<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
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<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
JSB FINANCIAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[X] Fee paid previously with preliminary materials: $116,155.26
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
As Filed Pursuant to Rule 424(b)(3)
REgistration No. 333-94385
[NORTH FORK LOGO] [JSB LOGO]
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
The boards of directors of North Fork Bancorporation, Inc. and JSB
Financial, Inc. have approved a merger agreement that provides for the merger of
JSB into North Fork. This strategic transaction provides JSB stockholders with
growth and opportunities that would not have been available on a stand alone
basis.
IF WE COMPLETE THE MERGER, JSB STOCKHOLDERS WILL RECEIVE 3.0 SHARES OF
NORTH FORK COMMON STOCK FOR EACH SHARE OF JSB COMMON STOCK. THIS REPRESENTS A
VALUE OF $50.06 BASED ON NORTH FORK'S CLOSING STOCK PRICE OF $16.69 ON JANUARY
10, 2000, AS REPORTED ON THE NEW YORK STOCK EXCHANGE, WHERE NORTH FORK'S SHARES
ARE LISTED UNDER THE SYMBOL "NFB." IN ADDITION, WE EXPECT THAT THE CONVERSION OF
SHARES OF JSB COMMON STOCK IN THE MERGER GENERALLY WILL BE TAX-FREE FOR U.S.
FEDERAL INCOME TAX PURPOSES TO JSB STOCKHOLDERS.
North Fork also has entered into an agreement to acquire Reliance Bancorp,
Inc., a savings and loan holding company. This transaction is described on page
3. After completion of the merger and the Reliance merger, we expect that
current North Fork stockholders will own approximately 74% of the combined
company, JSB stockholders will own approximately 16% of the combined company and
Reliance stockholders will own approximately 10% of the combined company.
We are asking JSB stockholders to approve and adopt the merger agreement.
We are asking North Fork stockholders to approve and adopt the merger agreement,
including the related issuance of North Fork common stock to JSB stockholders,
and to approve an amendment to North Fork's certificate of incorporation to
increase the number of authorized shares of North Fork common stock and to
reduce the par value of the North Fork common stock. Approval of the amendment
to North Fork's certificate of incorporation is not a condition to completing
the merger.
YOUR VOTE IS IMPORTANT. We cannot complete the merger unless the
stockholders of both companies approve and adopt the merger agreement. We have
each scheduled a special meeting of our respective stockholders to vote on these
important matters. The places, dates and times of the special meetings are as
follows:
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FOR NORTH FORK STOCKHOLDERS: FOR JSB STOCKHOLDERS:
February 11, 2000 February 10, 2000
10:00 a.m., local time 10:00 a.m., local time
Melville Marriott Long Island Marriott Hotel and Conference Center
1350 Old Walt Whitman Road 101 James Doolittle Boulevard
Melville, New York Uniondale, New York
</TABLE>
This document gives you detailed information about the special meetings and
the proposed transaction. We encourage you to read this document carefully.
We enthusiastically support this combination of our two companies and join
with the other members of our boards of directors in recommending that you vote
in favor of the merger.
/s/ John Adam Kanas
John Adam Kanas
Chairman, President and Chief Executive Officer
North Fork Bancorporation, Inc.
/s/ Park T. Adikes
Park T. Adikes
Chairman and Chief Executive Officer
JSB Financial, Inc.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE SECURITIES TO BE ISSUED UNDER THIS
JOINT PROXY STATEMENT-PROSPECTUS OR DETERMINED IF THIS JOINT PROXY
STATEMENT-PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE. THE SECURITIES NORTH FORK IS OFFERING THROUGH THIS
DOCUMENT ARE NOT SAVINGS OR DEPOSIT ACCOUNTS OR OTHER OBLIGATIONS OF ANY BANK OR
SAVINGS ASSOCIATION, AND THEY ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
This Joint Proxy Statement-Prospectus is dated January 11, 2000 and is first
being mailed to stockholders of North Fork and JSB on or about January 12, 2000.
<PAGE> 3
JSB LOGO
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 10, 2000
To the Stockholders
of JSB Financial, Inc.:
We will hold a special meeting of stockholders of JSB Financial, Inc. on
Thursday, February 10, 2000 at 10:00 a.m., local time, at the Long Island
Marriott Hotel and Conference Center, 101 James Doolittle Boulevard, Uniondale,
New York, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the Amended
and Restated Agreement and Plan of Merger, dated as of August 16, 1999,
by and between North Fork Bancorporation, Inc. and JSB, as more fully
described in the enclosed joint proxy statement-prospectus; and
2. To transact any other business as may properly be brought before the
special meeting.
We have fixed December 27, 1999 as the record date for determining those
JSB stockholders entitled to vote at the special meeting. Accordingly, only
stockholders of record at the close of business on that date are entitled to
notice of, and to vote at, the special meeting. A list of stockholders entitled
to vote at the special meeting will be available for examination by JSB
stockholders for any purpose germane to the meeting, during ordinary business
hours, beginning 10 days prior to the date of the special meeting, at JSB's
principal executive offices at 303 Merrick Road, Lynbrook, New York.
TO ENSURE YOUR REPRESENTATION AT THE SPECIAL MEETING, PLEASE COMPLETE AND
PROMPTLY MAIL YOUR PROXY CARD IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE OR
CALL THE TOLL-FREE NUMBER AS DESCRIBED ON THE PROXY CARD. This will not prevent
you from voting in person, but will help to secure a quorum and avoid added
solicitation costs. Your proxy may be revoked at any time before it is voted.
Please review the joint proxy statement-prospectus accompanying this notice for
more complete information regarding the merger and the special meeting.
By Order of the Board of Directors,
/s/ Joanne Corrigan
JOANNE CORRIGAN
Corporate Secretary
January 11, 2000
THE BOARD OF DIRECTORS OF JSB UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING IN PERSON, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY
CARD IN THE ENCLOSED POSTAGE PAID ENVELOPE. YOU MAY ALSO VOTE YOUR SHARES BY
CALLING THE TOLL-FREE NUMBER AS DESCRIBED ON THE ENCLOSED PROXY CARD. IF YOU
ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE
PREVIOUSLY RETURNED YOUR PROXY CARD OR USED THE TELEPHONE VOTING SYSTEM.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE STOCKHOLDER
MEETINGS.................................................. iii
SUMMARY..................................................... 1
SELECTED HISTORICAL FINANCIAL INFORMATION................... 8
SELECTED PRO FORMA COMBINED FINANCIAL INFORMATION FOR ALL
TRANSACTIONS.............................................. 13
SELECTED FINANCIAL RATIOS................................... 15
COMPARATIVE PER SHARE DATA.................................. 16
NORTH FORK SPECIAL MEETING.................................. 19
Date, Time and Place...................................... 19
Matters to Be Considered.................................. 19
Proxies................................................... 19
Solicitation of Proxies................................... 19
Record Date and Voting Rights; Vote Required.............. 20
Recommendation of the North Fork Board.................... 20
JSB SPECIAL MEETING......................................... 21
Date, Time and Place...................................... 21
Matters to Be Considered.................................. 21
Proxies................................................... 21
Solicitation of Proxies................................... 21
Record Date and Voting Rights; Vote Required.............. 22
Recommendation of the JSB Board........................... 22
THE MERGER.................................................. 23
Transaction Structure..................................... 23
Background of the Merger.................................. 23
Recommendation of the North Fork Board and Reasons for the
Merger................................................. 27
Recommendation of the JSB Board and Reasons for the
Merger................................................. 28
Opinion of North Fork's Financial Advisor................. 30
Opinion of JSB's Financial Advisor........................ 40
Conversion of Stock....................................... 48
Treatment of Options...................................... 48
Exchange of Stock Certificates............................ 49
Effective Time............................................ 49
Changing the Method of Effecting the Combination.......... 50
Conditions to the Completion of the Merger................ 50
Representations and Warranties............................ 51
Conduct of Business Pending the Merger.................... 52
No Solicitation by JSB.................................... 54
Regulatory Approvals Required for the Merger.............. 54
Material Federal Income Tax Consequences.................. 56
Termination of the Merger Agreement....................... 57
Termination Fees.......................................... 60
Extension, Waiver and Amendment of the Merger Agreement... 61
Stock Exchange Listing.................................... 61
Expenses.................................................. 61
Dividends................................................. 62
Appraisal Rights.......................................... 62
Accounting Treatment...................................... 62
Interests of Certain Persons in the Merger................ 62
Employee Matters.......................................... 65
</TABLE>
i
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Stock Option Agreement.................................... 67
Restrictions on Resales by Affiliates..................... 69
MANAGEMENT AND OPERATIONS FOLLOWING THE MERGER AND THE
RELIANCE MERGER........................................... 70
Board of Directors Following the Merger and the Reliance
Merger................................................. 70
Consolidation of Operations; Estimated Cost Savings and
Revenue Enhancements; Estimated Earnings Per Share..... 70
PRICE RANGE OF COMMON STOCK AND DIVIDENDS................... 72
North Fork................................................ 72
JSB....................................................... 72
North Fork Dividend Policy................................ 73
INFORMATION ABOUT NORTH FORK................................ 73
General................................................... 73
Management and Additional Information..................... 74
Security Ownership........................................ 74
INFORMATION ABOUT JSB....................................... 75
General................................................... 75
Management and Additional Information..................... 75
Security Ownership........................................ 76
REGULATION AND SUPERVISION OF NORTH FORK.................... 77
General................................................... 77
Payment of Dividends...................................... 77
Transactions with Affiliates.............................. 78
Holding Company Liability................................. 78
Prompt Corrective Action.................................. 78
Capital Adequacy.......................................... 79
Enforcement Powers of the Federal Banking Agencies........ 80
Control Acquisitions...................................... 80
Future Legislation........................................ 81
DESCRIPTION OF NORTH FORK CAPITAL STOCK..................... 81
General................................................... 81
Common Stock.............................................. 81
Preferred Stock........................................... 82
Anti-Takeover Provisions.................................. 82
COMPARISON OF STOCKHOLDER RIGHTS............................ 82
Summary of Material Differences Between the Rights of
North Fork Stockholders and Rights of JSB
Stockholders........................................... 83
PROPOSED AMENDMENT TO NORTH FORK'S CERTIFICATE OF
INCORPORATION............................................. 87
LEGAL MATTERS............................................... 88
EXPERTS..................................................... 88
STOCKHOLDER PROPOSALS....................................... 88
OTHER MATTERS............................................... 89
WHERE YOU CAN FIND MORE INFORMATION......................... 89
FORWARD-LOOKING STATEMENTS.................................. 91
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)............................................... 93
</TABLE>
<TABLE>
<S> <C>
Appendix A Amended and Restated Agreement and Plan of Merger
Appendix B Stock Option Agreement
Appendix C Opinion of Donaldson, Lufkin & Jenrette Securities
Corporation
Appendix D Opinion of Northeast Capital & Advisory, Inc.
Appendix E Proposed Amendment to North Fork's Certificate of
Incorporation
</TABLE>
ii
<PAGE> 6
QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE STOCKHOLDER MEETINGS
Q: WHAT DO I NEED TO DO NOW?
A: After you have carefully read this document, just indicate on your proxy card
how you want to vote. Complete, sign, date and mail the proxy card in the
enclosed postage-paid return envelope as soon as possible so that your shares
will be represented and voted at the special meeting. The board of directors
of North Fork and the board of directors of JSB each unanimously recommends
that its stockholders vote in favor of the merger.
North Fork's board of directors also recommends that North Fork stockholders
vote to approve the proposed amendment to its certificate of incorporation.
Approval of the amendment is not a condition to completing the merger.
Q: CAN I VOTE BY TELEPHONE?
A: You can vote your shares by calling the toll-free number and following the
instructions on the proxy card. The automated telephone voting system is
designed to authenticate stockholders by use of a personal identification
number. This procedure allows you to vote your shares and to confirm that
your instructions have been properly recorded.
Q: WHAT DO I DO IF I WANT TO CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY
CARD?
A: You may change your vote by revoking your proxy in any of the four following
ways:
- by sending a written notice to the corporate secretary of your company
prior to your special meeting stating that you would like to revoke your
proxy;
- by completing, signing and dating another proxy card and returning it by
mail prior to your special meeting;
- by attending your special meeting and voting in person; or
- by calling the toll-free number on the proxy card and following the
instructions if your shares were originally voted by telephone.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES AT THIS TIME?
A: No. After we complete the merger, we will send JSB stockholders written
instructions for exchanging their stock certificates. North Fork stockholders
do not need to exchange their stock certificates as a result of the merger or
the amendment to North Fork's certificate of incorporation.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: If you do not provide your broker with instructions on how to vote your
shares held in "street name," your broker will not be permitted to vote your
shares on the proposals presented at your special meeting. You should
therefore provide your broker with instructions as to how to vote your
shares. Failure to instruct your broker as to how to vote your shares will be
the equivalent of voting against each of the proposals presented at your
special meeting.
Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A: We presently expect to complete the merger in the first quarter of 2000.
However, we cannot assure you when or if the merger will occur. We must first
obtain the approvals of our stockholders at the special meetings and the
necessary regulatory approvals.
Q: WHO CAN I CALL WITH QUESTIONS ABOUT THE SPECIAL MEETINGS OR THE MERGER OR TO
OBTAIN ADDITIONAL INFORMATION ABOUT THE COMPANIES?
A: North Fork stockholders can contact Aurelie S. Graf, Corporate Secretary, at
(631) 844-1004 and JSB stockholders can call Edward Lekstutis, Vice
President, at (516) 887-7000, ext. 372.
iii
<PAGE> 7
This document incorporates important business and financial information
about our companies from documents we have filed with the Securities and
Exchange Commission that we have not included in or delivered with this
document. You may read and copy these documents at the SEC's public reference
facilities. Please call the SEC at 1-800-SEC-0330 for information about these
facilities. This information is also available at the Internet site the SEC
maintains at HTTP://WWW.SEC.GOV and at the offices of the New York Stock
Exchange. See "Where You Can Find More Information" on page 89.
You may also request copies of these documents from us. North Fork will
provide you with copies of the documents relating to North Fork, without charge,
upon written or oral request to:
North Fork Bancorporation, Inc.
275 Broad Hollow Road
Melville, New York 11747
(631) 844-1004
Attention: Aurelie S. Graf, Corporate Secretary
JSB will provide you with copies of the documents relating to JSB, without
charge, upon written or oral request to:
JSB Financial, Inc.
303 Merrick Road
Lynbrook, New York 11563
(516) 887-7000, ext. 372
Attention: Edward Lekstutis, Vice President
In order to receive timely delivery of the documents in advance of our
special meetings of stockholders, you should make out your requests no later
than February 3, 2000.
iv
<PAGE> 8
SUMMARY
This brief summary does not contain all of the information that should be
important to you. You should carefully read this entire document and the other
documents to which this document refers you to fully understand the merger. See
"Where You Can Find More Information" on page 89.
EACH JSB SHARE WILL BE EXCHANGED FOR 3.0 NORTH FORK SHARES (PAGE 48)
When we complete the merger, your shares of North Fork common stock and JSB
common stock will become shares of the combined company.
North Fork Stockholders. When the merger is complete, each of your shares
of North Fork common stock will remain outstanding as one share of common stock
of the combined company.
JSB Stockholders. When the merger is complete, each of your shares of JSB
common stock will automatically become the right to receive 3.0 shares of common
stock of the combined company.
If the average closing price of North Fork common stock over a pricing
period prior to the closing represents a decline below certain specified levels,
JSB will have the right to terminate the merger agreement. If JSB exercises this
right, North Fork will have the option to nullify JSB's termination by
increasing the exchange ratio based on a formula in the merger agreement. See
"--Termination of the Merger Agreement" on page 57.
Because the number of shares of common stock of the combined company that
the JSB stockholders will receive in the merger is fixed, subject to the
potential adjustment described above, the value of the shares of common stock of
the combined company the JSB stockholders will receive in the merger will change
as the price of North Fork common stock changes.
