SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MarkOne)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934
For the quarterly period ended June 30, 1998
-------------------------------------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-18764
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PULSE BANCORP, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-3016360
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
6 JACKSON ST., SOUTH RIVER, N.J. 08882
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 732-257-2400
-----------------------------
N/A
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
Indicate by check whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
---------- ----------
The number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date August 3, 1998
--------------
CLASS OUTSTANDING
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$1.00 par value common stock 3,120,300 Shares
<PAGE>
PULSE BANCORP, INC. AND SUBSIDIARIES
Index
<TABLE>
<CAPTION>
Page Number
<S> <C> <C>
PART I - CONSOLIDATED FINANCIAL INFORMATION
Consolidated Statements of Financial Condition at September 30,
1997 and June 30, 1998 (unaudited) 1
Consolidated Statements of Income for the Three and Nine Months
Ended June 30, 1997 and 1998 (unaudited) 2
Consolidated Statements of Cash Flows for the Nine Months Ended
June 30, 1997 and 1998 (unaudited) 3
Notes to Consolidated Financial Statements 4-6
Managements Discussion and Analysis of Financial Condition and
Results of Operations 7-12
Quantitative and Qualitative Disclosures about Market Risk 12
PART II - OTHER INFORMATION 13-14
SIGNATURES 15
</TABLE>
<PAGE>
PULSE BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
September 30, June 30,
1997 1998
ASSETS (Unaudited)
- ------ ---------------------------------
<S> <C> <C>
Cash and amounts due from depository institutions .................................. $ 3,550,908 $ 3,928,791
Federal funds sold ................................................................. 11,925,000 31,300,000
------------------------------
Total cash and cash equivalents ................................................ 15,475,908 35,228,791
Investment securities held to maturity; estimated fair value of
$96,386,850 and $71,702,115, respectively ........................................ 96,551,885 71,552,863
Mortgage backed securities held to maturity, net; estimated fair
value of $163,645,986 and $127,010,424, respectively ............................. 162,763,525 126,193,187
Investment securities available for sale ........................................... 60,741,955 111,838,330
Mortgage-backed securities available for sale ...................................... 53,393,335 40,357,595
Loans receivable, net .............................................................. 127,310,525 146,680,537
Premises & equipment, net .......................................................... 1,322,718 2,148,512
Real estate owned, net ............................................................. 136,491 1,338,999
Federal Home Loan Bank of New York stock, at cost .................................. 2,775,500 2,836,700
Interest receivable ................................................................ 4,584,337 5,075,730
Other assets ....................................................................... 959,530 850,721
------------------------------
Total assets .................................................................. $ 526,015,709 $ 544,101,965
==============================
LIABILITIES AND
- ---------------
STOCKHOLDERS' EQUITY
--------------------
Liabilities:
Deposits ........................................................................... $ 411,020,719 $ 434,646,229
Borrowings ......................................................................... 67,675,000 59,675,000
Advance payments by borrowers for taxes & insurance ................................ 805,394 892,984
Other liabilities .................................................................. 3,308,037 2,988,115
------------------------------
Total liabilities ............................................................. 482,809,150 498,202,328
------------------------------
Stockholders' Equity:
Preferred stock; authorized 5,000,000 shares; issued and
outstanding - none .............................................................. -- --
Common stock; par value $1.00; authorized 10,000,000 shares;
4,112,128 shares issued and 3,050,048 outstanding and
4,182,380 shares issued and 3,120,300 outstanding,
respectively .................................................................... 4,142,628 4,182,380
Paid in capital in excess of par value ............................................. 12,293,206 12,755,740
Retained earnings- substantially restricted ........................................ 42,676,884 44,940,852
Unrealized gain on securities available for sale, net of tax ....................... 771,341 698,165
Treasury Stock; at cost; 1,062,080 common shares, respectively ..................... (16,677,500) (16,677,500)
-----------------------------
Total stockholders' equity .................................................... 43,206,559 45,899,637
-----------------------------
Total liabilities and stockholders' equity..................................... $526,015,709 $ 544,101,965
=============================
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
PULSE BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
--------------------------------------------------------------------
1997 1998 1997 1998
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income:
Loans ................................................ $2,678,398 $2,967,222 $8,386,290 $8,571,421
Mortgage-backed securities............................ 3,753,811 2,942,526 10,694,342 9,716,981
Investments and other interest-earning assets......... 2,653,990 3,454,560 7,863,599 9,716,476
--------------------------------------------------------------------
Total interest income.............................. 9,086,199 9,364,308 26,944,231 28,004,878
--------------------------------------------------------------------
Interest expense:
Deposits.............................................. 4,734,047 4,950,323 13,836,004 14,537,383
Borrowings............................................ 913,435 895,245 2,804,324 2,991,584
--------------------------------------------------------------------
Total interest expense............................. 5,647,482 5,845,568 16,640,328 17,528,967
--------------------------------------------------------------------
Net interest income...................................... 3,438,717 3,518,740 10,303,903 10,475,911
--------------------------------------------------------------------
Net interest income after provision for loan losses...... 3,438,717 3,518,740 10,303,903 10,475,911
--------------------------------------------------------------------
Non-interest income:
Other fees and service charges on loans............... 79,734 76,672 222,990 216,509
Gain (loss) from real estate operations............... 5,284 (21,286) 82,595 (27,374)
Miscellaneous......................................... 113,079 20,001 156,112 60,691
--------------------------------------------------------------------
Total non-interest income.......................... 198,097 75,387 461,697 249,826
--------------------------------------------------------------------
Non-interest expenses:
Salaries and employee benefits........................ 690,984 755,782 2,015,781 2,239,002
Occupancy expense..................................... 55,842 106,420 207,504 318,472
Equipment expense..................................... 132,179 166,846 413,602 473,215
Advertising........................................... 118,927 74,755 312,991 291,413
Federal deposit insurance premium..................... 64,591 64,142 304,747 192,680
Miscellaneous......................................... 270,799 238,694 878,332 810,332
--------------------------------------------------------------------
Total non-interest expenses........................ 1,333,322 1,406,639 4,132,957 4,325,114
--------------------------------------------------------------------
Income before income taxes............................... 2,303,492 2,187,488 6,632,643 6,400,623
Income taxes............................................. 825,000 784,000 2,391,372 2,272,756
--------------------------------------------------------------------
Net income......................................... $1,478,492 $1,403,488 $4,241,271 $4,127,867
====================================================================
Basic earnings per common share.......................... $0.48 $0.45 $1.38 $1.33
====================================================================
Diluted earnings per common share........................ $0.47 $0.43 $1.35 $1.28
====================================================================
Dividends per common share............................... $0.175 $0.20 $0.525 $0.60
====================================================================
Diluted common shares outstanding........................ 3,171,827 3,242,332 3,145,585 3,219,020
====================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
PULSE BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
--------------------------------------
1997 1998
--------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income....................................................................... $4,241,271 $4,127,867
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation of premises and equipment......................................... 110,973. 135,759
Provision for losses on real estate owned...................................... 32,850 -
Amortization of premiums, discounts and fees, net.............................. (85,115) (79,217)
Gain on sale of real estate owned.............................................. (124,951) -
Increase in interest receivable................................................ (196,813) (491,393)
Decrease in other assets....................................................... 1,313,984 108,809
Decrease in other liabilities.................................................. (829,088) (319,922)
--------------------------------------
Net cash provided by operating activities.................................... 4,463,111 3,481,903
--------------------------------------
Cash flows from investing activities:
Proceeds from maturities and calls of investment securities held to maturity... 13,002,500 42,010,000
Purchase of investment securities held to maturity............................. (10,000,000) (17,000,000)
Principal repayments of investment securities available for sale....... - 31,268,332
Purchase of investment securities available for sale........................... - (82,341,875)
Purchase of mortgage-backed securities held to maturity........................ (35,089,594) (1,007,187)
Purchase of mortgage-backed securities available for sale...................... (19,960,979) -
Principal repayments on mortgage-backed securities held to maturity............ 26,758,186 37,558,562
Principal repayments on mortgage-backed securities available for sale.......... 4,524,286 13,041,412
Net decrease (increase) in loans receivable.................................... 14,624,578 (21,310,045)
Additions to premises and equipment............................................ (64,325) (961,553)
Proceeds from sale of real estate owned........................................ 2,419,825 723,048
Purchase of Federal Home Loan Bank of New York Stock........................... (232,400) (61,200)
--------------------------------------
Net cash (used in) provided by investing activities.......................... (4,017,923) 1,919,494
--------------------------------------
Cash flows from financing activities:
Net increase in deposits....................................................... 18,422,804 23,625,510
Net decrease in borrowings..................................................... (3,375,000) (8,000,000)
Increase in advance payments by borrowers
for taxes and insurance...................................................... 77,903 87,590
Issuance of common stock....................................................... 151,148 502,286
Cash dividends paid............................................................ (1,606,788) (1,863,900)
--------------------------------------
Net cash provided by financing activities.................................... 13,670,067 14,351,486
--------------------------------------
Net increase in cash and cash equivalents.......................................... 14,115,255 19,752,883
Cash and cash equivalents - beginning ............................................. 4,749,883 15,475,908
--------------------------------------
Cash and cash equivalents - ending................................................. $18,865,138 $35,228,791
======================================
Supplemental schedule of non-cash investing activities:
Transfer of loans receivable to real estate owned............................ $208,500 $1,950,508
======================================
Cash paid during the period for:
Income taxes................................................................. $1,000,000 $2,314,140
======================================
Interest..................................................................... $16,580,635 $14,542,995
======================================
</TABLE>
See accompanying notes to consolidated financial statements.
3.
<PAGE>
PULSE BANCORP, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements
1. PRINCIPLES OF CONSOLIDATION
- ------------------------------
The consolidated financial statements include the accounts of Pulse Bancorp,
Inc. (the "Corporation") and its wholly owned subsidiaries, Pulse Savings Bank,
Pulse Insurance Services, Pulse Real Estate, and Pulse Investment, Inc. The
Corporation's business is conducted principally through the Bank. All
significant intercompany accounts and transactions have been eliminated in
consolidation
2. BASIS OF PRESENTATION
- ------------------------
The accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-Q and, therefore, do not include
information or footnotes necessary for a complete presentation of consolidated
financial condition, results of operations, and cash flows in conformity with
generally accepted accounting principles. However, all adjustments, consisting
only of normal recurring adjustments, which, in the opinion of management, are
necessary for fair presentation of the consolidated financial statements, have
been included. The results of operations for the nine months ended June 30, 1998
are not necessarily indicative of the results which may be expected for the
entire fiscal year.
