
under Section 4001 of ERISA or Section 414 of the Code (an "ERISA
Affiliate"). Except as described on Disclosure Schedule 2.01(o), no Pension
Plan had an "accumulated funding deficiency" (as defined in Section 302 of
ERISA (whether or not waived) as of the date hereof; the present value of the
"benefit liabilities" (as defined in Section 4001(a)(16) of ERISA) under each
Pension Plan as of the date hereof, calculated on the basis of the actuarial
assumptions used in the most recent actuarial valuation for such Pension Plan
as of the date hereof does not exceed the fair market value of the assets of
such Pension Plan, and no notice of a "reportable event" (as defined in
Section 4043 of ERISA) for which the 30-day reporting requirement has not
been waived has been required to be filed for any Pension Plan within the
12-month period ending on the date hereof. Neither the Seller nor any
Subsidiary of the Seller has provided, or is required to provide, security to
any Pension Plan or to any single-employer plan of an ERISA Affiliate
pursuant to Section 401(a)(29) of the Code. Neither the Seller, its
Subsidiaries, nor any ERISA Affiliate currently contributes or, since
December 31, 1988, has contributed to any multiemployer plan, as defined in
Section 3(37) of ERISA. Each Employee Plan of the Seller or of any of its
Subsidiaries which is an employee "pension benefit plan" (as defined in
Section 3(2) of ERISA) and which is intended to be qualified under Section
401(a) of the Code (a "Qualified Plan") has received a favorable
determination letter from the Internal Revenue Service (the "IRS") that the
pension benefit plan meets the Tax Reform Act of 1986 and all applicable
legislative and regulatory requirements for tax qualification that became
effective at the time that the determination letter was issued and the Seller
and its Subsidiaries are not aware of any circumstances likely to result in
revocation of any such favorable determination letter. Each Qualified Plan
which is an "employee stock ownership plan" (as defined in Section 4975(e)(7)
of the Code) has satisfied all of the applicable requirements of Sections 409
and 4975(e)(7) of the Code and the regulations thereunder in all material
respects and any assets of any such Qualified Plan that are not allocated to
participants' individual accounts are pledged as security for, and subject to
the provisions of Section 4.03(e) of this Agreement may be applied to
satisfy, any securities acquisition indebtedness. There is no pending or, to
the Seller's knowledge, threatened litigation, administrative action or
proceeding relating to any Employee Plan. There has been no announcement or
commitment by the Seller or any Subsidiary of the Seller to create an
additional Employee Plan, or to amend an Employee Plan except for amendments
required by applicable law which materially increase the cost of such
Employee Plan and except for any plans or amendments expressly described
herein or on Disclosure Schedule 2.01(o); and, except as set forth in
Disclosure Schedule 2.01(o), the Seller and its Subsidiaries do not have any
obligations for post-retirement or post-employment benefits under any
Employee Plan (exclusive of any coverage mandated by the Consolidated Omnibus
Reconciliation Act of 1986 ("COBRA") that cannot be amended or terminated
upon no more than sixty (60) days' notice without incurring any liability
thereunder. With respect to each Employee Plan
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to the extent applicable, the Seller has supplied or will promptly supply to
the Purchaser a true and complete copy of (A) the most recent annual report
on the applicable form of the Form 5500 series filed with the IRS with all
the attachments filed, (B) such Employee Plan, including amendments thereto,
(C) each trust agreement and insurance contract relating to such Employee
Plan, including amendments thereto, (D) the most recent summary plan
description for such Employee Plan, including amendments thereto, if the
Employee Plan is subject to Title I of ERISA, (E) the most recent actuarial
report or valuation if such Employee Plan is a Pension Plan and (F) the most
recent determination letter issued by the IRS if such Employee Plan is a
Qualified Plan. To the extent that any individual plan or arrangement
described under this Section 2.01 does not completely meet representations
made herein, such plan and its variance from the representation is set out in
Disclosure Schedule 2.01(o).
(p) Title to Assets. Except for the Real Estate Owned ("REO") and except
as set forth in Disclosure Schedule 2.01(p), the Seller and each of its
Subsidiaries has insurable title (subject only to standard title insurance
policy exceptions as determined by customary practices in the area in which
such properties are located) to its owned real properties, except for liens,
as defined below, or such other defects arising by operation of law or which
would not, individually or in the aggregate, have a Material Adverse Effect
on the Seller. Seller, as lessee, has the right under valid and existing
leases of properties used by Seller in the conduct of its business to occupy
and use all such properties that are leased by it as are now occupied and
used by it. Liens shall mean any claim, encumbrance, or charge on property
for payment of a debt, obligation or duty.
(q) Fees. Except as set forth in Disclosure Schedule 2.01(q) and other
than financial advisory services performed for the Seller by Berwind
Financial Group, LP, the terms of which are set forth in Disclosure Schedule
2.01(q), neither the Seller nor any of its Subsidiaries, nor to Seller's
knowledge any of their respective officers, directors, employees or agents,
has employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions, or finder's fees, and no broker
or finder has acted directly or indirectly for the Seller or any Subsidiary
of the Seller, in connection with this Agreement or the transactions
contemplated hereby.
(r) Environmental Matters.
(i) Except as set forth in Disclosure Schedule 2.01(r) with respect to
the Seller and each of its Subsidiaries:
(A) Each of the Seller and its Subsidiaries, and to the knowledge
of the Seller, the Properties (as defined below) are, and have been, in
substantial compliance with all applicable Environmental Laws (as
defined below);
(B) There is no judicial or administrative proceeding pending or,
to the knowledge of the Seller, threatened against it or any of its
Subsidiaries (x) for alleged noncompliance (including by any
predecessor) with, or liability under, any applicable Environmental Law
or (y) relating to the Release (defined below) into the environment of
any Hazardous Material (as defined below), whether or not occurring at
or on a site owned, leased or operated by it or any of its
Subsidiaries;
(C) There is no judicial or administrative proceeding pending or to
the knowledge of the Seller threatened against the Seller or any of its
Subsidiaries in respect of any Property (x) relating to alleged
noncompliance (including by any predecessor) with, or liability under,
any Environmental Law or (y) relating to the Release into the
environment of any Hazardous Material whether or not occurring at or on
such Property;
(D) To the knowledge of Seller, the properties currently or,
formerly owned or operated by the Seller or any of its Subsidiaries
(including, without limitation, soil, groundwater or surface water on
or under such properties, and buildings thereon or, to the knowledge of
the Seller, (without having done any independent investigation)
adjacent to such properties) do not contain any Hazardous Material
other than as permitted under applicable Environmental Law;
(E) None of the Seller or any of its Subsidiaries has received any
notice, demand letter, executive or administrative order, directive or
request for information from any federal, state or local governmental
entity or any third party relating to a Release or a threatened Release
of Hazardous Materials or Remediation (defined below) thereof or
indicating that it may be in violation of, or liable under, any
applicable Environment Law;
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(F) To the knowledge of the Seller, during the period of its or any
of its Subsidiaries' ownership or operation of any of their respective
current properties, or its or any of its Subsidiaries' holding of a
security interest in a Property, there has been no Release of Hazardous
Material in, on, under, or to the knowledge of the Seller, affecting or
migrating to such properties. To the knowledge of the Seller prior to
the period of (A) the Seller's or any of its Subsidiaries' ownership or
operation of any of their respective current properties, or (B) the
Seller's or any of its Subsidiaries' holding of a security interest in
a Property, there was no Release of Hazardous Material in, on, under,
affecting or migrating to any such property; and
(G) None of the Seller or its Subsidiaries participates in the
management of a Loan Property within the meaning of 40 C.F.R.
ss.300.1100(c) (1993).
(ii) The following definitions apply for purposes of this Section
2.01(r): (a) "Property" means any property owned by the Seller (or any of
its Subsidiaries) or any property in which the Seller (or any of its
Subsidiaries) has an interest or with respect to which it holds a security
interest, including real estate owned ("REO") by the Seller, the branches
or offices of the Seller or its Subsidiaries, REO owned by any Subsidiary
and, where required by the context, includes the owner or operator of such
property, but only with respect to such property; (b) "Environmental Law"
means (i) any federal, state or local law, statute, ordinance, rule,
regulation, code, license, permit, authorization, approval, consent,
order, directive, executive or administrative order, judgment, decree or
injunction, (A) relating to the protection, preservation or restoration of
the environment (which includes, without limitation, air, water vapor,
surface water, groundwater, drinking water supply, structures, soil,
surface land, subsurface land, plant and animal life or any other natural
resource), or to employee health or safety, or (B) the exposure to, or the
use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of,
Hazardous Materials, in each case as amended and as now in effect,
including all judicial or legally binding administrative interpretations
of Environmental Laws or applicable regulations. The term "Environmental
Law" includes, without limitation, (i) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Superfund Amendments
and Authorization Act, the Federal Water Pollution Control Act of 1972,
the Clean Air Act, the Clean Water Act, the Resource Conservation and
Recovery Act of 1976 (including, but not limited to, the Hazardous and
Solid Waste Amendments thereto and Subtitle I relating to underground
storage tanks), the Solid Waste Disposal Act, the Toxic Substances Control
Act, the Federal Insecticide, Fungicide and Rodenticide Act, the
Occupational Safety and Health Act of 1970, the Hazardous Substances
Transportation Act, the Emergency Planning and Community Right-To-Know
Act, the Safe Drinking Water Act, the National Environmental Policy Act,
or any so-called "Superfund" or "Superlien" law, each as amended and as
now in effect, and (ii) any present federal, state and local laws,
statutes, ordinances, rules or regulations conditioning transfer of
property upon a negative declaration or other approval of a governmental
authority of the environmental condition of the property or requiring
notification or disclosure of Releases of Hazardous Substances or other
environmental condition of the Loan Property to any governmental authority
or other person or entity, in connection with transfer of title to or
interest in property; (c) "Hazardous Material" means any substance
(whether solid, liquid or gas) which is listed, defined, designated or
classified as hazardous, toxic or radioactive or otherwise regulated,
under any Environmental Law, whether by type or by quantity, including any
substance containing any such substance as a component. Hazardous Material
includes, without limitation, any toxic waste, pollutant, contaminant,
hazardous substance, toxic substance, hazardous waste, special waste,
industrial substance, extremely hazardous wastes, or words of similar
meanings or regulatory effect under any applicable Environmental Laws,
including, but not limited to, oil or petroleum or any fraction thereof,
radon, radioactive material, asbestos, asbestos-containing material, urea
formaldehyde foam insulation, lead and polychlorinated biphenyl; (d)
"Release of any Hazardous Material" means any release, deposit, discharge,
emission, leaking, spilling, seeping, migrating, injecting, pumping,
pouring, emptying, dumping or disposing of Hazardous Materials; and (e)
"Remediation" means but is not limited to, any response, remedial,
removal, or corrective action, any activity to cleanup, detoxify,
decontaminate, contain or otherwise remediate any Hazardous Material, any
actions to prevent, cure or mitigate any Release of Hazardous Materials,
any inspection, investigation, study, monitoring, assessment, audit,
sampling and testing, laboratory or other analysis, or evaluation in each
case relating to a Release or threatened Release of any Hazardous
Materials.
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(s) Allowance for Loan Losses. In the Seller's reasonable judgment, the
allowance for loan losses reflected in the Seller's audited statement of
condition at December 31, 1995, was, and the allowance for loan losses shown
on the balance sheets in its Reports for periods ending after December 31,
1995, have been and will be, adequate in all material respects, as of the
dates thereof, under generally accepted accounting principles applicable to
commercial banks and no Regulatory Agency has required or requested Seller to
increase the allowance for loan losses for such periods. The Seller has
disclosed to the Purchaser in writing prior to the date hereof the amounts of
all loans, leases, advances, credit enhancements, other extensions of credit,
commitments and interest-bearing assets of the Seller and its Subsidiaries
that have been classified as of December 31, 1995, as "Other Loans Specially
Mentioned," "Special Mention," "Substandard," "Doubtful," "Loss," or words of
similar import. From and after the date hereof, the Seller promptly will
provide the Purchaser with a copy of each quarterly classified asset report
it provides to its Board of Directors. The REO included in any non-performing
assets of the Seller or any of its Subsidiaries is carried net of reserves at
the lower of cost or fair value. Except as set forth in Disclosure Schedule
2.01(t), the Seller has received and maintains in its records with respect to
classified assets and REO with book values (net of reserves) in excess of
$50,000 current independent appraisals or current internal appraisals, in
either case performed and prepared by a certified appraiser; provided,
however, that "current" shall mean within the past 12 months.
(t) Material Interests of Certain Persons. Except as set forth in
Disclosure Schedule 2.01(t), to Seller's knowledge, no officer or director of
the Seller, or any associate (as such term is defined in Rule 14a-1(a) under
the Exchange Act) of any such officer or director, has any interest in any
material contract or property (real or personal), tangible or intangible,
used in or pertaining to the business of the Seller or any of its
Subsidiaries that would be required to be disclosed under the Commission's
Regulation S-K. No transaction listed in Disclosure Schedule 2.01(t), is or
has been in violation of any applicable rules or regulations of the FDIC, the
Department or of any other bank regulatory authority. Each of the
transactions set forth in Disclosure Schedule 2.01(t) has been disclosed in
Seller's annual proxy statement in accordance with the regulations of the
SEC.
(u) Insurance. The Seller and its Subsidiaries are presently insured, and
since December 31, 1993 have been insured, for reasonable amounts with
financially sound and reputable insurance companies, against such risks as
companies engaged in a similar business located in the State of New Jersey
would, in accordance with good business practice, customarily be insured.
Each policy of insurance maintained by Seller as of the date hereof is set
forth in Disclosure Schedule 2.01(u). Seller has not 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 increased.
(v) Investment Securities. Except for ownership of subsidiary shares and
except as set forth in Disclosure Schedule 2.01(a)(iv), the Seller does not
nor do any of its Subsidiaries own or hold any equity securities or any
security of or interest in any mutual fund or other similar investment
vehicle which invests in equity securities. None of the investments reflected
in the consolidated balance sheet of the Seller as of December 31, 1995, and
none of such investments with face value of in excess of $100,000 made by it
or any of its Subsidiaries since December 31, 1995, is subject to any
restriction (contractual or statutory), other than applicable securities
laws, that would materially impair the ability of the entity holding such
investment freely to dispose of such investment at any time, except to the
extent any such investments are pledged in the ordinary course of business
(including in connection with hedging arrangements or programs or reverse
repurchase arrangements) consistent with prudent banking practice to secure
obligations of the Seller or any of its Subsidiaries.