TRANSACTION GENERALLY TAX-FREE FOR JSB STOCKHOLDERS (PAGE 56)
Each of North Fork and JSB has received an opinion of its counsel, dated
the date of this document, that the merger will be treated as a transaction of a
type that is generally tax-free to JSB stockholders for U.S. federal income tax
purposes. Neither North Fork nor JSB will be obligated to complete the merger
unless it receives a legal opinion from its counsel, dated the closing date,
that the merger will be treated as a transaction of a type that is generally
tax-free for U.S. federal income tax purposes.
If the merger qualifies as a type that is generally tax-free for U.S.
federal income tax purposes, then the JSB stockholders generally will not
recognize any gain or loss for U.S. federal income tax purposes as a result of
the exchange of all of their shares of JSB common stock in the merger, except in
connection with any cash received instead of fractional shares.
In the event that (a) either North Fork or JSB fails to receive, on the
closing date of the merger, the tax opinion described above from its counsel,
(b) either North Fork or JSB decides to waive the tax opinion condition to its
obligation to complete the merger, and (c) North Fork and JSB determine that the
material federal income tax consequences of the merger are different from those
described above, North Fork and JSB will resolicit approval of their
stockholders prior to completing the merger.
Even if such legal opinions are rendered to North Fork and JSB, such
opinions are not binding on the Internal Revenue Service or the courts and,
accordingly, there can be no assurance that the Internal Revenue Service will
not challenge the conclusions reflected in such opinions or that it will not
prevail in any such challenge thereto.
THIS TAX TREATMENT MAY NOT APPLY TO ALL JSB STOCKHOLDERS. DETERMINING THE
ACTUAL TAX CONSEQUENCES OF THE MERGER TO YOU CAN BE COMPLICATED. THEY WILL
DEPEND ON YOUR SPECIFIC SITUATION AND ON VARIABLES NOT WITHIN OUR CONTROL. YOU
SHOULD CONSULT YOUR OWN TAX ADVISOR FOR A FULL UNDERSTANDING OF THE MERGER'S TAX
CONSEQUENCES TO YOU.
COMPARATIVE MARKET PRICE INFORMATION (PAGE 72)
North Fork common stock trades on the New York Stock Exchange under the
symbol "NFB" and JSB common stock trades on the NYSE under the symbol "JSB."
The following table lists the closing prices of North Fork common stock and
JSB common stock, and the equivalent per share value of a share of JSB common
stock, on August 13, 1999, the last trading
1
<PAGE> 9
day before we announced the merger, and on January 10, 2000. The "equivalent per
share value of JSB common stock" at the specified dates represents the closing
price of a share of North Fork common stock on that date multiplied by the
exchange ratio of 3.0.
<TABLE>
<CAPTION>
EQUIVALENT PER
NORTH FORK JSB SHARE VALUE OF
COMMON COMMON JSB COMMON
STOCK STOCK STOCK
---------- ------ --------------
<S> <C> <C> <C>
August 13, 1999...... $20.44 $58.75 $61.31
January 10, 2000..... $16.69 $49.25 $50.06
</TABLE>
Of course, the market price of North Fork common stock will change prior to
the merger, while the exchange ratio is fixed. You should obtain current stock
price quotations for North Fork common stock and JSB common stock. You can get
these quotations from a newspaper, on the Internet or by calling your broker.
DIVIDEND POLICY OF NORTH FORK (PAGE 73)
The holders of North Fork common stock receive dividends if and when
declared by the North Fork board of directors out of legally available funds.
North Fork's past practice has been to pay dividends on its common stock at a
rate of 30% to 40% of earnings. North Fork declared a cash dividend of $0.18 per
common share for the fourth quarter of 1999 and for each of the first three
fiscal quarters of 1999, North Fork paid a cash dividend of $0.15 per common
share. Following completion of the merger and the Reliance merger, North Fork
expects to continue paying quarterly cash dividends on a basis consistent with
its past practice. However, the declaration and payment of dividends will depend
upon business conditions, operating results, capital and reserve requirements
and the North Fork board of directors' consideration of other relevant factors.
OUR FINANCIAL ADVISORS SAY THE EXCHANGE RATIO IS FAIR TO STOCKHOLDERS (PAGES 30
AND 40)
North Fork Stockholders. In deciding to approve the merger, the North Fork
board of directors considered the opinion of its financial advisor, Donaldson,
Lufkin & Jenrette Securities Corporation, that, as of August 16, 1999, the
exchange ratio was fair to North Fork stockholders from a financial point of
view. North Fork has received an updated opinion from Donaldson, Lufkin &
Jenrette dated the date of this document. We have attached the updated opinion
to this document as Appendix C. You should read the opinion completely to
understand the assumptions made, matters considered and limitations on the
review undertaken by Donaldson, Lufkin & Jenrette in providing its opinion.
North Fork has agreed to pay a fee of $1.5 million to Donaldson, Lufkin &
Jenrette, of which $1.35 million is payable upon closing of the merger.
JSB Stockholders. In deciding to approve the merger, the JSB board of
directors considered the opinion of its financial advisor, Northeast Capital &
Advisory, Inc., that, as of August 15, 1999, the exchange ratio was fair to the
holders of JSB common stock from a financial point of view. JSB has received an
updated opinion from Northeast Capital dated the date of this document. We have
attached the updated opinion to this document as Appendix D. You should read the
opinion completely to understand the assumptions made, matters considered and
limitations on the review undertaken by Northeast Capital in providing its
opinion. JSB has agreed to pay a fee of $1.1 million to Northeast Capital, of
which $600,000 is payable upon closing of the merger, subject to a possible
increase if the consideration to be received by JSB's stockholders exceeds $70
per share.
INFORMATION ABOUT NORTH FORK AND JSB (PAGES 73 AND 75)
NORTH FORK BANCORPORATION, INC.
275 Broad Hollow Road
Melville, New York 11747
(631) 844-1004
North Fork is a bank holding company. North Fork's primary subsidiary,
North Fork Bank, a New York State-chartered, FDIC-insured commercial bank,
operates 112 retail banking facilities throughout Suffolk and Nassau counties on
Long Island, New York, as well as in the New York City boroughs of Manhattan,
Queens, Brooklyn and the Bronx and in Westchester and Rockland counties north of
New York City. At September 30, 1999, North Fork had total assets of $11.9
billion, total deposits of $6.6 billion and stockholders' equity of $717.6
million.
2
<PAGE> 10
JSB FINANCIAL, INC.
303 Merrick Road
Lynbrook, New York 11563
(516) 887-7000
JSB is a savings and loan holding company. JSB's wholly owned subsidiary,
Jamaica Savings Bank FSB, a federally-chartered, FDIC-insured savings bank,
operates 13 retail banking facilities in the New York City boroughs of Manhattan
and Queens and in Nassau and Suffolk counties, New York. Jamaica Savings Bank is
a community-oriented financial institution, serving its market area with a wide
selection of loan products and retail financial services. At September 30, 1999,
JSB had total assets of $1.6 billion, deposits of $1.1 billion and stockholders'
equity of $374 million.
JSB WILL MERGE INTO NORTH FORK (PAGE 23)
We propose a merger of JSB with and into North Fork. The name of the
combined company will be "North Fork Bancorporation, Inc." We expect to complete
the merger in the first quarter of 2000.
We have attached the merger agreement to this document as Appendix A.
Please read the merger agreement carefully. It is the legal document that
governs the merger.
OUR REASONS FOR THE MERGER (PAGES 27 AND 28)
Our companies are proposing to merge because we believe that:
- by combining them we can create a stronger company that will provide
significant benefits to our stockholders and customers alike.
- by bringing our customers and banking products together we can do a
better job of increasing our combined revenues and earnings than we could
if we did not merge.
- the merger will strengthen the combined company's position as a
competitor in the financial services industry, which is rapidly changing
and growing more competitive.
NORTH FORK HAS ENTERED INTO AN AGREEMENT TO ACQUIRE RELIANCE BANCORP, INC.
On August 30, 1999, North Fork entered into an agreement with Reliance
Bancorp, Inc. providing for the merger of Reliance with and into North Fork. At
September 30, 1999, Reliance had $2.5 billion in total assets, $1.6 billion in
deposits, $171.7 million in stockholders' equity and served customers from 29
retail banking facilities throughout Suffolk and Nassau counties on Long Island,
New York, as well as in the New York City boroughs of Manhattan and Queens. For
more information about Reliance, see "Where You Can Find More Information" on
page 89.
In the Reliance merger, Reliance stockholders will receive 2.0 shares of
North Fork common stock in exchange for each share of Reliance common stock.
North Fork intends to account for its acquisition of Reliance under the purchase
method of accounting and to fund the Reliance acquisition through the reissuance
of North Fork treasury shares. North Fork expects to reissue a total of
approximately 17 million treasury shares as consideration in the Reliance
merger. Accordingly, following the announcement of its agreement with Reliance,
North Fork implemented a stock purchase program under which it authorized the
purchase of up to 8.5 million shares of its common stock. The pro forma
financial information in this document includes pro forma adjustments reflecting
the completion of the Reliance merger under the purchase method of accounting.
See "Pro Forma Condensed Combined Financial Statements (Unaudited)" on page 93.
North Fork intends to account for the merger with JSB using the
"pooling-of-interests" method of accounting, but will not be able to do so
unless it reissues a sufficient number of shares of its common stock currently
held in its treasury prior to completing the JSB merger. Accordingly, North Fork
intends to complete the Reliance merger prior to the completion of the JSB
merger. Completion of the Reliance merger is subject to a number of conditions,
including the receipt of all required regulatory approvals and the approval of
the stockholders of Reliance. North Fork expects to complete the Reliance merger
in the first quarter of 2000, but cannot assure you as to whether or when all of
these conditions will be satisfied and the Reliance merger will be completed.
COMPLETION OF THE RELIANCE MERGER DOES NOT REQUIRE THE APPROVAL OF THE
STOCKHOLDERS OF EITHER NORTH FORK OR JSB, AND NEITHER NORTH FORK STOCKHOLDERS
NOR JSB STOCKHOLDERS ARE BEING ASKED TO VOTE UPON THE RELIANCE MERGER.
3
<PAGE> 11
THE STOCKHOLDERS' MEETINGS (PAGES 19 AND 21)
North Fork Stockholders. The North Fork special meeting will be held on
Friday, February 11, 2000 at 10:00 a.m., local time, at the Melville Marriott,
1350 Old Walt Whitman Road, Melville, New York. At the North Fork special
meeting, you will be asked:
1. to approve and adopt the merger agreement, including the related
issuance of North Fork common stock;
2. to adopt an amendment to North Fork's certificate of incorporation to
increase the number of authorized shares of North Fork common stock from
200 million to 500 million and to reduce the par value of North Fork's
common stock from $2.50 per share to $0.01 per share; and
3. to act on any other matters that may properly be submitted to a vote at
the North Fork special meeting.
JSB Stockholders. The JSB special meeting will be held on Thursday,
February 10, 2000 at 10:00 a.m., local time, at the Long Island Marriott Hotel
and Conference Center, 101 James Doolittle Boulevard, Uniondale, New York. At
the JSB special meeting, you will be asked:
1. to approve and adopt the merger agreement; and
2. to act on any other matters that may properly be submitted to a vote at
the JSB special meeting.
RECORD DATE AND VOTE REQUIRED FOR APPROVAL OF THE MERGER (PAGES 20 AND 22)
North Fork Stockholders. You can vote at the North Fork special meeting if
you owned North Fork common stock at the close of business on December 15, 1999.
On that date, there were 128,439,378 shares of North Fork common stock
outstanding and entitled to vote. You can cast one vote for each share of North
Fork common stock that you owned on that date. In order to approve and adopt the
merger agreement, the holders of a majority of the outstanding shares of North
Fork common stock must vote in favor of doing so.
JSB Stockholders. You can vote at the JSB special meeting if you owned JSB
common stock at the close of business on December 27, 1999. On that date, there
were 9,371,139 shares of JSB common stock outstanding and entitled to vote. You
can cast one vote for each share of JSB common stock that you owned on that
date. In order to approve and adopt the merger agreement, the holders of a
majority of the outstanding shares of JSB common stock must vote in favor of
doing so.
WE UNANIMOUSLY RECOMMEND THAT STOCKHOLDERS APPROVE THE MERGER (PAGES 27 AND 28)
North Fork Stockholders. North Fork's board of directors believes that the
merger is fair to you and in your best interests, and unanimously recommends
that you vote "FOR" the proposal to approve and adopt the merger agreement,
including the related issuance of North Fork common stock.
JSB Stockholders. JSB's board of directors believes that the merger is
fair to you and in your best interests, and unanimously recommends that you vote
"FOR" the proposal to approve and adopt the merger agreement.
COMPLETION OF THE MERGER IS SUBJECT TO CERTAIN CONDITIONS (PAGE 50)
The completion of the merger is subject to a number of conditions being
met, including approval of the merger agreement by both North Fork stockholders
and JSB stockholders and receipt of all required regulatory approvals.
Where the law permits, a party to the merger agreement could elect to waive
a condition to its obligation to complete the merger, even if that condition has
not been satisfied. We cannot be certain when (or if) the conditions to the
merger will be satisfied or waived or that the merger will be completed.
WE EXPECT POOLING-OF-INTERESTS ACCOUNTING TREATMENT (PAGE 62)
North Fork intends to account for the merger as a "pooling-of-interests."
This means that, for accounting and financial reporting purposes, we will treat
our companies as if they had always been combined.
In order for the merger to qualify for pooling-of-interests accounting
treatment, North Fork must, in addition to meeting all of the other criteria to
qualify for pooling-of-interests accounting treatment, reissue a sufficient
number of shares of its common stock currently held as treasury shares
4
<PAGE> 12
prior to completing the merger. North Fork intends to do so by reissuing
treasury shares as consideration in the Reliance merger. Accordingly, North Fork
intends to complete the Reliance merger before completing its merger with JSB so
that the JSB merger will qualify for pooling-of-interests accounting treatment.
Completion of the Reliance merger is subject to a number of conditions,
including the receipt of all required regulatory approvals and the approval of
the stockholders of Reliance. North Fork and Reliance are working to obtain all
regulatory and other approvals required to complete the Reliance merger.
However, North Fork cannot assure you that all of the conditions to the Reliance
merger will be satisfied in the anticipated time frame or otherwise. If North
Fork is unable to complete its acquisition of Reliance in the anticipated time
frame or otherwise, completion of JSB's merger with North Fork will be delayed,
and North Fork may have to reissue the required number of treasury shares in a
public or private offering or in some other alternative transaction in order for
the JSB merger to qualify for pooling-of-interests accounting treatment.
WE MAY NOT COMPLETE THE MERGER WITHOUT ALL REQUIRED REGULATORY APPROVALS (PAGE
54)
We cannot complete the merger unless it is approved by the Board of
Governors of the Federal Reserve System, the New York State Banking Department
and the Federal Deposit Insurance Corporation. In addition, we must give prior
notice of the merger to the Office of Thrift Supervision.
As of the date of this document, we have received the approval of the New
York State Banking Department, the Federal Deposit Insurance Corporation and the
Board of Governors of the Federal Reserve System. We have also provided prior
notice of the merger to the Office of Thrift Supervision.
TERMINATION OF THE MERGER (PAGE 57)
We can agree at any time not to complete the merger, even if the
stockholders of both our companies have approved it. Also, either of us can
decide, without the consent of the other, not to complete the merger in a number
of other situations, including:
- the final denial of a required regulatory approval,
- the failure of either party to obtain the required vote of its
stockholders to approve the merger agreement,
- the other party's board of directors changes, in a manner adverse to the
terminating party, its recommendation of the merger,
- the other party materially breaches its representations, warranties or
obligations under the merger agreement, or
- the failure to complete the merger by February 29, 2000 (however, this
date will be extended to April 30, 2000 if, on February 29, 2000, all
conditions to completing the merger have been satisfied other than the
receipt of all required regulatory approvals).