3. LOANS RECEIVABLE, NET
- ------------------------
<TABLE>
<CAPTION>
September 30, June 30,
1997 1998
------------------------------------
<S> <C> <C>
Real Estate Mortgage:
One-to-four family........................................................... $77,761,695 $90,000,823
Multi family................................................................. 15,088,127 13,093,075
Commercial................................................................... 22,321,707 23,484,739
------------------------------------------
115,171,529 126,578,637
------------------------------------------
Construction Loans.............................................................. 219,256 185,600
Consumer:
Home equity.................................................................. 14,348,020 21,925,631
Passbook or certificate...................................................... 229,173 189,010
------------------------------------------
14,577,193 22,114,641
------------------------------------------
Total loans............................................................. 129,967,978 148,878,878
------------------------------------------
Less: Allowance for loan losses................................................. 2,357,396 1,980,743
Deferred loan fees and discounts....................................... 300,057 217,598
------------------------------------------
2,657,453 2,198,341
------------------------------------------
$127,310,525 $146,680,537
==========================================
</TABLE>
<TABLE>
<CAPTION>
An analysis of the allowance for loan losses is as follows: Nine Months Ended
June 30,
------------------------------------------
1997 1998
---- ----
<S> <C> <C>
Balance-beginning.......................................... $2,458,777 $2,357,396
Provisions charged to operations........................... - -
Losses charged to allowance................................ (101,381) (376,653)
------------------------------------------
Balance-ending............................................. $2,357,396 $1,980,743
==========================================
</TABLE>
4
<PAGE>
PULSE BANCORP, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements
4. INVESTMENT SECURITIES
- ------------------------
<TABLE>
<CAPTION>
September 30, 1997
-----------------------------------------------------------------------------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Held To Maturity Value Gains Losses Value
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government (including agencies) $95,954,388 $313,494 $503,532 $95,764,350
Obligations of state and political
subdivisions 597,497 25,003 - 622,500
-----------------------------------------------------------------------------------
$96,551,885 $338,497 $503,532 $96,386,850
===================================================================================
Available For Sale
U.S. Government Agency Debentures $59,822,275 $333,264 $237,084 $59,918,455
Equity securities 800,000 23,500 - 823,500
-----------------------------------------------------------------------------------
$60,622,275 $356,764 $237,084 $60,741,955
===================================================================================
</TABLE>
<TABLE>
<CAPTION>
June 30, 1998
-----------------------------------------------------------------------------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Held To Maturity Value Gains Losses Value
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government (including agencies) $70,965,344 $209,734 $81,268 $71,093,810
Obligations of state and political 587,519 20,786 - 608,305
subdivisions
-----------------------------------------------------------------------------------
$71,552,863 $230,520 $81,268 $71,702,115
===================================================================================
Available For Sale
U.S. Government Agency Debentures $108,886,982 $613,689 $58,680 $109,441,991
Equity securities 2,320,000 81,188 4,849 2,396,339
-----------------------------------------------------------------------------------
$111,206,982 $694,877 $63,529 $111,838,330
===================================================================================
</TABLE>
5
<PAGE>
PULSE BANCORP, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements
5. MORTGAGE-BACKED SECURITIES
- ------------------------------
<TABLE>
<CAPTION>
September 30, 1997
------------------------------------------------------------------------------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Held To Maturity Value Gains Losses Value
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Government National Mortgage Association $62,595,447 $1,404,217 - $63,999,664
Federal Home Loan Mortgage Corporation 35,726,553 409,980 265,291 35,871,242
Federal National Mortgage Association 30,556,079 182,409 $155,962 30,582,526
Collateralized mortgage obligations 33,885,446 1,836 $694,728 33,192,554
------------------------------------------------------------------------------------
$162,763,525 $1,998,442 $1,115,981 $163,645,986
====================================================================================
Available For Sale
Government National Mortgage Association $33,217,483 $774,300 $ - $33,991,783
Federal Home Loan Mortgage Corporation 9,473,817 189,614 - 9,663,431
Federal National Mortgage Association 9,616,497 121,624 - 9,738,121
------------------------------------------------------------------------------------
$52,307,797 $1,085,538 $ - $53,393,335
====================================================================================
</TABLE>
<TABLE>
<CAPTION>
June 30, 1998
------------------------------------------------------------------------------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Held To Maturity Value Gains Losses Value
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Government National Mortgage Association $47,783,762 $815,398 $35,915 $48,563,245
Federal Home Loan Mortgage Corporation 25,251,027 398,708 198,458 25,451,277
Federal National Mortgage Association 25,177,413 296,858 110,010 25,364,261
Collateralized mortgage obligations 27,980,985 1,462 350,806 27,631,641
------------------------------------------------------------------------------------
$126,193,187 $1,512,426 $695,189 $127,010,424
====================================================================================
Available For Sale
Government National Mortgage Association $24,397,515 $285,884 $37,823 $24,645,576
Federal Home Loan Mortgage Corporation 8,350,833 213,417 - 8,564,250
Federal National Mortgage Association 7,149,711 57,160 59,102 7,147,769
------------------------------------------------------------------------------------
$39,898,059 $556,461 $96,925 $40,357,595
====================================================================================
</TABLE>
6. NET INCOME PER COMMON SHARE
- ------------------------------
The Corporation adopted SFAS No. 128 (SFAS 128) "Earnings per Share" as of
December 31, 1997 and basic earnings per common share has been calculated based
on the weighted average number of shares outstanding. Diluted earnings per share
includes common stock outstanding plus the shares that would be outstanding
assuming the exercise of dilutive stock options, all of which are considered to
be common stock equivalents. The number of shares that would be issued from the
exercise of stock options has been reduced by the number of shares that could
have been purchased from the proceeds at the average price of the Corporation's
common stock. Earnings per share data for the three and nine months ending June
30, 1997 has been restated pursuant to the provisions of SFAS 128.
6.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Corporation may from time to time make written or oral "forward-looking
statements", including statements contained in the Corporation's filings with
the Securities and Exchange Commission (including this quarterly report on Form
10-Q and the exhibits thereto), in its reports to stockholders and in other
communications by the Corporation, which are made in good faith by the
Corporation pursuant to the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995.
These forward-looking statements involve risks and uncertainties, such as
statements of the Corporation's plans, objectives, expectations, estimates and
intentions, that are subject to change based on various important factors (some
of which are beyond the Corporation's control). The following factors, among
others, could cause the Corporation's financial performance to differ materially
from the plans, objectives, expectations, estimates and intentions expressed in
such forward-looking statements: the strength of the United States economy in
general and the strength of the local economies in which the Corporation
conducts operations; the effect of, and changes in, trade, monetary and fiscal
policies and laws, including interest rate policies of the Board of Governors of
the Federal Reserve System, inflation, interest rate, market and monetary
fluctuations; the timely development of and acceptance of new products and
services of the Corporation and the perceived overall value of these products
and services by users, including the features, pricing and quality compared to
competitors' products and services; the willingness of users to substitute
competitors' products and services for the Corporation's products and services;
the success of the Corporation in gaining regulatory approval of its products
and services, when required; the impact of changes in financial services' laws
and regulations (including laws concerning taxes, banking, securities and
insurance); technological changes, acquisitions; changes in consumer spending
and savings habits; and the success of the Corporation at managing the risks
involved in the foregoing.
The Corporation cautions that the foregoing list of important factors is not
exclusive. The Corporation does not undertake to update any forward-looking
statement, whether written or oral, that may be made from time to time by or on
behalf of the Corporation.
FINANCIAL CONDITION
The Corporation's assets at June 30, 1998 totaled $544.1 million, which
represents an increase of $18.1 million or 3.4% when compared with $526.0
million at September 30, 1997. Total deposits at June 30, 1998 increased $23.6
million or 5.8% to $434.6 million when compared with $411.0 million at September
30, 1997. Investment securities held to maturity decreased $25.0 million or
25.9% to $71.6 million at June 30, 1998 when compared with $96.6 million at
September 30, 1997. Investment securities available for sale increased $51.1
million or 84.1% to $111.8 million at June 30, 1998 when compared to $60.7
million at September 30, 1997. The increase was a result of purchases of $82.3
million, which more than offset principal repayments of $31.2 million.
Mortgage-backed securities held to maturity decreased by $36.6 million or 22.5%
to $126.2 million at June 30, 1998 when compared to $162.8 million at September
30, 1997. The decrease in mortgage-backed securities held to maturity was
primarily due to repayments of $37.6 million, which more than offset purchases
of $1.0 million. Mortgage-backed securities available for sale decreased $13.0
million or 24.4% to $40.4 million at June 30, 1998 compared to $53.4 million at
September 30, 1997. The decrease in mortgage-backed securities available for
sale was due to principal repayments of $13.0 million. Loans receivable
increased $19.4 million or 15.2% to $146.7 million at June
7
<PAGE>
30, 1998 when compared to $127.3 million at September 30, 1997. The increase was
a result of loan originations of $29.8 million and the purchases of 1-4 family
loans totaling $4.7 million, which more than offset principal repayments of
$13.1 million, along with the transfer of $2.0 million in loans to real estate
owned. Other liabilities decreased by $320,000 or 9.7% to $3.0 million at June
30, 1998 compared to $3.3 million at September 30, 1997. The decrease was
primarily due to a decrease in the Corporation's income tax liability. Other
assets decreased $109,000 to $851,000 at June 30, 1998. Real estate owned, which
consists of real estate acquired in settlement of loans, totaled $1.3 million
and $136,000 at June 30, 1998 and September 30, 1997, respectively. The increase
was due to three non-accrual multi-family mortgage loans totaling $2.0 million
that transferred during the period, which more than offset two sales that
resulted in proceeds of approximately $1.0 million. Stockholders' equity
amounted to $45.9 million and $43.2 million at June 30, 1998 and September 30,
1997, respectively.
Results of operations for three months ended June 30, 1998 and 1997
Net income decreased $75,000 or 5.1% to $1.40 million for the three months ended
June 30, 1998 compared to $1.48 million for the same 1997 period. The decrease
was attributable to increases in interest and non-interest expenses, along with
a decrease in non-interest income, which more than offset an increase in
interest income. Interest income on loans during the three months ended June 30,
1998 increased $289,000 or 10.8% to $2.9 million when compared to $2.7 million
during the same 1997 period. The increase during the 1998 period resulted from
an increase in the average balance of loans outstanding, which more than offset
a decrease in the average yield on the loan portfolio. Interest on
mortgage-backed securities decreased by $811,000 or 21.7% during the three
months ended June 30, 1998 when compared with the same 1997 period as a result
of decreased balances. Interest earned on investments and other interest-earning
assets increased $801,000 or 30.2% to $3.5 million during the three months ended
June 30, 1998 when compared to $2.7 million during the same 1997 period. The
increase during the 1998 period resulted primarily from an increase in the
average balance of investments and other interest-earning assets outstanding.
Interest on deposits increased $216,000 or 4.6% to $5.0 million for the three
months ended June 30, 1998 compared to $4.7 million during the same 1997 period
primarily as a result of increased deposits outstanding. Interest on borrowings
was $895,000 for the three months ended June 30, 1998 compared with $913,000 for
the same 1997 period. The decrease was due to a decrease in the Bank's cost of
borrowing, along with a lower average balance outstanding of securities sold
under repurchase agreements during the 1998 period.
During the three months ended June 30, 1998 and 1997 the Bank did not make any
provisions for loan losses. Although no provisions were made, as management
believes the levels of reserves were adequate, no assurances can be made that
future increases to the reserve will not be necessary. The allowance for loan
losses is based on management's evaluation of the risk inherent in its loan
portfolio and gives due consideration to the changes in general market
conditions and in the nature and volume of loan activity. At June 30, 1998 and
September 30, 1997, the Bank's non-performing loans, which includes loans
delinquent 90 days or more, totaled $1.4 million and $1.7 million, respectively.
The allowance for loan losses amounted to $2.0 million or 1.35% of total loans
at June 30, 1998 and $2.4 million or 1.82% of total loans at September 30, 1997.
Non-interest income decreased $123,000 or 61.9% to $75,000 during the three
months ended June 30,
8
<PAGE>
1998 when compared with $198,000 during the same 1997 period. Miscellaneous
income and income from real estate operations decreased by $93,000 and $26,000,
respectively. The decrease in miscellaneous income was due to a settlement of
$100,000 the bank recorded in the 1997 period in exchange for the release of
its' first mortgage lein on a residential property which was deemed to be an
environmental hazard.
Non-interest expenses increased $73,000 or 5.5% to $1.4 million during the three
months ended June 30, 1998 when compared with $1.3 million during the same 1997
period. During the three months ended June 30, 1998, salaries and employee
benefits, occupancy, and equipment miscellaneous increased by $65,000, $51,000
and $35,000, respectively. The increase in salaries and employee benefits
resulted from an increase in the number of full-time equivalent staff required
due to the addition of our East Brunswick office, along with a general increase
in compensation levels. The increases in occupancy and equipment were also the
result of the additional branch office.
Income tax expense totaled $784,000 and $825,000 during the three months ended
June 30, 1998 and 1997, respectively. The decrease was primarily due to a
decrease in taxable income.
Results of operations for nine months ended June 30, 1998 and 1997
Net income decreased $113,000 or 2.7% to $4.13 million for the nine months ended
June 30, 1998 compared to $4.24 million for the same 1997 period. The decrease
was attributable to an increase in interest and non-interest expenses, along
with a decrease in non-interest income, which more than offset an increase in
interest income. Interest income on loans during the nine months ended June 30,
1998 increased $185,000 or 2.2% to $8.6 million when compared to $8.4 million
during the same 1997 period. The increase during the 1998 period resulted from
an increase in the average balance of loans outstanding. Interest on
mortgage-backed securities decreased by $977,000 or 9.1% during the nine months
ended June 30, 1998 when compared with the same 1997 period as a result of
decreased balances. Interest earned on investments and other interest-earning
assets increased $1.9 million or 23.6% to $9.7 million during the nine months
ended June 30, 1998 when compared to $7.9 million during the same 1997 period.
The increase during the 1997 period resulted primarily from an increase in the
average balance of investments and other interest-earning assets outstanding.
Interest on deposits increased $701,000 or 5.1% to $14.5 million for the nine
months ending June 30, 1998 compared to $13.8 million during the same 1997
period primarily as a result of increased deposits outstanding along with an
increase in the bank's cost of funds. Interest on borrowings was $3.0 million
for the nine months ended June 30, 1998 compared with$2.8 million for the same
1997 period. The increase
was due to a higher average balance outstanding of securities sold under
repurchase agreements during the 1997 period, along with an increase in the
Bank's cost of borrowing.