(w) Registration Obligations. Except with respect to the Debentures,
neither the Seller nor any of its Subsidiaries is under any obligation,
contingent or otherwise, to register any of its securities under the
Securities Act.
(x) Books and Records. The books and records of the Seller and its
Subsidiaries have been, and are being, maintained in accordance with
applicable legal and accounting requirements and reflect in all material
respects the substance of material events and transactions that should be
included therein.
(y) Corporate Documents. The Seller has delivered to the Purchaser true
and complete copies of its Certificate of Incorporation and bylaws, as
amended to date, which are currently in full force and effect, and the
certificate of incorporation and bylaws of each of its Subsidiaries.
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(z) Community Reinvestment Act Compliance. Seller and Seller Bank are in
substantial compliance with the applicable provisions of the Community
Reinvestment Act of 1977 and the regulations promulgated thereunder, and
received a CRA rating of at least satisfactory as of its last examination. As
of the date of this Agreement, Seller has not been advised of the existence
of any fact or circumstance or set of facts or circumstances which, if true,
would cause Seller to fail to be in substantial compliance with such
provisions.
Section 2.02 Representations and Warranties of the Purchaser and
Acquisition Corp. The Purchaser and Acquisition Corp. represent and warrant
to the Seller that:
(a) Corporate Organization and Qualification.
(i) Purchaser. The Purchaser is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of
Delaware and is a savings and loan holding company duly registered under
HOLA.
(ii) Acquisition Corp. Acquisition Corp. will at the Effective Time be
a corporation duly incorporated, validly existing and in good standing
under the laws of the State of Delaware. Acquisition Corp. will not, prior
to the Effective Time, engage in any business other than the transactions
contemplated by this Agreement or have any obligations or liabilities
other than its obligations hereunder.
(b) Capital Structure. The authorized capital stock of the Purchaser
consists of 37,000,000 shares of common stock, par value $.01 per share
("Purchaser Common Stock"), and 2,500,000 shares of preferred stock, par
value $.01 per share (the "Purchaser Preferred Stock"). As of June 30, 1995,
20,356,768 shares of Purchaser Common Stock and no shares of Purchaser
Preferred Stock were outstanding. At the Effective Time, all the issued and
outstanding capital stock of Acquisition Corp. will be owned by the
Purchaser. All outstanding shares of capital stock of the Purchaser is, and
at the Effective Time will be, and all outstanding shares of capital stock of
Acquisition Corp. at the Effective Time will be, validly issued, fully paid
and nonassessable and not subject to any preemptive rights.
(c) Authority. Each of the Purchaser and the Acquisition Corp. has all
requisite corporate power and authority to enter into this Agreement, subject
to approval of regulators, and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement, and the consummation of
the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Purchaser and the Acquisition
Corp. This Agreement has been duly executed and delivered by the Purchaser
and the Acquisition Corp., and assuming due execution and delivery by the
Seller, constitutes a valid and binding obligation of the Purchaser and the
Acquisition Corp., enforceable in accordance with its terms subject to
applicable conservatorship, receivership, bankruptcy, insolvency and similar
laws affecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity (including without limitation
specific performance), whether applied in a court of law or a court of
equity.
(d) No Violations. The execution, delivery and performance of this
Agreement by the Purchaser or the Acquisition Corp. do not, and the
consummation of the transactions contemplated hereby will not, constitute (i)
a breach or violation of, or a default under, any law, rule or regulation or
any judgment, decree, order, governmental permit or license, or agreement,
indenture or instrument of the Purchaser or the Acquisition Corp. or to which
the Purchaser (or any of their respective properties) is subject, (ii) a
breach or violation of, or a default under, the certificate of incorporation,
charter or bylaws of the Purchaser, the Acquisition Corp. or any Subsidiary
of the foregoing or (iii) a breach or violation of, or a default under (or an
event which with due notice or lapse of time or both would constitute a
default under), or result in the termination of, accelerate the performance
required by, or result in the creation of any lien, pledge, security
interest, charge or other encumbrance upon any of the properties or assets of
the Purchaser or the Acquisition Corp. under any of the terms, conditions or
provisions of any note, bond, indenture, deed of trust, loan agreement or
other agreement, instrument or obligation to which the Purchaser or the
Acquisition Corp. is a party, or to which any of their respective properties
or assets may be bound or affected.
(e) Consents. Except as referred to herein or in connection, or in
compliance, with the provisions of the Exchange Act, the BHCA, the HOLA, the
BMA, the NJSA, the rules and regulations of the OTS, and the envi-
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ronmental, corporation, securities or blue sky laws or regulations of the
various states, no filing or registration with, or authorization, consent or
approval of, any public body or authority is necessary for the consummation
by the Purchaser, or the Acquisition Corp. of the Merger or the other
transactions contemplated by this Agreement.
(f) Access to Funds. The Purchaser and the Acquisition Corp. on the date
hereof have, and at the Effective Time will have, all funds necessary to
consummate the Merger and fulfill its obligations under the terms of this
Agreement, including without limitation, its obligation to pay the aggregate
Merger Consideration and to consummate in a timely manner the transactions
contemplated by this Agreement.
(g) Absence of Claims. No litigation, proceeding or controversy before any
court or governmental agency is pending, and there is no pending claim,
action or proceeding against the Purchaser, the Acquisition Corp. or any of
their subsidiaries, which is reasonably likely, individually or in the
aggregate, to materially hinder or delay consummation of the transactions
contemplated hereby, and, to the best of the Purchaser's knowledge, no such
litigation, proceeding, controversy, claim or action has been threatened.
(h) Absence of Regulatory Actions. Neither the Purchaser nor any of its
Subsidiaries is a party to any cease and desist order, written agreement or
memorandum of understanding with, or a party to any commitment letter or
similar written undertaking to, or is subject to any order or directive by,
or is a recipient of any extraordinary supervisory letter from any Regulatory
Agency, nor has it been advised by any Regulatory Agency that it is
contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such order, directive, written agreement,
memorandum of understanding, extraordinary supervisory letter, commitment
letter or similar written undertaking which such directive, order, agreement
or understanding would materially hinder or delay consummation of the
transactions contemplated hereby. Purchaser shall make available to Seller,
for review on the premises of the Purchaser, all reports of any Regulatory
Agency since June 30, 1993 and any responses thereto.
(i) Corporate Documents. The Purchaser has delivered to the Seller true
and complete copies of the Purchaser's certificate of incorporation, charter
and bylaws as amended to date and currently in full force and effect and,
prior to the Effective Time, will have delivered to the Seller true and
complete copies of the certificate of incorporation, charter and bylaws of
Acquisition Corp.
(j) Financial Statements. Purchaser has previously delivered, or will
deliver, to Seller the Purchaser's audited Financial Statements for the year
ended June 30, 1995, and the Purchaser's unaudited Financial Statements for
the quarter ended March 31, 1995. Once available, Purchaser shall deliver
audited financial statements for the year ended June 30, 1996. The Financial
Statements of Purchaser have been prepared in conformity in all material
respects with GAAP applied on a consistent basis (except for changes, if any,
required by GAAP and disclosed therein) throughout the periods covered by
such statements, and fairly present in all materials respects the
consolidated financial condition, results of operations, stockholders'
equity, and cash flows of Purchaser as of and for the periods ending on the
dates thereof, except for Purchaser's interim financial statements which are
subject to normal year-end adjustments.
(k) Absence of Knowledge. As of the date hereof, neither the Purchaser nor
the Acquisition Corp. knows of any reason why it would be unable to obtain
all of the necessary approvals required in order to consummate the
transactions contemplated by this Agreement. As of the date of this
Agreement, the Purchaser and Acquisition Corp. believe that, in light of its
financial condition, it shall be able to obtain all such approvals, without
the imposition of any burdensome term or condition.
(l) Community Reinvestment Act Compliance. The Purchaser's subsidiary bank
is in substantial compliance with the applicable provisions of the Community
Reinvestment Act of 1977 and the regulations promulgated thereunder, and
received a CRA rating of at least satisfactory as of its last examination. As
of the date of this Agreement, the Purchaser's subsidiary bank has not been
advised of the existence of any fact or circumstance or set of facts or
circumstances which, if true, would cause the Purchaser's subsidiary bank to
fail to be in substantial compliance with such provisions.
(m) OTS Presumptive Disqualifiers. Neither Purchaser, the Acquisition
Corp., nor any Affiliate of Purchaser or the Acquisition Corp., including any
management official thereof, has engaged in any activity that would give rise
to a presumptive disqualifier under 12 C.F.R. Section 574.7(g).
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(n) Permits and Licenses. To the best of Purchaser's knowledge, the
Purchaser has all permits, licenses, certificates of authority, orders and
approvals and have made all filings, applications and registrations with
applicable governmental and regulatory bodies that are required to permit
them to carry on their respective businesses as they are presently being
conducted and the absence of which could have a material adverse effect on
the ability of the Purchaser to consummate the transactions contemplated
hereby.
(o) Reports.
(i) As of their respective dates, neither the Purchaser's 10-K for the
fiscal year ended June 30, 1995, nor any other Report filed subsequent
thereto, each in the form (including any documents specifically
incorporated by reference therein) filed with the SEC or the OTS,
contained or will contain any untrue statement of a material fact or
omitted or will omit to state a material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading. Each of the
balance sheets of the Purchaser or its Subsidiaries contained or
specifically incorporated by reference in the Purchaser's Reports
(including in each case any related notes and schedules) fairly presented
the financial position of the entity or entities to which its relates as
of its date and each of the Financial Statements fairly presented the
results of operations, shareholders' equity and cash flows, as the case
may be, of the entity or entities to which it relates for the periods set
forth therein (subject, in the case of unaudited interim statement, to
normal year-end audit adjustments), in each case in accordance with GAAP
consistently applied during the periods involved, except as may be noted
therein.
(ii) The Purchaser has filed all reports, registrations and statements,
together with any amendments required to be made with respect thereto,
that they were required to file since June 30, 1995, with the Regulatory
Agencies, the National Association of Securities Dealers, Inc. and any
other SRO, and have paid all fees and assessments due and payable in
connection therewith, except for those fees and assessments that would not
be material.
(p) Purchaser's Information. The information relating to Purchaser to be
furnished to Seller for inclusion in the proxy statement to be used to
solicit shareholder approval of this Agreement and related merger as of the
date of such proxy statement and up to the date of the shareholder meeting
shall not contain any untrue statement of material fact or omit to state a
material fact necessary to make the statement therein not misleading.
(q) Absence of Certain Changes or Events. From June 30, 1995, to the date
hereof: (i) Purchaser has not, except as set forth in Disclosure Schedule
2.02(q), incurred any material liability, other than in the ordinary course
of their business consistent with past practice, and (ii) there has not been
any condition, event change or occurrence that individually, or in the
aggregate, had, or is reasonably like to have, a Material Adverse Effect on
the Purchaser.
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ARTICLE III
CONDUCT PENDING THE MERGER
Section 3.01 Conduct of the Seller's Business Prior to the Effective Time.
Except with the written consent of Purchaser, which consent shall not be
unreasonably withheld and which will be provided within 3 calendar days from
the date of request, from and after the execution and delivery of this
Agreement and until the Effective Time, the Seller and its Subsidiaries will:
(a) conduct its and their business, maintain its and their properties and
operate only in the ordinary course of business consistent with past
practices and maintain Seller's Financial Statements and Reports in
accordance with GAAP and maintain Seller Bank's Regulatory Reports in
accordance with Regulatory Accounting Principles, if applicable;
(b) conduct its and their business and operate only in accordance with
sound banking practices, including charging off all loans required to be
charged off by bank regulators and regulations, statutes and sound banking
practices as determined by the Boards of Directors of the Seller and the
Seller Bank;
(c) maintain an allowance for loan losses deemed by management of the
Seller to be adequate based on past loan loss experience and evaluation of
potential losses in current portfolios;
(d) remain in good standing with all applicable bank regulatory
authorities and preserve each of its and their existing banking locations;
(e) use their commercially reasonable efforts to maintain and preserve
intact its business organization, properties, leases and advantageous
business relationships and maintain good relationships with employees,
goodwill and business relationships with customers and others;
(f) maintain in full force and effect all of the insurance policies and
bonds covering the directors, officers, employees, properties, businesses and
Employee Plans of the Seller and its Subsidiaries;
(g) consult with the Purchaser prior to acquiring any interest in real
property, except in the ordinary course of business
(h) not knowingly take any action which would materially adversely affect
or delay the ability of the Seller, Seller Bank, Purchaser or the Acquisition
Corp. to obtain any necessary approvals, consents or waivers of any
governmental authority or any other entity required for the transactions
contemplated hereby; and
(i) take such actions in the ordinary course of business consistent with
past practices to protect the Seller Bank's deposit base and prevent any
excessive withdrawals of deposits, provided, however, Seller Bank shall not
pay any interest on deposits which would exceed the maximum amount paid on
like accounts with comparable institutions in the Seller Bank's marketplace.
(j) provide to the Purchaser monthly trial balances on deposits and loans.
Section 3.02 Forbearance by the Seller. Without limiting the covenants set
forth in Section 3.01 hereof, except as otherwise specifically provided in
this Agreement and except to the extent required by law or regulation or by
regulatory authorities, and except in each case as specifically permitted by
other subsections of this Section 3.02 or any Schedules attached hereto, from
and after the execution and delivery of this Agreement and until the
Effective Time, the Seller and its Subsidiaries will not, without the prior
written consent of the Purchaser and Acquisition Corp. which written consent
will not be unreasonably withheld and which will be provided within 3
calendar days from the date of request:
(a) amend its or their Certificate of Incorporation, Charter, or Bylaws or
other corporate governance documents;
(b) except for the issuance of up to a maximum of 486,600 shares of Seller
Common Stock upon exercise of Seller Options, and 428,125 shares of Seller's
Common Stock to retire Seller's Debentures, issue or sell any
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shares of its or their capital stock, issue or grant any stock options,
warrants, rights, calls or commitments of any character calling for or
permitting the issuance or sale of its or their capital stock (or securities
convertible into or exchangeable, with or without additional consideration,
for shares of such capital stock or amend any of the terms of the outstanding
stock options);
(c) increase or reduce the number of shares of its or their capital stock
by split-up, reverse split, reclassification, distribution of stock
dividends, change of par or stated value or otherwise modify, change or amend
the voting rights or preferences attributable to any such capital stock,
except that the reduction of outstanding shares of capital stock attributable
to a stockholder perfecting dissenters' rights shall not be violative of this
section;
(Paragraph (d) intentionally omitted.)