JSB MAY DECIDE NOT TO COMPLETE THE MERGER IF NORTH FORK'S STOCK PRICE DECREASES
SIGNIFICANTLY (PAGE 58)
In addition, JSB can decide not to complete the merger if both of the
following are true:
(1) the average of the closing prices of North Fork's common stock over the
15-trading-day period ending on the day prior to the "valuation date"
(which is the date of receipt of the last of the required regulatory
and stockholder approvals, including any required regulatory waiting
periods) is less than $16.35, and
(2) the ratio obtained by comparing North Fork's average closing price
described in clause (1) above to North Fork's closing price of $20.44
on August 13, 1999, is more than ten percentage points less than the
ratio obtained by comparing the sum of the weighted average closing
prices of the stocks of an index group of selected banks and thrifts
for the same 15-trading-day period to the sum of the weighted closing
prices for these stocks on August 13, 1999.
Any decision by JSB not to complete the merger under this provision will not be
effective, however, if North Fork elects to increase the exchange ratio in
accordance with a formula in the merger agreement to provide JSB stockholders
more shares of North Fork common stock in exchange for each share of JSB common
stock.
5
<PAGE> 13
WE MAY AMEND THE TERMS OF THE MERGER AND WAIVE RIGHTS UNDER THE MERGER AGREEMENT
(PAGE 61)
We may jointly amend the terms of the merger agreement, and each of us may
waive our right to require the other party to adhere to any of those terms, to
the extent legally permissible. However, after our stockholders approve the
merger agreement, they must approve any amendment or waiver that reduces the
consideration that will be received by JSB's stockholders.
EACH OF US MUST PAY THE OTHER A TERMINATION FEE UNDER CERTAIN CIRCUMSTANCES
(PAGE 60)
North Fork or JSB, as applicable, will be required to pay the other company
a termination fee of:
(1) $12.5 million, plus the other company's reasonable out-of-pocket
expenses, if, within 12 months after August 16, 1999, it receives a
proposal for a competing transaction and any of the following occur:
- its board of directors changes, in a manner adverse to the other
company, its recommendation of the merger,
- the merger is not approved by its stockholders or its stockholder
meeting for the purpose of voting on the merger is canceled or is
not held, or
- it willfully breaches the merger agreement, and
(2) $25 million, plus the other company's reasonable out-of-pocket
expenses, if, within 18 months after August 16, 1999, without having
received the other company's consent, it enters into an agreement to
engage in, or recommends that its stockholders approve, an acquisition
transaction not permitted under the terms of the merger agreement.
Any fee payable under clause (2) above will be reduced dollar-for-dollar by the
full amount of any fee actually paid under clause (1) above. No fee described
above is payable if the merger agreement is validly terminated for certain
reasons at or prior to the time that the fee becomes payable.
JSB HAS GRANTED NORTH FORK AN OPTION TO PURCHASE SHARES OF JSB COMMON STOCK
(PAGE 67)
In connection with the merger agreement, JSB granted to North Fork an
option to purchase up to 1,848,092 shares of JSB common stock (approximately
19.9% of JSB's outstanding common stock) at a price of $58.75 per share. The
option is exercisable upon the occurrence of certain events generally involving
a competing transaction with a third party to acquire JSB or a significant
amount of its stock or assets. As of the date of this document, we know of no
such event that has occurred. The option could have the effect of discouraging
other companies from offering to acquire JSB.
The stock option agreement limits the aggregate profit North Fork is
permitted to receive as a result of the payment of any termination fees
described above and the exercise of any rights under the stock option agreement
to $30 million. We have attached the stock option agreement as Appendix B to
this joint proxy statement-prospectus.
NORTH FORK AND JSB STOCKHOLDERS DO NOT HAVE APPRAISAL RIGHTS AS A RESULT OF THE
MERGER (PAGE 62)
The stockholders of JSB and North Fork do not have any right to an
appraisal of the value of their shares in connection with the merger.
JSB OFFICERS AND DIRECTORS HAVE SOME INTERESTS IN THE MERGER THAT ARE DIFFERENT
FROM OR IN ADDITION TO THEIR INTERESTS AS STOCKHOLDERS (PAGE 62)
JSB directors and officers have interests in the merger in addition to
their interests as stockholders of JSB. These interests exist because of
employment agreements that some JSB officers have entered into with JSB and
rights that JSB officers and directors have under certain benefit, severance and
compensation plans maintained by JSB. These agreements and plans will provide
certain officers with severance benefits if their employment with the combined
company is terminated at or after the completion of the merger and will provide
certain officers with other rights and benefits as a result of the completion of
the merger.
Following the merger, the combined company will indemnify, and provide
directors' and officers' insurance for, the officers and directors of JSB for
events occurring before the merger, including events that are related to the
merger. Also, upon comple-
6
<PAGE> 14
tion of the merger, Park T. Adikes, the Chairman and Chief Executive Officer of
JSB, will become a member of the board of directors of North Fork and North Fork
Bank, and the remaining members of the JSB board of directors will be invited to
become members of an advisory board of North Fork.
The JSB board of directors knew about these additional interests, and
considered them, when it approved the merger agreement.
PROPOSED AMENDMENT TO NORTH FORK'S CERTIFICATE OF INCORPORATION (PAGE 87)
In addition to the vote on the merger, North Fork's board of directors has
proposed, and requests that North Fork stockholders approve, an amendment to
North Fork's certificate of incorporation to:
- increase the number of authorized shares of common stock from 200 million
to 500 million, and
- reduce the par value of the common stock from $2.50 per share to $0.01
per share.
We have attached the form of the proposed amendment as Appendix E to this
joint proxy statement-prospectus and encourage you to review it.
In order to approve the proposed amendment, the holders of a majority of
the outstanding shares of North Fork common stock must vote in favor of doing
so.
The North Fork board of directors believes that the proposed amendment to
North Fork's certificate of incorporation is advisable and in the best interest
of its stockholders and recommends that North Fork stockholders vote "FOR" the
proposed amendment to North Fork's certificate of incorporation.
Approval of the proposed amendment is not a condition to completing the
merger.
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE (PAGE 91)
This joint proxy statement-prospectus, including information included or
incorporated by reference in this document, contains certain forward-looking
statements with respect to the financial condition, results of operations,
plans, objectives, future performance and business of each of North Fork, JSB
and Reliance, as well as certain information relating to the merger and/or the
Reliance merger. Also, statements preceded by, followed by or that include the
words "believes," "expects," "anticipates," "estimates" or similar expressions
are forward-looking statements. These forward-looking statements involve certain
risks and uncertainties. Actual results may differ materially from those
contemplated by the forward-looking statements due to various factors.
7
<PAGE> 15
SELECTED HISTORICAL FINANCIAL INFORMATION
The following tables show selected historical financial information for
North Fork and JSB for the five years ended December 31, 1998 and the nine
months ended September 30, 1999 and 1998 and for Reliance for the three months
ended September 30, 1999 and 1998 and the five years ended June 30, 1999. This
information is derived from historical financial statements previously filed by
North Fork, JSB and Reliance with the SEC. See "Where You Can Find More
Information" on page 89.
Certain JSB and Reliance financial information has been reclassified to
conform with North Fork's financial information. The financial information for
the nine months ended September 30, 1999 for North Fork and JSB reflect, in the
opinions of management of North Fork and JSB, respectively, all adjustments
necessary for a fair presentation of such information. North Fork has been
advised that the financial information for Reliance for the three months ended
September 30, 1999 reflects, in the opinion of management of Reliance, all
adjustments necessary for a fair presentation of such information. Results for
these interim periods are not necessarily indicative of the results which may be
expected for the full year or any other interim period.
8
<PAGE> 16
NORTH FORK BANCORPORATION, INC.
SELECTED HISTORICAL FINANCIAL INFORMATION
(UNAUDITED)
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------------- ----------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARY STATEMENTS
OF INCOME:
Interest Income.................. $ 604,444 $ 560,984 $ 753,100 $ 724,424 $ 613,762 $ 530,239 $ 471,496
Interest Expense................. 267,591 245,888 328,456 326,803 281,107 242,129 192,524
----------- ----------- ----------- ----------- ---------- ---------- ----------
Net Interest Income............ 336,853 315,096 424,644 397,621 332,655 288,110 278,972
Provision for Loan Losses(2)..... 3,750 14,500 15,500 8,100 8,000 13,525 9,475
Non-Interest Income(3)........... 44,314 41,588 54,885 50,915 38,602 29,695 28,168
Net Securities
Gains/(Losses)(2).............. 9,900 2,318 9,433 8,407 6,224 5,886 (8,587)
Other Non-Interest
Expense(2)(4).................. 112,943 111,681 146,607 157,182 172,425 140,983 154,449
Capital Securities Costs......... 12,633 12,633 16,843 9,235 25 -- --
Amortization & Write-down of
Intangible Assets(2)........... 6,267 12,403 14,479 7,292 6,364 1,688 1,543
Merger Related Restructure
Charges(2)..................... -- 52,452 52,452 -- 21,613 19,024 14,338
----------- ----------- ----------- ----------- ---------- ---------- ----------
Income Before Income Taxes..... 255,474 155,333 243,081 275,134 169,054 148,471 118,748
Provision for Income
Taxes(2)(5).................... 89,416 44,394 75,106 104,613 74,606 69,567 42,557
----------- ----------- ----------- ----------- ---------- ---------- ----------
Net Income..................... $ 166,058 $ 110,939 $ 167,975 $ 170,521 $ 94,448 $ 78,904 $ 76,191
=========== =========== =========== =========== ========== ========== ==========
SHARE DATA:(6)
Weighted Average
Shares -- Basic................ 137,342 140,547 140,706 136,761 136,504 142,297 136,054
Weighted Average Shares --
Diluted........................ 138,197 141,680 141,766 139,333 138,707 144,227 142,055
Common Shares Outstanding at
Period-End..................... 133,316 143,295 141,072 139,478 136,961 140,262 138,607
CONSOLIDATED PER SHARE DATA:(6)
Net Income -- Basic.............. $ 1.21 $ 0.79 $ 1.19 $ 1.24 $ 0.69 $ 0.55 $ 0.56
Net Income -- Diluted(2)......... $ 1.20 $ 0.78 $ 1.18 $ 1.22 $ 0.68 $ 0.55 $ 0.54
Cash Dividends(7)................ $ 0.45 $ 0.38 $ 0.65 $ 0.38 $ 0.28 $ 0.18 $ 0.12
Dividend Payout Ratio(2)......... 37% 48% 55% 32% 36% 26% 25%
Stated Book Value at
Period-End..................... $ 5.38 $ 6.09 $ 5.89 $ 5.53 $ 4.45 $ 4.15 $ 3.80
Tangible Book Value at
Period-End..................... $ 4.77 $ 5.45 $ 5.29 $ 4.84 $ 3.85 $ 3.95 $ 3.64
CONSOLIDATED BALANCE SHEET DATA
AT
PERIOD-END:
Total Assets..................... $11,914,847 $10,224,071 $10,679,556 $10,073,632 $8,691,434 $7,622,458 $6,842,809
Securities:
Available-for-Sale............. 3,598,197 3,188,063 2,980,223 2,156,624 1,301,891 1,425,868 344,316
Held-to-Maturity............... 1,279,978 988,814 1,571,545 1,763,308 1,851,575 1,770,734 2,463,007
Loans............................ 6,386,042 5,655,875 5,714,293 5,739,131 5,044,073 4,086,497 3,761,979
Allowance for Loan Losses........ 68,950 73,606 71,759 74,393 73,280 77,899 86,952
Intangible Assets(2)............. 81,052 92,579 84,676 96,398 82,073 27,893 22,208
Demand Deposits.................. 1,461,517 1,113,162 1,263,105 948,458 771,920 520,977 397,539
Interest Bearing Deposits........ 5,109,381 5,356,111 5,164,517 5,389,481 5,427,940 4,983,498 4,947,761
Federal Funds Purchased &
Securities Sold Under
Agreements to Repurchase....... 2,676,416 2,435,096 2,955,096 2,104,036 1,075,487 987,229 491,766
Other Borrowings................. 1,494,000 35,000 35,000 449,600 590,088 457,278 409,006
Capital Securities............... 199,308 199,283 199,289 199,264 99,637 -- --
Stockholders' Equity............. 717,576 873,027 831,250 770,889 609,434 582,515 527,212
CONSOLIDATED AVERAGE BALANCE
SHEET DATA:
Total Assets..................... $11,319,022 $10,012,801 $10,107,386 $ 9,557,020 $8,283,418 $7,099,152 $6,880,831
Securities....................... 4,763,573 3,722,703 3,835,761 3,783,276 3,346,563 2,879,863 2,781,830
Loans............................ 5,991,922 5,744,394 5,729,743 5,357,470 4,531,541 3,919,342 3,724,486
Total Deposits................... 6,521,679 6,481,241 6,484,243 6,179,024 6,114,852 5,402,606 5,403,927
Federal Funds Purchased &
Securities Sold Under
Agreements to Repurchase....... 3,042,175 2,114,106 2,236,257 1,944,592 939,365 658,050 611,114
Other Borrowings................. 552,557 234,032 185,783 485,200 533,516 397,830 289,082
Capital Securities............... 199,299 199,274 199,277 105,646 281 -- --
Stockholders' Equity............. 825,414 824,658 837,413 667,211 589,352 558,816 503,491
</TABLE>
9
<PAGE> 17
- ---------------
(1) (A) During the periods presented, the following mergers were accounted for
using the pooling-of-interests method of accounting:
(a) March 1998, New York Bancorp Inc. ("NYB")
(b) December 1996, North Side Savings Bank
(c) January 1995 Hamilton Bancorp, Inc. (merged with NYB)
(d) November 1994, Metro Bancshares Inc.
(B) The following mergers were accounted for using the purchase method of
accounting:
(a) June 1998, Amivest Corporation
(b) December 1997, Superior Savings of New England (formerly Branford
Savings Bank)
(c) March 1996, domestic banking business of Extebank
(d) March 1996, ten Long Island branches of First Nationwide Bank
(e) July 1995, Great Neck Bancorp.
North Fork's consolidated results of operations reflect activity of the
acquired businesses specified in (1)(B) above subsequent to the acquisition
dates.
(2) Merger related restructure charges and other special items incurred in the
first quarter of 1998 consisted of a $52.5 million merger related
restructure charge, an additional $11.5 million loan loss provision, a $6
million write-down of intangible assets, securities losses of $2.5 million,
and $1.8 million of other operating expenses (net of $20.7 million in tax
benefit). Tax items included a charge of $5 million related to the recapture
of bad debt reserve of NYB's banking subsidiary, Home Federal Savings Bank,
for state and local tax purposes and a benefit of $20 million, which
resulted from a corporate reorganization. Diluted earnings per share and the
dividend payout ratio excluding the merger related restructure charges and
other special items would have been $1.06 and 35%, and $1.46 and 45% for the
periods ended September 30, 1998 and December 31, 1998, respectively.
(3) Includes $4.5 million from interest on a tax settlement received by NYB from
the Internal Revenue Service during 1997.
(4) Includes a $17.8 million Savings Association Insurance Fund recapitalization
charge incurred during 1996.
(5) Includes a $5.7 million benefit for NYB's cumulative effect of change in
accounting for income taxes during 1994.
(6) Amounts have been restated to give effect to the 3-for-2 common stock split
effective May 15, 1998, the 2-for-1 common stock split effective May 15,
1997, NYB's 4-for-3 common stock split effective July 24, 1997, NYB's
3-for-2 common stock split effective January 23, 1997, and NYB's ten percent
common stock dividend effective February 14, 1994.
(7) Cash dividends per share represent North Fork's historical cash dividends.
See accompanying "Selected Financial Ratios" on page 15 for additional
information.
10
<PAGE> 18
JSB FINANCIAL, INC.