During the nine months ended June 30, 1998 and 1997 the Bank did not make any
provisions for loan losses. Although no provisions were made, as management
believes the levels of reserves were adequate, no assurances can be made that
future increases to the reserve will not be necessary. The allowance for loan
losses is based on management's evaluation of the risk inherent in its loan
portfolio and gives due consideration to the changes in general market
conditions and in the nature and volume of loan activity. At June 30, 1998 and
September 30, 1997, the Bank's non-performing loans, which includes loans
delinquent 90 days or more, totaled $1.4 million and $1.7 million, respectively.
The allowance for loan losses amounted to $2.0 million or 1.35% of total loans
at June 30, 1998 and $2.4 million or 1.82% of total loans at September 30, 1997.
9
<PAGE>
Non-interest income decreased $212,000 or 45.9% to $250,000 during the nine
months ended June 30, 1998 when compared with $462,000 during the same 1997
period. The decrease during the 1998 period resulted from decreases in income
from real estate operations, miscellaneous and other fees and service charges on
loans of $110,000, $95,000 and 6,000, respectively. The decrease in income from
real estate operations was mostly due to a gain of $119,000 recorded on a sale
during the 1997 period. The decrease in miscellaneous income was due to a
settlement of $100,000 the bank recorded in the 1997 period in exchange for the
release of its' first mortgage lein on a residential property which was deemed
to be an environmental hazard.
Non-interest expenses increased $192,000 or 4.7% to $4.3 million during the nine
months ended June 30, 1998 when compared with $4.1 million during the same 1997
period. During the nine months ended June 30, 1998, salaries and employee
benefits, occupancy, and equipment increased by $223,000, $111,000 and $60,000,
respectively, which more than offset decreases to federal deposit insurance,
advertising and miscellaneous expenses of $112,000, $68,000, and $22,000,
respectively. The increase in salaries and employee benefits resulted from an
increase in the number of full-time equivalent staff required due to the
addition of our East Brunswick office, along with a general increase in
compensation levels. Furthermore, the increases in occupancy and equipment
expenses were also the result of the new office. The large decrease in FDIC
insurance expense was a direct result of the lower insurance premiums that took
effect January 1, 1997 due to the recapitalization of the Savings Association
Insurance Fund.
Income tax expense totaled $2.3 million and $2.4 million during the nine months
ended June 30, 1998 and 1997, respectively. The decrease was primarily due to a
decrease in taxable income.
Year 2000
The Corporation has a year 2000 committee in place that is comprised of senior
management that is diligently working towards the remediation of any year 2000
problems with any of the Bank's internal or external computer systems. All
automated systems have been assessed and all third party vendors have been
contacted for their responses on the matter. Any vendor not responding to our
compliance efforts will have their system replaced with one that is year 2000
certified in the quarter ending December 31, 1998.
Most of the critical data processing of the Bank that could be impacted by this
problem is provided by a third party national service bureau. The service bureau
has advised the Bank that it conducted a thorough month-long test of its core
software system in May 1998 and has completed all changes necessary to ensure
its ability to process in the year 2000 and beyond. During the quarter ending
September 30, 1998, the Bank expects to test in a live environment, operating on
a date in the year 2000, the compatablity of the Bank's internal systems with
that of the service bureau's core system.
As of April 1998, the Bank had completed replacing all of its computers at a
cost of approximately $100,000. The replacement of these machines was a project
that was anticipated in the normal course of business, not just a result of the
year 2000.
The Bank continues to evaluate appropriate courses of corrective action. Based
on current analysis, the Bank does not expect additional expenses to have a
material effect on its financial position or results of operations. However,
despite our best efforts, factors outside our control could possibly weigh on
our ability to process data, possibly leading to an adverse impact on the Bank's
results of operations.
10
<PAGE>
Liquidity and Capital Resources
Liquidity is a measurement of the Bank's ability to generate sufficient cash
flow, in order to meet all current and future financial obligations and
commitments as they arise. The Bank adjusts its liquidity levels in order to
meet funding needs for deposit outflows, payment of real estate taxes from
escrow accounts on mortgage loans, repayments of borrowings, when applicable,
and loan funding commitments. The Bank also adjusts its liquidity level as
appropriate to meet its asset/liability objectives. The Bank's primary sources
of funds are deposits, amortization and prepayments of loan and mortgage- backed
securities principal, maturities of investment securities, and funds provided by
operations and short and medium term borrowings. While scheduled loan
amortization and maturing investment securities are a relatively predictable
source of funds, deposit flow and loan and mortgage-backed securities
prepayments are greatly influenced by market interest rates, economic conditions
and competition. The Bank manages the pricing of its deposits to maintain a
steady deposit balance. In addition, the Bank invests its excess funds in
federal funds and overnight deposits with the FHLB-NY which provides liquidity
to meet lending requirements. Federal funds sold at June 30, 1998 and September
30, 1997 totaled $31.3 million and $11.6 million, respectively. The Bank's
liquidity, represented by cash and cash equivalents, is a product of its
operating, investing and financing activities. These activities are summarized
as follows:
Nine months ended June 30,
--------------------------
1997 1998
--------------------------
(In Thousands)
Cash and cash equivalents- beginning $ 4,750 $ 15,476
--------------------
Operating activities:
Net income 4,241 4,128
Adjustments to reconcile net
income to net cash provided
by operating activities 222 (646)
--------------------
Net cash provided by operating activities 4,463 3,482
Net cash (used in) provided by investing activities (4,018) 1,919
Net cash provided by financing activities 13,670 14,352
--------------------
Net increase in cash and
cash equivalents 14,115 19,753
--------------------
Cash and cash equivalents- ending $ 18,865 $ 35,229
====================
Cash was generated by operating activities during the 1998 and 1997 periods. The
primary source of cash from operating activities during both periods was net
income. The primary sources and uses of investing activity of the Bank are
proceeds from net maturities and repayments and the purchase of investment and
mortgage-backed securities, net loan activity and from borrowing. Net loans
increased $19.4 million during the nine months ended June 30, 1998 compared to a
decrease of $14.6 million during the same 1997 period. During the nine months
ended June 30, 1998 and 1997, purchases of mortgage-backed securities totaled
$1.0 million and $55.1 million, respectively, and principal repayments totaled
$50.6 million and
11
<PAGE>
$31.3 million, respectively. During the nine months ended June 30, 1998 and
1997, purchases of investment securities totaled $99.3 million and $10.0
million, respectively, and maturities and calls totaled $73.3 million and $13.0
million, respectively. In addition to funding new loan production and the
purchase of investment and mortgage-backed securities through operations and
financing activities, these activities were also funded by principal repayments
on existing loans and mortgage-backed securities and also through short and
medium term borrowings.
The primary source of financing activities during the 1998 and 1997 periods was
from an increase in deposits outstanding amounting to $23.6 million and $18.4
million, respectively. Net borrowings decreased $8.0 million and $3.4 million
during 1998 and 1997, respectively. During the nine months ended June 30, 1998
and 1997, cash dividends of $1.86 million and $1.61 million, respectively, were
paid on the Corporation's common stock.
Liquidity management is both a daily and long-term function of business
management. Excess liquidity is generally invested in short-term investments,
such as federal funds and interest-bearing deposits. If the Bank requires funds
beyond its ability to generate them internally, borrowing agreements exist with
the FHLB-NY, which provides an additional source of funds.
The Bank anticipates that it will have sufficient funds available to meet its
current commitments to originate loans and to purchase mortgage-backed and
investment securities. At June 30, 1998, such outstanding commitments amounted
to $39.3 million. Certificates of deposit scheduled to mature in one year or
less, at June 30, 1998, totaled $246.2 million. Management believes that a
significant portion of such deposits will remain with the Bank.
The Bank is subject to regulatory capital requirements mandated by the Federal
Deposit Insurance Corporation ("FDIC"). The Bank is required to maintain minimum
regulatory capital ratios, defined by the FDIC as risk-based ratio capital (Tier
1 and Total) and leverage ratio capital. The following table presents the
minimum capital requirement ratios and the actual ratios as of June 30, 1998:
Requirement Actual Excess
----------------------------------------
Risk-based Capital
Tier 1 4.00% 24.84% 20.84%
Total 8.00% 26.01% 18.01%
Leverage ratio 4.00% 7.69% 3.69%
Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
12
<PAGE>
PULSE BANCORP, INC. AND SUBSIDIARY
Part II
ITEM 1. Legal Proceedings
- --------------------------
Not applicable.
ITEM 2. Changes in Securities
- ------------------------------
Not applicable.
ITEM 3. Defaults Upon Senior Securities
- ----------------------------------------
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
Not applicable
ITEM 5. Other Materially Important Events
- ------------------------------------------
On July 9, 1998 the Corporation signed a merger agreement with
First Source Bancorp, Inc. The merger is expected to occur during
December 1998. Following the merger, the Corporation will cease
to exist and stockholders of the Corporation will receive stock
of First Source Bancorp, Inc. in exchange of their stock of the
Corporation. Additional information about the merger, including
the method of determining the consideration to be paid to
stockholders of the Corporation, is contained in a Current Report
on Form 8-K filed by the Corporation with the Securities and
Exchange Commission (the "Commission") during July 1998. Although
the Merger Agreement imposes certain operating restrictions on
the Corporation through the date of merger, these restrictiions
do not impede the ability of the Corporation to function as an
operating company and the Corporation does not expect that its
financial condition, liquidity and results of operations,
including those of the Bank, will be materially impacted prior to
the merger as a result of these restrictions. The merger is
subject to regulatory non-objection and stockholder approval.
ITEM 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) In addition to the exhibits currently filed pursuant to Item
601 of Regulation S-K, the following exhibits are being filed
with this report. Exhibits 10.1, 10.2, and 10.3 supplant exhibits
previously filed under identical exhibit numbers in the Annual
Report on Form 10-K for the fiscal year ended September 30, 1997.
Exhibit 2. Agreement and Plan of Merger with First
--------- Source Bancorp, Inc., including a stock option
agreement (incorporated by reference to exhibits
99.2 and 99.3 of a Current Report on Form 8-K
(Commission file number 0-18764), dated
13
<PAGE>
July 9, 1998). All omitted schedules are
referenced in the text of the documents and
correspond to the appropriate sections of the
text. Omitted schedules will be furnished
supplementally to the Commission at the request
of the Commission.
Exhibit 10.1. Employment agreement with Benjamin S. Konopacki
------------
Exhibit 10.2. Employment agreement with George T. Hornyak, Jr.
------------
Exhibit 10.3. Employment agreement with Thomas Konopacki
------------
Exhibit 10.8. Employment agreement with Jeffrey M. Gostkowski
------------
(b) Reports on Form 8-K. None
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PULSE BANCORP, INC
Date: 7/29/98 By:/s/George T. Hornyak, Jr.
--------- ---------------------------------
George T. Hornyak, Jr.
President
Chief Executive Officer
(Duly Authorized Officer)
Date: 7/29/98 By:/s/Thomas B. Konopacki
--------- ------------------------------
Thomas B. Konopacki
Executive Vice President
Chief Financial Officer
15
EMPLOYMENT AGREEMENT
THIS AGREEMENT, is entered into this 23rd day of April 1998,
("Effective Date") by and between Pulse Savings Bank (the "Bank") and Benjamin
S. Konopacki (the "Executive").
WITNESSETH
WHEREAS, the Executive has heretofore been employed by the Bank as the
Chairman and is experienced in all phases of the business of the Bank; and
WHEREAS, the Bank desires to be ensured of the Executive's continued
active participation in the business of the Bank; and
WHEREAS, in order to induce the Executive to remain in the employ of
the Bank and in consideration of the Executive's agreeing to remain in the
employ of the Bank, the parties desire to specify the continuing employment
relationship between the Bank and the Executive;
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereby agree as follows:
1. Employment. The Bank hereby employs the Executive in the capacity of
Chairman. The Executive hereby accepts said employment and agrees to render such
administrative and management services to the Bank and Pulse Bancorp, Inc.
("Parent") as are currently rendered and as are customarily performed by persons
situated in a similar executive capacity. The Executive shall promote the
business of the Bank and Parent. The Executive's other duties shall be such as
the Board of Directors for the Bank (the "Board of Directors" or "Board") may
from time to time reasonably direct, including normal duties as an officer of
the Bank.