(e) (i) except as set forth in Disclosure Schedule 3.02(e), adopt, amend
or otherwise modify any of Seller's Employee Plans, any bonus, pension,
profit sharing, retirement or other compensation plan qualified or non-
qualified; (ii) except as set forth in Disclosure Schedule 3.02(e), enter
into or amend any contract of employment with any officer which is not
terminable at will without cost or other liability; (iii) except as set forth
in Disclosure Schedule 3.02(e), make or grant any general or individual wage
or salary increase or increase in any manner the compensation or fringe
benefits of any of its employees, officers or directors; (iv) become a party
to or commit itself to fund or otherwise establish any trust or account
related to any Employee Plan with or for the benefit of any employee, officer
or director; (v) hire any new employee, except that Seller may hire
individuals of comparable skills and qualifications and at comparable levels
of compensation to fill existing vacancies identified in Disclosure Schedule
3.02(e) and replace any employees who terminate their employment with Seller
after the date of this Agreement; (vi) pay any bonus under any bonus or
compensation plan (except as set forth in Disclosure Schedule 3.02(e); or
(vii) except as set forth in Disclosure Schedule 3.02(e), make any
discretionary contribution to any Employee Plan;
(f) incur any obligations, liabilities or expenses or make any charitable
contributions, except in the ordinary course of business consistent with past
practice;
(g) merge or consolidate Seller with any other corporation; sell, transfer
or lease any of its or their assets or property except in the ordinary course
of business, or close any banking office; 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 Seller and any
other person; enter into a purchase and assumption transaction with respect
to deposits and liabilities; permit the revocation or surrender by Seller of
its certificate of authority to do business or its certificate of authority
to maintain, or file an application for the relocation of any existing branch
officer, or file an application for a certificate of authority to establish a
new branch office;
(h) waive, release, transfer or grant any rights, or modify or change in
any material respect, any material leases, licenses or agreements, other than
in the ordinary course of business;
(i) subject any asset or property of Seller to a lien, mortgage, pledge,
security interest or other encumbrance (other than in connection with
deposits, repurchase agreements, bankers acceptances, and accounts
established in the ordinary course of business, transactions in "federal
funds" and any lien, pledge, security interest or other encumbrance incurred
in the ordinary course of business consistent with past practice which does
not have or could not reasonably be expected to have a Material Adverse
Effect on Seller); modify in any material respect the manner in which Seller
has heretofore conducted its business or enter into any new line of business;
(j) make any loan or commitment secured by 1-4-family residential
properties to any borrower or group of affiliated borrowers except in the
ordinary course of business consistent with past practices and policies;
(k) except as set forth in Disclosure Schedule 3.02(k), compromise, extend
or restructure any real estate loan, construction loan or commercial loan
with an unpaid principal balance except in the ordinary course of business
consistent with past practices and policies;
(l) offer, issue any commitment for, or approve any first lien variable
rate residential mortgage loans, or home equity line of credit loans other
than on terms and conditions, exclusive of interest rates substantially
similar to those for such loans then currently offered by Seller;
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(m) make or commit to make any commercial business loan in excess of $
250,000 (including, without limitation, lines of credit and letters of
credit) or any commercial real estate or construction loan (including,
without limitation, lines of credit and letters of credit) secured by any
non-1-4 family residential properties and except in the ordinary course of
business consistent with past practices and policies;
(n) purchase or commit to purchase any bulk loan servicing portfolio;
(o) make any fixed rate loan with a term exceeding 20 years and which
cannot be sold in the secondary market;
(p) other than with respect to loan transactions entered into in the
ordinary course of business consistent with past practices and policies or
other than with respect to loans which are readily saleable in the secondary
market without recourse to the Federal Home Loan Mortgage Corporate or
Federal National Mortgage Association, make or enter into any material
transaction, contract or agreement or incur any other material commitment;
(q) incur any indebtedness for borrowed money (or guarantee any
indebtedness for borrowed money), except for deposit liabilities and except
for indebtedness incurred in the ordinary course of business the repayment
term of which does not exceed 90 days;
(r) cancel or compromise any debt or claim, which has not previously been
charged off, other than in the ordinary course of business and in an
aggregate amount which would not have a Materially Adverse Effect on Seller;
(s) enter into any transaction other than in the ordinary course of
business;
(t) invite or initiate discussions or negotiations for the acquisition or
merger of the Seller or any Subsidiary by or with any corporation or other
entity other than the Purchaser or its affiliates;
(u) take any action which constitutes a breach or default of its
obligations under this Agreement, or would result in any of its
representations or warranties set forth in this Agreement becoming untrue, or
which is reasonably likely to delay or jeopardize the receipt of any of the
regulatory approvals required hereby;
(v) change its method of accounting as in effect as of December 31, 1995,
except as required by changes in GAAP or Regulatory Agencies;
(w) engage in or enter into any transactions with respect to Seller's
portfolio of securities or make any investment in any security other than
U.S. Treasury obligations and obligations of GNMA, FNMA and FHLMC with a
maturity of one year or less or investments in any security guaranteed by the
Small Business Administration with a face amount in excess of $250,000,
except that Seller may not under any circumstances engage in or enter into
any structured transactions, derivative securities, arbitrage or hedging
activity;
(x) settle any claim, action or proceeding involving any liability of the
Seller or Seller Bank for money, damages or other payment in excess of
$50,000 or material restrictions upon the operations of the Seller or the
Seller Bank;
(aa) sell or otherwise dispose of or encumber any shares of capital stock
of any Seller Subsidiary;
(bb) fail to keep in full force and effect its insurance and bonds as now
carried;
(cc) change its methodology or monthly accrual for the allowance for loan
losses;
(dd) fail to notify Purchaser promptly of its receipt of any letter,
notice or other communication, whether written or oral, from any Regulatory
Authority advising that it is contemplating issuing, requiring, or requesting
any agreement, memoranda, understanding or similar undertaking, or order,
directive, or extraordinary supervisory letter;
(ee) fail to remain in compliance with any capital requirement of any
Regulatory Authority to which it is subject;
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(ff) fail to promptly notify Purchaser of (A) the commencement or, to the
knowledge of Seller, threat of any audit, action, or proceeding involving any
material amount of Taxes of Seller; or (B) the receipt by Seller of any
deficiency or audit notices or reports in respect of any material
deficiencies asserted by any Federal, state, local, or other Tax authority;
(gg) agree to the extension of any statute of limitations for making any
assessments with respect to Taxes;
(hh) fail to maintain and keep its properties in as good repair and
condition as at present, except for ordinary wear and tear;
(ii) except in the ordinary course of business and consistent with
applicable laws and regulations, make any loan or loan commitment to any of
its officers, directors or 5% or more stockholders (or any person or entity
controlled by or affiliated with such officer, director or 5% or more
stockholder); or
(jj) agree or make any commitment to take any action to do any of the
foregoing.
Section 3.03 Conduct of the Purchaser's Business Prior to the Effective
Time. Except as expressly provided in this Agreement, during the period from
the date of this Agreement to the Effective Time, the Purchaser shall not (i)
take any action that would cause the representations in Section 2.02 to fail
to be true and accurate or that would materially affect the ability of the
Purchaser and the Bank to perform its covenants and agreements under this
Agreement or to consummate the transactions contemplated hereby or (ii) take
any action, which would materially adversely affect or delay the ability of
the Seller or the Purchaser to obtain any necessary approvals, consents or
waivers of any governmental authority required for the transactions
contemplated hereby. Except as expressly provided in this Agreement,
Acquisition Corp. shall not conduct any business prior to the Effective Time.
ARTICLE IV
COVENANTS
Section 4.01 No Solicitation. From and after the date hereof until the
termination of this Agreement, neither the Seller or Seller Bank, nor any of
their respective officers, directors, employees, representatives, agents or
affiliates (including, without limitation, any investment banker, attorney or
accountant retained by the Seller or any of its subsidiaries), will, directly
or indirectly, initiate, solicit or knowingly encourage (including by way of
furnishing non-public information or assistance), or facilitate knowingly,
any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Acquisition Proposal (as defined
below), or enter into or maintain or continue discussions or negotiate with
any person or entity in furtherance of such inquiries or to obtain an
Acquisition Proposal or agree to or endorse any Acquisition Proposal, or
authorize or permit any of its officers, directors or employees or any of its
subsidiaries or any investment banker, financial advisor, attorney,
accountant or other representative retained by any of its subsidiaries to
take any such action, and the Seller shall notify Purchaser orally (within
one business day) and in writing (as promptly as practicable) of all of the
relevant details relating to all inquiries and proposals which it or any of
its subsidiaries or any such officer, director, employee, investment banker,
financial advisor, attorney, accountant or other representative may receive
relating to any of such matters and if such inquiry or proposal is in
writing, the Seller shall deliver to Purchaser a copy of such inquiry or
proposal promptly; provided, however, that nothing contained in this Section
4.01 shall prohibit the Board of Directors of the Seller from (i) furnishing
information to, or entering into discussions or negotiations with any person
or entity that makes an unsolicited written, bona fide proposal, to acquire
the Seller pursuant to a merger, consolidation, share exchange, business
combination, tender or exchange offer or other similar transaction, if, and
only to the extent that, (A) the Board of Directors of the Seller receives a
written opinion from its independent financial advisor that such proposal may
be superior to the Merger from a financial point-of-view to the Seller's
stockholders, (B) the Board of Directors of the Seller, after consultation
with and based upon the written advice of independent legal counsel (who may
be the Seller's regularly engaged independent legal counsel), determines in
good faith that such action is necessary for the Board of Directors of the
Seller to comply with its fiduciary duties to stockholders under applicable
law (such proposal that satisfies (A) and (B) being referred to herein as a
"Superior Proposal") and (C) prior to furnishing such information to, or
entering into discussions or negotiations with, such person or entity, the
Seller (x) provides reasonable notice to Purchaser to the effect that it is
furnishing information to, or entering into discussions or negotiations with,
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such person or entity and (y) receives from such person or entity an executed
confidentiality agreement in reasonably customary form, (ii) complying with
Rule 14e-2 promulgated under the Exchange Act with regard to a tender or
exchange offer or (iii) failing to make or withdrawing or modifying its
recommendation and entering into a Superior Proposal if there exists a
Superior Proposal and the Board of Directors of the Seller, after
consultation with and based upon the written advice of independent legal
counsel (who may be the Seller's regularly engaged independent legal
counsel), determines in good faith that such action is necessary for the
Board of Directors of the Seller to comply with its fiduciary duties to
stockholders under applicable law. For purposes of this Agreement,
"Acquisition Proposal" shall mean any of the following (other than the
transactions contemplated hereunder) involving the Seller or any of its
subsidiaries: (i) any merger, consolidation, share exchange, business
combination, or other similar transaction; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of 10% or more of the assets
of the Seller or Seller Bank, taken as a whole, in a single transaction or
series of transactions; (iii) any tender offer or exchange offer for 10% or
more of the outstanding shares of capital stock of the Seller or the filing
of a registration statement under the Securities Act in connection therewith;
or (iv) any public announcement of a proposal, plan or intention to do any of
the foregoing or any agreement to engage in any of the foregoing.
Section 4.02 Certain Policies of the Seller; Balance Sheet.
(a) At the request of the Purchaser accompanied or preceded by the
Purchaser's written confirmation that it is not aware of any fact or
circumstance that would result in the failure of any condition set forth in
Article V or an event of termination under Article VI, the Seller shall
modify and change its loan, litigation and real estate valuation policies and
practices (including loan classifications and levels of reserves) after the
date on which all required shareholder, federal depository institution
regulatory (other than the applicable waiting period) and other approvals are
received and prior to the Effective Time so as to be consistent on a mutually
satisfactory basis with those of the Purchaser; provided, that such policies
and practices (x) are consistent with generally accepted accounting
principles and all applicable laws and regulations and (y) do not violate any
law or regulation or cause the Seller to be other than well-capitalized as
defined by the FDIC.
(b) The Seller's representations, warranties and covenants contained in
this Agreement shall not be deemed to be untrue or breached in any respect
for any purpose as a consequence of any modifications or changes undertaken
to conform to Purchaser's policies solely on account of this Section 4.02.
Section 4.03 Access and Information.
(a) From the date of this Agreement through the Effective Time, Seller and
Seller Bank shall afford to each of Purchaser and its authorized agents and
representatives, reasonable access to their respective properties, assets,
books and records and personnel, at reasonable business hours and after
reasonable notice; and Purchaser shall be provided with such financial and
operating data and other information with respect to the businesses,
properties, assets, books and records and personnel of Seller and Seller Bank
as they shall from time to time reasonably request. Purchaser agrees to
conduct any such requests and discussions hereunder in a manner so as not to
interfere unreasonably with normal operations and consumer and employee
relationships of Seller. In the event the Purchaser learns of any information
or matters during such investigation that the Purchaser believes may
constitute or reveal a material breach of the Seller's representations,
warranties, covenants or agreements contained herein, the Purchaser shall
provide the Seller with a written notice within 15 business days or such
longer period as extended by the parties in writing contemplated by this
Section 4.03, specifying the information or matters learned and the basis
upon which they may constitute or reveal a material breach of the Seller's
representations, warranties, covenants or agreements and the Seller has the
right to cure such material breach within 30 calendar days from the date of
such notice. No breach of a representation, warranty, covenant or agreement
that is learned pursuant to Purchaser's investigation contemplated by this
Section 4.03 shall constitute a material breach of a representation,
warranty, covenant or agreement by Seller under any provision of or for any
purpose under this Agreement and the information or matters underlying such
breach shall be deemed to have been fully disclosed in Seller's disclosure
pursuant to this Agreement, unless Purchaser provides Seller with a written
notice relating thereto delivered and the Seller has not cured such breach
within the time period provided in the immediately preceding sentence and
Purchaser exercises its right to terminate this Agreement on the basis
thereof in accordance with Section 6.01(f).