SELECTED HISTORICAL FINANCIAL INFORMATION
(UNAUDITED)
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, YEARS ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARY STATEMENTS OF
INCOME:
Interest Income(1).................... $ 84,526 $ 89,466 $ 117,813 $ 109,611 $ 108,345 $ 107,862 $ 103,380
Interest Expense...................... 27,981 29,098 38,476 39,874 40,217 40,707 36,619
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Interest Income................. 56,545 60,368 79,337 69,737 68,128 67,155 66,761
Provision/(Recovery) for Loan
Losses(2)........................... 13 41 51 648 (1,400) 2,676 608
Non-Interest Income(3)................ 1,212 4,461 5,134 2,627 2,578 2,634 2,902
Real Estate Operations, net........... 1,223 287 714 10,442 1,767 1,225 3,497
Net Securities Gains.................. -- -- -- 6,991 2 -- --
Other Non-Interest Expense............ 21,175 20,818 27,458 27,434 27,598 29,561 30,937
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income Before Income Taxes.......... 37,792 44,257 57,676 61,715 46,277 38,777 41,615
Provision for Income Taxes(4)......... 16,218 10,030 13,288 24,625 19,552 16,603 18,018
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income.......................... $ 21,574 $ 34,227 $ 44,388 $ 37,090 $ 26,725 $ 22,174 $ 23,597
========== ========== ========== ========== ========== ========== ==========
SHARE DATA:
Weighted Average Shares -- Basic...... 9,319 9,864 9,793 9,858 10,062 10,604 11,099
Weighted Average Shares -- Diluted.... 9,520 10,159 10,074 10,190 10,436 11,053 11,588
Common Shares Outstanding at Period-
End................................. 9,290 9,759 9,506 9,920 9,783 10,505 10,682
CONSOLIDATED PER SHARE DATA:
Net Income -- Basic................... $ 2.32 $ 3.47 $ 4.53 $ 3.76 $ 2.66 $ 2.09 $ 2.13
Net Income -- Diluted................. $ 2.27 $ 3.37 $ 4.41 $ 3.64 $ 2.56 $ 2.01 $ 2.04
Cash Dividends........................ $ 1.35 $ 1.20 $ 1.60 $ 1.40 $ 1.20 $ 1.00 $ 0.72
Dividend Payout Ratio................. 60% 36% 36% 38% 47% 50% 35%
Stated Book Value at Period-End....... $ 40.28 $ 39.07 $ 40.24 $ 37.05 $ 34.27 $ 32.38 $ 30.67
Tangible Book Value at Period-End..... $ 40.28 $ 39.07 $ 40.24 $ 37.05 $ 34.27 $ 32.38 $ 30.67
CONSOLIDATED BALANCE SHEET DATA AT
PERIOD-END:
Total Assets.......................... $1,595,770 $1,552,436 $1,621,649 $1,535,031 $1,516,016 $1,548,301 $1,565,095
Securities:
Available-for-Sale.................. 90,006 76,207 92,514 69,888 57,880 46,373 33,798
Held-to-Maturity.................... 193,540 241,008 208,457 352,967 460,509 592,060 728,630
Loans................................. 1,232,745 1,140,857 1,175,583 1,005,625 860,101 772,942 715,380
Allowance for Loan Losses............. 5,937 5,912 5,924 5,880 5,327 4,697 4,085
Demand Deposits....................... 54,925 50,069 58,756 44,067 41,584 55,103 49,224
Interest Bearing Deposits............. 1,075,751 1,088,897 1,091,007 1,097,863 1,120,718 1,140,966 1,183,916
Other Borrowings...................... 50,000 -- 50,000 -- -- -- --
Stockholders' Equity.................. 374,232 381,294 382,476 367,514 335,299 340,107 327,634
CONSOLIDATED AVERAGE BALANCE SHEET
DATA:
Total Assets.......................... $1,613,500 $1,556,449 $1,561,304 $1,534,578 $1,533,714 $1,539,130 $1,612,931
Securities............................ 242,200 304,327 288,414 464,237 546,982 674,768 802,336
Loans................................. 1,188,525 1,074,841 1,096,509 912,407 825,962 735,599 687,426
Total Deposits........................ 1,143,629 1,149,802 1,148,841 1,151,377 1,181,528 1,194,195 1,271,597
Other Borrowings...................... 50,000 -- 3,288 -- -- -- 394
Stockholders' Equity.................. 374,533 373,066 374,194 348,608 332,045 332,493 328,313
</TABLE>
- ---------------
(1) Includes a $3 million recovery of non-accrual interest and late charges
during June 1998.
(2) Includes a $2 million charge relating to the write-down of certain assets
associated with the Nationar seizure by the Superintendent of Banks of the
State of New York during 1995 and the full recovery of that charge during
1996.
(3) Includes a $1.3 million recovery of prior period expenses on a
non-performing loan and a $1 million gain from the sale of two of JSB's
subsidiaries during 1998.
(4) Includes a $10.7 million benefit resulting from the realignment of an
operating subsidiary during 1998.
See accompanying "Selected Financial Ratios" on page 15 for additional
information.
11
<PAGE> 19
RELIANCE BANCORP, INC.
SELECTED HISTORICAL FINANCIAL INFORMATION
(UNAUDITED)
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED JUNE 30,
----------------------- ------------------------------------------------------------
1999 1998 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARY STATEMENTS OF
INCOME:
Interest Income........................ $ 41,522 $ 42,868 $ 167,780 $ 153,980 $ 133,300 $ 100,379 $ 61,294
Interest Expense....................... 22,852 24,635 93,922 86,112 71,653 52,985 28,361
---------- ---------- ---------- ---------- ---------- ---------- --------
Net Interest Income.................. 18,670 18,233 73,858 67,868 61,647 47,394 32,933
Provision for Loan Losses.............. -- 150 650 1,650 950 725 400
Non-Interest Income(2)................. 1,515 1,173 5,161 5,821 3,229 2,425 1,076
Income from Money Centers.............. 723 632 2,650 1,882 -- -- --
Net Securities Gains/(Losses).......... -- 66 119 (5) 172 678 147
Other Non-Interest Expense(3).......... 9,334 9,214 36,400 35,443 39,620 26,175 17,212
Capital Securities Costs............... 1,021 1,030 4,084 716 -- -- --
Amortization of Intangible Assets...... 1,141 1,140 4,563 4,218 3,404 1,928 --
---------- ---------- ---------- ---------- ---------- ---------- --------
Income Before Income Taxes........... 9,412 8,570 36,091 33,539 21,074 21,669 16,544
Provision for Income Taxes............. 4,030 3,799 15,940 14,810 10,138 9,946 6,842
---------- ---------- ---------- ---------- ---------- ---------- --------
Net Income........................... $ 5,382 $ 4,771 $ 20,151 $ 18,729 $ 10,936 $ 11,723 $ 9,702
========== ========== ========== ========== ========== ========== ========
SHARE DATA:
Weighted Average Shares -- Basic....... 8,235 9,001 8,467 8,890 8,299 8,594 9,327
Weighted Average Shares -- Diluted..... 8,695 9,500 8,914 9,425 8,724 8,863 9,460
Common Shares Outstanding at
Period-End........................... 8,589 8,984 8,586 9,565 8,776 9,129 9,390
CONSOLIDATED PER SHARE DATA:
Net Income -- Basic.................... $ 0.65 $ 0.53 $ 2.38 $ 2.11 $ 1.32 $ 1.36 $ 1.04
Net Income -- Diluted.................. $ 0.62 $ 0.50 $ 2.26 $ 1.99 $ 1.25 $ 1.32 $ 1.03
Cash Dividends......................... $ 0.21 $ 0.18 $ 0.78 $ 0.68 $ 0.60 $ 0.46 $ 0.40
Dividend Payout Ratio.................. 34% 36% 35% 34% 48% 35% 39%
Stated Book Value at Period-End........ $ 19.99 $ 20.65 $ 19.99 $ 20.37 $ 18.54 $ 16.83 $ 16.37
Tangible Book Value at Period-End...... $ 13.79 $ 14.22 $ 13.66 $ 14.21 $ 13.36 $ 11.41 $ 16.37
CONSOLIDATED BALANCE SHEET DATA AT
PERIOD-END:
Total Assets........................... $2,478,899 $2,493,186 $2,451,773 $2,485,729 $1,976,764 $1,782,550 $931,436
Securities:
Available-for-Sale................... 1,012,881 1,054,416 1,057,206 1,075,254 748,728 605,011 128,333
Held-to-Maturity..................... 309,679 323,287 284,752 289,448 205,382 232,822 437,652
Loans.................................. 1,007,594 983,380 983,193 978,738 914,503 822,241 333,809
Allowance for Loan Losses.............. 9,068 9,085 9,120 8,941 5,182 4,495 1,729
Intangible Assets...................... 53,232 57,795 54,373 58,936 45,463 49,429 --
Demand Deposits........................ 62,615 53,373 64,430 52,225 20,474 20,360 --
Interest Bearing Deposits.............. 1,505,237 1,618,246 1,491,388 1,585,879 1,424,580 1,334,112 673,785
Federal Funds Purchased & Securities
Sold Under Agreements to
Repurchase........................... 328,334 319,752 313,716 398,070 311,913 263,160 57,035
Other Borrowings....................... 333,655 236,700 338,718 182,136 40,000 3,000 40,000
Capital Securities..................... 50,000 50,000 50,000 50,000 -- -- --
Stockholders' Equity................... 171,702 185,555 171,667 194,864 162,670 153,619 153,733
CONSOLIDATED AVERAGE BALANCE SHEET
DATA:
Total Assets........................... $2,472,963 $2,486,088 $2,475,646 $2,178,262 $1,870,026 $1,410,775 $894,549
Securities............................. 1,333,998 1,376,444 1,377,068 1,074,358 918,918 734,551 526,976
Loans.................................. 999,414 982,356 974,017 966,320 848,060 598,030 332,580
Total Deposits......................... 1,568,367 1,654,079 1,636,607 1,566,625 1,393,655 1,066,693 623,877
Federal Funds Purchased & Securities
Sold Under Agreements to
Repurchase........................... 325,695 347,221 276,748 309,618 288,844 150,173 10,103
Other Borrowings....................... 336,633 215,866 309,323 84,920 22,519 29,882 95,554
Capital Securities..................... 50,000 50,000 50,024 8,876 -- -- --
Stockholders' Equity................... 168,308 192,446 180,694 183,998 154,030 154,071 157,460
</TABLE>
- ---------------
(1) During the periods presented Reliance completed the following mergers
accounted for in accordance with the purchase method of accounting:
(a) October 1997, Continental Bank
(b) January 1996, Sunrise Bancorp, Inc.
(c) August 1995, Bank of Westbury
Reliance's consolidated results of operations reflect activity of the
acquired businesses subsequent to the acquisition dates.
(2) Includes a $1.5 million condemnation award received in September 1997.
(3) Includes an $8.3 million SAIF recapitalization charge during 1997.
See accompanying "Selected Financial Ratios" on page 15 for additional
information.
12
<PAGE> 20
SELECTED PRO FORMA COMBINED FINANCIAL INFORMATION
FOR ALL TRANSACTIONS
(UNAUDITED)
The following table shows selected financial information for North Fork,
JSB and Reliance on a pro forma combined basis giving effect to the following:
(a) the merger, for all periods indicated, as if the merger had become
effective at the end of the periods indicated, in the case of the
balance sheet information presented, and at the beginning of the
periods indicated, in the case of the income statement information
presented. The pro forma information reflects the merger accounted for
using the pooling-of-interests method of accounting; and
(b) the Reliance merger, with respect to information as of and for the
nine months ended September 30, 1999 and 1998 and as of and for the
year ended December 31, 1998, as if such transaction had become
effective at the end of such periods, in the case of the balance sheet
information presented, and at the beginning of such periods, in the
case of the income statement information presented. The pro forma
information reflects the Reliance merger accounted for using the
purchase method of accounting.
The selected pro forma combined year-end balance sheet and income statement
information reflects information for North Fork and JSB as of and for their
annual reporting periods ended December 31 for each of the periods indicated.
Financial information for the nine months ended September 30, 1999 and 1998 and
the year ended December 31, 1998 combine North Fork, JSB and Reliance,with
results of Reliance presented to coincide with the reporting period for North
Fork. Following the merger and the Reliance merger, the combined company's
fiscal year, like that of North Fork, will end on December 31.
We anticipate that the merger and the Reliance merger will provide the
combined company with financial benefits that include reduced operating expenses
and enhanced opportunities to increase revenue. The pro forma information, while
helpful in illustrating the financial characteristics of the combined company
under one set of assumptions, does not reflect the anticipated financial
benefits and, accordingly, does not attempt to predict or suggest future
results.
The selected pro forma combined financial information has been derived from
and should be read with the historical financial statements of North Fork, JSB
and Reliance incorporated by reference into this document and the pro forma
combined financial statements and related notes included in this document. See
"Where You Can Find More Information" on page 89 and "Pro Forma Condensed
Combined Financial Statements (Unaudited)" on page 93.
This information is for illustrative purposes only. The companies would
likely have performed differently had they always been combined. You should not
rely on this information as being indicative of the future results that the
combined company will experience after the merger and the Reliance merger.
13
<PAGE> 21
NORTH FORK BANCORPORATION, INC.
SELECTED PRO FORMA COMBINED FINANCIAL INFORMATION
FOR ALL TRANSACTIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------------- ---------------------------------------
1999 1998 1998 1997 1996
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARY STATEMENTS OF INCOME:
Interest Income................................ $ 799,839 $ 753,136 $ 1,010,162 $ 834,035 $ 722,107
Interest Expense............................... 363,939 343,486 459,204 366,677 321,324
----------- ----------- ----------- ----------- -----------
Net Interest Income.......................... 435,900 409,650 550,958 467,358 400,783
Provision for Loan Losses...................... 3,913 15,141 16,501 8,748 6,600
Non-Interest Income............................ 49,729 49,698 64,968 53,542 41,180
Real Estate Operations, net.................... 1,223 287 714 10,442 1,767
Income from Money Centers...................... 2,071 1,944 2,614 -- --
Net Securities Gains........................... 10,012 2,376 9,432 15,398 6,226
Other Non-Interest Expense..................... 161,862 160,135 210,477 184,616 200,023
Capital Securities Costs....................... 15,706 14,379 19,591 9,235 25
Amortization & Write-down of Intangible
Assets....................................... 16,072 22,207 27,552 7,292 6,364
Merger Related Restructure Charges............. -- 52,452 52,452 -- 21,613
----------- ----------- ----------- ----------- -----------
Income Before Income Taxes................... 301,382 199,641 302,113 336,849 215,331
Provision for Income Taxes..................... 113,146 59,124 95,102 129,238 94,158
----------- ----------- ----------- ----------- -----------
Net Income................................... $ 188,236 $ 140,517 $ 207,011 $ 207,611 $ 121,173
=========== =========== =========== =========== ===========
SHARE DATA:
Weighted Average Shares -- Basic............... 169,969 171,539 171,395 166,335 166,690
Weighted Average Shares -- Diluted............. 172,335 174,645 174,332 169,903 170,015
Common Shares Outstanding at Period-End........ 171,580 172,733 172,034 169,238 166,310
CONSOLIDATED PER SHARE DATA:
Net Income -- Basic............................ $ 1.11 $ 0.82 $ 1.21 $ 1.25 $ 0.73
Net Income -- Diluted.......................... 1.09 0.80 1.19 1.22 0.71
Cash Dividends................................. 0.45 0.38 0.65 0.38 0.28
Stated Book Value at Period-End................ 7.20 8.39 8.14 6.73 5.68
Tangible Book Value at Period-End.............. 5.21 6.31 6.11 6.16 5.19
CONSOLIDATED BALANCE SHEET DATA AT PERIOD-END:
Total Assets................................... 16,051,230 14,325,050 14,828,866 11,608,663 10,207,450
Securities:
Available-for-Sale........................... 4,557,186 4,174,788 3,992,054 2,226,512 1,359,771
Held-to-Maturity............................. 1,783,197 1,553,109 2,095,023 2,116,275 2,312,084
Loans.......................................... 8,626,381 7,780,112 7,860,971 6,744,756 5,904,174
Allowance for Loan Losses...................... 83,955 88,603 86,909 80,273 78,607
Intangible Assets.............................. 342,517 358,607 349,564 96,398 82,073
Demand Deposits................................ 1,579,057 1,216,604 1,378,484 992,525 813,504
Interest Bearing Deposits...................... 7,690,369 8,063,254 7,853,170 6,487,344 6,548,658
Federal Funds Purchased & Securities Sold Under
Agreements to Repurchase..................... 3,004,750 2,754,848 3,142,283 2,104,036 1,075,487
Other Borrowings............................... 1,877,655 271,700 446,129 449,600 590,088
Capital Securities............................. 244,308 244,283 244,289 199,264 99,637
Stockholders' Equity........................... 1,235,851 1,449,083 1,400,185 1,138,403 944,733
CONSOLIDATED AVERAGE BALANCE SHEET DATA:
Total Assets................................... 15,402,407 13,903,509 14,039,639 11,091,598 9,817,132
Securities..................................... 6,375,985 5,241,272 5,375,295 4,247,513 3,893,545
Loans.......................................... 8,157,285 7,804,457 7,810,913 6,269,877 5,357,503
Total Deposits................................. 9,249,486 9,244,478 9,266,978 7,330,401 7,296,380
Federal Funds Purchased & Securities Sold Under
Agreements to Repurchase..................... 3,320,005 2,428,691 2,535,353 1,944,592 939,365
Other Borrowings............................... 952,204 382,215 377,746 485,200 533,516
Capital Securities............................. 249,299 227,965 233,359 105,646 281
Stockholders' Equity........................... 1,373,760 1,390,406 1,400,377 1,015,819 921,397
</TABLE>
- ---------------
The managements of North Fork, JSB and Reliance may adjust the pro forma
information included in this document as a result of their review of their
classifications and accounting policies. The managements of North Fork, JSB and
Reliance do not expect these adjustments to be material.