2. Term of Employment. The term of employment of Executive under this
Agreement shall be for the period commencing on the Effective Date and ending
sixty (60) months thereafter ("Term"). Such Agreement shall be extended annually
on the anniversary date of the Effective Date for an additional one year period
("Automatic Extension"), absent delivery of written notice by the Board to the
Executive not less than 60 days prior to the date of such Automatic Extension
that the Board does not intend that such Agreement shall be extended and the
reason for such Board action.
3. Compensation, Benefits and Expenses.
(a) Base Salary. The Bank shall compensate and pay the Executive
during the Term of this Agreement a minimum base salary at the rate of
$55,000.00 per annum ("Base Salary"), payable in cash not less frequently than
monthly; provided, that the rate of such salary shall be reviewed by the Board
of Directors not less often than annually, and the Executive shall be entitled
to receive increases at such percentages or in such amounts as determined by the
<PAGE>
Board of Directors. The base salary may not be decreased without the Executive's
express written consent.
(b) Discretionary Bonus. The Executive shall be entitled to
participate in an equitable manner with all other senior management employees of
the Bank in discretionary bonuses that may be authorized and declared by the
Board of Directors to its senior management executives from time to time. No
other compensation provided for in this Agreement shall be deemed a substitute
for the Executive's right to participate in such discretionary bonuses when and
as declared by the Board.
(c) Participation in Benefit and Retirement Plans. The Executive
shall be entitled to participate in and receive the benefits of any plan of the
Bank which may be or may become applicable to senior management relating to
pension or other retirement benefit plans, profit-sharing, stock options or
incentive plans, or other plans, benefits and privileges given to employees and
executives of the Bank, to the extent commensurate with his then duties and
responsibilities, as fixed by the Board of Directors of the Bank.
(d) Participation in Medical Plans and Insurance Policies. The
Executive shall be entitled to participate in and receive the benefits of any
plan or policy of the Bank which may be or may become applicable to senior
management relating to life insurance, short and long term disability, medical,
dental, eye-care, prescription drugs or medical reimbursement plans.
(e) Vacations and Sick Leave. The Executive shall be entitled to
paid annual vacation leave in accordance with the policies as established from
time to time by the Board of Directors, which shall in no event be less than
four weeks per annum. The Executive shall also be entitled to an annual sick
leave benefit as established by the Board for senior management employees of the
Bank. The Executive shall not be entitled to receive any additional compensation
from the Bank for failure to take a vacation or sick leave, nor shall he be able
to accumulate unused vacation or sick leave from one year to the next, except to
the extent authorized by the Board of Directors.
(f) Expenses. The Bank shall reimburse the Executive or otherwise
provide for or pay for all reasonable expenses incurred by the Executive in
furtherance of, or in connection with the business of the Bank, including, but
not by way of limitation, automobile and traveling expenses, and all reasonable
entertainment expenses, subject to such reasonable documentation and other
limitations as may be established by the Board of Directors of the Bank. If such
expenses are paid in the first instance by the Executive, the Bank shall
reimburse the Executive therefor.
(g) Changes in Benefits. The Bank shall not make any changes in
such plans, benefits or privileges previously described in Section 3(c), (d) and
(e) which would adversely affect the Executive's rights or benefits thereunder,
unless such change occurs pursuant to a program applicable to all executive
officers of the Bank and does not result in a proportionately
2
<PAGE>
greater adverse change in the rights of, or benefits to, the Executive as
compared with any other executive officer of the Bank. Nothing paid to Executive
under any plan or arrangement presently in effect or made available in the
future shall be deemed to be in lieu of the salary payable to Executive pursuant
to Section 3(a) hereof.
4. Loyalty; Noncompetition.
(a) The Executive shall devote his full time and attention to the
performance of his employment under this Agreement. During the term of the
Executive's employment under this Agreement, the Executive shall not engage in
any business or activity contrary to the business affairs or interests of the
Bank or Parent.
(b) Nothing contained in this Section 4 shall be deemed to
prevent or limit the right of Executive to invest in the capital stock or other
securities of any business dissimilar from that of the Bank or Parent, or,
solely as a passive or minority investor, in any business.
5. Standards. During the term of this Agreement, the Executive shall
perform his duties in accordance with such reasonable standards expected of
executives with comparable positions in comparable organizations and as may be
established from time to time by the Board of Directors.
6. Termination and Termination Pay. The Executive's employment under
this Agreement shall be terminated upon any of the following occurrences:
(a) The death of the Executive during the term of this Agreement,
in which event the Executive's estate shall be entitled to receive the
compensation due the Executive through the last day of the calendar month in
which Executive's death shall have occurred.
(b) The Board of Directors may terminate the Executive's
employment at any time, but any termination by the Board of Directors other than
termination for Just Cause, shall not prejudice the Executive's right to
compensation or other benefits under the Agreement. The Executive shall have no
right to receive compensation or other benefits for any period after termination
for Just Cause. The Board may within its sole discretion, acting in good faith,
terminate the Executive for Just Cause and shall notify such Executive
accordingly. Termination for "Just Cause" shall include termination because of
the Executive's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of the Agreement.
(c) Except as provided pursuant to Section 9 hereof, in the event
Executive's employment under this Agreement is terminated by the Board of
Directors without Just Cause, the Bank shall be obligated to continue to pay the
Executive the salary provided pursuant to Section 3(a) herein, up to the date of
termination of the remaining Term of this Agreement, but
3
<PAGE>
in no event for a period of less than twenty-four (24), and the cost of
Executive obtaining all health, life, disability, and other benefits which the
Executive would be eligible to participate in through such date based upon the
benefit levels substantially equal to those being provided Executive at the date
of termination of employment.
(d) The voluntary termination by the Executive during the term of
this Agreement with the delivery of no less than 60 days written notice to the
Board of Directors, other than pursuant to Section 9(b), in which case the
Executive shall be entitled to receive only the compensation, vested rights, and
all employee benefits up to the date of such termination.
7. Regulatory Exclusions. Notwithstanding anything herein to the
contrary, any payments made to the Executive pursuant to the Agreement, or
otherwise, shall be subject to and conditioned upon compliance with 12 USC
ss.1828(k) and any regulations promulgated thereunder.
8. Disability. If the Executive shall become disabled or incapacitated
to the extent that he is unable to perform his duties hereunder, by reason of
medically determinable physical or mental impairment, as determined by a doctor
engaged by the Board of Directors, Executive shall nevertheless continue to
receive the compensation and benefits provided under the terms of this Agreement
as follows: 50% of such compensation and benefits during the remaining term of
the Agreement. Such benefits noted herein shall be reduced by any benefits
otherwise provided to the Executive during such period under the provisions of
disability insurance coverage in effect for Bank employees. Thereafter,
Executive shall be eligible to receive benefits provided by the Bank under the
provisions of disability insurance coverage in effect for Bank employees. Upon
returning to active full-time employment, the Executive's full compensation as
set forth in this Agreement shall be reinstated as of the date of commencement
of such activities. In the event that the Executive returns to active employment
on other than a full-time basis, then his compensation (as set forth in Section
3(a) of this Agreement) shall be reduced in proportion to the time spent in said
employment, or as shall otherwise be agreed to by the parties.
9. Change in Control.
(a) Notwithstanding any provision herein to the contrary, in the
event of the involuntary termination of Executive's employment during the term
of this Agreement following any Change in Control of the Bank or Parent, or
within 24 months thereafter of such Change in Control, absent Just Cause,
Executive shall be paid an amount equal to the product of 2.99 times the
Executive's "base amount" as defined in Section 280G(b)(3) of the Internal
Revenue Code of 1986, as amended (the "Code") and regulations promulgated
thereunder. Said sum shall be paid, at the option of Executive, either in one
(1) lump sum within thirty (30) days of such termination discounted to the
present value of such payment using as the discount rate the interest in effect
on one year U.S. Treasury obligations as of the date of payment as reported in
the Wall Street Journal Eastern Edition, or in periodic payments over the next
36 months or the remaining term of this Agreement whichever is less, as if
Executive's employment had not
4
<PAGE>
been terminated, and such payments shall be in lieu of any other future payments
which the Executive would be otherwise entitled to receive under Section 6 of
this Agreement. Notwithstanding the forgoing, all sums payable hereunder shall
be reduced in such manner and to such extent so that no such payments made
hereunder when aggregated with all other payments to be made to the Executive by
the Bank or the Parent shall be deemed an "excess parachute payment" in
accordance with Section 280G of the Code and be subject to the excise tax
provided at Section 4999(a) of the Code. The term "Change in Control" shall
refer to: (i) the sale of all, or a material portion, of the assets of the
Savings Bank or the Parent; (ii) the merger or recapitalization of the Savings
Bank or the Parent whereby the Savings Bank or the Parent is not the surviving
entity; (iii) a change in control of the Savings Bank or the Parent, as
otherwise defined or determined by the New Jersey Department of Banking or
Office of Thrift Supervision (with respect to its supervision of Parent as a
unitary savings and loan holding company) or regulations promulgated by such
agencies; or (iv) the acquisition, directly or indirectly, of the beneficial
ownership (within the meaning of that term as it is used in Section 13(d) of the
Securities Exchange Act of 1934 and the rules and regulations promulgated
thereunder) of twenty-five percent (25%) or more of the outstanding voting
securities of the Savings Bank or the Parent by any person, trust, entity or
group. The term "person" means an individual other than the Executive, or a
corporation, partnership, trust, association, joint venture, pool, syndicate,
sole proprietorship, unincorporated organization or any other form of entity not
specifically listed herein.
(b) Notwithstanding any other provision of this Agreement to the
contrary, Executive may voluntarily terminate his employment during the term of
this Agreement following a Change in Control of the Bank or Parent, or within
twenty-four months following such Change in Contriol, and Executive shall
thereupon be entitled to receive the payment described in Section 9(a) of this
Agreement, upon the occurrence, or within 120 days thereafter, of any of the
following events, which have not been consented to in advance by the Executive
in writing: (i) if Executive would be required to move his personal residence or
perform his principal executive functions more than thirty-five (35) miles from
the Executive's primary office as of the signing of this Agreement; (ii) if in
the organizational structure of the Bank, Executive would be required to report
to a person or persons other than the Board of Directors of the Bank; (iii) if
the Bank should fail to maintain Executive's base compensation in effect as of
the date of the Change in Control and the existing employee benefits plans,
including material fringe benefit, stock option and retirement plans; (iv) if
Executive would be assigned duties and responsibilities other than those
normally associated with his position as referenced at Section 1, herein; (v) if
Executive's responsibilities or authority have in any way been materially
diminished or reduced; or (vi) if Executive would not be re-elected to the Board
of Directors of the Bank or the Parent.
10. Withholding. All payments required to be made by the Bank hereunder
to the Executive shall be subject to the withholding of such amounts, if any,
relating to tax and other payroll deductions as the Bank may reasonably
determine should be withheld pursuant to any applicable law or regulation.
11. Successors and Assigns.
5
<PAGE>
(a) This Agreement shall inure to the benefit of and be binding
upon any corporate or other successor of the Bank or Parent which shall acquire,
directly or indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Bank or Parent.
(b) Since the Bank is contracting for the unique and personal
skills of the Executive, the Executive shall be precluded from assigning or
delegating his rights or duties hereunder without first obtaining the written
consent of the Bank.
12. Amendment; Waiver. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing, signed by the Executive and such officer or officers as may be
specifically designated by the Board of Directors of the Bank to sign on its
behalf. No waiver by any party hereto at any time of any breach by any other
party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
13. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of New
Jersey, except to the extent preempted by the laws of the United States where
applicable.
14. Nature of Obligations. Nothing contained herein shall create or
require the Bank to create a trust of any kind to fund any benefits which may be
payable hereunder, and to the extent that the Executive acquires a right to
receive benefits from the Bank hereunder, such right shall be no greater than
the right of any unsecured general creditor of the Bank.
15. Headings. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
16. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect.
17. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the rules then in effect of the district office of the American
Arbitration Association ("AAA") nearest to the home office of the Bank, and
judgment upon the award rendered may be entered in any court having jurisdiction
thereof, except to the extent that the parties may otherwise reach a mutual
settlement of such issue. Further, the Bank shall reimburse the Executive for
all reasonable costs and expenses, including reasonable attorneys' fees, arising
from any such dispute or arbitration without regard to the ultimate outcome of
such dispute, proceeding or action. Such reimbursement shall be paid within ten
(10) days of Executive furnishing to the Bank or Parent evidence, which may be
in the form, among other things, of a canceled check or receipt, of any costs or
expenses incurred by Executive with regard to such matter.