(b) The Purchaser agrees to treat as strictly confidential all information
received from the Seller or its Subsidiaries and agree not to divulge to any
other person, natural or corporate (other than essential employees and
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agents of such party) any financial statements, schedules, contracts,
agreements, instruments, papers, documents and other information relating to
the Seller and its Subsidiaries which it may come to know or which may come
into its possession and, if the transactions contemplated hereby are not
consummated for any reason, agrees promptly to return to the Seller all
written material furnished by Seller or its Subsidiaries.
(c) Each party hereto will not, and will cause its respective
representatives not to, use any information obtained from any other such
party as a result of this Agreement (including this Section 4.03) or in
connection with the transactions contemplated hereby (whether so obtained
before or after the execution hereof, including work papers and other
materials derived therefrom (collectively, the "Confidential Information")
for any purpose unrelated to the consummation of the transactions
contemplated by this Agreement. Subject to the requirements of law,
regulation and applicable Regulatory Agencies, each party hereto will keep
confidential, and will cause its respective representatives to keep
confidential, all Confidential Information relating to or furnished by any
other such party unless such information (i) was already or becomes known to
the general public, other than from a prohibited disclosure by a party to
this Agreement or its representatives, (ii) becomes available to such party
or an affiliate of such party from sources (other than another party to this
Agreement or its representatives) not bound by a confidentiality obligation
or agreement, (iii) is disclosed with the prior written approval of the party
which furnished such Confidential Information or (iv) is or becomes readily
ascertainable from published information. In the event that this Agreement is
terminated or the transactions contemplated by this Agreement shall otherwise
fail to be consummated, each party hereto and its respective representatives
shall promptly cause all Confidential Information in the possession of itself
and its representatives, including all copies or extracts thereof, to be
returned to the party which furnished the same.
Section 4.04 Certain Filings, Consents and Arrangements. The Purchaser and
the Seller shall cause Acquisition Corp. to, (a) make as soon as practicable
(or cause to be made) from the date of the Agreement, (or cause to be made)
any filings and applications required to be filed in order to obtain all
approvals, consents and waivers of governmental authorities necessary or
appropriate for the consummation of the transactions contemplated hereby (b)
cooperate with one another (i) in promptly determining what filings are
required to be made or approvals, consents or waivers are required to be
obtained under any relevant federal, state or foreign law or regulation and
(ii) in promptly making any such filings, furnishing information required in
connection therewith and seeking timely to obtain any such approvals,
consents or waivers, (c) use reasonable efforts to obtain all such approvals,
consents or waivers, to respond to all inquiries and requests for information
from regulatory authorities, (d) apprise each other of the content of all
communications with regulatory authorities with respect to all filings and
applications, and (e) deliver to the other copies of all such filings and
applications (except for materials that are legally privileged or which it is
prohibited by law from disclosing) promptly after they are filed.
Section 4.05 Additional Agreements. Subject to the terms and conditions of
this Agreement, each of the parties hereto agrees to use all reasonable
efforts to take promptly, or cause to be taken promptly, all actions and to
do promptly, or cause to be done promptly, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement as promptly as
practicable, including using reasonable efforts to obtain all necessary
actions or non-actions, extensions, waivers, consents and approvals from all
applicable governmental entities, effecting all necessary registrations,
applications and filings (including, without limitation, filings under any
applicable state securities laws) and obtaining any required contractual
consents and regulatory approvals.
Section 4.06 Publicity. The initial press release announcing this
Agreement shall be a joint press release and thereafter the Seller and the
Purchaser shall consult with each other in issuing any press releases or
similar public disclosure with respect to the other or the transactions
contemplated hereby and in making any filings with any governmental entity or
with any national securities exchange with respect thereto; provided,
however, that nothing contained in this Section 4.08 shall prohibit any party
from responding to questions from the business press or, following
notification to the other parties to this Agreement, from making any
disclosure which, after consultation with its counsel, it deems necessary to
comply with the requirements of applicable law or regulation.
Section 4.07 Notification of Certain Matters. The Purchaser and the
Acquisition Corp., on the one hand, and the Seller and the Seller Bank, on
the other hand, shall give prompt notice to the other of (a) the occurrence
or its knowledge of any event or condition that would cause any of its
representations or warranties set forth in
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this Agreement not to be true and correct in all material respects as of the
date of this Agreement or as of the Effective Time (except as to any
representation or warranty which specifically relates to an earlier date), or
any of its obligations set forth in this Agreement required to be performed
at or prior to the Effective Time not to be performed in all material
respects at or prior to the Effective Time (any such notice, a "Supplemental
Disclosure Schedule"), including without limitation, any event, condition,
change or occurrence which individually or in the aggregate has, or which, so
far as reasonably can be foreseen at the time of its occurrence, is
reasonably likely to result in a Material Adverse Effect on it; and (b) any
action of a third party of which it receives notice that might reasonably be
expected to prevent or materially delay the consummation of the transactions
contemplated hereby, including, without limitation, any notice or other
communication from any third party alleging that the consent of such third
party is or may be required in connection with the transactions contemplated
by this Agreement. Any Supplemental Disclosure Schedule given by the Seller
to the Purchaser shall be deemed to amend the Disclosure Schedule and, unless
the Purchaser, by written notice to the Seller given within fifteen (15)
business days of its receipt of such Supplemental Disclosure Schedule,
exercises any right of termination it may then have under Section 6.01(b),
the Purchaser shall thereafter be deemed to have permanently and irrevocably
waived (on behalf of itself and its Subsidiaries) (i) any right of
termination (or any other rights or remedies) arising out of or with respect
to the events or conditions described in such Supplemental Disclosure
Schedule; and (ii) any contribution of such events or conditions towards the
occurrence of a Material Adverse Effect; provided, that no such waiver shall
exist with respect to the cumulation of such events or conditions with any
other events or conditions described in any subsequent Supplemental
Disclosure Schedule for purposes of determining the occurrence of a Material
Adverse Effect.
Section 4.08 Indemnification.
(a) From and after the Effective Time through the sixth anniversary of the
Effective Date, the Purchaser agrees to indemnify and hold harmless each
present and former director and officer of the Seller or its Subsidiaries and
each officer or employee of the Seller or its Subsidiaries that is serving or
has served as a director or trustee of another entity expressly at the
Seller's request or direction (each, an "Indemnified Party"), against any
costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities (collectively, the "Costs") incurred
in connection with any claim, action, suit, proceeding or investigation,
whether civil, criminal, administrative or investigative, and whether or not
the Indemnified Party is a party thereto, arising out of matters existing or
occurring at or prior to the Effective Time (including the transactions
contemplated by this Agreement), whether asserted or claimed prior to, at or
after the Effective Time, to the fullest extent then permitted under Delaware
law or, if greater, that the Seller would have been permitted under its
certificate of incorporation, charter or bylaws in effect on the date hereof.
(b) Any Indemnified Party wishing to claim indemnification under Section
4.08(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Purchaser thereof, but the failure
to so notify shall not relieve the Purchaser of any liability it may have
hereunder to such Indemnified Party if such failure does not materially and
substantially prejudice the indemnifying party. In the event of any such
claim, action, suit, proceeding or investigation, (i) the Purchaser shall
have the right to assume the defense thereof with counsel reasonably
acceptable to the Indemnified Party and the Purchaser shall not be liable to
such Indemnified Party for any legal expenses of other counsel subsequently
incurred by such Indemnified Party in connection with the defense thereof,
except that if the Purchaser does not elect to assume such defense within a
reasonable time or counsel for the Indemnified Party at any time advises that
there are issues which raise conflicts of interest between the Purchaser and
the Indemnified Party, the Indemnified Party may retain counsel satisfactory
to such Indemnified Party, and the Purchaser shall remain responsible for the
reasonable fees and expenses of such counsel as set forth above, promptly as
statements therefor are received; provided, however, that the Purchaser shall
be obligated pursuant to this paragraph (b) to pay for only one firm of
counsel for all Indemnified Parties in any one jurisdiction with respect to
any given claim, action, suit, proceeding or investigation unless the use of
one counsel for such Indemnified Parties would present such counsel with a
conflict of interest; (ii) the Indemnified Party will reasonably cooperate in
the defense of any such matter and (iii) the Purchaser shall not be liable
for any settlement effected by an Indemnified Party without its prior written
consent, which consent may not be withheld unless such settlement is
unreasonable in light of such claims, actions, suits, proceedings or
investigations against, and defenses available to, such Indemnified Party.
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(c) In the event Purchaser or any of its successors or assigns (i)
consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its
properties and assets to any person, then, and in each such case, to the
extent necessary, proper provision shall be made so that the successors and
assigns of Purchaser assume the obligations set forth in this Section 4.08.
(d) The provisions of this Section 4.08 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and their respective
heirs and representatives.
Section 4.09 Shareholders' Meeting. The Seller shall take all action
necessary, in accordance with applicable law and its certificate of
incorporation and bylaws, to convene a meeting of the holders of Seller
Common Stock (the "Shareholder Meeting") as promptly as practicable for the
purpose of considering and voting on the approval and adoption of this
Agreement. The Seller's Board of Directors, subject to its fiduciary duties
as advised by such board's counsel and investment advisor, (i) shall
recommend at the Shareholder Meeting that the holders of the Seller Common
Stock vote in favor of and approve and adopt this Agreement and (ii) shall
use its reasonable best efforts to solicit such approvals.
Section 4.10 Proxy Statement. As soon as practicable after the date
hereof, the Seller shall prepare a proxy statement, which shall be reasonably
acceptable to counsel to the Purchaser, to take shareholder action on the
Merger and this Agreement (the "Proxy Statement"), file the Proxy Statement
with the SEC, respond to comments of the staff of the SEC and promptly
thereafter mail the Proxy Statement to all holders of record (as of the
applicable record date) of shares of Seller Common Stock. The Seller shall
provide the Purchaser with reasonable opportunity to review and comment upon
the contents of the Proxy Statement. The Seller represents and covenants that
the Proxy Statement and any amendment or supplement thereto, at the date of
mailing to shareholders of the Seller and the date of the Shareholder
Meeting, will be in material compliance with all relevant rules and
regulations of the SEC and, with respect to the Seller and the transactions
contemplated herein, will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The Purchaser shall furnish the Seller
with all information concerning the Purchaser as the Seller may reasonably
request in connection with the Proxy Statement such written information
included in the Proxy Statement shall be in material compliance with all
relevant rules and regulations of the SEC and will not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
Section 4.11 Stock Option Agreement. Simultaneously with the execution of
this Agreement, the Seller and the Purchaser shall execute a Stock Option
Agreement (the "Option Agreement"), the form of which is attached hereto as
Exhibit B, pursuant to which the Seller shall grant an unconditional,
irrevocable option (the "Option") to the Purchaser.
Section 4.12 Dissenters' Rights. Any holder of Seller Common Stock
otherwise entitled to receive Merger Consideration for each of his or her
shares shall be entitled to demand payment of the fair cash value of such
shares as specified in N.J.S.A. 14:11-2 if the holder follows the procedures
specified in the statutes. Those shares shall hereafter be specified as
"Dissenting Shares." Any Dissenting Shares shall not, after the Effective
Time, be entitled to vote for any purpose or receive any dividends or other
distributions and shall not be converted into cash as provided in Section
1.03 hereof; provided, however, that shares of Seller Common Stock held by a
dissenting shareholder who subsequently withdraws a demand for payment, fails
to comply fully with the requirements of the NJSA, or otherwise fails to
establish the right of such shareholder to be paid the fair cash value of
such shareholder's shares under the NJSA shall be deemed to be converted into
cash pursuant to the terms and conditions specified herein. Seller shall give
Purchaser prompt notice of any written demands for appraisal of any shares of
Seller Common Stock, attempted withdrawals of any such demands, and any other
instruments served pursuant to the NJSA and received by Seller relating to
shareholders' rights of appraisal. Seller shall not, except with the prior
written consent of Purchaser, voluntarily make any payment with respect to
any demands for appraisals of any shares of Seller Common Stock, offer to
settle or settle any such demands or approve any withdrawal of any such
demands.
Section 4.13 Operating Transition. Notwithstanding any other provision of
this Agreement, in order to effect an orderly operating transition of the
business of the Seller Bank from the Seller to the Purchaser, Seller
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agrees to cause the Seller Bank to provide Purchaser and Purchaser's agents
and representatives with the opportunity to participate in a joint calling
program on depositors and borrowers from Seller Bank, to participate in the
training of employees of Seller Bank and to maintain a liaison to observe the
day-to-day operations of Seller Bank. Purchaser agrees that its participation
will not interfere with the orderly conduct of the business of Seller Bank.
ARTICLE V
CONDITIONS TO CONSUMMATION
Section 5.01 Conditions to Each Party's Obligations. The respective
obligations of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following conditions,
none of which may be waived:
(a) this Agreement shall have been approved by the requisite vote of the
holders of Seller Common Stock at the Shareholder Meeting in accordance with
applicable law;
(b) all necessary regulatory or governmental approvals, consents or
waivers required to consummate the transactions contemplated hereby shall
have been obtained and shall remain in full force and effect and all
statutory waiting periods in respect thereof shall have expired; and
(c) no party hereto shall be subject to any order, decree or injunction of
a court or agency of competent jurisdiction which enjoins or prohibits the
consummation of the Merger.
Section 5.02 Conditions to the Obligations of the Purchaser under this
Agreement. The obligations of the Purchaser to effect the Merger shall be
further subject to the satisfaction at or prior to the Effective Time of the
following conditions, any one or more of which may be waived by the
Purchaser:
(a) each of the obligations, covenants and agreements of the Seller
required to be performed by it at or prior to the Effective Time pursuant to
the terms of this Agreement shall have been duly performed and complied with
in all material respects, except as to the failure to perform an obligation,
covenant or agreement that would not, individually or in the aggregate,
result in a Material Adverse Effect on Seller and its Subsidiaries taken as a
whole, and the Purchaser shall have received a certificate to the foregoing
effect dated the Effective Date and signed by the Chairman and President of
the Seller;
(b) the representations and warranties of the Seller contained in this
Agreement (subject to Section 4.07) shall be true and correct in all material
respects as of the date of this Agreement and as of the Effective Time (as
though made at and as of the Effective Time except as to (i) any
representation or warranty which specifically relates to an earlier date and
(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 on Purchaser and its
Subsidiaries taken as a whole) and the Purchaser shall have received a
certificate to the foregoing effect dated the Closing Date signed by the
Chairman and President of the Seller.