14
<PAGE> 22
SELECTED FINANCIAL RATIOS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------ -------------------------
1999 1998 1998 1997 1996
------ ------ ----- ----- -----
<S> <C> <C> <C> <C> <C>
PERFORMANCE RATIOS:
Return on Average Total Assets:
North Fork.................................... 1.96% 1.48% 1.66% 1.78% 1.14%
JSB........................................... 1.79 2.94 2.84 2.42 1.74
North Fork/JSB Pro Forma...................... 1.94 1.68 1.82 1.87 1.23
North Fork/JSB/Reliance Pro Forma............. 1.63 1.35 1.47 N/A N/A
Return on Average Total Stockholders' Equity:
North Fork.................................... 26.33 18.44 20.50 25.63 15.90
JSB........................................... 8.64 13.40 12.99 11.50 8.51
North Fork/JSB Pro Forma...................... 21.31 16.94 18.29 21.01 13.34
North Fork/JSB/Reliance Pro Forma............. 18.54 14.08 15.38 N/A N/A
Total Stockholders' Equity to Total Assets (end
of period):
North Fork.................................... 6.02 8.54 7.78 7.65 7.01
JSB........................................... 23.45 24.56 23.59 23.94 22.12
North Fork/JSB Pro Forma...................... 7.80 10.65 9.87 9.81 9.26
North Fork/JSB/Reliance Pro Forma............. 7.70 10.12 9.44 N/A N/A
CAPITAL RATIOS:
Tier 1 Risk-Based Capital:
North Fork.................................... 12.76 16.58 15.19 15.33 13.82
JSB........................................... 26.14 29.14 27.59 31.80 33.33
North Fork/JSB Pro Forma...................... 14.39 18.72 17.26 17.97 17.15
North Fork/JSB/Reliance Pro Forma............. 12.39 15.76 14.63 N/A N/A
Regulatory Minimum Requirement................ 4.00 4.00 4.00 4.00 4.00
Total Risk-Based Capital:
North Fork.................................... 13.75 17.83 16.39 16.58 15.11
JSB........................................... 28.32 31.57 30.53 32.35 33.89
North Fork/JSB Pro Forma...................... 15.61 20.23 18.82 19.11 18.32
North Fork/JSB/Reliance Pro Forma............. 13.58 17.20 16.13 N/A N/A
Regulatory Minimum Requirement................ 8.00 8.00 8.00 8.00 8.00
Leverage Ratio:
North Fork.................................... 7.65 9.68 9.09 8.74 7.46
JSB........................................... 20.87 22.43 21.68 21.91 20.7
North Fork/JSB Pro Forma...................... 8.98 11.40 10.76 10.53 9.47
North Fork/JSB/Reliance Pro Forma............. 7.46 9.22 8.72 N/A N/A
Regulatory Minimum Requirement................ 4.00 4.00 4.00 4.00 4.00
ASSET QUALITY DATA:
Allowance for Loan Losses to Net Loans (end of
period):
North Fork.................................... 1.08 1.30 1.26 1.30 1.45
JSB........................................... 0.48 0.52 0.50 0.58 0.62
North Fork/JSB Pro Forma...................... 0.98 1.17 1.13 1.19 1.33
North Fork/JSB/Reliance Pro Forma............. 0.97 1.14 1.11 N/A N/A
Allowance for Loan Losses to Non-performing Loans
(end of period):
North Fork.................................... 450 430 470 198 146
JSB........................................... 1,934 1,282 1,319 44 38
North Fork/JSB Pro Forma...................... 479 452 494 158 122
North Fork/JSB/Reliance Pro Forma............. 362 333 375 N/A N/A
Non-performing Assets to Total Assets:
North Fork.................................... 0.13 0.20 0.17 0.43 0.64
JSB........................................... 0.04 0.05 0.04 0.90 0.98
North Fork/JSB Pro Forma...................... 0.12 0.18 0.16 0.49 0.69
North Fork/JSB/Reliance Pro Forma............. 0.15 0.22 0.18 N/A N/A
</TABLE>
15
<PAGE> 23
COMPARATIVE PER SHARE DATA
(UNAUDITED)
The following table shows historical per share information about our basic
and diluted net income, cash dividends and stated and tangible book values, and
similar pro forma information reflecting (a) the merger and the Reliance merger,
with respect to information for September 30, 1999 and 1998 and the year ended
1998, and (b) the merger, with respect to information for the years ended 1997
and 1996. The pro forma comparative per share data assume the merger had been
consummated at the beginning of the periods presented and that the Reliance
merger had been consummated on January 1, 1998. We also assumed that JSB will be
merged with North Fork using the pooling-of-interests method of accounting, and
that Reliance will be merged with North Fork using the purchase method of
accounting. See "Pro Forma Condensed Combined Financial Statements (Unaudited)"
on page 93.
The information listed as "Equivalent Pro Forma" was obtained by
multiplying the corresponding pro forma amounts by an exchange ratio of 3.0. We
present this information to reflect the fact that JSB stockholders will receive
more than one share of North Fork common stock for each share of JSB common
stock exchanged in the merger.
The information in the following table is based on the historical financial
information that we have presented in our prior SEC filings. We are
incorporating this material into this document by reference. See "Where You Can
Find More Information" on page 89. This information is for illustrative purposes
only. The companies would likely have performed differently had they always been
combined. You should not rely on this information as being indicative of the
future results that the combined company will experience after the merger and
the Reliance merger.
16
<PAGE> 24
COMPARATIVE PER SHARE DATA
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------ --------------------------
1999 1998 1998 1997 1996
------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
NORTH FORK COMMON STOCK:
Net Income per Share:
Basic:
Historical............................... $ 1.21 $ 0.79 $ 1.19 $ 1.24 $ 0.69
North Fork/JSB Pro Forma(1).............. 1.14 0.85 1.25 1.25 0.73
North Fork/JSB/Reliance Pro Forma(2)..... 1.11 0.82 1.21 N/A N/A
Diluted:
Historical............................... 1.20 0.78 1.18 1.22 0.68
North Fork/JSB Pro Forma(1).............. 1.13 0.84 1.23 1.22 0.71
North Fork/JSB/Reliance Pro Forma(2)..... 1.09 0.80 1.19 N/A N/A
Cash Dividends Declared per Common Share(3):
Historical............................... 0.45 0.38 0.65 0.38 0.28
North Fork/JSB Pro Forma................. 0.45 0.38 0.65 0.38 0.28
North Fork/JSB/Reliance Pro Forma........ 0.45 0.38 0.65 N/A N/A
Book Value Per Share at Period End:
Stated:
Historical............................... 5.38 6.09 5.89 5.53 4.45
North Fork/JSB Pro Forma(4).............. 6.54 7.27 7.16 6.73 5.68
North Fork/JSB/Reliance Pro Forma(5)..... 7.20 8.39 8.14 N/A N/A
Tangible:
Historical............................... 4.77 5.45 5.29 4.84 3.85
North Fork/JSB Pro Forma(4).............. 6.04 6.73 6.66 6.16 5.19
North Fork/JSB/Reliance Pro Forma(5)..... 5.21 6.31 6.11 N/A N/A
JSB COMMON STOCK:
Net Income per Share:
Basic:
Historical............................... 2.32 3.47 4.53 3.76 2.66
North Fork/JSB Equivalent Pro Forma(6)... 3.41 2.56 3.75 3.74 2.18
North Fork/JSB/Reliance Equivalent Pro
Forma(7)............................... 3.32 2.46 3.62 N/A N/A
Diluted:
Historical............................... 2.27 3.37 4.41 3.64 2.56
North Fork/JSB Equivalent Pro Forma(6)... 3.38 2.53 3.70 3.67 2.14
North Fork/JSB/Reliance Equivalent Pro
Forma(7)............................... 3.28 2.41 3.56 N/A N/A
Cash Dividends Declared per Common Share:
Historical............................... 1.35 1.20 1.60 1.40 1.20
North Fork/JSB Equivalent Pro Forma(6)... 1.35 1.13 1.95 1.14 0.84
North Fork/JSB/Reliance Equivalent Pro
Forma(7)............................... 1.35 1.13 1.95 N/A N/A
Book Value Per Share at Period End:
Stated:
Historical............................... 40.28 39.07 40.24 37.05 34.27
North Fork/JSB Equivalent Pro Forma(6)... 19.63 21.81 21.47 20.18 17.04
North Fork/JSB/Reliance Equivalent Pro
Forma(7)............................... 21.61 25.17 24.42 N/A N/A
Tangible:
Historical............................... 40.28 39.07 40.24 37.05 34.27
North Fork/JSB Equivalent Pro Forma(6)... 18.13 20.20 19.97 18.47 15.56
North Fork/JSB/Reliance Equivalent Pro
Forma(7)............................... 15.62 18.94 18.32 N/A N/A
</TABLE>
- ---------------
(1) The North Fork/JSB pro forma net income per share amounts are calculated by
totaling the historical net income of North Fork and JSB and dividing the
resulting amounts by the average pro forma shares of North Fork and JSB
giving effect to the merger. The average pro forma shares of North Fork and
JSB reflect North Fork's historical basic and diluted average shares, plus
historical basic and diluted average
17
<PAGE> 25
shares of JSB as adjusted for an exchange ratio of 3.0 shares of North Fork
common stock for each share of JSB common stock.
(2) The North Fork/JSB/Reliance pro forma net income per share amounts are
calculated by (a) totaling the historical net income of North Fork and JSB,
as described in Note (1), plus Reliance's net income for the nine months
ended September 30, 1999 and 1998 and the year ended December 31, 1998; and
(b) dividing the resulting amounts by the average pro forma shares of North
Fork, JSB and Reliance combined, giving effect to the merger and the
Reliance merger. The average pro forma shares of North Fork, JSB and
Reliance combined equals (a) the historical basic and diluted average shares
of North Fork plus (b) the historical basic and diluted average shares of
JSB as adjusted for the exchange ratio of 3.0 plus (c) the historical basic
and diluted average shares of Reliance, conformed to North Fork's calendar
year basis, and adjusted for an exchange ratio of 2.0, less (d) the assumed
purchase of North Fork common stock and Reliance common stock equivalents
necessary to effect the Reliance merger.
(3) The North Fork/JSB and North Fork/JSB/Reliance pro forma dividends per share
represent North Fork's historical dividends per share.
(4) The North Fork/JSB pro forma stated and tangible book value per share
amounts are calculated by totaling the historical stated and tangible
stockholders' equity for North Fork and JSB and dividing the resulting
amounts by the total North Fork/JSB pro forma common shares outstanding.
Stockholders' equity at September 30, 1999 has been adjusted to reflect the
pro forma merger-related restructure charge, net of taxes, anticipated to be
recognized in connection with the JSB merger. The North Fork/ JSB pro forma
common shares reflect North Fork's historical common shares outstanding and
JSB's historical common shares outstanding as adjusted for an exchange ratio
of 3.0.
(5) The North Fork/JSB/Reliance pro forma stated and tangible book value per
share amounts are calculated by totaling the historical stated and tangible
stockholders' equity for North Fork, JSB and Reliance and dividing the
resulting amounts by the total North Fork/JSB/Reliance pro forma common
shares outstanding. Stockholders' equity at September 30, 1999 has been
adjusted to reflect the pro forma merger-related restructure charge, net of
taxes, anticipated to be recognized in connection with the JSB merger and
the Reliance merger. Additionally, stockholders' equity has been adjusted to
reflect the net intangible asset anticipated to be recognized in connection
with the Reliance merger. The North Fork/ JSB/Reliance pro forma common
shares outstanding reflect (a) North Fork's historical common shares
outstanding; (b) JSB's historical common shares outstanding as adjusted for
an exchange ratio of 3.0; (c) Reliance's historical common shares
outstanding as adjusted for an exchange ratio of 2.0; and (d) the assumed
purchase of North Fork common stock and Reliance common stock equivalents
necessary to effect the Reliance merger.
(6) The North Fork/JSB equivalent pro forma amounts are calculated by
multiplying the corresponding North Fork/JSB pro forma amounts by an
exchange ratio of 3.0.
(7) The North Fork/JSB/Reliance equivalent pro forma amounts are calculated by
multiplying the corresponding North Fork/JSB/Reliance pro forma amounts by
an exchange ratio of 3.0.
18
<PAGE> 26
NORTH FORK SPECIAL MEETING
DATE, TIME AND PLACE
This joint proxy statement-prospectus is first being mailed by North Fork
to its stockholders on or about January 12, 2000, and is accompanied by a form
of proxy solicited by the North Fork board of directors for use at the North
Fork special meeting to be held on Friday, February 11, 2000, at 10:00 a.m.,
local time, at the Melville Marriott, 1350 Old Walt Whitman Road, Melville, New
York, and at any adjournment or postponement of that meeting.
MATTERS TO BE CONSIDERED
At the North Fork special meeting, you will be asked:
(1) to approve and adopt the merger agreement, including the related
issuance of North Fork common stock,
(2) to adopt an amendment to the North Fork certificate of incorporation to
increase the number of authorized shares of North Fork common stock
from 200 million to 500 million and to reduce the par value of North
Fork common stock from $2.50 to $0.01 per share, and
(3) to act on any other matters that may properly be submitted to a vote at
the North Fork special meeting.
North Fork stockholders may also be asked to vote upon a proposal to
adjourn or postpone the North Fork special meeting. North Fork could use any
adjournment or postponement of the North Fork special meeting for the purpose,
among others, of allowing additional time for soliciting additional votes to
approve the merger agreement and the amendment to the North Fork certificate of
incorporation.
PROXIES
The accompanying form of proxy is for use at the North Fork special meeting
if you are unable or do not wish to attend in person. You may also vote your
shares by calling the toll-free number as described on the enclosed proxy card.