6
<PAGE>
18. Confidential Information. The Executive acknowledges that during his
or her employment he or she will learn and have access to confidential
information regarding the Savings Bank and the Parent and its customers and
businesses ("Confidential Information"). The Executive agrees and covenants not
to disclose or use for his or her own benefit, or the benefit of any other
person or entity, any such Confidential Information, unless or until the Savings
Bank or tthe Parent consents to such disclosure or use or such information
becomes common knowledge in the industry or is otherwise legally in the public
domain. The Executive shall not knowingly disclose or reveal to any unauthorized
person any Confidential Information relating to the Savings Bank, the Parent, or
any subsidiaries or affiliates, or to any of the businesses operated by them,
and the Executive confirms that such information constitutes the exclusive
property of the Savings Bank and the Parent. The Executive shall not otherwise
knowingly act or conduct himself (a) to the material detriment of the Savings
Bank or the Parent, or its subsidiaries, or affiliates, or (b) in a manner which
is inimical or contrary to the interests of the Savings Bank or the Parent.
Executive acknowledges and agrees that the existence of this Agreement and its
terms and conditions constitutes Confidential Information of the Savings Bank,
and the Executive agrees not to disclose the Agreement or its contents without
the prior written consent of the Savings Bank. Notwithstanding the foregoing,
the Savings Bank reserves the right in its sole discretion to make disclosure of
this Agreement as it deems necessary or appropriate in compliance with its
regulatory reporting requirements. Notwithstanding anything herein to the
contrary, failure by the Executive to comply with the provisions of this Section
may result in the immediate termination of the Agreement within the sole
discretion of the Savings Bank, disciplinary action against the Executive taken
by the Savings Bank, including but not limited to the termination of employment
of the Executive for breach of the Agreement and the provisions of this Section,
and other remedies that may be available in law or in equity.
19. Entire Agreement. This Agreement together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.
7
EMPLOYMENT AGREEMENT
THIS AGREEMENT, is entered into this 23rd day of April 1998,
("Effective Date") by and between Pulse Savings Bank (the "Bank") and George T.
Hornyak, Jr. (the "Executive").
WITNESSETH
WHEREAS, the Executive has heretofore been employed by the Bank as the
President and Chief Executive Officer and is experienced in all phases of the
business of the Bank; and
WHEREAS, the Bank desires to be ensured of the Executive's continued
active participation in the business of the Bank; and
WHEREAS, in order to induce the Executive to remain in the employ of
the Bank and in consideration of the Executive's agreeing to remain in the
employ of the Bank, the parties desire to specify the continuing employment
relationship between the Bank and the Executive;
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereby agree as follows:
1. Employment. The Bank hereby employs the Executive in the capacity of
President and Chief Executive Officer. The Executive hereby accepts said
employment and agrees to render such administrative and management services to
the Bank and Pulse Bancorp, Inc. ("Parent") as are currently rendered and as are
customarily performed by persons situated in a similar executive capacity. The
Executive shall promote the business of the Bank and Parent. The Executive's
other duties shall be such as the Board of Directors for the Bank (the "Board of
Directors" or "Board") may from time to time reasonably direct, including normal
duties as an officer of the Bank.
2. Term of Employment. The term of employment of Executive under this
Agreement shall be for the period commencing on the Effective Date and ending
sixty (60) months thereafter ("Term"). Such Agreement shall be extended annually
on the anniversary date of the Effective Date for an additional one year period
("Automatic Extension"), absent delivery of written notice by the Board to the
Executive not less than 60 days prior to the date of such Automatic Extension
that the Board does not intend that such Agreement shall be extended and the
reason for such Board action.
3. Compensation, Benefits and Expenses.
(a) Base Salary. The Bank shall compensate and pay the Executive
during the Term of this Agreement a minimum base salary at the rate of
$330,000.00 per annum ("Base Salary"), payable in cash not less frequently than
monthly; provided, that the rate of such salary shall be reviewed by the Board
of Directors not less often than annually, and the Executive shall
<PAGE>
be entitled to receive increases at such percentages or in such amounts as
determined by the Board of Directors. The base salary may not be decreased
without the Executive's express written consent.
(b) Discretionary Bonus. The Executive shall be entitled to
participate in an equitable manner with all other senior management employees of
the Bank in discretionary bonuses that may be authorized and declared by the
Board of Directors to its senior management executives from time to time. No
other compensation provided for in this Agreement shall be deemed a substitute
for the Executive's right to participate in such discretionary bonuses when and
as declared by the Board.
(c) Participation in Benefit and Retirement Plans. The Executive
shall be entitled to participate in and receive the benefits of any plan of the
Bank which may be or may become applicable to senior management relating to
pension or other retirement benefit plans, profit-sharing, stock options or
incentive plans, or other plans, benefits and privileges given to employees and
executives of the Bank, to the extent commensurate with his then duties and
responsibilities, as fixed by the Board of Directors of the Bank.
(d) Participation in Medical Plans and Insurance Policies. The
Executive shall be entitled to participate in and receive the benefits of any
plan or policy of the Bank which may be or may become applicable to senior
management relating to life insurance, short and long term disability, medical,
dental, eye-care, prescription drugs or medical reimbursement plans.
(e) Vacations and Sick Leave. The Executive shall be entitled to
paid annual vacation leave in accordance with the policies as established from
time to time by the Board of Directors, which shall in no event be less than
four weeks per annum. The Executive shall also be entitled to an annual sick
leave benefit as established by the Board for senior management employees of the
Bank. The Executive shall not be entitled to receive any additional compensation
from the Bank for failure to take a vacation or sick leave, nor shall he be able
to accumulate unused vacation or sick leave from one year to the next, except to
the extent authorized by the Board of Directors.
(f) Expenses. The Bank shall reimburse the Executive or otherwise
provide for or pay for all reasonable expenses incurred by the Executive in
furtherance of, or in connection with the business of the Bank, including, but
not by way of limitation, automobile and traveling expenses, and all reasonable
entertainment expenses, subject to such reasonable documentation and other
limitations as may be established by the Board of Directors of the Bank. If such
expenses are paid in the first instance by the Executive, the Bank shall
reimburse the Executive therefor.
(g) Changes in Benefits. The Bank shall not make any changes in
such plans, benefits or privileges previously described in Section 3(c), (d) and
(e) which would adversely affect the Executive's rights or benefits thereunder,
unless such change occurs pursuant to a
2
<PAGE>
program applicable to all executive officers of the Bank and does not result in
a proportionately greater adverse change in the rights of, or benefits to, the
Executive as compared with any other executive officer of the Bank. Nothing paid
to Executive under any plan or arrangement presently in effect or made available
in the future shall be deemed to be in lieu of the salary payable to Executive
pursuant to Section 3(a) hereof.
4. Loyalty; Noncompetition.
(a) The Executive shall devote his full time and attention to the
performance of his employment under this Agreement. During the term of the
Executive's employment under this Agreement, the Executive shall not engage in
any business or activity contrary to the business affairs or interests of the
Bank or Parent.
(b) Nothing contained in this Section 4 shall be deemed to
prevent or limit the right of Executive to invest in the capital stock or other
securities of any business dissimilar from that of the Bank or Parent, or,
solely as a passive or minority investor, in any business.
5. Standards. During the term of this Agreement, the Executive shall
perform his duties in accordance with such reasonable standards expected of
executives with comparable positions in comparable organizations and as may be
established from time to time by the Board of Directors.
6. Termination and Termination Pay. The Executive's employment under
this Agreement shall be terminated upon any of the following occurrences:
(a) The death of the Executive during the term of this Agreement,
in which event the Executive's estate shall be entitled to receive the
compensation due the Executive through the last day of the calendar month in
which Executive's death shall have occurred.
(b) The Board of Directors may terminate the Executive's
employment at any time, but any termination by the Board of Directors other than
termination for Just Cause, shall not prejudice the Executive's right to
compensation or other benefits under the Agreement. The Executive shall have no
right to receive compensation or other benefits for any period after termination
for Just Cause. The Board may within its sole discretion, acting in good faith,
terminate the Executive for Just Cause and shall notify such Executive
accordingly. Termination for "Just Cause" shall include termination because of
the Executive's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of the Agreement.
(c) Except as provided pursuant to Section 9 hereof, in the event
Executive's employment under this Agreement is terminated by the Board of
Directors without Just Cause, the Bank shall be obligated to continue to pay the
Executive the salary provided pursuant to
3
<PAGE>
Section 3(a) herein, up to the date of termination of the remaining Term of this
Agreement, but in no event for a period of less than twenty-four (24), and the
cost of Executive obtaining all health, life, disability, and other benefits
which the Executive would be eligible to participate in through such date based
upon the benefit levels substantially equal to those being provided Executive at
the date of termination of employment.
(d) The voluntary termination by the Executive during the term of
this Agreement with the delivery of no less than 60 days written notice to the
Board of Directors, other than pursuant to Section 9(b), in which case the
Executive shall be entitled to receive only the compensation, vested rights, and
all employee benefits up to the date of such termination.
7. Regulatory Exclusions. Notwithstanding anything herein to the
contrary, any payments made to the Executive pursuant to the Agreement, or
otherwise, shall be subject to and conditioned upon compliance with 12 USC
ss.1828(k) and any regulations promulgated thereunder.
8. Disability. If the Executive shall become disabled or incapacitated
to the extent that he is unable to perform his duties hereunder, by reason of
medically determinable physical or mental impairment, as determined by a doctor
engaged by the Board of Directors, Executive shall nevertheless continue to
receive the compensation and benefits provided under the terms of this Agreement
as follows: 50% of such compensation and benefits during the remaining term of
the Agreement. Such benefits noted herein shall be reduced by any benefits
otherwise provided to the Executive during such period under the provisions of
disability insurance coverage in effect for Bank employees. Thereafter,
Executive shall be eligible to receive benefits provided by the Bank under the
provisions of disability insurance coverage in effect for Bank employees. Upon
returning to active full-time employment, the Executive's full compensation as
set forth in this Agreement shall be reinstated as of the date of commencement
of such activities. In the event that the Executive returns to active employment
on other than a full-time basis, then his compensation (as set forth in Section
3(a) of this Agreement) shall be reduced in proportion to the time spent in said
employment, or as shall otherwise be agreed to by the parties.
9. Change in Control.
(a) Notwithstanding any provision herein to the contrary, in the
event of the involuntary termination of Executive's employment during the term
of this Agreement following any Change in Control of the Bank or Parent, or
within 24 months thereafter of such Change in Control, absent Just Cause,
Executive shall be paid an amount equal to the product of 2.99 times the
Executive's "base amount" as defined in Section 280G(b)(3) of the Internal
Revenue Code of 1986, as amended (the "Code") and regulations promulgated
thereunder. Said sum shall be paid, at the option of Executive, either in one
(1) lump sum within thirty (30) days of such termination discounted to the
present value of such payment using as the discount rate the interest in effect
on one year U.S. Treasury obligations as of the date of payment as reported in
the Wall Street Journal Eastern Edition, or in periodic payments over the next
36 months or
4
<PAGE>
the remaining term of this Agreement whichever is less, as if Executive's
employment had not been terminated, and such payments shall be in lieu of any
other future payments which the Executive would be otherwise entitled to receive
under Section 6 of this Agreement. Notwithstanding the forgoing, all sums
payable hereunder shall be reduced in such manner and to such extent so that no
such payments made hereunder when aggregated with all other payments to be made
to the Executive by the Bank or the Parent shall be deemed an "excess parachute
payment" in accordance with Section 280G of the Code and be subject to the
excise tax provided at Section 4999(a) of the Code. The term "Change in Control"
shall refer to: (i) the sale of all, or a material portion, of the assets of the
Savings Bank or the Parent; (ii) the merger or recapitalization of the Savings
Bank or the Parent whereby the Savings Bank or the Parent is not the surviving
entity; (iii) a change in control of the Savings Bank or the Parent, as
otherwise defined or determined by the New Jersey Department of Banking or
Office of Thrift Supervision (with respect to its supervision of Parent as a
unitary savings and loan holding company) or regulations promulgated by such
agencies; or (iv) the acquisition, directly or indirectly, of the beneficial
ownership (within the meaning of that term as it is used in Section 13(d) of the
Securities Exchange Act of 1934 and the rules and regulations promulgated
thereunder) of twenty-five percent (25%) or more of the outstanding voting
securities of the Savings Bank or the Parent by any person, trust, entity or
group. The term "person" means an individual other than the Executive, or a
corporation, partnership, trust, association, joint venture, pool, syndicate,
sole proprietorship, unincorporated organization or any other form of entity not
specifically listed herein.