(c) the Purchaser shall have received certified copies of the resolutions
(or documents of like import) evidencing the authorization of this Agreement
and the consummation of the transactions contemplated hereby by the Seller's
Board of Directors and the Seller's shareholders;
(d) the Purchaser shall have received a certificate of corporate existence
for the Seller from the Secretary of State of the State of New Jersey (such
certificate to be dated as of a day as close as practicable to the date of
the Closing) and a similar certificate for the Seller Bank from the
Department;
(e) Subject to the Purchaser's compliance with Sections 4.05 and 4.07,
none of the approvals or consents referred to in Section 5.01(b) hereof shall
contain any condition which would, or would be reasonably likely to, have a
Material Adverse Effect on the Purchaser and its Subsidiaries taken as a
whole giving effect to the completion of the transactions contemplated
hereby;
(f) the Purchaser shall have received an opinion or opinions, dated the
date of the Closing, from Blank, Rome, Comisky & McCauley, counsel to the
Seller, to the effect that:
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(i) Seller is a corporation duly authorized, validly existing and in
good standing corporation under the laws of the State of New Jersey and
Seller Bank is a state-chartered commercial bank duly organized and in
existence under the laws of the United States of America;
(ii) the Seller has the power and authority to carry on its business
currently conducted, to own, lease and operate its properties and to
consummate the transactions contemplated by this Agreement and Plan of
Merger and the Subsidiaries have the corporate power and authority to
carry on their business currently conducted and to own, lease and operate
their properties;
(iii) this Agreement and Plan of Merger have been duly authorized and
approved by the Seller and this Agreement and Plan of Merger and the
transactions contemplated thereby have been approved by the requisite vote
of the Seller's shareholders and duly authorized, executed and delivered
by the Seller and this Agreement and Plan of Merger constitute the valid
and binding obligation of the Seller;
(iv) the authorized capitalization of the Seller is as set forth in
Section 2.01(b) hereof;
(v) to counsel's best knowledge, all acts, other proceedings required
to be taken by or on the part of the Seller, including the adoption of
this Agreement and Plan of Merger by the shareholders of the Seller, and
the necessary approvals, consents, authorizations or notifications
required to be taken to consummate the transactions contemplated by this
Agreement and Plan of Merger, have been properly taken or obtained;
neither the execution and delivery of this Agreement and Plan of Merger
nor the consummation of the transactions contemplated hereby and thereby,
with or without the giving of notice or the lapse of time, or both, will
(i) violate any provision of the Certificate, Charter or Bylaws of the
Seller or the Subsidiaries; or (ii) to the knowledge of such counsel,
violate, conflict with, result in the material breach or termination of,
constitute a material default under, accelerate the performance required
by, or result in the creation of any material lien, charge or encumbrance
upon any of the properties or assets of the Seller or the Subsidiaries
pursuant to any indenture, mortgage, deed of trust, or other agreement or
instrument to which the Seller or the Subsidiaries are a party or by which
it or any of their properties or assets may be bound, or violate any
statute, rule or regulation applicable to the Seller or the Subsidiaries,
which would have a Material Adverse Effect on the financial condition,
assets, liabilities, or business of the Seller or the Subsidiaries; to the
knowledge of such counsel, no consent, approval, authorization, order,
registration or qualification of or with any court, regulatory authority
or other governmental body, other than as specifically contemplated by
this Agreement is required for the consummation by the Seller or the
Subsidiaries of the transactions contemplated by this Agreement and Plan
of Merger;
(vi) to the knowledge of such counsel, since the date of this
Agreement, neither the Seller nor the Subsidiaries have granted any
options, warrants, calls, agreements or commitments of any character
relating to any of the shares of the Seller or the Subsidiaries, nor has
the Seller or the Subsidiaries granted any rights to purchase or otherwise
acquire from the Seller or the Subsidiaries any shares of the Seller's or
the Subsidiaries' capital stock, except as provided in this Agreement as
set forth in Disclosure Schedule 2.01(b);
(vii) to the knowledge of such counsel and except as disclosed pursuant
to Disclosure Schedule 2.01(k), there are no actions, suits, proceedings
or investigations of any nature pending or threatened that challenge the
validity or legality of the transactions contemplated by this Agreement or
Plan of Merger which seek or threaten to restrain, enjoin or prohibit (or
obtain substantial damages in connection with) the consummation of such
transactions;
(viii) to the knowledge of such counsel and except as is set forth in
Disclosure Schedule 2.01(k), there is no litigation, appraisal or other
proceeding or governmental investigation pending or threatened against or
relating to the business or property of the Seller or the Subsidiaries
which would have a Materially Adverse Effect on the consolidated financial
condition of the Seller, or of any legal impediment to the continued
operation of the properties and business of the Seller or the Subsidiaries
in the ordinary course after the consummation of the transactions
contemplated by this Agreement and Plan of Merger.
(g) the Seller shall have furnished the Purchaser with such certificates
of its officers or others and such other documents to evidence fulfillment of
the conditions set forth in this Section 5.02 as the Purchaser may reasonably
request.
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(h) the Seller will be responsible for making all filings and/or
submitting all returns with respect to any state and/or local real estate
transfer or gains taxes that are required to be filed before the Effective
Time. Seller also agrees to pay any expenses relating to the preparation or
filing of returns with respect thereto.
Section 5.03 Conditions to the Obligations of the Seller. The obligations
of the Seller to effect the Merger shall be further subject to the
satisfaction at or prior to the Effective Time of the following conditions,
any one or more of which may be waived by the Seller:
(a) each of the obligations of the Purchaser required to be performed by
it at or prior to the Effective Date pursuant to the terms of this Agreement
shall have been duly performed and complied with in all material respects,
and the Seller shall have received a certificate to the foregoing effect
dated the Closing Date and signed by the President and Chief Financial
Officer of the Purchaser;
(b) the representations and warranties of the Purchaser contained in this
Agreement shall be true and correct in all material respects as of the date
of this Agreement and as of the Effective Time (as though made at and as of
the Effective Time except as to any representation or warranty which
specifically relates to an earlier date) and the Seller shall have received a
certificate to the foregoing effect dated the Effective Date signed by the
President and the Chief Financial Officer of the Purchaser;
(c) the Seller shall have received an opinion, dated as of the Effective
Date, from Muldoon, Murphy & Faucette, counsel for the Purchaser to the
effect that:
(i) Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware;
(ii) Purchaser has the corporate power and authority to carry on its
business as now conducted, to own, lease and operate its properties
and to consummate the transactions contemplated by the Agreement;
(iii) the Agreement has been duly authorized, executed and delivered by
Purchaser and Acquisition Corp. and constitutes the valid and binding
obligation of Purchaser and Acquisition Corp;
(iv) all corporate acts and other proceedings required to be taken by or on
the part of Purchaser and Acquisition Corp. to consummate the
transactions contemplated by the Agreement have been properly taken;
neither the execution and delivery of the Agreement, nor the
consummation of the transactions contemplated hereby and thereby, with
and without the giving of notice or the lapse of time, or both, will
violate any provision of the Articles of Incorporation or Bylaws of
Purchaser;
(v) except as disclosed in such opinion, to the knowledge of such counsel
there are no actions, suits, proceedings or investigations (public or
private) of any nature pending or threatened that challenge the
validity or propriety of the transactions contemplated by the
Agreement or which seek or threaten to restrain, enjoin or prohibit or
to obtain substantial damages in connection with the consummation of
such transactions; and
(vi) all regulatory and governmental approvals and consents which are
necessary to be obtained by Purchaser and its subsidiaries to permit
the execution, delivery and performance of the Agreement have been
obtained.
ARTICLE VI
TERMINATION
Section 6.01 Termination. Notwithstanding any other provision of this
Agreement, this Agreement may be terminated, and the Merger abandoned, prior
to the Effective Time, either before or after its approval by the
shareholders of the Seller;
(a) by the mutual consent of the Purchaser and the Seller in a written
instrument if the board of directors of each so determines by vote of a
majority of the members of its entire board;
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(b) by the Purchaser or the Seller (provided that the party seeking
termination is not then in material breach of any representation, warranty,
covenant or other agreement contained herein), in the event of (i) a failure
to perform or comply by the other party with any covenant or agreement of
such other party contained in this Agreement, which failure or non-compliance
is material in the context of the transactions contemplated by this
Agreement, or (ii) subject to Section 4.07, any inaccuracies, omissions or
breach in the representations, warranties, covenants or agreements of the
other party contained in this Agreement the circumstances as to which either
individually or in the aggregate have, or reasonably could be expected to
have, a Material Adverse Effect on such other party; in either case which has
not been or cannot be cured within 30 calendar days after written notice
thereof is given by the party seeking to terminate to such other party;
(c) by the Purchaser or the Seller by written notice to the other party if
either (i) any approval, consent or waiver of a governmental authority
required to permit consummation of the transactions contemplated hereby shall
have been denied or (ii) any governmental authority of competent jurisdiction
shall have issued a final, unappealable order enjoining or otherwise
prohibiting consummation of the transactions contemplated by this Agreement,
or (iii) the holders of Seller Common Stock shall fail to approve and adopt
this Agreement, provided, however, that no party shall have the right to
terminate this Agreement pursuant to this Section 6.01(c) if such denial or
request or recommendation for withdrawal shall be due to the failure of the
party seeking to terminate this Agreement to perform or observe the covenants
and agreements of such party set forth herein;
(d) by the Purchaser or the Seller, in the event that the Merger is not
consummated by December 31,1996, unless the failure of such occurrence is due
to the failure to perform or comply with any covenant or agreement contained
in this Agreement by the party seeking to terminate;
(e) by the Purchaser, if the Board of Directors of the Seller does not
publicly recommend in the Proxy Statement that the Seller's stockholders
approve and adopt this Agreement or if, after recommending in the Proxy that
stockholders approve and adopt this Agreement, the Board of Directors of the
Seller shall have withdrawn, modified or amended such recommendation in any
respect materially adverse to the Purchaser; or
(f) subject to Section 4.07, by the Purchaser by written notice to the
Seller in the event that there has occurred since the date of this Agreement
an event, condition, change or occurrence which, individually or in the
aggregate, has had or could reasonably be expected to result in a Material
Adverse Effect on the Seller; provided that the Purchaser shall have given
the Seller thirty (30) calendar days prior written notice of such
termination, and the Seller shall not have remedied such event, condition,
change or occurrence by the end of such thirty-day period.
Section 6.02 Effect of Termination. In the event of termination of this
Agreement by either the Purchaser or the Seller as provided in Section 6.01,
this Agreement shall forthwith become void and have no effect except (i)
Sections 4.03(b), 4.03(c), 8.06 and 8.07, shall survive any termination of
this Agreement, (ii) that notwithstanding anything to the contrary contained
in this Agreement, no party shall be relieved or released from any
liabilities or damages arising out of its willful breach of any provision of
this Agreement, and (iii) in the event this Agreement (x) is terminated
subsequent to the occurrence of a Triggering Event (as such term is defined
in the Option Agreement, except for Section 2(b)(iv) or (y) is terminated by
Purchaser pursuant to Section 6.01(b) or 6.01(e) hereof, and within 12 months
after such termination by Purchaser a Triggering Event shall occur, then in
addition to any other amounts payable or stock issuable by the Seller
pursuant to this Agreement or the Option Agreement, as the case may be, the
Seller shall pay to Purchaser a termination fee (the "Termination Fee") of
$500,000.
ARTICLE VII
CLOSING, EFFECTIVE DATE AND EFFECTIVE TIME
Section 7.01 Effective Date and Effective Time. Subject to the provisions
of Article V and VI, the closing of the transactions contemplated hereby
shall take place at the offices of the Purchaser on such date (the "Closing
Date") and at such time as the Purchaser and the Seller mutually agree to
within ten (10) business days after the expiration of all applicable waiting
periods in connection with approvals of governmental authorities and all
conditions to the consummation of this Agreement are satisfied or waived, or
on such other date as may be agreed by the parties. Subject to the provisions
of this Agreement, on the Closing Date, the Certificate of Merger
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<PAGE>
shall be signed, verified and affirmed as required by Delaware Law and duly
filed with the Secretary of State of the State of Delaware. The date of such
filing is herein called the "Effective Date." The "Effective Time" of the
Merger shall be the time on the Effective Date as set forth in such articles
of merger. Section 7.02 Deliveries at the Closing. Subject to the provisions
of Articles V and VI, on the Closing Date there shall be delivered to the
Purchaser and the Seller the documents and instruments required to be
delivered under Article V.
ARTICLE VIII
OTHER MATTERS
Section 8.01 Certain Definitions; Interpretation. As used in this
Agreement, the following terms shall have the meanings indicated, unless the
context otherwise requires:
"material" means material to the Purchaser or the Seller (as the
case may be) and its respective subsidiaries, taken as a whole.
"person" includes an individual, corporation, partnership,
association, trust or unincorporated organization.
When a reference is made in this Agreement to Sections or Exhibits, such
reference shall be to a Section of, or Exhibit to, this Agreement unless
otherwise indicated. The headings contained in this Agreement are for ease of
reference only and shall not affect the meaning or interpretation of this
Agreement. Whenever the words "include, "includes, or "including" are used in
this Agreement, they shall be deemed followed by the words "without
limitation." Any singular term in this Agreement shall be deemed to include
the plural, and any plural term the singular. Any reference to gender in this
Agreement shall be deemed to include any other gender.
Section 8.02 Non-Survival of Representations, Warranties, Covenants and
Agreements. All representations, warranties, covenants and agreements
contained in this Agreement (or in any instrument delivered pursuant to this
Agreement) shall not survive beyond the Effective Time, except for the
agreements contained in Article I and Sections 4.08, and 8.06 hereof.