You may revoke your proxy at any time before it is exercised by submitting to
the Corporate Secretary of North Fork written notice of revocation or a properly
executed proxy having a later date, or by attending the North Fork special
meeting and voting in person. Written notices of revocation and other
communications with respect to the revocation of North Fork proxies should be
addressed to North Fork Bancorporation, Inc., 275 Broad Hollow Road, Melville,
New York 11747, Attention: Corporate Secretary. Alternatively, if you have voted
by telephone, you may call the toll-free number again and follow the
instructions. All shares represented by valid proxies received pursuant to this
solicitation, and not revoked before they are exercised, will be voted in the
manner indicated in these proxies. IF YOU DO NOT INDICATE HOW YOU WANT TO VOTE,
YOUR PROXY WILL BE VOTED "FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND
ADOPTION OF THE AMENDMENT TO NORTH FORK'S CERTIFICATE OF INCORPORATION.
North Fork's board of directors is unaware of any other matters to be
presented for action at the North Fork special meeting. However, if other
matters do properly come before the North Fork special meeting, North Fork
intends that shares represented by proxies in the accompanying form will be
voted, or not voted, at the discretion of the persons named in the proxies. No
proxy that is voted against approval of the merger agreement will be voted in
favor of any adjournment or postponement of the North Fork special meeting for
the purpose of soliciting additional proxies.
SOLICITATION OF PROXIES
North Fork will bear the entire cost of soliciting proxies from North Fork
stockholders. In addition to the solicitation of proxies by mail, North Fork
will request that banks, brokers and other record holders send proxies and proxy
material to the beneficial owners of the stock held by them and obtain voting
instructions from such beneficial owners if necessary. North Fork will reimburse
those record holders for their reasonable
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expenses in so doing. North Fork has also made arrangements with D.F. King & Co.
Inc. to assist it in soliciting proxies from banks, brokers and nominees, and
has agreed to pay $7,000 plus expenses for those services. If necessary, North
Fork may also use several of its employees, who will not receive additional
compensation, to solicit proxies from North Fork stockholders, either personally
or by telephone, telegram, facsimile or special delivery letter.
RECORD DATE AND VOTING RIGHTS; VOTE REQUIRED
The North Fork board of directors has fixed December 15, 1999 as the record
date for determining North Fork stockholders entitled to notice of and to vote
at the North Fork special meeting. Accordingly, only holders of record of shares
of North Fork common stock at the close of business on the North Fork record
date will be entitled to notice of and to vote at the North Fork special
meeting. At the close of business on the North Fork record date, there were
128,439,378 shares of North Fork common stock outstanding and held by
approximately 7,200 holders of record. Each share of North Fork common stock
outstanding on the North Fork record date entitles its holder to one vote.
The presence, in person or by proxy, of a majority of the shares of North
Fork common stock outstanding and entitled to vote on the North Fork record date
is necessary to constitute a quorum at the North Fork special meeting. Shares
held by persons attending the North Fork special meeting but not voting, and
shares for which holders have abstained from voting, will be counted as present
at the North Fork special meeting for purposes of determining the presence or
absence of a quorum. Brokers who hold shares in nominee or "street name" for
customers who are the beneficial owners of those shares are prohibited from
giving a proxy to vote shares held for those customers on the matters to be
considered and voted on at the North Fork special meeting without specific
instructions from those customers. If the brokers do not receive instructions,
the shares will not be voted. These so-called "broker non-votes" will also be
counted as present for purposes of determining whether a quorum exists.
UNDER APPLICABLE DELAWARE LAW, EACH OF THE APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT AND THE ADOPTION OF THE AMENDMENT TO THE NORTH FORK CERTIFICATE
OF INCORPORATION REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF
THE OUTSTANDING SHARES OF NORTH FORK COMMON STOCK ENTITLED TO VOTE AT THE NORTH
FORK SPECIAL MEETING. ABSTENTIONS AND BROKER NON-VOTES WILL HAVE THE SAME EFFECT
AS VOTES AGAINST THESE PROPOSALS. ACCORDINGLY, THE NORTH FORK BOARD OF DIRECTORS
URGES NORTH FORK STOCKHOLDERS TO COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY
CARD AND RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE-PAID ENVELOPE OR CALL THE
TOLL-FREE NUMBER AS DESCRIBED ON THE PROXY CARD.
As of the North Fork record date, directors and executive officers of North
Fork owned 7,066,501 shares of North Fork common stock, entitling them to
exercise approximately 5.5% of the voting power of the North Fork common stock
entitled to vote at the North Fork special meeting. On the basis of the
unanimous approval of the merger agreement by the North Fork board of directors,
we currently expect that each director and executive officer of North Fork will
vote the shares of North Fork common stock beneficially owned by him or her for
approval and adoption of the merger agreement and for adoption of the amendment
to the North Fork certificate of incorporation.
As of the North Fork record date, directors and executive officers of JSB
owned 6,000 shares of North Fork common stock, or less than 1% of the voting
power of the North Fork common stock entitled to vote at the North Fork special
meeting.
RECOMMENDATION OF THE NORTH FORK BOARD
The North Fork board of directors has unanimously approved the merger
agreement and the amendment to the North Fork certificate of incorporation. The
North Fork board of directors believes that the merger agreement and the
amendment to the North Fork certificate of incorporation are in the best
interests of North Fork and the North Fork stockholders, and recommends that the
North Fork stockholders vote "FOR" approval and adoption of the merger
agreement, including the related issuance of North Fork common stock, and "FOR"
adoption of the amendment to the North Fork certificate of incorporation. See
"The Merger --
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<PAGE> 28
Recommendation of the North Fork Board and Reasons for the Merger" on page 27
and "Proposed Amendment to North Fork's Certificate of Incorporation" on page
87.
JSB SPECIAL MEETING
DATE, TIME AND PLACE
This joint proxy statement-prospectus is first being mailed by JSB to its
stockholders on or about January 12, 2000 and is accompanied by a form of proxy
solicited by the JSB board of directors for use at the JSB special meeting, to
be held on Thursday, February 10, 2000, at 10:00 a.m., local time, at The Long
Island Marriott Hotel and Conference Center, 101 James Doolittle Boulevard,
Uniondale, New York, and at any adjournment or postponement of that meeting.
MATTERS TO BE CONSIDERED
At the JSB special meeting, you will be asked to approve and adopt the
merger agreement and to act on any other matters that may be properly submitted
to a vote at the JSB special meeting. JSB stockholders may also be asked to vote
upon a proposal to adjourn or postpone the JSB special meeting. JSB could use
any adjournment or postponement of the JSB special meeting for the purpose,
among others, of allowing additional time for soliciting additional votes to
approve and adopt the merger agreement.
PROXIES
The accompanying form of proxy is for your use at the JSB special meeting
if you are unable or do not wish to attend in person. You may also vote your
shares by calling the toll-free number as described on the enclosed proxy card.
You may revoke your proxy at any time before it is exercised by submitting to
the Corporate Secretary of JSB written notice of revocation, by properly
executing a proxy having a later date, or by attending the JSB special meeting
and voting in person. Written notices of revocation and other communications
with respect to the revocation of JSB proxies should be addressed to JSB
Financial, Inc., 303 Merrick Road, Lynbrook, New York 11563, Attention:
Corporate Secretary. Alternatively, if you have voted by telephone, you may call
the toll-free number again and follow the instructions. All shares represented
by valid proxies received pursuant to this solicitation, and not revoked before
they are exercised, will be voted in the manner indicated in those proxies. IF
YOU DO NOT INDICATE HOW YOU WANT TO VOTE, YOUR PROXY WILL BE VOTED "FOR"
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
JSB's board of directors is unaware of any other matters to be presented
for action at the JSB special meeting. However, if other matters do properly
come before the JSB special meeting, JSB intends that shares represented by
proxies in the accompanying form will be voted, or not voted, at the discretion
of the persons named in the proxies. No proxy that is voted against approval of
the merger agreement will be voted in favor of any adjournment or postponement
of the JSB special meeting for the purpose of soliciting additional proxies.
SOLICITATION OF PROXIES
JSB will bear the entire cost of soliciting proxies from JSB stockholders.
In addition to the solicitation of proxies by mail, JSB will request that banks,
brokers and other record holders send proxies and proxy material to the
beneficial owners of stock held by them and obtain voting instructions from such
beneficial owners if necessary. JSB will reimburse those record holders for
their reasonable expenses in so doing. JSB has also made arrangements with
Morrow & Co., Inc. to assist it in soliciting proxies from banks, brokers and
nominees, and has agreed to pay approximately $6,000 plus expenses for those
services. If necessary, JSB may also use several of its employees, who will not
receive additional compensation, to solicit proxies from JSB stockholders,
either personally or by telephone, telegram, facsimile or special delivery
letter.
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RECORD DATE AND VOTING RIGHTS; VOTE REQUIRED
The JSB board of directors has fixed December 27, 1999 as the record date
for determining JSB stockholders entitled to notice of and to vote at the JSB
special meeting. Accordingly, only JSB stockholders of record at the close of
business on the JSB record date will be entitled to notice of and to vote at the
JSB special meeting. At the close of business on the JSB record date, there were
9,371,139 shares of JSB common stock outstanding and held by approximately
10,000 holders of record. Each share of JSB common stock outstanding on the JSB
record date entitles its holder to one vote.
The presence, in person or by proxy, of a majority of the shares of JSB
common stock outstanding and entitled to vote on the JSB record date is
necessary to constitute a quorum at the JSB special meeting. Shares held by
persons attending the JSB special meeting but not voting, and shares for which
holders have abstained from voting, will be counted as present at the JSB
special meeting for purposes of determining the presence or absence of a quorum.
Brokers who hold shares in nominee or "street name" for customers who are the
beneficial owners of those shares are prohibited from giving a proxy to vote
shares held for those customers on the matters to be considered and voted on at
the JSB special meeting without specific instructions from those customers. If
the brokers do not receive instructions, the shares will not be voted. These
so-called "broker non-votes" will also be counted as present for purposes of
determining whether a quorum exists.
UNDER APPLICABLE DELAWARE LAW, APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE
OUTSTANDING SHARES OF JSB COMMON STOCK ENTITLED TO VOTE AT THE JSB SPECIAL
MEETING. ABSTENTIONS AND BROKER NON-VOTES WILL HAVE THE SAME EFFECT AS VOTES
AGAINST APPROVAL OF THE MERGER AGREEMENT. ACCORDINGLY, THE JSB BOARD OF
DIRECTORS URGES JSB STOCKHOLDERS TO COMPLETE, DATE AND SIGN THE ACCOMPANYING
PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE-PAID ENVELOPE OR CALL
THE TOLL-FREE NUMBER AS DESCRIBED ON THE PROXY CARD.
As of the JSB record date, directors and executive officers of JSB owned
approximately 862,721 shares of JSB common stock, entitling them to exercise
approximately 9.2% of the voting power of the JSB common stock entitled to vote
at the JSB special meeting. On the basis of the unanimous approval of the merger
agreement by the JSB board of directors, we currently expect that each director
and executive officer of JSB will vote the shares of JSB common stock
beneficially owned by him or her for approval and adoption of the merger
agreement. As of the JSB record date, directors and executive officers of North
Fork owned no shares of JSB common stock.
RECOMMENDATION OF THE JSB BOARD
The JSB board of directors has unanimously approved the merger agreement
and the transactions contemplated by the merger agreement. The JSB board of
directors believes that the terms of the merger agreement are fair to and in the
best interests of JSB and the JSB stockholders and recommends that the JSB
stockholders vote "FOR" approval and adoption of the merger agreement. See "The
Merger -- Recommendation of the JSB Board and Reasons for the Merger" on page
28.
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THE MERGER
The following description of the material information pertaining to the
merger, including the material terms and provisions of the merger agreement and
the related stock option agreement, is qualified in its entirety by reference to
the more detailed Appendices to this joint proxy statement-prospectus, including
the merger agreement in Appendix A and the stock option agreement in Appendix B.
We urge you to read the Appendices in their entirety.
TRANSACTION STRUCTURE
The North Fork board of directors and the JSB board of directors each have
unanimously approved the merger agreement, which provides for the merger of JSB
with and into North Fork. North Fork will be the surviving corporation in the
merger. Immediately following completion of the merger, JSB's savings bank
subsidiary, Jamaica Savings Bank FSB, will be merged with and into North Fork's
principal bank subsidiary, North Fork Bank. We expect to complete both the
merger and the bank merger in the first quarter of 2000. Each share of North
Fork common stock issued and outstanding at the effective time of the merger
will remain issued and outstanding as one share of common stock of the combined
company, and each share of JSB common stock issued and outstanding at the
effective time of the merger will be converted into 3.0 shares of North Fork
common stock. This exchange ratio is subject to potential upward adjustment only
as described under "-- Termination of the Merger Agreement" on page 57.
The North Fork certificate of incorporation, as may be amended to reflect
the increase in the authorized number of shares of North Fork common stock from
200 million to 500 million and the reduction in the par value of the common
stock (see "Proposed Amendment to North Fork's Certificate of Incorporation" on
page 87), will be the certificate of incorporation of the combined company after
completion of the merger, and the North Fork bylaws will be the bylaws of the
combined company. Upon completion of the merger, the board of directors of the
combined company will be expanded by one member, and Park T. Adikes, the
Chairman and Chief Executive Officer of JSB, will become a member of the boards
of directors of North Fork and North Fork Bank.
BACKGROUND OF THE MERGER
The board of directors of JSB has regularly reviewed various strategic
alternatives available to JSB, including, among others, continuing as an
independent institution and growing internally, acquiring other financial
institutions, merging with a similarly sized institution in a merger-of-equals
and merging JSB with a larger financial institution. During 1998 and 1999,
Northeast Capital & Advisory, Inc., JSB's financial advisor, and Thacher
Proffitt & Wood, JSB's outside legal counsel, participated in such reviews.
In April 1999, certain members of JSB's management engaged in preliminary
discussions with another financial institution regarding a proposed
merger-of-equals transaction. During this time, JSB also continued to review
with Northeast Capital the other strategic alternatives available to JSB. At a
board of directors meeting on April 13, 1999, Northeast Capital made a financial
presentation to the JSB board of directors with respect to the proposed business
combination, which included, among other things, an analysis of the proposed
business combination in light of the JSB board of directors' recent review of
JSB's strategic options. The JSB board of directors authorized management to
pursue further discussions with the other institution, and, in late April, JSB
and the other financial institution each conducted a due diligence review of the
other.
At a special board of directors meeting on May 3, 1999, the board of
directors and management of JSB considered a financial presentation by Northeast
Capital and a legal analysis by Thacher Proffitt regarding the proposed business
combination. Northeast Capital and Thacher Proffitt reviewed with the JSB board
of directors the preliminary considerations, discussions and analyses regarding
such possible business combination, including the results of the due diligence
review of the other institution, the financial aspects of, and alternative
structures for, the proposed business combination, and alternative transactions
with other institutions, including the possibility of conducting a limited
auction of JSB or acquiring another company.
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In mid-May, the discussions regarding the possible business combination
were discontinued for business, financial and practical reasons. Following
termination of such discussions, management of JSB discussed with Northeast
Capital, Thacher Proffitt and the members of the JSB board of directors the
possibility of evaluating and considering a possible business combination with
one of a limited number of prospective financial institutions. JSB's management
and Northeast Capital identified a group of financial institutions operating
within or reasonably close to the New York City metropolitan area from which JSB
might consider soliciting indications of interest, taking into account, among
other things, each institution's financial ability to complete such a
transaction, its ability to manage the execution risk of such a transaction, its
ability to achieve cost savings and its perceived interest in JSB.