(b) Notwithstanding any other provision of this Agreement to the
contrary, Executive may voluntarily terminate his employment during the term of
this Agreement following a Change in Control of the Bank or Parent, or within
twenty-four months following such Change in Contriol, and Executive shall
thereupon be entitled to receive the payment described in Section 9(a) of this
Agreement, upon the occurrence, or within 120 days thereafter, of any of the
following events, which have not been consented to in advance by the Executive
in writing: (i) if Executive would be required to move his personal residence or
perform his principal executive functions more than thirty-five (35) miles from
the Executive's primary office as of the signing of this Agreement; (ii) if in
the organizational structure of the Bank, Executive would be required to report
to a person or persons other than the Board of Directors of the Bank; (iii) if
the Bank should fail to maintain Executive's base compensation in effect as of
the date of the Change in Control and the existing employee benefits plans,
including material fringe benefit, stock option and retirement plans; (iv) if
Executive would be assigned duties and responsibilities other than those
normally associated with his position as referenced at Section 1, herein; (v) if
Executive's responsibilities or authority have in any way been materially
diminished or reduced; or (vi) if Executive would not be re-elected to the Board
of Directors of the Bank or the Parent.
10. Withholding. All payments required to be made by the Bank hereunder
to the Executive shall be subject to the withholding of such amounts, if any,
relating to tax and other payroll deductions as the Bank may reasonably
determine should be withheld pursuant to any applicable law or regulation.
5
<PAGE>
11. Successors and Assigns.
(a) This Agreement shall inure to the benefit of and be binding
upon any corporate or other successor of the Bank or Parent which shall acquire,
directly or indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Bank or Parent.
(b) Since the Bank is contracting for the unique and personal
skills of the Executive, the Executive shall be precluded from assigning or
delegating his rights or duties hereunder without first obtaining the written
consent of the Bank.
12. Amendment; Waiver. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing, signed by the Executive and such officer or officers as may be
specifically designated by the Board of Directors of the Bank to sign on its
behalf. No waiver by any party hereto at any time of any breach by any other
party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
13. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of New
Jersey, except to the extent preempted by the laws of the United States where
applicable.
14. Nature of Obligations. Nothing contained herein shall create or
require the Bank to create a trust of any kind to fund any benefits which may be
payable hereunder, and to the extent that the Executive acquires a right to
receive benefits from the Bank hereunder, such right shall be no greater than
the right of any unsecured general creditor of the Bank.
15. Headings. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
16. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect.
17. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the rules then in effect of the district office of the American
Arbitration Association ("AAA") nearest to the home office of the Bank, and
judgment upon the award rendered may be entered in any court having jurisdiction
thereof, except to the extent that the parties may otherwise reach a mutual
settlement of such issue. Further, the Bank shall reimburse the Executive for
all reasonable costs and expenses, including reasonable attorneys' fees, arising
from any such dispute or arbitration without regard to the ultimate outcome of
such dispute, proceeding or action. Such reimbursement shall be paid within ten
(10) days of Executive furnishing to the Bank or Parent
6
<PAGE>
evidence, which may be in the form, among other things, of a canceled check or
receipt, of any costs or expenses incurred by Executive with regard to such
matter.
18. Confidential Information. The Executive acknowledges that during his
or her employment he or she will learn and have access to confidential
information regarding the Savings Bank and the Parent and its customers and
businesses ("Confidential Information"). The Executive agrees and covenants not
to disclose or use for his or her own benefit, or the benefit of any other
person or entity, any such Confidential Information, unless or until the Savings
Bank or tthe Parent consents to such disclosure or use or such information
becomes common knowledge in the industry or is otherwise legally in the public
domain. The Executive shall not knowingly disclose or reveal to any unauthorized
person any Confidential Information relating to the Savings Bank, the Parent, or
any subsidiaries or affiliates, or to any of the businesses operated by them,
and the Executive confirms that such information constitutes the exclusive
property of the Savings Bank and the Parent. The Executive shall not otherwise
knowingly act or conduct himself (a) to the material detriment of the Savings
Bank or the Parent, or its subsidiaries, or affiliates, or (b) in a manner which
is inimical or contrary to the interests of the Savings Bank or the Parent.
Executive acknowledges and agrees that the existence of this Agreement and its
terms and conditions constitutes Confidential Information of the Savings Bank,
and the Executive agrees not to disclose the Agreement or its contents without
the prior written consent of the Savings Bank. Notwithstanding the foregoing,
the Savings Bank reserves the right in its sole discretion to make disclosure of
this Agreement as it deems necessary or appropriate in compliance with its
regulatory reporting requirements. Notwithstanding anything herein to the
contrary, failure by the Executive to comply with the provisions of this Section
may result in the immediate termination of the Agreement within the sole
discretion of the Savings Bank, disciplinary action against the Executive taken
by the Savings Bank, including but not limited to the termination of employment
of the Executive for breach of the Agreement and the provisions of this Section,
and other remedies that may be available in law or in equity.
19. Entire Agreement. This Agreement together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.
7
EMPLOYMENT AGREEMENT
THIS AGREEMENT, is entered into this 23rd day of April 1998,
("Effective Date") by and between Pulse Savings Bank (the "Bank") and Thomas
Konopacki (the "Executive").
WITNESSETH
WHEREAS, the Executive has heretofore been employed by the Bank as a
Vice President and is experienced in all phases of the business of the Bank; and
WHEREAS, the Bank desires to be ensured of the Executive's continued
active participation in the business of the Bank; and
WHEREAS, in order to induce the Executive to remain in the employ of
the Bank and in consideration of the Executive's agreeing to remain in the
employ of the Bank, the parties desire to specify the continuing employment
relationship between the Bank and the Executive;
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereby agree as follows:
1. Employment. The Bank hereby employs the Executive in the capacity as
a Vice President. The Executive hereby accepts said employment and agrees to
render such administrative and management services to the Bank and Pulse
Bancorp, Inc. ("Parent") as are currently rendered and as are customarily
performed by persons situated in a similar executive capacity. The Executive
shall promote the business of the Bank and Parent. The Executive's other duties
shall be such as the President of the Bank or the Board of Directors for the
Bank (the "Board of Directors" or "Board") may from time to time reasonably
direct, including normal duties as an officer of the Bank.
2. Term of Employment. The term of employment of Executive under this
Agreement shall be for the period commencing on the Effective Date and ending
thirty-six (36) months thereafter ("Term"). Such Agreement shall be extended
annually on the anniversary date of the Effective Date for an additional one
year period ("Automatic Extension"), absent delivery of written notice by the
Board to the Executive not less than 60 days prior to the date of such Automatic
Extension that the Board does not intend that such Agreement shall be extended
and the reason for such Board action.
3. Compensation, Benefits and Expenses.
(a) Base Salary. The Bank shall compensate and pay the Executive
during the Term of this Agreement a minimum base salary at the rate of
$165,000.00 per annum ("Base Salary"), payable in cash not less frequently than
monthly: provided, that the rate of such salary shall be reviewed by the Board
of Directors not less often than annually, and the Executive shall
<PAGE>
be entitled to receive increases at such percentages or in such amounts as
determined by the Board of Directors. The base salary may not be decreased
without the Executive's express written consent.
(b) Discretionary Bonus. The Executive shall be entitled to
participate in an equitable manner with all other senior management employees of
the Bank in discretionary bonuses that may be authorized and declared by the
Board of Directors to its senior management executives from time to time. No
other compensation provided for in this Agreement shall be deemed a substitute
for the Executive's right to participate in such discretionary bonuses when and
as declared by the Board.
(c) Participation in Benefit and Retirement Plans. The Executive
shall be entitled to participate in and receive the benefits of any plan of the
Bank which may be or may become applicable to senior management relating to
pension or other retirement benefit plans, profit-sharing, stock options or
incentive plans, or other plans, benefits and privileges given to employees and
executives of the Bank, to the extent commensurate with his then duties and
responsibilities, as fixed by the Board of Directors of the Bank.
(d) Participation in Medical Plans and Insurance Policies. The
Executive shall be entitled to participate in and receive the benefits of any
plan or policy of the Bank which may be or may become applicable to senior
management relating to life insurance, short and long term disability, medical,
dental, eye-care, prescription drugs or medical reimbursement plans.
(e) Vacations and Sick Leave. The Executive shall be entitled to
paid annual vacation leave in accordance with the policies as established from
time to time by the Board of Directors, which shall in no event be less than
four weeks per annum. The Executive shall also be entitled to an annual sick
leave benefit as established by the Board for senior management employees of the
Bank. The Executive shall not be entitled to receive any additional compensation
from the Bank for failure to take a vacation or sick leave, nor shall he be able
to accumulate unused vacation or sick leave from one year to the next, except to
the extent authorized by the Board of Directors.
(f) Expenses. The Bank shall reimburse the Executive or otherwise
provide for or pay for all reasonable expenses incurred by the Executive in
furtherance of, or in connection with the business of the Bank, including, but
not by way of limitation, automobile and traveling expenses, and all reasonable
entertainment expenses, subject to such reasonable documentation and other
limitations as may be established by the Board of Directors of the Bank. If such
expenses are paid in the first instance by the Executive, the Bank shall
reimburse the Executive therefor.
(g) Changes in Benefits. The Bank shall not make any changes in
such plans, benefits or privileges previously described in Section 3(c), (d) and
(e) which would adversely affect the Executive's rights or benefits thereunder,
unless such change occurs pursuant to a
2
<PAGE>
program applicable to all executive officers of the Bank and does not result in
a proportionately greater adverse change in the rights of, or benefits to, the
Executive as compared with any other executive officer of the Bank. Nothing paid
to Executive under any plan or arrangement presently in effect or made available
in the future shall be deemed to be in lieu of the salary payable to Executive
pursuant to Section 3(a) hereof.
4. Loyalty; Noncompetition.
(a) The Executive shall devote his full time and attention to the
performance of his employment under this Agreement. During the term of the
Executive's employment under this Agreement, the Executive shall not engage in
any business or activity contrary to the business affairs or interests of the
Bank or Parent.
(b) Nothing contained in this Section 4 shall be deemed to
prevent or limit the right of Executive to invest in the capital stock or other
securities of any business dissimilar from that of the Bank or Parent, or,
solely as a passive or minority investor, in any business.
5. Standards. During the term of this Agreement, the Executive shall
perform his duties in accordance with such reasonable standards expected of
executives with comparable positions in comparable organizations and as may be
established from time to time by the Board of Directors.
6. Termination and Termination Pay. The Executive's employment under
this Agreement shall be terminated upon any of the following occurrences:
(a) The death of the Executive during the term of this Agreement,
in which event the Executive's estate shall be entitled to receive the
compensation due the Executive through the last day of the calendar month in
which Executive's death shall have occurred.
(b) The Board of Directors may terminate the Executive's
employment at any time, but any termination by the Board of Directors other than
termination for Just Cause, shall not prejudice the Executive's right to
compensation or other benefits under the Agreement. The Executive shall have no
right to receive compensation or other benefits for any period after termination
for Just Cause. The Board may within its sole discretion, acting in good faith,
terminate the Executive for Just Cause and shall notify such Executive
accordingly. Termination for "Just Cause" shall include termination because of
the Executive's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of the Agreement.
(c) Except as provided pursuant to Section 9 hereof, in the event
Executive's employment under this Agreement is terminated by the Board of
Directors without Just Cause, the Bank shall be obligated to continue to pay the
Executive the salary provided pursuant to
3
<PAGE>
Section 3(a) herein, up to the date of termination of the remaining Term of this
Agreement, but in no event for a period of less than twenty-four (24), and the
cost of Executive obtaining all health, life, disability, and other benefits
which the Executive would be eligible to participate in through such date based
upon the benefit levels substantially equal to those being provided Executive at
the date of termination of employment.
(d) The voluntary termination by the Executive during the term of
this Agreement with the delivery of no less than 60 days written notice to the
Board of Directors, other than pursuant to Section 9(b), in which case the
Executive shall be entitled to receive only the compensation, vested rights, and
all employee benefits up to the date of such termination.
7. Regulatory Exclusions. Notwithstanding anything herein to the
contrary, any payments made to the Executive pursuant to the Agreement, or
otherwise, shall be subject to and conditioned upon compliance with 12 USC
ss.1828(k) and any regulations promulgated thereunder.