Section 8.03 Amendment. This Agreement may be amended by the parties
hereto, by or pursuant to action taken by their respective boards of
directors, at any time before or after approval hereof by the shareholders of
the Seller but, after such approval, no amendment shall be made which reduces
the amount or changes the form of the Merger Consideration as provided in
Section 1.02 or which in any way materially adversely affects the rights of
such shareholders, without the further approval of such shareholders. This
Agreement may not be amended except by an instrument in writing specifically
referring to this Section 8.03 and signed on behalf of each of the parties
hereto.
Section 8.04 Waiver. At any time prior to the Effective Date, the
Purchaser, on the one hand, and the Seller, on the other hand, may (i) extend
the time for the performance of any of the obligations or other acts of the
other, (ii) waive any inaccuracies in the representations and warranties of
the other contained herein or in any documents delivered pursuant hereto and
(iii) waive compliance by the other with any of the agreements or conditions
contained herein which may legally be waived. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid only if set forth
in an instrument in writing specifically referring to this Section 8.04 and
signed on behalf of such party.
Section 8.05 Counterparts. This Agreement may be executed in counterparts
each of which shall be deemed to constitute an original, but all of which
together shall constitute one and the same instrument.
Section 8.06 Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of New Jersey, without
regard to conflicts of laws principles.
Section 8.07 Expenses. Each party hereto will bear all expenses incurred
by it in connection with this Agreement and the transactions contemplated
hereby, except that if the Termination Fee becomes payable, the Seller shall
pay the Termination Fee to the Purchaser upon demand.
Section 8.08 Notices. All notices, requests, acknowledgements and other
communications hereunder to a party shall be in writing and shall be
delivered by hand, overnight courier or by facsimile transmission (confirmed
in writing) to such party at its address or facsimile number set forth below
or such other address or facsimile number as such party may specify by notice
hereunder, and shall be deemed to have been delivered as of the date so
delivered.
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<PAGE>
If to the Seller, to:
Continental Bancorporation
1345 Chews Landing Road
Laurel Springs, NJ 08021-2792
609-227-8000
Facsimile: 609-231-9345
Attention: William Steinberg
and
Lawrence R. Wiseman, Esquire
Blank, Rome, Comisky & McCauley
Four Penn Center Plaza
Philadelphia, PA 19103
215-569-5549
Facsimile: 215-569-5555
If to the Purchaser or Acquisition Corp., to:
Collective Bancorp, Inc.
P.O. 316
Egg Harbor, NJ 08215
1-800-327-4550
Facsimile: 1-609-965-4381
Attention: Scott T. Page
With copies to:
Muldoon, Murphy & Faucette
5101 Wisconsin Avenue, N.W.
Washington, D.C. 20016
202-362-0840
Facsimile: (202) 966-9409
Attention: George W. Murphy, Jr., Esq.
Section 8.09 Entire Agreement; Etc. This Agreement, together with the
Disclosure Schedules (including any Supplemental Disclosure Schedules), the
Exhibits and the Plan of Merger, represent the entire understanding of the
parties hereto with reference to the transactions contemplated hereby and
supersedes any and all other oral or written agreements heretofore made. All
terms and provisions of the Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and
assigns. Except as to Section 4.08, nothing in this Agreement is intended to
confer upon any other person any rights or remedies of any nature whatsoever
under or by reason of this Agreement.
Section 8.10 Assignment. This Agreement may not be assigned by any party
hereto without the written consent of the other parties.
Section 8.11 Schedules Not Admissions. Inclusion in any Exhibit hereto or
in the Disclosure Schedules (including in any Supplemental Disclosure
Schedule) of any statement or information by the Seller shall not constitute
an admission that such information is required (by reason of materiality or
otherwise) to be furnished as part of such Disclosure Schedules, (including
any Supplemental Disclosure Schedule) or otherwise under this Agreement or an
admission against interest with respect to any person not a party hereto.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
COLLECTIVE BANCORP, INC.
By: /s/ Thomas H. Hamilton
------------------------------------------
Chairman and Chief Executive Officer
CBAC CORP.
By: /s/ Thomas H. Hamilton
------------------------------------------
Chairman and Chief Executive Officer
CONTINENTAL BANCORPORATION
By: /s/ William Steinberg
-------------------------------------------
William Steinberg, Chairman
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<PAGE>
APPENDIX B
PLAN OF MERGER
BY AND AMONG
COLLECTIVE BANCORP, INC.,
CBAC CORP.
AND
CONTINENTAL BANCORPORATION
DATED AS OF MAY 21, 1996
<PAGE>
This PLAN OF MERGER dated as of May 21, 1996, (the "Plan of Merger") is
entered into by and among COLLECTIVE BANCORP, INC., a Delaware corporation
(the "Purchaser"), CBAC CORP., a Delaware corporation and a wholly owned
subsidiary of the Purchaser (the "Acquisition Corp."), and CONTINENTAL
BANCORPORATION, a New Jersey corporation (the "Seller"), pursuant to an
Agreement and Plan of Merger dated as of May 21, 1996, ("Merger Agreement")
by and among the Purchaser, the Acquisition Corp. and the Seller. Capitalized
terms not otherwise defined herein shall have the meanings set forth in the
Merger Agreement.
In consideration of the mutual covenants and agreements set forth herein
and subject to the terms and conditions of the Merger Agreement, the parties
hereto agree as follows:
Section 1. The Merger. At the Effective Time, Acquisition Corp. will merge
with and into the Seller (the "Merger"), with the Seller being the surviving
entity (the "Surviving Corporation"). The separate corporate existence of
Acquisition Corp. shall thereupon cease. The Surviving Corporation shall
continue to be governed by the laws of the State of Delaware and its separate
corporate existence with all of its rights, privileges, immunities, powers
and franchises shall continue unaffected by the Merger.
Section 2. Name of Surviving Corporation. The name of the Surviving
Corporation shall be CBAC Corp.
Section 3. Exchange Procedures. Those shares of Seller Common Stock which
at the Effective Time will be converted into the right to receive the Merger
Consideration pursuant to Section 1.02 of the Merger Agreement will be
Exchanged in accordance with the provisions of Section 1.03 of the Merger
Agreement.
Section 4. Assets and Liabilities. At the Effective Time, all assets and
property (real, personal, and mixed, tangible and intangible, choses in
action, rights, and credits) then owned by Acquisition Corp. shall
immediately become the property of the Surviving Corporation. The Surviving
Corporation shall be deemed to be a continuation of Acquisition Corp. and the
Seller, the rights and obligations of which shall succeed to such rights and
obligations and the duties and liabilities connected therewith.
Section 5. Directors of Surviving Corporation. At the Effective Time, the
directors of Acquisition Corp. shall become the directors of the Surviving
Corporation. The name and addresses, and terms of such directors are set
forth below.
George W. French 158 Philadelphia Avenue
Egg Harbor City, New Jersey 08215
Term Expires: 1998
Edward J. McColgan 158 Philadelphia Avenue
Egg Harbor City, New Jersey 08215
Term Expires: 1998
Robert F. Mutschler 158 Philadelphia Avenue
Egg Harbor City, New Jersey 08215
Term Expires: 1998
Wesley J. Bahr 158 Philadelphia Avenue
Egg Harbor City, New Jersey 08215
Term Expires: 1997
Thomas H. Hamilton 158 Philadelphia Avenue
Egg Harbor City, New Jersey 08215
Term Expires: 1996
Miles Lerman 158 Philadelphia Avenue
Egg Harbor City, New Jersey 08215
Term Expires: 1996
David S. MacAllaster 158 Philadelphia Avenue
Egg Harbor City, New Jersey 08215
Term Expires: 1997
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<PAGE>
William R. Miller 158 Philadelphia Avenue
Egg Harbor City, New Jersey 08215
Term Expires: 1996
Herman O. Wunsch 158 Philadelphia Avenue
Egg Harbor City, New Jersey 08215
Term Expires: 1997
Section 6. Certificate of Incorporation and Bylaws. At the Effective Time,
the certificate of incorporation and bylaws of the Seller shall be amended in
their entirety to conform to the certificate of incorporation and bylaws of
Acquisition Corp. in effect immediately prior to the Effective Time and shall
become the federal charter and bylaws of the Surviving Corporation.
Section 7. Termination. This Plan of Merger shall terminate automatically
at such time as the Merger Agreement is terminated.
Section 8. Shareholder and Board Approval. The transactions contemplated
by the Merger Agreement and this Plan of Merger shall be ratified and
approved by a majority of the shares voting at a meeting of Seller's
shareholders held to approve and adopt the Merger Agreement. This Plan of
Merger has been approved by the board of directors of each of the Purchaser,
Acquisition Corp. and the Seller.
Section 9. Counterparts. This Plan of Merger may be executed in one or
more counterparts, each of which shall be deemed to be an original and all of
which taken together shall constitute one instrument.
Section 10. Amendments. This Plan of Merger may be amended by the parties
hereto, by or pursuant to action taken by their respective boards of
directors, at any time before or after approval hereof by the shareholders of
the Seller but, after such approval, no amendment shall be made which reduces
the amount or changes the form of the Merger Consideration as provided in
Section 1.02 of the Merger Agreement or which in any way materially adversely
affects the rights of such shareholders, without the further approval of such
shareholders. This Plan of Merger may not be amended except by an instrument
in writing specifically referring to this Section 10 and signed on behalf of
each of the parties hereto.
Section 11. Severability. Any provision of this Plan of Merger which is
prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof.
Section 12. Governing Law. This Plan of Merger shall be governed by, and
interpreted in accordance with, the laws of the State of New Jersey, without
regard to conflicts of laws principles.
Section 13. Captions and References. The captions contained in this Plan
of Merger are for convenience of reference only and do not form a part of
this Plan of Merger.
IN WITNESS WHEREOF, the parties hereto have caused this Plan of Merger to
be duly executed as of the date first above written.
COLLECTIVE BANCORP, INC.
By: /s/ Thomas H. Hamilton
---------------------------------
Chairman and Chief Executive Officer
CBAC CORP.
By: /s/ Thomas H. Hamilton
---------------------------------
Chairman and Chief Executive Officer
CONTINENTAL BANCORPORATION
By: /s/ William Steinberg
---------------------------------
Chairman
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<PAGE>
APPENDIX C
BERWIND
FINANCIAL GROUP, L.P
INVESTMENT BANKING
MERCHANT BANKING
July 24, 1996
Board of Directors
Continental Bancorporation
1345 Chews Landing Road
Laurel Springs, NJ 08021
Directors:
You have requested our opinion as to the fairness, from a financial point
of view, to the shareholders of Continental Bancorporation ("Continental") of
the financial terms of the proposed merger between Continental and Collective
Bancorp, Inc. ("Collective"). The terms of the proposed merger (the "Proposed
Merger") by and between Continental, Collective and a wholly owned subsidiary
of Collective, CBAC Corp., are set forth in the Agreement and Plan of Merger
(collectively, the "Agreement") dated May 21, 1996, and provide that each
outstanding share of Continental common stock will be converted into the
right to receive from Collective cash in an amount equal to $5.00.
Berwind Financial Group, L.P., as part of its investment banking business,
regularly is engaged in the valuation of assets, securities and companies in
connection with various types of asset and security transactions, including
mergers, acquisitions, private placements and valuations for various other
purposes, and in the determination of adequate consideration in such
transactions.
In arriving at our opinion, we have, among other things: (i) reviewed the
historical financial performance, current financial position and general
prospects of Continental, (ii) reviewed the Agreement, (iii) reviewed and
analyzed the stock market performance of Continental, (iv) studied and
analyzed the consolidated financial and operating data of Continental, (v)
considered the terms and conditions of the Proposed Merger between
Continental and Collective as compared with the terms and conditions of
comparable bank and bank holding company mergers and acquisitions, (vi) met
and/or communicated with certain members of Continental's senior management
to discuss its operations, historical financial statements, and future
prospects, (vii) reviewed the Proxy Statement, and (viii) conducted such
other financial analyses, studies and investigations as we deemed
appropriate.
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<PAGE>
Board of Directors
July 24, 1996
Page 2
Our opinion is given in reliance on information and representations made
or given by Continental and its officers, directors, auditors, counsel and
other agents, and on filings, releases and other information issued by
Continental including financial statements, financial projections, and stock
price data as well as certain information from recognized independent
sources. We have not independently verified the information concerning
Continental nor other data which we have considered in our review and, for
purposes of the opinion set forth below, we have assumed and relied upon the
accuracy and completeness of all such information and data. Additionally, we
assume that the Proposed Merger is, in all respects, lawful under applicable
law.
With regard to financial and other information relating to the general
prospects of Continental, we have assumed that such information has been
reasonably prepared and reflects the best currently available estimates and
judgments of the management of Continental as to Continental's most likely
future performance. In rendering our opinion, we have assumed that in the
course of obtaining the necessary regulatory approvals for the Proposed
Merger, no conditions will be imposed that will have a material adverse
effect on the contemplated benefits of the Proposed Merger to Continental.
Our opinion is based upon information provided to us by the management of
Continental, as well as market, economic, financial, and other conditions as
they exist and can be evaluated only as of the date hereof and speaks to no
other period. Our opinion pertains only to the financial consideration of the
Proposed Merger and does not constitute a recommendation to the Board of
Continental and does not constitute a recommendation to Continental's
shareholders as to how such shareholders should vote on the Proposed Merger.
Based on the foregoing, it is our opinion that, as of the date hereof, the
Proposed Merger between Continental and Collective is fair, from a financial
point of view, to the shareholders of Continental.
Sincerely,
/s/ Berwind Financial Group, L.P.
---------------------------------
BERWIND FINANCIAL GROUP, L.P.