Northeast Capital and Thacher Proffitt suggested a procedure to determine
the level of interest that certain financial institutions might have in a
business combination transaction with JSB. Northeast Capital then prepared
confidential books containing financial, business and other information for
possible business combinations between JSB and approximately a dozen different
financial institutions (after excluding five others for a variety of reasons) to
be distributed to such financial institutions. The information in the
confidential books included pro forma profiles for such transactions structured
using purchase accounting and pooling-of-interests accounting, a draft of a
proposed definitive merger agreement and the procedures to be followed in order
for the financial institutions to submit their indications of interest in
considering a business combination with JSB. In identifying the best candidates
and preparing such information, Northeast Capital took into consideration a
number of factors for each of the financial institutions, including core income
to assets, core income to equity, price to core earnings per share, stock price
appreciation over the last three years, core earnings per share growth over the
last five years, pro forma earnings per share dilution, equity to assets,
leverage ratio and insider stock ownership.
In early June 1999, based upon advice from Northeast Capital and Thacher
Proffitt, JSB's management directed Northeast Capital to contact the identified
financial institutions on its behalf, and, upon the execution of confidentiality
agreements by such financial institutions, provide them with such confidential
books. Of the institutions contacted, seven executed confidentiality agreements
and received confidential materials regarding JSB from Northeast Capital. These
institutions were requested to advise Northeast Capital by June 30, 1999 of
their preliminary indication of interest in a possible business combination with
JSB.
At its June 22, 1999 meeting, the JSB board of directors authorized JSB's
management to continue evaluating and considering JSB's strategic alternatives,
including identifying and contacting additional financial institutions,
providing such financial institutions with such confidential information as
JSB's management deemed necessary and appropriate and eliminating from such list
those institutions which management determined not suitable for pursuing further
discussions with regard to a possible business combination. Following the
meeting, Northeast Capital provided several additional financial institutions
with the confidential information concerning JSB upon the execution of
confidentiality agreements by these institutions.
In late June and early July, 1999, Northeast Capital spoke to
representatives of several of the financial institutions that received
confidential information regarding their preliminary indications of interest.
JSB received written indications of interest from three of the financial
institutions, two of which were subsequently revised later in July. On July 19,
1999, two of the financial institutions that had submitted written indications
of interest made separate presentations to the JSB board of directors regarding
their proposals. Shortly thereafter, North Fork submitted its preliminary
expression of interest.
At a July 27, 1999 meeting of North Fork's board of directors, members of
North Fork's management reviewed with the North Fork board of directors summary
financial and statistical data for JSB and preliminary pro forma financial and
market share information resulting from a combination of JSB with North Fork.
After discussion, North Fork's board of directors authorized North Fork's
management to proceed to discuss and negotiate the terms of a potential merger
transaction with JSB, subject to a due diligence review of JSB and approval of
the North Fork board of directors.
In late July, based on the terms of the indications of interest received,
JSB continued to consider its other strategic alternatives in comparison to the
submitted indications of interest. At this time, JSB was engaging in
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discussions primarily with North Fork and one other financial institution. On
July 31, 1999, North Fork conducted its due diligence review of JSB. Shortly
thereafter, Park T. Adikes, Chairman and Chief Executive Officer of JSB, met
with John Adam Kanas, Chairman, President and Chief Executive Officer of North
Fork, to discuss North Fork's interest in JSB.
On August 10, 1999, a special meeting of the JSB board of directors was
held for the purpose of determining whether JSB should (1) continue to consider
its strategic alternatives, (2) pursue a possible transaction with one of the
financial institutions that submitted an indication of interest to determine if
an acceptable transaction could be negotiated, or (3) remain independent and
possibly implement one or more of several alternative courses of action in order
to enhance long-term shareholder value. At this meeting, the JSB board of
directors determined not to give further consideration to two of the written
indications of interest primarily because the indications of interest from both
North Fork and the other institution offered superior value, notwithstanding the
fact that the other institution's indication of interest had technically lapsed
prior to the August 10 meeting. Upon the advice of Northeast Capital and Thacher
Proffitt, the JSB board of directors continued to consider the indication of
interest received from the other institution.
Further, at the August 10th meeting, Northeast Capital made a presentation
to the board of directors which included a financial analysis of JSB's possible
strategic alternatives, including: (i) remaining independent, (ii) initiating a
self-tender offer, (iii) waiting for another acquirer, (iv) pursuing a
merger-of-equals, (v) acquiring another company, (vi) engaging in a transaction
with North Fork, or (vii) engaging in a transaction with the other institution.
Northeast Capital then engaged in a detailed financial analysis comparing the
preliminary indications of interest received from North Fork and the other
institution. North Fork's indication of interest contemplated a merger of JSB
into North Fork, structured as a tax-free, stock-for-stock exchange with an
exchange ratio having a nominal value of $60 per share, and included a
"walk-away" provision that would allow JSB to terminate the merger agreement in
the event of a specified decline in North Fork's stock price as compared to the
stock prices of an index group of financial institutions, subject to North
Fork's ability to increase the exchange ratio in order to prevent JSB from
otherwise terminating the merger agreement. In addition, North Fork offered a
seat on the boards of directors of North Fork and North Fork Bank to Mr. Adikes.
The indication of interest from the other institution contemplated a merger
of JSB into the other institution, structured as a tax-free, stock-for-stock
exchange, with an exchange ratio having a nominal value of $65.52 per share. The
other institution's proposal included a "walk-away" provision and offered seats
on the board of directors to Mr. Adikes and two outside directors of JSB. Both
North Fork and the other institution offered to create an advisory board of
directors for the remaining members of the JSB board of directors, and both
North Fork and the other institution proposed a transaction that was expected to
be accounted for as a pooling-of-interests.
Northeast Capital then proceeded to analyze the two indications of interest
using a discounted cash flow analysis, an analysis of median peer group
multiples and a median analyst target price analysis. Northeast Capital also
utilized a pro forma forward-looking financial analysis using cash earnings per
share, net of expected transaction cost savings, times a forward trading
multiple, plus expected dividends. Under each analysis, the value offered per
JSB share under North Fork's indication of interest was superior to the value
offered under the other institution's indication of interest. See "Opinion of
JSB's Financial Advisor" on page 40. Northeast Capital also advised JSB's board
of directors that Northeast Capital believed that North Fork's indication of
interest entailed less execution risk because of North Fork's greater experience
in completing mergers and that North Fork could be expected to achieve greater
cost savings than the other institution.
Northeast Capital also attempted to quantify the value of certain other
factors to be considered by the JSB board of directors in comparing the two
indications of interest. These other factors included the impact of the
transaction on JSB's customers and employees and the communities served by JSB.
After taking these factors into consideration, the JSB board of directors
determined that North Fork's indication of interest was still superior.
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After consideration of Northeast Capital's financial analysis of North
Fork's proposal, the other institution's proposal and certain other factors (see
"-- Recommendation of the JSB Board and Reasons for the Merger" on page 28, the
board of directors concluded that North Fork's proposal presented superior long-
term value for JSB and its stockholders and authorized JSB's management to
pursue negotiations with North Fork regarding the proposed transaction and to
notify the other institution that it was not the favored bidder at that time.
Mr. Adikes and Northeast Capital then left the August 10th meeting to call
North Fork in order to confirm the proposed terms of the transaction with
respect to the exchange ratio, walk-away provisions, due diligence, board of
directors, deal protection, timing and other substantive points. While there was
still some disagreement between the parties as to the exchange ratio after such
call, the JSB board of directors determined that management should proceed with
a due diligence review of North Fork and continue to negotiate with North Fork
regarding the exchange ratio and the other terms of the proposed merger. On
August 11, 12 and 13, 1999, JSB conducted its due diligence review of North
Fork, and, from August 12 through 15, 1999, JSB, North Fork and their respective
legal and financial advisors continued to work toward a mutually acceptable
definitive merger agreement with respect to the proposed transaction.
At a special meeting held on August 15, 1999, Northeast Capital made
another presentation to the JSB board of directors regarding the proposed
transaction with North Fork. This presentation was similar to the one made to
the JSB board of directors on August 10, 1999, but was updated to reflect the
results of JSB's due diligence investigation of North Fork, certain adjustments
to the discounted cash flow models and forward-looking financial analyses,
changes in trading multiples for North Fork, JSB and their peer groups and the
revised exchange ratio of 3.0. This exchange ratio indicated a value for North
Fork's offer of $61.31 (based upon North Fork's closing stock price on August
13, 1999), representing an increase from the indicated value of $60.00 as of
August 10, 1999, while the indicated value for the other institution's offer had
decreased from $65.52 as of August 10, 1999 to $63.80 as of August 13, 1999 due
to a decrease in the other institution's stock price. In addition, Northeast
Capital, Thacher Proffitt and JSB's management discussed the results of the due
diligence review of North Fork. Northeast Capital then delivered to the JSB
board of directors Northeast Capital's written opinion that the exchange ratio
in the proposed merger was fair, from a financial point of view, to the
stockholders of JSB. Thacher Proffitt then reviewed with the JSB board of
directors the material terms and conditions contained in the definitive merger
agreement, the stock option agreement and the related documents. Based on the
consideration of the various factors discussed below under "-- Recommendation of
the JSB Board and Reasons for the Merger" on page 28, the JSB board of directors
then unanimously approved the merger agreement and the stock option agreement.
On August 16, 1999, the North Fork board of directors held a special
meeting at which senior management of North Fork reviewed its discussions and
negotiations with JSB regarding the proposed business combination, as well as
the results of its due diligence investigation of JSB. Senior management of
North Fork and Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ")presented financial information with respect to JSB and the potential
transaction to the North Fork board of directors, and DLJ rendered its oral
opinion (which was subsequently confirmed in writing) that, as of that date, the
exchange ratio set forth in the merger agreement was fair to North Fork
stockholders from a financial point of view. Also at this meeting, counsel to
North Fork reviewed with the North Fork board of directors the terms of the
merger agreement and the stock option agreement. After questions by and
discussion among the members of the North Fork board of directors, and after
consideration of the factors described below under "-- Recommendation of the
North Fork Board and Reasons for the Merger" on page 27, the North Fork board of
directors voted unanimously to approve the merger agreement and the transactions
contemplated by the merger agreement, as well as the stock option agreement.
Following the completion of the North Fork board of directors meeting on
August 16, 1999, North Fork and JSB entered into the merger agreement and the
stock option agreement.
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RECOMMENDATION OF THE NORTH FORK BOARD AND REASONS FOR THE MERGER
THE NORTH FORK BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS FAIR TO, AND
IN THE BEST INTERESTS OF, NORTH FORK AND ITS STOCKHOLDERS. ACCORDINGLY, THE
NORTH FORK BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
UNANIMOUSLY RECOMMENDS THAT THE NORTH FORK STOCKHOLDERS VOTE "FOR" APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT, INCLUDING THE RELATED ISSUANCE OF NORTH FORK
COMMON STOCK.
In reaching its decision to approve and recommend the merger agreement,
including the related issuance of North Fork common stock, the North Fork board
of directors consulted with management of North Fork, as well as with its legal
and financial advisors, and considered the following material factors:
- The overall strategic focus of North Fork and the opportunities for
growth by North Fork in the market areas where JSB conducts business,
including the fact that the merger would enhance North Fork's retail
banking franchise by adding 130,000 retail customers, 13 retail banking
facilities and $1.1 billion in deposits;
- The anticipated financial effects of the merger, including an estimated
$13.2 million in cost savings, $4.7 million in revenue enhancements and
$4.7 million in tax efficiencies, each on an after-tax basis, expected to
result from the merger; and the expectation that the merger would be
immediately accretive to North Fork's earnings in 2000 by $.03 per share,
based on I/B/E/S International Inc. estimates (I/B/E/S is a data service
that monitors and publishes compilations of earnings estimates by
selected research analysts) for North Fork and JSB and North Fork
management's estimates for cost savings, revenue enhancements and other
efficiencies to be achieved following the merger, and would increase
North Fork's stated and tangible book value per share. On a pro forma
basis as of June 30, 1999 (giving effect only to the North Fork-JSB
merger), North Fork would have total assets of $13.2 billion, deposits of
$7.6 billion, stockholders' equity of $1.2 billion, stated and tangible
book value per share of approximately $7.18 and $6.70, respectively, and
a leverage ratio of 10.35%. North Fork management expects to reduce the
number of JSB employees by an estimated 136 full-time and 41 part-time
and does not expect to close any JSB branch offices. The North Fork board
of directors was advised in this regard that North Fork expected to incur
an after-tax restructuring charge of approximately $37 million in
connection with the completion of the merger. The combined company's
ability to achieve these cost savings, revenue enhancements and other
results depends on various factors, a number of which will be beyond its
control, and there can be no assurance that such results will be
achieved. See "Management and Operations Following the Merger and the
Reliance Merger" on page 70 and "Forward-Looking Statements" on page 91;
- The North Fork board's review, based on a presentation by North Fork's
management, of the business, operations, earnings and financial condition
of JSB on a historical and prospective basis;
- The terms of the merger agreement and the stock option agreement,
including the exchange ratio, which, based on closing stock price for
North Fork prior to the announcement of the transaction, provided for a
price-to-book value per share multiple of 1.52x and a price-to-estimated
year 2000 earnings per share multiple of 18.0x. The North Fork board of
directors was advised in this regard that the exchange ratio was subject
to possible upward adjustment under the circumstances set forth in the
merger agreement. See "-- Termination of the Merger Agreement" on page
57;
- The current and prospective economic, competitive and regulatory
environment facing financial institutions and their competitors
generally, and North Fork in particular;
- The North Fork board of directors' familiarity with and review of North
Fork's business, operations, financial condition, earnings and prospects,
including its potential growth and profitability and the associated
business risks;
- The expectation that the merger would be treated as a tax-free
reorganization for federal income tax purposes and would be accounted for
as a pooling-of-interests;
- The financial information reviewed by DLJ with the North Fork board of
directors, and the opinion of DLJ that, as of August 16, 1999, and
subject to the matters set out in its opinion, the exchange ratio is
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<PAGE> 35
fair to North Fork's stockholders from a financial point of view. See
"-- Opinion of North Fork's Financial Advisor" on page 30;
- The views of North Fork's management concerning the likelihood of
receiving all regulatory approvals required for the merger; and
- The terms of the merger agreement providing for termination fees payable
by each of North Fork and JSB to the other under limited circumstances,
the stock option granted by JSB to North Fork and the provisions of the
merger agreement restricting JSB's ability to solicit competing bids, and
the potential effect that these provisions may have on competing offers
for JSB.
In view of the wide variety of factors considered in connection with its
evaluation of the merger and the complexity of these matters, North Fork's board
of directors did not find it practicable to and did not attempt to quantify,
rank or otherwise assign relative weights to these factors. North Fork's board
of directors considered all of the factors described above together, including
through discussions with and questioning of North Fork's management and North
Fork's legal and financial advisors. In considering the factors described above,
individual members of North Fork's board of directors may have given different
weight to different factors.
RECOMMENDATION OF THE JSB BOARD AND REASONS FOR THE MERGER
THE JSB BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS FAIR TO, AND IN THE
BEST INTERESTS OF, JSB AND ITS STOCKHOLDERS. ACCORDINGLY, THE JSB BOARD OF
DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND UNANIMOUSLY
RECOMMENDS THAT JSB STOCKHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT.