8. Disability. If the Executive shall become disabled or incapacitated
to the extent that he is unable to perform his duties hereunder, by reason of
medically determinable physical or mental impairment, as determined by a doctor
engaged by the Board of Directors, Executive shall nevertheless continue to
receive the compensation and benefits provided under the terms of this Agreement
as follows: 50% of such compensation and benefits during the remaining term of
the Agreement. Such benefits noted herein shall be reduced by any benefits
otherwise provided to the Executive during such period under the provisions of
disability insurance coverage in effect for Bank employees. Thereafter,
Executive shall be eligible to receive benefits provided by the Bank under the
provisions of disability insurance coverage in effect for Bank employees. Upon
returning to active full-time employment, the Executive's full compensation as
set forth in this Agreement shall be reinstated as of the date of commencement
of such activities. In the event that the Executive returns to active employment
on other than a full-time basis, then his compensation (as set forth in Section
3(a) of this Agreement) shall be reduced in proportion to the time spent in said
employment, or as shall otherwise be agreed to by the parties.
9. Change in Control.
(a) Notwithstanding any provision herein to the contrary, in the
event of the involuntary termination of Executive's employment during the term
of this Agreement following any Change in Control of the Bank or Parent, or
within 24 months thereafter of such Change in Control, absent Just Cause,
Executive shall be paid an amount equal to the product of 2.99 times the
Executive's "base amount" as defined in Section 280G(b)(3) of the Internal
Revenue Code of 1986, as amended (the "Code") and regulations promulgated
thereunder. Said sum shall be paid, at the option of Executive, either in one
(1) lump sum within thirty (30) days of such termination discounted to the
present value of such payment using as the discount rate the interest in effect
on one year U.S. Treasury obligations as of the date of payment as reported in
the Wall Street Journal Eastern Edition, or in periodic payments over the next
36 months or
4
<PAGE>
the remaining term of this Agreement whichever is less, as if Executive's
employment had not been terminated, and such payments shall be in lieu of any
other future payments which the Executive would be otherwise entitled to receive
under Section 6 of this Agreement. Notwithstanding the forgoing, all sums
payable hereunder shall be reduced in such manner and to such extent so that no
such payments made hereunder when aggregated with all other payments to be made
to the Executive by the Bank or the Parent shall be deemed an "excess parachute
payment" in accordance with Section 280G of the Code and be subject to the
excise tax provided at Section 4999(a) of the Code. The term "Change in Control"
shall refer to: (i) the sale of all, or a material portion, of the assets of the
Savings Bank or the Parent; (ii) the merger or recapitalization of the Savings
Bank or the Parent whereby the Savings Bank or the Parent is not the surviving
entity; (iii) a change in control of the Savings Bank or the Parent, as
otherwise defined or determined by the New Jersey Department of Banking or
Office of Thrift Supervision (with respect to its supervision of Parent as a
unitary savings and loan holding company) or regulations promulgated by such
agencies; or (iv) the acquisition, directly or indirectly, of the beneficial
ownership (within the meaning of that term as it is used in Section 13(d) of the
Securities Exchange Act of 1934 and the rules and regulations promulgated
thereunder) of twenty-five percent (25%) or more of the outstanding voting
securities of the Savings Bank or the Parent by any person, trust, entity or
group. The term "person" means an individual other than the Executive, or a
corporation, partnership, trust, association, joint venture, pool, syndicate,
sole proprietorship, unincorporated organization or any other form of entity not
specifically listed herein.
(b) Notwithstanding any other provision of this Agreement to the
contrary, Executive may voluntarily terminate his employment during the term of
this Agreement following a Change in Control of the Bank or Parent, or within
twenty-four months following such Change in Contriol, and Executive shall
thereupon be entitled to receive the payment described in Section 9(a) of this
Agreement, upon the occurrence, or within 120 days thereafter, of any of the
following events, which have not been consented to in advance by the Executive
in writing: (i) if Executive would be required to move his personal residence or
perform his principal executive functions more than thirty-five (35) miles from
the Executive's primary office as of the signing of this Agreement; (ii) if in
the organizational structure of the Bank, Executive would be required to report
to a person or persons other than the President or the Board of Directors of the
Bank; (iii) if the Bank should fail to maintain Executive's base compensation in
effect as of the date of the Change in Control and the existing employee
benefits plans, including material fringe benefit, stock option and retirement
plans; (iv) if Executive would be assigned duties and responsibilities other
than those normally associated with his position as referenced at Section 1,
herein; or (v) if Executive's responsibilities or authority have in any way been
materially diminished or reduced.
10. Withholding. All payments required to be made by the Bank hereunder
to the Executive shall be subject to the withholding of such amounts, if any,
relating to tax and other payroll deductions as the Bank may reasonably
determine should be withheld pursuant to any applicable law or regulation.
11. Successors and Assigns.
5
<PAGE>
(a) This Agreement shall inure to the benefit of and be binding
upon any corporate or other successor of the Bank or Parent which shall acquire,
directly or indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Bank or Parent.
(b) Since the Bank is contracting for the unique and personal
skills of the Executive, the Executive shall be precluded from assigning or
delegating his rights or duties hereunder without first obtaining the written
consent of the Bank.
12. Amendment; Waiver. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing, signed by the Executive and such officer or officers as may be
specifically designated by the Board of Directors of the Bank to sign on its
behalf. No waiver by any party hereto at any time of any breach by any other
party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
13. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of New
Jersey, except to the extent preempted by the laws of the United States where
applicable.
14. Nature of Obligations. Nothing contained herein shall create or
require the Bank to create a trust of any kind to fund any benefits which may be
payable hereunder, and to the extent that the Executive acquires a right to
receive benefits from the Bank hereunder, such right shall be no greater than
the right of any unsecured general creditor of the Bank.
15. Headings. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
16. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect.
17. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the rules then in effect of the district office of the American
Arbitration Association ("AAA") nearest to the home office of the Bank, and
judgment upon the award rendered may be entered in any court having jurisdiction
thereof, except to the extent that the parties may otherwise reach a mutual
settlement of such issue. Further, the Bank shall reimburse the Executive for
all reasonable costs and expenses, including reasonable attorneys' fees, arising
from any such dispute or arbitration without regard to the ultimate outcome of
such dispute, proceeding or action. Such reimbursement shall be paid within ten
(10) days of Executive furnishing to the Bank or Parent evidence, which may be
in the form, among other things, of a canceled check or receipt, of any costs or
expenses incurred by Executive with regard to such matter.
6
<PAGE>
18. Confidential Information. The Executive acknowledges that during his
or her employment he or she will learn and have access to confidential
information regarding the Savings Bank and the Parent and its customers and
businesses ("Confidential Information"). The Executive agrees and covenants not
to disclose or use for his or her own benefit, or the benefit of any other
person or entity, any such Confidential Information, unless or until the Savings
Bank or tthe Parent consents to such disclosure or use or such information
becomes common knowledge in the industry or is otherwise legally in the public
domain. The Executive shall not knowingly disclose or reveal to any unauthorized
person any Confidential Information relating to the Savings Bank, the Parent, or
any subsidiaries or affiliates, or to any of the businesses operated by them,
and the Executive confirms that such information constitutes the exclusive
property of the Savings Bank and the Parent. The Executive shall not otherwise
knowingly act or conduct himself (a) to the material detriment of the Savings
Bank or the Parent, or its subsidiaries, or affiliates, or (b) in a manner which
is inimical or contrary to the interests of the Savings Bank or the Parent.
Executive acknowledges and agrees that the existence of this Agreement and its
terms and conditions constitutes Confidential Information of the Savings Bank,
and the Executive agrees not to disclose the Agreement or its contents without
the prior written consent of the Savings Bank. Notwithstanding the foregoing,
the Savings Bank reserves the right in its sole discretion to make disclosure of
this Agreement as it deems necessary or appropriate in compliance with its
regulatory reporting requirements. Notwithstanding anything herein to the
contrary, failure by the Executive to comply with the provisions of this Section
may result in the immediate termination of the Agreement within the sole
discretion of the Savings Bank, disciplinary action against the Executive taken
by the Savings Bank, including but not limited to the termination of employment
of the Executive for breach of the Agreement and the provisions of this Section,
and other remedies that may be available in law or in equity.
19. Entire Agreement. This Agreement together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.
7
EMPLOYMENT AGREEMENT
THIS AGREEMENT, is entered into this 23rd day of April 1998,
("Effective Date") by and between Pulse Savings Bank (the "Bank") and Jeffrey M.
Gostkowski (the "Executive").
WITNESSETH
WHEREAS, the Executive has heretofore been employed by the Bank as a
Vice President and is experienced in all phases of the business of the Bank; and
WHEREAS, the Bank desires to be ensured of the Executive's continued
active participation in the business of the Bank; and
WHEREAS, in order to induce the Executive to remain in the employ of
the Bank and in consideration of the Executive's agreeing to remain in the
employ of the Bank, the parties desire to specify the continuing employment
relationship between the Bank and the Executive;
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereby agree as follows:
1. Employment. The Bank hereby employs the Executive in the capacity as
a Vice President. The Executive hereby accepts said employment and agrees to
render such administrative and management services to the Bank and Pulse
Bancorp, Inc. ("Parent") as are currently rendered and as are customarily
performed by persons situated in a similar executive capacity. The Executive
shall promote the business of the Bank and Parent. The Executive's other duties
shall be such as the President of the Bank or the Board of Directors for the
Bank (the "Board of Directors" or "Board") may from time to time reasonably
direct, including normal duties as an officer of the Bank.
2. Term of Employment. The term of employment of Executive under this
Agreement shall be for the period commencing on the Effective Date and ending
thirty-six (36) months thereafter ("Term"). Such Agreement shall be extended
annually on the anniversary date of the Effective Date for an additional one
year period ("Automatic Extension"), absent delivery of written notice by the
Board to the Executive not less than 60 days prior to the date of such Automatic
Extension that the Board does not intend that such Agreement shall be extended
and the reason for such Board action.
3. Compensation, Benefits and Expenses.
(a) Base Salary. The Bank shall compensate and pay the Executive
during the Term of this Agreement a minimum base salary at the rate of
$87,000.00 per annum ("Base Salary"), payable in cash not less frequently than
monthly; provided, that the rate of such salary shall be reviewed by the Board
of Directors not less often than annually, and the Executive shall
<PAGE>
be entitled to receive increases at such percentages or in such amounts as
determined by the Board of Directors. The base salary may not be decreased
without the Executive's express written consent.
(b) Discretionary Bonus. The Executive shall be entitled to
participate in an equitable manner with all other senior management employees of
the Bank in discretionary bonuses that may be authorized and declared by the
Board of Directors to its senior management executives from time to time. No
other compensation provided for in this Agreement shall be deemed a substitute
for the Executive's right to participate in such discretionary bonuses when and
as declared by the Board.
(c) Participation in Benefit and Retirement Plans. The Executive
shall be entitled to participate in and receive the benefits of any plan of the
Bank which may be or may become applicable to senior management relating to
pension or other retirement benefit plans, profit-sharing, stock options or
incentive plans, or other plans, benefits and privileges given to employees and
executives of the Bank, to the extent commensurate with his then duties and
responsibilities, as fixed by the Board of Directors of the Bank.
(d) Participation in Medical Plans and Insurance Policies. The
Executive shall be entitled to participate in and receive the benefits of any
plan or policy of the Bank which may be or may become applicable to senior
management relating to life insurance, short and long term disability, medical,
dental, eye-care, prescription drugs or medical reimbursement plans.
(e) Vacations and Sick Leave. The Executive shall be entitled to
paid annual vacation leave in accordance with the policies as established from
time to time by the Board of Directors, which shall in no event be less than
four weeks per annum. The Executive shall also be entitled to an annual sick
leave benefit as established by the Board for senior management employees of the
Bank. The Executive shall not be entitled to receive any additional compensation
from the Bank for failure to take a vacation or sick leave, nor shall he be able
to accumulate unused vacation or sick leave from one year to the next, except to
the extent authorized by the Board of Directors.
(f) Expenses. The Bank shall reimburse the Executive or otherwise
provide for or pay for all reasonable expenses incurred by the Executive in
furtherance of, or in connection with the business of the Bank, including, but
not by way of limitation, automobile and traveling expenses, and all reasonable
entertainment expenses, subject to such reasonable documentation and other
limitations as may be established by the Board of Directors of the Bank. If such
expenses are paid in the first instance by the Executive, the Bank shall
reimburse the Executive therefor.
(g) Changes in Benefits. The Bank shall not make any changes in
such plans, benefits or privileges previously described in Section 3(c), (d) and
(e) which would adversely affect the Executive's rights or benefits thereunder,
unless such change occurs pursuant to a
2
<PAGE>
program applicable to all executive officers of the Bank and does not result in
a proportionately greater adverse change in the rights of, or benefits to, the
Executive as compared with any other executive officer of the Bank. Nothing paid
to Executive under any plan or arrangement presently in effect or made available
in the future shall be deemed to be in lieu of the salary payable to Executive
pursuant to Section 3(a) hereof.