C-2
<PAGE>
APPENDIX D
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of May 21, 1996, between COLLECTIVE
BANCORP, INC., a Delaware corporation ("Grantee"), and CONTINENTAL
BANCORPORATION, a New Jersey corporation ("Issuer").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), which agreement has
been executed by the parties hereto immediately prior to this Agreement; and
WHEREAS, as a condition to Grantee's entering into the Merger Agreement
and in consideration therefor, Issuer has agreed to grant Grantee the Option
(as hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties
hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to 956,704
fully paid and nonassessable shares of Issuer's Common Stock, par value $2.00
per share ("Common Stock"), at a price of $4.00, per share; provided,
however, that in the event Issuer issues or agrees to issue any shares of
Common Stock (other than as permitted under the Merger Agreement) at a price
less than $4.00 per share (as adjusted pursuant to subsection (b) of Section
5), such price shall be equal to such lesser price (such price, as adjusted
if applicable, the "Option Price"), provided further that in no event shall
the number of shares for which this Option is exercisable exceed 19.9% of the
Issuer's issued and outstanding common shares. The number of shares of Common
Stock that may be received upon the exercise of the Option and the Option
Price are subject to adjustment as herein set forth
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date hereof (or any treasury shares
held by Issuer have been or are sold after May 21, 1996) (other than pursuant
to this Agreement or as set forth in the Merger Agreement), the number of
shares of Common Stock subject to the Option shall be increased so that,
after such issuance, its equals 19.9% of the number of shares of Common Stock
then issued and outstanding without giving effect to any shares subject to or
issued pursuant to the Option. Nothing contained in this Section 1(b) or
elsewhere in this Agreement shall be deemed to authorize Issuer or Grantee to
breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, and from time to time, if, but only if, a Triggering Event (as
hereinafter defined) has occurred prior to the occurrence of an Exercise
Termination Event (as hereinafter defined), provided that the Holder shall
have sent the written notice of such exercise (as provided in subsection (e)
of this Section 2) within 30 days following such Triggering Event. Each of
the following shall be an Exercise Termination Event: (i) the Effective Time
of the Merger; (ii) termination of the Merger Agreement in accordance with
the provisions thereof if such termination occurs prior to the occurrence of
a Triggering Event; (iii) the passage of 18 months after termination of the
Merger Agreement if such termination follows the occurrence of a Triggering
Event; or (iv) the passage of 12 months after termination of the Merger
Agreement, if such termination is pursuant to Sections 6.01(b), 6.01(e) or
6.01(f) and a Triggering Event shall not have occurred during such time. The
"Last Triggering Event" shall mean the last Triggering Event to occur. The
term "Holder" shall mean the holder or holders of the Option.
(b) The term "Triggering Event" shall mean any of the following events or
transactions occurring after the date hereof:
(i) (a) Issuer or any of its Subsidiaries (each an "Issuer
Subsidiary"), without having received Grantee's prior written consent,
shall have entered into an agreement to engage in an Acquisition
Transaction (as hereinafter defined) with any person (the term "person"
for purposes of this Agreement having the meaning assigned thereto in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act, and the rules and
regulations thereunder) other than Grantee or any of its Subsidiaries
(each a "Grantee Subsidiary") or (b) the Board of Directors of Issuer
shall have recommended that the stockholders of Issuer approve or accept
any Acquisi-
D-1
<PAGE>
tion Transaction other than as contemplated by the Merger Agreement. For
purposes of this Agreement, "Acquisition Transaction" shall mean (x) a
merger or consolidation, or any similar transaction, involving Issuer or
any of its subsidiaries ("Issuer Subsidiary"), (y) a purchase, lease or
other acquisition representing 10% or more of the consolidated assets of
Issuer and its subsidiaries, or (z) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise)
of securities representing 10% or more of the voting power of Issuer or
any of Issuer Subsidiary;
(ii) Issuer or any Issuer Subsidiary, without having received Grantee's
prior written consent, shall have authorized, recommended, proposed or
publicly announced its intention to authorize, recommend or propose, an
agreement to engage in an Acquisition Transaction with any person other
than Grantee or a Grantee Subsidiary, or the Board of Directors of Issuer
shall have withdrawn or modified, or publicly announced its interest to
withdraw or modify, its recommendation that the stockholders of Issuer
approve the transactions contemplated by the Merger Agreement;
(iii) Any person, other than Grantee, any Grantee Subsidiary or any
Issuer Subsidiary acting in a fiduciary capacity, shall have acquired
beneficial ownership or the right to acquire beneficial ownership of 10%
or more of the outstanding shares of Common Stock; (the term "beneficial
ownership" for purposes of this Agreement having the meaning assigned
thereto in Section 13(d) of the Exchange Act, and the rules and
regulations thereunder) and the Seller's shareholders shall not approve
the Merger, or the Seller shall not have called a meeting of shareholders,
or Seller shall not have held a meeting of shareholders to vote on the
Merger no later than September 30, 1996, or the Seller shall have called a
meeting of shareholders or shall have distributed a proxy statement or
other solicitation materials in connection with such Acquisition
Transaction;
(iv) After a proposal is made by a third party to Issuer or its
stockholders to engage in an Acquisition Transaction, Issuer shall have
breached any representation, warranty, covenant or obligation contained in
the Merger Agreement and such breach (x) would entitle Grantee to
terminate the Merger Agreement and (y) shall not have been cured prior to
the Notice Date (as defined below); or
(v) The holders of Issuer Common Stock shall not have approved the
Merger Agreement and the transactions contemplated thereby at the meeting
of such stockholders held for the purpose of voting on such agreement, or
such meeting shall not have been held or shall have been cancelled prior
to termination of the Merger Agreement, in each case after it shall have
been publicly announced that any person (other than Grantee or any
affiliate of Grantee or any person acting in concert in any respect with
Grantee) shall have made, or disclosed an intention to make, a proposal to
engage in an Acquisition Transaction; or
(vi) Issuer's Board of Directors shall not have recommended to the
stockholders of Issuer that such stockholders vote in favor of the
approval of the Merger Agreement and the transactions contemplated thereby
or shall have withdrawn or modified such recommendation in a manner
adverse to Grantee.
(c) Issuer shall notify Grantee promptly in writing of the occurrence of a
Triggering Event, it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(d) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which being
herein referred to as the "Notice Date") specifying (i) the total number of
shares it will purchase pursuant to such exercise and (ii) a place and date
not earlier than three business days nor later than 60 business days from the
Notice Date for the closing of such purchase (the "Closing Date"); provided,
that if the closing of the purchase and sale pursuant to the Option (the
"Closing") cannot be consummated by reason of any applicable judgment,
decree, order, law or regulation, the period of time that otherwise would run
pursuant to this sentence shall run instead from the date on which such
restriction on consummation has expired or been terminated; and provided
further, without limiting the foregoing, that if prior notification to or
approval of the FDIC or any other regulatory agency is required in connection
with such purchase, the Holder shall promptly file the required notice or
application for approval and shall expeditiously process the same and the
period of time that otherwise would run pursuant to this sentence shall run
instead from the date on which any required notification periods have expired
or been terminated or such approvals have been obtained and any requisite
waiting period or periods shall have passed. Any exercise of the Option shall
be deemed to occur on the
D-2
<PAGE>
Notice Date relating thereto. Notwithstanding this subsection (e), in no
event shall any Closing Date be more than 18 months after the related Notice
Date, and if the Closing Date shall not have occurred within 18 months after
the related Notice Date due to the failure to obtain any such required
approval, the exercise of the Option effected on the Notice Date shall be
deemed to have expired. In the event (i) Grantee receives official notice
that an approval of the FDIC, Federal Reserve Board or any other regulatory
authority required for the purchase of Option Shares (as hereinafter defined)
would not be issued or granted, (ii) a Closing Date shall not have occurred
within 18 months after the related Notice Date due to the failure to obtain
any such required approval or (iii) Holder shall have the right pursuant to
the last sentence of Section 7 to exercise the Option, Grantee shall
nevertheless be entitled to exercise its right as set forth in Section 7 and,
Grantee or Holder shall be entitled to exercise the Option in connection with
the resale of Issuer Common Stock or other securities pursuant to a
registration statement as provided in Section 6.
(e) At the Closing referred to in subsection (d) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer,
provided that failure or refusal of Issuer to designate such a bank account
shall not preclude the Holder from exercising the Option.
(f) At such Closing, simultaneously with the delivery of immediately
available funds as provided in subsection (e) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number
of shares of Common Stock purchased by the Holder and if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder
thereof to purchase the balance of the shares purchasable hereunder, and the
Holder shall deliver to Issuer a copy of this Agreement and a letter agreeing
that the Holder will not offer to sell or otherwise dispose of such shares in
violation of applicable law or the provisions of this Agreement.
(g) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the registered
holder hereof and Issuer and to resale restrictions arising under
the Securities Act of 1933, as amended. A copy of such agreement is
on file at the principal office of Issuer and will be provided to
the holder hereof without charge upon receipt by Issuer of a written
request therefor."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act in the above legend shall be removed by
delivery of substitute certificate(s) without such reference if the Holder
shall have delivered to Issuer a copy of a letter from the staff of the SEC,
or an opinion of counsel, in form and substance reasonably satisfactory to
Issuer, to the effect that such legend is not required for purposes of the
Securities Act; (ii) the reference to the provisions of this Agreement in the
above legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in
compliance with the provisions of this Agreement and under circumstances that
do not require the retention of such reference; and (iii) the legend shall be
removed in its entirety if the conditions in the preceding clauses (i) and
(ii) are both satisfied. In addition, such certificates shall bear any other
legend as may be required by law.
(h) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (d) of this Section 2
and the tender of the applicable purchase price in immediately available
funds, the Holder shall be deemed to be the holder of record of the shares of
Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually delivered
to the Holder or the Issuer shall have failed or refused to designate the
bank account described in subsection (e) of this Section 2. Issuer shall pay
all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation,
issuance and delivery of stock certificates under this Section 2 in the name
of the Holder or its assignee, transferee or designee.
(i) Notwithstanding anything to the contrary contained in this Agreement,
the Issuer shall not be obligated to issue shares of common stock upon the
exercise of the Option (i) in the absence of any required governmental or
regulatory approval or consent necessary for the Issuer to issue shares or
for the Grantee to exercise the
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Option, (ii) in the event the Grantee is in material breach of its
representations, warranties, covenants or obligations under the Merger
Agreement or (iii) so long as any injunction or decree or ruling issued by a
court of competent jurisdiction is in effect which prohibits the sale or
delivery of the common stock.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock (and other securities issuable pursuant to Section 5(a)) so that
the Option may be exercised without additional authorization of Common Stock
(or such other securities) after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock
(or such other securities); (ii) that it will not, by charter amendment or
through reorganization, consolidation, merger, dissolution or sale of assets,
or by any other voluntary act, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions to be
observed or performed hereunder by Issuer; (iii) promptly to take all action
as may from time to time be required (including (x) complying with all
premerger notification, reporting and waiting period requirements specified
in 15 U.S.C. 18a and regulations promulgated thereunder and (y) in the event
the Change in Bank Control Act of 1978, as amended, or any state banking law,
prior approval of or notice to the FDIC or to any state regulatory authority
is necessary before the Option may be exercised, cooperating fully with the
Holder in preparing such applications or notices and providing such
information to the FDIC or such state regulatory authority as they may
require) in order to permit the Holder to exercise the Option and the Issuer
duly and effectively to issue shares of Common Stock pursuant hereto; and
(iv) promptly to take all action provided herein to protect the rights of the
Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender
of this Agreement at the principal office of Issuer, for other Agreements
providing for Options of different denominations entitling the holder thereof
to purchase, on the same terms and subject to the same conditions as are set
forth herein, in the aggregate the same number of shares of Common Stock
purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any Stock Option Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of loss, theft
or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and date.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of
this Agreement, the number of shares of Common Stock purchasable upon the
exercise of the Option shall be subject to adjustment from time to time as
provided in this Section 5.
(a) In the event of any change in Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares or the like, the type and
number of shares of Common Stock purchasable upon exercise hereof shall be
appropriately adjusted so that Grantee shall receive upon exercise of the
Option and payment of the aggregate Option Price hereunder the number and
class of shares or other securities or property that Grantee would have
received in respect of Common Stock if the Option had been exercised in
full immediately prior to such event, or the record date therefor, as
applicable.
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option
Price shall be adjusted by multiplying the Option Price by a fraction, the
numerator of which shall be equal to the number of shares of Common Stock
purchasable prior to the adjustment and the denominator of which shall be
equal to the number of shares of Common Stock purchasable after the
adjustment.
6. (a) Upon the occurrence of a Triggering Event that occurs prior to an
Exercise Termination Event (or as otherwise provided in the last sentence of
Section 2(e)), Issuer shall, at the request of Grantee delivered within 30
days after such Triggering Event (or such trigger date as is provided in the
last sentence of Section 2(e)) (whether on its own behalf or on behalf of any
subsequent holder of this Option (or part thereof) or any of the shares of
Common Stock issued pursuant hereto), promptly prepare, file and keep current
a shelf registration statement under the Securities Act covering any shares
issued and issuable pursuant to this Option and shall use its best efforts to
cause such registration statement to become effective and remain current in
order to permit the
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sale or other disposition of any shares of Common Stock issued upon total or
partial exercise of this Option ("Option Shares") in accordance with any plan
of disposition requested by Grantee. Issuer will use its best efforts to
cause such registration statement first to become effective and then to
remain effective for such period not in excess of 180 days from the day such
registration statement first becomes effective or such shorter time as may be
reasonably necessary to effect such sales or other dispositions. Grantee for
a period of 18 months following such first request shall have the right to
demand a second such registration if reasonably necessary to effect such
sales or dispositions. Holder shall not be obligated to pay, liable for or
otherwise bear any payments, fees or expenses associated with any
registration contemplated by this Section 6, all of which such payments, fees
or expenses shall be borne by the Issuer. The foregoing notwithstanding, if,
at the time of any request by Grantee for registration of Option Shares as
provided above, Issuer is in registration with respect to an underwritten
public offering of shares of Common Stock, and if in the good faith judgment
of the managing underwriter or managing underwriters, or, if none, the sole
underwriter or underwriters, of such offering the inclusion of the Holder's
Option or Option Shares would interfere with the successful marketing of the
shares of Common Stock offered by Issuer, the number of Option Shares
otherwise to be covered in the registration statement contemplated hereby may
be reduced; and provided, however, that after any such required reduction the
number of Option Shares to be included in such offering for the account of
the Holder shall constitute at least 25% of the total number of shares to be
sold by the Holder and Issuer in the aggregate; and provided further,
however, that if such reduction occurs, then the Issuer shall file a
registration statement for the balance as promptly as practical and no
reduction shall thereafter occur (and such registration shall not be charged
against the Holder). Each such Holder shall provide all information
reasonably requested by Issuer for inclusion in any registration statement to
be filed hereunder. If requested by any such Holder in connection with such
registration, Issuer shall become a party to any underwriting agreement
relating to the sale of such shares, but only to the extent of obligating
itself in respect of representations, warranties, indemnities and other
agreements customarily included in such underwriting agreements for the
Issuer. Upon receiving any request under this Section 6 from any Holder,
Issuer agrees to send a copy thereof to any other person known to Issuer to
be entitled to registration rights under this Section 6, in each case by
promptly mailing the same, postage prepaid, to the address of record of the
persons entitled to receive such copies. Holder shall not obligated to pay,
liable for or otherwise bear any payments, fees or expenses associated with
any registration contemplated by this Section 6, all of which such payments,
fees or expenses shall be borne by the Issuer.