4. Loyalty; Noncompetition.
(a) The Executive shall devote his full time and attention to the
performance of his employment under this Agreement. During the term of the
Executive's employment under this Agreement, the Executive shall not engage in
any business or activity contrary to the business affairs or interests of the
Bank or Parent.
(b) Nothing contained in this Section 4 shall be deemed to
prevent or limit the right of Executive to invest in the capital stock or other
securities of any business dissimilar from that of the Bank or Parent, or,
solely as a passive or minority investor, in any business.
5. Standards. During the term of this Agreement, the Executive shall
perform his duties in accordance with such reasonable standards expected of
executives with comparable positions in comparable organizations and as may be
established from time to time by the Board of Directors.
6. Termination and Termination Pay. The Executive's employment under
this Agreement shall be terminated upon any of the following occurrences:
(a) The death of the Executive during the term of this Agreement,
in which event the Executive's estate shall be entitled to receive the
compensation due the Executive through the last day of the calendar month in
which Executive's death shall have occurred.
(b) The Board of Directors may terminate the Executive's
employment at any time, but any termination by the Board of Directors other than
termination for Just Cause, shall not prejudice the Executive's right to
compensation or other benefits under the Agreement. The Executive shall have no
right to receive compensation or other benefits for any period after termination
for Just Cause. The Board may within its sole discretion, acting in good faith,
terminate the Executive for Just Cause and shall notify such Executive
accordingly. Termination for "Just Cause" shall include termination because of
the Executive's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of the Agreement.
(c) Except as provided pursuant to Section 9 hereof, in the event
Executive's employment under this Agreement is terminated by the Board of
Directors without Just Cause, the Bank shall be obligated to continue to pay the
Executive the salary provided pursuant to
3
<PAGE>
Section 3(a) herein, up to the date of termination of the remaining Term of this
Agreement, but in no event for a period of less than twenty-four (24), and the
cost of Executive obtaining all health, life, disability, and other benefits
which the Executive would be eligible to participate in through such date based
upon the benefit levels substantially equal to those being provided Executive at
the date of termination of employment.
(d) The voluntary termination by the Executive during the term of
this Agreement with the delivery of no less than 60 days written notice to the
Board of Directors, other than pursuant to Section 9(b), in which case the
Executive shall be entitled to receive only the compensation, vested rights, and
all employee benefits up to the date of such termination.
7. Regulatory Exclusions. Notwithstanding anything herein to the
contrary, any payments made to the Executive pursuant to the Agreement, or
otherwise, shall be subject to and conditioned upon compliance with 12 USC
ss.1828(k) and any regulations promulgated thereunder.
8. Disability. If the Executive shall become disabled or incapacitated
to the extent that he is unable to perform his duties hereunder, by reason of
medically determinable physical or mental impairment, as determined by a doctor
engaged by the Board of Directors, Executive shall nevertheless continue to
receive the compensation and benefits provided under the terms of this Agreement
as follows: 50% of such compensation and benefits during the remaining term of
the Agreement. Such benefits noted herein shall be reduced by any benefits
otherwise provided to the Executive during such period under the provisions of
disability insurance coverage in effect for Bank employees. Thereafter,
Executive shall be eligible to receive benefits provided by the Bank under the
provisions of disability insurance coverage in effect for Bank employees. Upon
returning to active full-time employment, the Executive's full compensation as
set forth in this Agreement shall be reinstated as of the date of commencement
of such activities. In the event that the Executive returns to active employment
on other than a full-time basis, then his compensation (as set forth in Section
3(a) of this Agreement) shall be reduced in proportion to the time spent in said
employment, or as shall otherwise be agreed to by the parties.
9. Change in Control.
(a) Notwithstanding any provision herein to the contrary, in the
event of the involuntary termination of Executive's employment during the term
of this Agreement following any Change in Control of the Bank or Parent, or
within 24 months thereafter of such Change in Control, absent Just Cause,
Executive shall be paid an amount equal to the product of 2.99 times the
Executive's "base amount" as defined in Section 280G(b)(3) of the Internal
Revenue Code of 1986, as amended (the "Code") and regulations promulgated
thereunder. Said sum shall be paid, at the option of Executive, either in one
(1) lump sum within thirty (30) days of such termination discounted to the
present value of such payment using as the discount rate the interest in effect
on one year U.S. Treasury obligations as of the date of payment as reported in
the Wall Street Journal Eastern Edition, or in periodic payments over the next
36 months or
4
<PAGE>
the remaining term of this Agreement whichever is less, as if Executive's
employment had not been terminated, and such payments shall be in lieu of any
other future payments which the Executive would be otherwise entitled to receive
under Section 6 of this Agreement. Notwithstanding the forgoing, all sums
payable hereunder shall be reduced in such manner and to such extent so that no
such payments made hereunder when aggregated with all other payments to be made
to the Executive by the Bank or the Parent shall be deemed an "excess parachute
payment" in accordance with Section 280G of the Code and be subject to the
excise tax provided at Section 4999(a) of the Code. The term "Change in Control"
shall refer to: (i) the sale of all, or a material portion, of the assets of the
Savings Bank or the Parent; (ii) the merger or recapitalization of the Savings
Bank or the Parent whereby the Savings Bank or the Parent is not the surviving
entity; (iii) a change in control of the Savings Bank or the Parent, as
otherwise defined or determined by the New Jersey Department of Banking or
Office of Thrift Supervision (with respect to its supervision of Parent as a
unitary savings and loan holding company) or regulations promulgated by such
agencies; or (iv) the acquisition, directly or indirectly, of the beneficial
ownership (within the meaning of that term as it is used in Section 13(d) of the
Securities Exchange Act of 1934 and the rules and regulations promulgated
thereunder) of twenty-five percent (25%) or more of the outstanding voting
securities of the Savings Bank or the Parent by any person, trust, entity or
group. The term "person" means an individual other than the Executive, or a
corporation, partnership, trust, association, joint venture, pool, syndicate,
sole proprietorship, unincorporated organization or any other form of entity not
specifically listed herein.
(b) Notwithstanding any other provision of this Agreement to the
contrary, Executive may voluntarily terminate his employment during the term of
this Agreement following a Change in Control of the Bank or Parent, or within
twenty-four months following such Change in Contriol, and Executive shall
thereupon be entitled to receive the payment described in Section 9(a) of this
Agreement, upon the occurrence, or within 120 days thereafter, of any of the
following events, which have not been consented to in advance by the Executive
in writing: (i) if Executive would be required to move his personal residence or
perform his principal executive functions more than thirty-five (35) miles from
the Executive's primary office as of the signing of this Agreement; (ii) if in
the organizational structure of the Bank, Executive would be required to report
to a person or persons other than the President or the Board of Directors of the
Bank; (iii) if the Bank should fail to maintain Executive's base compensation in
effect as of the date of the Change in Control and the existing employee
benefits plans, including material fringe benefit, stock option and retirement
plans; (iv) if Executive would be assigned duties and responsibilities other
than those normally associated with his position as referenced at Section 1,
herein; or (v) if Executive's responsibilities or authority have in any way been
materially diminished or reduced.
10. Withholding. All payments required to be made by the Bank hereunder
to the Executive shall be subject to the withholding of such amounts, if any,
relating to tax and other payroll deductions as the Bank may reasonably
determine should be withheld pursuant to any applicable law or regulation.
11. Successors and Assigns.
5
<PAGE>
(a) This Agreement shall inure to the benefit of and be binding
upon any corporate or other successor of the Bank or Parent which shall acquire,
directly or indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Bank or Parent.
(b) Since the Bank is contracting for the unique and personal
skills of the Executive, the Executive shall be precluded from assigning or
delegating his rights or duties hereunder without first obtaining the written
consent of the Bank.
12. Amendment; Waiver. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing, signed by the Executive and such officer or officers as may be
specifically designated by the Board of Directors of the Bank to sign on its
behalf. No waiver by any party hereto at any time of any breach by any other
party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
13. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of New
Jersey, except to the extent preempted by the laws of the United States where
applicable.
14. Nature of Obligations. Nothing contained herein shall create or
require the Bank to create a trust of any kind to fund any benefits which may be
payable hereunder, and to the extent that the Executive acquires a right to
receive benefits from the Bank hereunder, such right shall be no greater than
the right of any unsecured general creditor of the Bank.
15. Headings. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
16. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect.
17. Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by
arbitration in accordance with the rules then in effect of the district office
of the American Arbitration Association ("AAA") nearest to the home office of
the Bank, and judgment upon the award rendered may be entered in any court
having jurisdiction thereof, except to the extent that the parties may otherwise
reach a mutual settlement of such issue. Further, the Bank shall reimburse the
Executive for all reasonable costs and expenses, including reasonable attorneys'
fees, arising from any such dispute or arbitration without regard to the
ultimate outcome of such dispute, proceeding or action. Such reimbursement shall
be paid within ten (10) days of Executive furnishing to the Bank or Parent
evidence, which may be in the form, among other things, of a canceled check or
receipt, of any costs or expenses incurred by Executive with regard to such
matter.
6
<PAGE>
18. Confidential Information. The Executive acknowledges that during his
or her employment he or she will learn and have access to confidential
information regarding the Savings Bank and the Parent and its customers and
businesses ("Confidential Information"). The Executive agrees and covenants not
to disclose or use for his or her own benefit, or the benefit of any other
person or entity, any such Confidential Information, unless or until the Savings
Bank or tthe Parent consents to such disclosure or use or such information
becomes common knowledge in the industry or is otherwise legally in the public
domain. The Executive shall not knowingly disclose or reveal to any unauthorized
person any Confidential Information relating to the Savings Bank, the Parent, or
any subsidiaries or affiliates, or to any of the businesses operated by them,
and the Executive confirms that such information constitutes the exclusive
property of the Savings Bank and the Parent. The Executive shall not otherwise
knowingly act or conduct himself (a) to the material detriment of the Savings
Bank or the Parent, or its subsidiaries, or affiliates, or (b) in a manner which
is inimical or contrary to the interests of the Savings Bank or the Parent.
Executive acknowledges and agrees that the existence of this Agreement and its
terms and conditions constitutes Confidential Information of the Savings Bank,
and the Executive agrees not to disclose the Agreement or its contents without
the prior written consent of the Savings Bank. Notwithstanding the foregoing,
the Savings Bank reserves the right in its sole discretion to make disclosure of
this Agreement as it deems necessary or appropriate in compliance with its
regulatory reporting requirements. Notwithstanding anything herein to the
contrary, failure by the Executive to comply with the provisions of this Section
may result in the immediate termination of the Agreement within the sole
discretion of the Savings Bank, disciplinary action against the Executive taken
by the Savings Bank, including but not limited to the termination of employment
of the Executive for breach of the Agreement and the provisions of this Section,
and other remedies that may be available in law or in equity.
19. Entire Agreement. This Agreement together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.
7
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION DERIVED FROM THE
QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 3,928,791
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 31,300,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 152,195,925
<INVESTMENTS-CARRYING> 197,746,050
<INVESTMENTS-MARKET> 198,712,539
<LOANS> 146,680,537
<ALLOWANCE> 1,980,743
<TOTAL-ASSETS> 544,101,965
<DEPOSITS> 434,646,229
<SHORT-TERM> 59,675,000
<LIABILITIES-OTHER> 3,881,099
<LONG-TERM> 0
0
0
<COMMON> 4,182,380
<OTHER-SE> 41,717,257
<TOTAL-LIABILITIES-AND-EQUITY> 544,101,965
<INTEREST-LOAN> 8,571,421
<INTEREST-INVEST> 18,880,651
<INTEREST-OTHER> 552,806
<INTEREST-TOTAL> 28,004,878
<INTEREST-DEPOSIT> 14,537,383
<INTEREST-EXPENSE> 17,528,967
<INTEREST-INCOME-NET> 10,475,911
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,325,114
<INCOME-PRETAX> 6,400,623
<INCOME-PRE-EXTRAORDINARY> 6,400,623
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,127,867
<EPS-PRIMARY> 1.33
<EPS-DILUTED> 1.28
<YIELD-ACTUAL> 1.02
<LOANS-NON> 67,544
<LOANS-PAST> 1,036,339
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 5,898,000
<ALLOWANCE-OPEN> 2,357,396
<CHARGE-OFFS> 376,653
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 1,980,743
<ALLOWANCE-DOMESTIC> 1,980,743
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