(b) The Issuer will indemnify and hold harmless Grantee, any underwriter
(as defined in the Securities Act) for Grantee, and each person, if any, who
controls Grantee or such underwriter (within the meaning of the Securities
Act) from and against any and all loss, damage, liability, cost and expense
to which Grantee or any such underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses,
damages, liabilities, costs or expenses arise out of or are caused by any
untrue statement or alleged untrue statement of any material fact contained
in such registration statement, any prospectus or preliminary prospectus
contained therein 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, in light of the circumstances in which they were made, not
misleading; provided, however, that the Issuer will not be liable in any such
case to the extent that any such loss, damage, liability, cost or expense
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with
information furnished by Grantee, such underwriter or such controlling person
in writing specifically for use in the preparation thereof.
7. (a) Upon the occurrence of a Triggering Event that occurs prior to an
Exercise Termination Event, (i) at the request of the Holder, delivered
within 30 days after such occurrence (or such later period as provided in
Section 8 or the last sentence of Section 2(e), Issuer (or any successor
thereto) shall repurchase the Option from the Holder at a price (the "Option
Repurchase Price") equal to the amount by which (A) the market/offer price
(as defined below) exceeds (B) the Option Price, multiplied by the number of
shares for which this Option may then be exercised and (ii) at the request of
the owner of Option Shares from time to time (the "Owner"), delivered within
30 days after such occurrence (or such later period as provided in Section
8), Issuer shall repurchase such number of the Option Shares from the Owner
as the Owner shall designate at a price (the "Option Share Repurchase Price")
equal to the market/offer price multiplied by the number of Option Shares so
designated. The term "market/offer price" shall mean the highest of (i) the
highest price per share of Common Stock at which a tender offer or exchange
offer therefor has been made, (ii) the highest price per share of Common
Stock to be
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<PAGE>
paid by any third party pursuant to an agreement with Issuer, (iii) the
average of the Closing Price of the Common Stock of Issuer for the ten days
preceding the Triggering Event. In determining the market/offer price, the
value of consideration other than cash, to the extent consideration other
than cash is accepted by the Holder or the Owner, shall be determined by a
nationally recognized investment banking firm selected by the Holder or
Owner, as the case may be.
(b) The Holder and the Owner, as the case may be, may exercise its right
to require Issuer to repurchase the Option and any Option Shares pursuant to
this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the
Holder or the Owner, as the case may be, elects to require Issuer to
repurchase this Option and/or the Option Shares in accordance with the
provisions of this Section 7. As promptly as practicable, and in any event
within five business days after the surrender of the Option and/or
certificates representing Option Shares and the receipt of such notice or
notices relating thereto, Issuer shall deliver or cause to be delivered to
the Holder the Option Repurchase Price and/or to the Owner the Option Share
Repurchase Price therefor or the portion thereof that Issuer is not then
prohibited under applicable law and regulation from delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing
the Option and/or the Option Shares in full, Issuer shall immediately so
notify the Holder and/or the Owner and thereafter deliver or cause to be
delivered, from time to time, to the Holder and/or the Owner, as appropriate,
the portion of the Option Repurchase Price and the Option Share Repurchase
Price, respectively, that it is no longer prohibited from delivering, within
five business days after the date on which Issuer is no longer so prohibited;
provided, however, that if Issuer at any time after delivery of a notice of
repurchase pursuant to paragraph (b) of this Section 7 is prohibited under
applicable law or regulation, or as a consequence of administrative policy,
from delivering to the Holder and/or the Owner, as appropriate, the Option
Repurchase Price and the Option Share Repurchase Price, respectively, in full
(and Issuer hereby undertakes to use its best efforts to obtain all required
regulatory and legal approvals and to file any required notices as promptly
as practicable in order to accomplish such repurchase), the Holder or Owner
may revoke its notice of repurchase of the Option or the Option Shares either
in whole or to the extent of the prohibition, whereupon, in the latter case,
Issuer shall promptly (i) deliver to the Holder and/or the Owner, as
appropriate, that portion of the Option Repurchase Price or the Option Share
Repurchase Price that Issuer is not prohibited from delivering; and (ii)
deliver, as appropriate, either (A) to the Holder, a new Stock Option
Agreement evidencing the right of the Holder to purchase that number of
shares of Common Stock obtained by multiplying the number of shares of Common
Stock for which the surrendered Stock Option Agreement was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Option Repurchase Price less the portion thereof theretofore
delivered to the Holder and the denominator of which is the Option Repurchase
Price, or (B) to the Owner, a certificate for the Option Shares it is then so
prohibited from repurchasing. If an Exercise Termination Event shall have
occurred prior to the date of the notice by Issuer described in the first
sentence of this subsection (c), or shall be scheduled to occur at any time
before the expiration of a period ending on the thirtieth day after such
date, the Holder shall nonetheless have the right to exercise the Option
until the expiration of such 30 day period.
8. The 30-day period for exercise of certain rights under Sections 2, 6,
7, and 11 shall be extended: (i) to the extent necessary to obtain all
regulatory approvals for the exercise of such rights, and for the expiration
of all statutory waiting periods provided such approvals are obtained within
9 months of the submission of an application by the Holder or Grantee; and
(ii) to the extent necessary to avoid liability under Section 16(b) of the
Exchange Act by reason of such exercise.
9. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part
of Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly
executed and delivered by Issuer. This Agreement is the valid and legally
binding obligation of Issuer, enforceable against Issuer in accordance with
its terms.
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<PAGE>
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof
through the termination of this Agreement in accordance with its terms will
have reserved for issuance upon the exercise of the Option, that number of
shares of Common Stock equal to the maximum number of shares of Common Stock
at any time and from time to time issuable hereunder, and all such shares,
upon issuance pursuant hereto, will be duly authorized, validly issued, fully
paid, nonassessable, and will be delivered free and clear of all claims,
liens, encumbrance and security interests and not subject to any preemptive
rights.
(c) The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, conflict with,
or result in any violation pursuant to any provisions of the Certificate of
Incorporation or by-laws of Issuer or any Subsidiary of Issuer or, subject to
obtaining any approvals or consents contemplated hereby, result in any
violation of any loan or credit agreement, note, mortgage, indenture, lease,
Plan or other agreement, obligation, instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Issuer or any Subsidiary of Issuer or their
respective properties or assets which Violation would have a Material Adverse
Effect on Issuer.
(d) Issuer reaffirms with respect to this Agreement and the transactions
contemplated hereby the representations and warranties contained in Section
2.01 of the Merger Agreement.
10. Grantee hereby represents and warrants to Issuer as follows:
(a) Grantee has all requisite corporate power and authority to enter into
this Option Agreement and consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the
Grantee. This Agreement has been duly executed and delivered by
Grantee.
(b) This Option is not being and any shares or other securities acquired
by Grantee upon exercise of the Option will not be acquired with a
view to the public distribution thereof and will not be transferred or
otherwise disposed of except in compliance with the Securities Act.
11. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to
any other person, without the express written consent of the other party,
except that in the event a subsequent Triggering Event shall have occurred
prior to an Exercise Termination Event, Grantee, subject to the express
provisions hereof, may assign in whole or in part its rights and obligations
hereunder within 30 days following such subsequent Triggering Event (or such
later period as provided in Section 8).
12. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including without limitation applying to the Federal Deposit
Insurance Corporation for approval to acquire the shares issuable hereunder,
but Grantee shall not be obligated to apply to state banking authorities for
approval to acquire the shares of Common Stock issuable hereunder until such
time, if ever, as it deems appropriate to do so.
13. Notwithstanding anything to the contrary herein, in the event that the
Holder or Owner or any Related Person thereof is a person making without the
prior written consent of Issuer an offer or proposal to engage in an
Acquisition Transaction (other than the transaction contemplated by the
Merger Agreement), then (i) in the case of a Holder or any Related Person
thereof, the Option held by it shall immediately terminate and be of no
further force or effect, and (ii) in the case of an Owner or any Related
Person thereof, the Option Shares held by it shall be immediately
repurchasable by Issuer at the Option Price. A Related Person of a Holder or
Owner means any Affiliate (as defined in Rule 12b-2 of the rules and
regulations under the Exchange Act) of the Holder or Owner and any person
that is the beneficial owner of 20% or more of the voting power of the Holder
or Owner, as the case may be.
14. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
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<PAGE>
15. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Holder is not permitted to acquire the full number
of shares of Common Stock provided in Section 1(a) hereof (as adjusted
pursuant to Section 1(b) or Section 5 hereof), it is the express intention of
Issuer to allow the Holder to acquire or to require Issuer to repurchase such
lesser number of shares as may be permissible, without any amendment or
modification hereof.
16. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person,
by cable, telegram, telecopy or telex, or by registered or certified mail
(postage prepaid, return receipt requested) at the respective addresses of
the parties set forth in the Merger Agreement.
17. This Agreement shall be governed by and construed in accordance with
the laws of the State of New Jersey, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
18. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute
one and the same agreement.
19. Except as otherwise expressly provided herein or in the Merger
Agreement, the Issuer shall bear and pay all costs and expenses incurred by
it or the Grantee, Holder or Owner or on their behalf in connection with the
transactions contemplated hereunder, including fees and expenses of their own
financial consultants, investment bankers, accountants and counsel.
20. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties
with respect to the transactions contemplated hereunder and supersedes all
prior arrangements or understandings with respect thereof, written or oral.
The terms and conditions of this Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective successors except as assigns, any rights, remedies obligations or
liabilities under or by reason of this Agreement, except as expressly
provided herein. Any provision of this Agreement may be waived at any time by
the party that is entitled to the benefits of such provision. This Agreement
may not be modifiedd, amended, altered or supplemented except upon the
execution and delivery of a written agreement executed by the parties hereto.
21. In the event of any exercise of the Option by Grantee, Issuer and
Grantee shall execute and deliver all other documents and instruments and
take all other action that may be reasonably necessary in order to consummate
the transactions provided for by such exercise.
22. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
IN WITNESS WHEREOF, Collective Bancorp, Inc. and Continental
Bancorporation have caused this Agreement to be signed by their respective
officers thereunto duly authorized, all as of the date first written above.
[Signatures are on the following page.]
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COLLECTIVE BANCORP, INC.
By: /s/ Thomas H. Hamilton
---------------------------------
Thomas H. Hamilton
Chairman and Chief Executive Officer
CONTINENTAL BANCORPORATION
By: /s/William Steinberg
---------------------------------
William Steinberg
Chairman
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<PAGE>
CONTINENTAL BANCORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS AUGUST 28, 1996
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints William Steinberg and
Richard H. Hineline, and each of them, as attorneys and proxies of the
undersigned, each with full power of substitution, for and in the name, place
and stead of the undersigned, to appear at the Annual Meeting of Shareholders
of Continental Bancorporation ("the Company") to be held on the 28th day of
August, 1996, and at any postponement or adjournment thereof, and to vote all
of the shares of Common Stock of the Company which the undersigned is
entitled to vote, with all the powers and authority the undersigned would
possess if personally present. The undersigned hereby directs that this proxy
be voted as follows:
1. To approve and adopt an Agreement and Plan of Merger and a related Plan of
Merger, pursuant to which, among other things, (a) CBAC Corp., a newly
formed subsidiary of Collective Bancorp, Inc., will be merged with and
into the Company and immediately thereafter the Company will be merged
with and into Collective Bancorp, Inc. and, as a result thereof, the
Company's bank subsidiary, Continental Bank of New Jersey, will become a
subsidiary of Collective Bancorp, Inc., and (b) each outstanding share of
the Common Stock of the Company (other than shares held by Collective
Bancorp, Inc. and its affiliates) will be converted into the right to
receive $5.00 in cash, all as more fully described in the accompanying
Proxy Statement:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. [ ] To elect all eight nominees listed below for one year terms, as
described in the accompanying Proxy Statement. (To withhold authority to
vote for all eight nominees listed below check this box |B(.)
Stanley W. Adleman Richard H. Hineline
Ira Albom Mark Rosen
David F. Dierker William Steinberg
F. Budd Hineline, Jr. Vito A. Valecce
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.
(-----------------------)
(TO BE DATED AND SIGNED ON REVERSE SIDE HEREOF)
THIS PROXY WILL, WHEN PROPERLY EXECUTED, BE VOTED AS DIRECTED BY THE
SHAREHOLDER. IF NO DIRECTIONS TO THE CONTRARY ARE INDICATED IN THE BOXES
PROVIDED, THE PERSONS NAMED HEREIN INTEND TO VOTE TO APPROVE THE MERGER WITH
COLLECTIVE BANCORP, INC. AND TO ELECT ALL EIGHT NOMINEES FOR DIRECTOR LISTED
ON THE REVERSE SIDE HEREOF.
THIS PROXY CONFERS CERTAIN DISCRETIONARY AUTHORITY DESCRIBED IN THE PROXY
STATEMENT. A MAJORITY OF SAID ATTORNEYS AND PROXIES PRESENT AT SAID MEETING
(OR IF ONLY ONE SHALL BE PRESENT, THEN THAT ONE) MAY EXERCISE ALL OF THE
POWERS HEREUNDER. THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE
COMPANY'S PROXY STATEMENT, DATED JULY 24, 1996, THE COMPANY'S 1995 ANNUAL
REPORT TO SHAREHOLDERS AND THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR
THE QUARTER ENDED MARCH 31, 1996.
Dated:__________________________, 1996
(Please date this proxy)
________________________________(SEAL)
(Shareholder's Signature)
________________________________(SEAL)
(Shareholder's Signature)
It would be helpful if you signed your
name or names exactly as it appears
hereon, indicating any official position
or representative capacity.