In reaching its determination that the terms of the merger agreement and
the transactions contemplated thereby are fair to and in the best interests of
JSB and its stockholders, the JSB board of directors considered a number of
factors, including the following material factors:
- the JSB board of directors' familiarity with and review of JSB's
business, results of operations, financial condition, management,
competitive position and future prospects, the nature of the industry in
which JSB operates, both on a historical and prospective basis, and the
potential growth, development, productivity and profitability of JSB;
- the current and prospective environment in which JSB operates, including
national, regional and local economic conditions, the competitive
environment for banks, thrifts and other financial institutions
generally, the increased regulatory burdens on financial institutions
generally, the trend toward consolidation in the banking and thrift
industry and in the financial services industry and the likely effect of
the foregoing factors on JSB's potential growth, development,
productivity and profitability;
- the JSB board of directors' review, based in part on presentations by
JSB's management and advisors and financial information received from
North Fork's management, of North Fork's business, results of operations,
financial condition and management, and North Fork's operating
performance and the performance of the North Fork common stock on both a
historical and prospective basis, the strategic fit between the parties,
the expected cost savings of $20.2 million per year, pre-tax, and $13.2
million per year, after-tax, and revenue enhancements of $4.7 million per
year, after-tax, that could result from the merger and the respective
contributions the parties would bring to a combined institution;
- the JSB board of directors' belief that, while no assurance can be given,
it is likely that the merger will be completed and that the business and
financial advantages to be gained by the merger are likely to be achieved
within a reasonable time frame;
- the anticipated financial impact of the proposed merger on the combined
company's future financial performance, including that, while no
assurance can be given, the transaction is expected to be accretive to
the combined company's cash earnings per share by 0.68% in 2000;
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<PAGE> 36
- North Fork's record of successfully completing other acquisitions and
integrating the acquired companies;
- North Fork's pro forma dividend rate with respect to each JSB share after
giving effect to the merger, which is equal to the current dividend per
JSB share;
- the JSB board of directors' review of the historical market prices of the
JSB common stock, which ranged between $43.20 and $58.75 during the 12
months prior to the announcement of the merger, compared to the
consideration of $61.31 per share to be received by JSB's stockholders,
based on North Fork's closing price on August 13, 1999, and the
expectation of the JSB board of directors that the merger will provide
holders of JSB common stock with the opportunity to receive a premium
over the historical trading prices for their shares;
- the expectation that the receipt of North Fork common stock by the JSB
stockholders in the merger would be on a tax-free basis for federal
income tax purposes (except with respect to cash received in lieu of
fractional shares);
- a comparison of the consideration to be paid to JSB's stockholders
compared to that paid in other reported transactions involving the
acquisition of banks and thrifts in New York State which had occurred
since January 1, 1998, which indicated, among other things, (1) a ratio
of the excess of the deal price over tangible book divided by core
deposits of 23.0%, compared to the median ratio of the excess of the deal
price over tangible book divided by core deposits of 17.8% in such other
New York State transactions, (2) a deal price to deposit ratio of 51.3%,
compared to the median deal price to deposit ratio of 25.9% for such
other New York State transactions and (3) a tangible book multiple of
268% (if adjusted to exclude JSB's capital in excess of an 8% leverage
capital ratio), compared to the median tangible book multiple of 244% for
such other New York State transactions. See "-- Opinion of JSB's
Financial Advisor" on page 40;
- the JSB board of directors' review with its legal and financial advisors
of alternatives to the merger, including its review of and negotiations
over the proposals made by other institutions, the alternative of
remaining independent and growing internally and the possibility of other
strategic business combinations;
- the JSB board of directors' belief that North Fork has a strong financial
and capital position and, based on analyses performed by Northeast
Capital, that the North Fork common stock to be received by JSB's
stockholders provides a potential long-term value of $23 to $24 per North
Fork share, or $69 to $72 per JSB share based on the 3.0 exchange ratio,
and that the North Fork common stock to be received by JSB's stockholders
provides a substantial capacity for future growth and considerable
potential for long-term strategic value to such stockholders. See
"-- Opinion of JSB's Financial Advisor" on page 40;
- the presentation by Northeast Capital and the written opinion of
Northeast Capital that the exchange ratio in the merger is fair from a
financial point of view to the JSB stockholders. See "-- Opinion of JSB's
Financial Advisor" on page 40;
- the expectation that the combined institution will continue to provide
quality service to the communities and customers served by JSB and be
able to offer a more extensive range of products and services to the
communities and customers that will be served by the combined
institution, and the expectation that there would be approximately 170
full-time and part-time employee reductions and no branch closings in
connection with the merger; and
- the review by the JSB board of directors with its legal and financial
advisors of the terms and conditions of the merger agreement, including
the exchange ratio, the ability of JSB to terminate the merger agreement
under certain circumstances if the value of the North Fork common stock
declines (see "-- Termination of the Merger Agreement" on page 57), the
provision for the payment of a termination fee in the event the merger is
not consummated for certain reasons, North Fork's agreement to appoint
Mr. Adikes to the North Fork and North Fork Bank boards of directors and
to
29
<PAGE> 37
create an advisory board of directors for the remaining members of JSB's
board of directors to advise North Fork with respect to deposit and
lending activities in JSB's former market area and the maintenance and
development of customer relationships, and the provisions of the merger
agreement relating to the treatment of JSB's employees under certain
employee benefit plans and programs; and
- the review by the JSB board of directors with its legal and financial
advisors of the terms and conditions of the stock option agreement and
the other documents executed in connection with the merger.
In view of the wide variety of material factors considered in connection
with its evaluation of the merger, the JSB board of directors did not find it
practical to, and did not, quantify or otherwise attempt to assign relative
weights to the specific factors considered in reaching its determination. In
considering the factors described above, individual members of the JSB board of
directors may have given different weights to different factors.
OPINION OF NORTH FORK'S FINANCIAL ADVISOR
North Fork engaged DLJ to act as financial advisor with respect to the
possible business combination with JSB. North Fork's decision to engage DLJ was
based upon its qualifications, expertise and reputation, as well as upon its
prior experience with North Fork.
On August 16, 1999, DLJ rendered to North Fork's board of directors its
oral opinion, which DLJ subsequently confirmed in writing, to the effect that,
based upon the assumptions, limitations and qualifications set forth in its
opinion, as of August 16, 1999, the exchange ratio was fair from a financial
point of view to the holders of the North Fork common stock. DLJ confirmed its
opinion in a written opinion dated as of the date of this document (the "DLJ
OPINION").
You should consider the following when reading the discussion of the DLJ
opinion in this document:
- The following description of the DLJ opinion is qualified by reference to
the full opinion located in Appendix C to this document. We urge you to
read the entire DLJ opinion carefully.
- The DLJ opinion was necessarily based on economic, market, financial and
other conditions as they existed on the date of that opinion and on the
information made available to DLJ as of that date and, although
subsequent developments may affect the DLJ opinion, DLJ does not have any
obligation to update, revise or reaffirm its opinion.
- DLJ expressed no opinion as to the prices at which the North Fork common
stock or the JSB common stock will actually trade at any time.
- The DLJ opinion does not address the relative merits of the merger and
the other business strategies considered by North Fork's board of
directors, nor does it address the board of directors' decision to
proceed with the merger.
- The DLJ opinion does not constitute a recommendation to any stockholder
as to how such stockholder should vote on the proposed transaction.
In arriving at its opinion, DLJ, among other things:
- reviewed the merger agreement;
- reviewed financial and other information that was publicly available or
furnished to DLJ by North Fork and JSB, including information provided
during discussions with their respective managements;
- reviewed certain financial projections of North Fork and JSB provided by
management of North Fork (in the case of financial projections for JSB,
North Fork used estimates published by Zacks Investment Research, Inc.
("ZACKS"), a research firm which publishes analysts' earnings estimates
of public companies), including certain cost savings and operating
synergies anticipated by the management of North Fork to result from the
merger;
30
<PAGE> 38
- compared certain financial and securities data of North Fork and JSB with
various other companies whose securities are traded in public markets;
- reviewed the historical stock prices and trading volumes of North Fork
common stock and JSB common stock;
- reviewed prices and premiums paid in certain other business combinations;
and
- conducted such other financial studies, analyses and investigations as
DLJ deemed appropriate for purposes of its opinion.
In rendering the DLJ opinion, DLJ relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
it from public sources, that was provided to DLJ by North Fork and JSB or their
respective representatives, or that was otherwise reviewed by DLJ, and assumed
that North Fork was not aware of any information prepared by it or its other
representatives that might be material to DLJ's opinion that was not made
available to DLJ. In particular, DLJ relied upon the estimates of the management
of North Fork of the cost savings and operating synergies achievable as a result
of the merger. With respect to the financial projections that DLJ reviewed,
including cost savings and operating synergies, DLJ assumed that they had been
reasonably prepared reflecting the best currently available estimates and
judgments of the management of North Fork as to the future operating and
financial performance of North Fork, JSB and the combined company. DLJ is not an
expert in the evaluation of loan and lease portfolios for purposes of assessing
the adequacy of the allowances for losses with respect to these portfolios and
assumed, with the consent of the board of directors of North Fork, that these
allowances for North Fork and JSB were in the aggregate adequate to cover all
losses with respect to these portfolios. In addition, DLJ did not review
individual credit files nor did DLJ make an independent evaluation or appraisal
of the assets and liabilities (including any hedge or derivative positions) of
North Fork or JSB or any of their subsidiaries and DLJ was not furnished with
any such evaluation or appraisal. DLJ did not assume any responsibility for
making any independent evaluation of any assets or liabilities or for making any
independent verification of any of the information reviewed by it. DLJ assumed
that the merger will qualify as a tax-free reorganization for United States
federal income tax purposes and that all material governmental, regulatory or
other consents and approvals necessary for the consummation of the merger will
be obtained without any adverse effect on the anticipated benefits of the
merger.
DLJ, as part of its investment banking services, is regularly engaged in
the valuation of businesses and securities in connection with mergers,
acquisitions, underwritings, sales and distributions of listed and unlisted
securities, private placements and valuations for corporate and other purposes.
In the ordinary course of its business, DLJ and its affiliates actively trade
the securities of North Fork and JSB for their own account and for accounts of
their customers, and, accordingly, may at any time hold a long or short position
in those securities. DLJ has performed investment banking and other services for
North Fork in the past and has been compensated for such services.
North Fork has agreed to pay DLJ a transaction fee of $1.5 million in
connection with its engagement, $150,000 of which was payable upon execution of
DLJ's engagement letter and the remainder of which is payable upon completion of
the merger. North Fork has also agreed to reimburse DLJ for all out-of-pocket
expenses, including the reasonable fees and expenses of counsel, and to
indemnify DLJ against certain liabilities, including certain liabilities under
the federal securities laws.
The following is a summary of the material financial analyses DLJ used in
connection with providing the DLJ opinion to North Fork's board of directors on
August 16, 1999 and does not purport to be a complete description of the
analyses performed by DLJ. The following quantitative information, to the extent
it is based on market data, is based on market data as it existed at or about
August 10, 1999 and is not necessarily indicative of current market conditions.
You should understand that the order of analyses (and results thereof) described
does not represent relative importance or weight given to such analyses by DLJ.
The summary of financial analyses includes information presented in tabular
format. THE TABLES SHOULD BE READ TOGETHER WITH THE TEXT OF THOSE SUMMARIES.
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<PAGE> 39
Business Review. DLJ reviewed selected five-year historical consolidated
financial information of JSB and North Fork. DLJ also reviewed JSB's and North
Fork's operating profitability and growth performance during such period. In
addition, DLJ discussed JSB's and North Fork's:
- loan and deposit composition, based on the dollar value of loans and
deposits; and
- deposit market share, based on the dollar value of deposits, in the
counties of New York in which JSB operates.
Historical Stock Price Performance Analysis. DLJ compared the daily
closing price per share of JSB common stock and North Fork common stock for the
one-year and three-year periods ended August 10, 1999. For each of JSB and North
Fork, DLJ also compared the ratio of closing stock price on August 10, 1999 to
the 52-week high and low prices. DLJ noted that JSB's common stock closing price
of $56.500 on August 10, 1999 represented 95.6% of the 52-week high price and
126.3% of the 52-week low price. North Fork's common stock closing price of
$19.188 on August 10, 1999 represented 71.7% of the 52-week high price and
135.8% of the 52-week low price and implied a value per JSB share of $57.56
based on the exchange ratio.
Comparable Company Analysis. DLJ compared selected operating and stock
market results of JSB and North Fork to publicly available information for a
bank peer group that DLJ selected and deemed to be relevant. The bank peer
group, which included selected depository institutions between $400.0 million
and $5.0 billion in market capitalization headquartered in Connecticut, New
Jersey, New York and eastern Pennsylvania, consisted of:
<TABLE>
<S> <C>
Astoria Financial Corporation Queens County Bancorp, Inc.
Commerce Bancorp Richmond County Financial Corp.
Dime Bancorp, Inc. Roslyn Bancorp, Inc.
Fulton Financial Corporation Sovereign Bancorp
GreenPoint Financial Corporation Staten Island Bancorp, Inc.
Hudson United Bancorp Susquehanna Bancshares, Inc.
Independence Community Bank Corp. Valley National Bancorp
M&T Bank Corporation Webster Financial Corporation
People's Bank
</TABLE>
In addition, DLJ analyzed JSB and North Fork compared with their bank peer
group discussed above, the S&P 500 and the S&P Bank Index on the following
bases:
- a total return analysis for the year-to-date, one-year, three-year and
five-year periods;
- the relative stock price performance for the one-year period ended August
10, 1999;
- a valuation analysis of JSB compared with the low, medium and high
multiples of the bank peer group discussed above (see below); and
- the one-year relative forward price-to-earnings performance based on
estimates of North Fork's management.
DLJ also analyzed and compared JSB's and North Fork's rankings as of June 30,
1999 within the bank peer group discussed above with respect to JSB's and North
Fork's:
- market capitalization as of August 10, 1999;
- total assets, total equity and the percentage of total equity to total
assets;
- return on average common equity, excluding non-recurring items;
- return on average assets, excluding non-recurring items;
- efficiency ratio (calculated as overhead expenses divided by net interest
income plus non-interest income, each as determined by DLJ);
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<PAGE> 40
- fee based ratio;
- net interest margin;
- tangible common equity ratio;
- ratio of reserves to loans; and
- ratio of reserves to non-performing assets.
Comparable Trading Valuation Analysis. DLJ compared selected operating and
stock market results of JSB to the bank peer group discussed above. The
valuation analysis compared JSB with the low, medium and high multiples of this
peer group.
The following tables compare selected information derived by DLJ for JSB
and North Fork using management assumptions and the median of the bank peer
group using I/B/E/S estimates:
<TABLE>
<CAPTION>
PRICING MULTIPLES
--------------------------------------------------------------
PRICE/FORWARD PRICE/FORWARD PRICE/ PRICE/TANGIBLE
EARNINGS CASH EARNINGS BOOK VALUE BOOK VALUE
------------- ------------- ---------- --------------
<S> <C> <C> <C> <C>
JSB............................ 17.1x 17.1x 1.40x 1.40x
North Fork..................... 11.3x 10.9x 3.27x 3.64x
Peer Group Median.............. 12.8x 11.6x 1.61x 2.27x
</TABLE>
<TABLE>
<CAPTION>
LAST 12 MONTHS OPERATING STATISTICS
-----------------------------------------------------------------------
NORMALIZED NORMALIZED
RETURN RETURN ON EFFICIENCY FEE BASED
ON ASSETS COMMON EQUITY RATIO RATIO
----------------- ----------------- ---------------- ---------
<S> <C> <C> <C> <C>
JSB...................... 1.83% 7.71% 34.2% 8.1%
North Fork............... 1.95% 24.28% 32.3% 11.3%
Peer Group Median........ 1.15% 12.82% 49.1% 16.4%
</TABLE>
JSB's Price/Forward Earnings multiple of 17.1x and Price/Forward Cash
Earnings multiple of 17.1x exceeded the Peer Group Median Price/Forward Earnings
multiple of 12.8x and Price/Forward Cash Earnings multiple of 11.6x possibly due
to takeover speculation in the marketplace. JSB's stock rose from $50.00 on June
25, 1999 to $57.75 on July 8, 1999, possibly due to market speculation that JSB
was for sale. JSB's stock traded toward the upper end of that range leading up
to the fairness opinion presentation.
JSB's Price/Book Value multiple of 1.40x and Price/Tangible Book Value
multiple of 1.40x were below the Peer Group Median Price/Book Value multiple of
1.61x and Price/Tangible Book Value multiple of 2.27x possibly due to the amount
of "excess capital" JSB has relative to its peers. JSB's tangible capital ratio
of 23.14% is significantly higher than the Peer Group Median of 6.98%. The lower
trading multiple suggests that the market does not value this excess capital as
much as it does the capital required for operations.
Comparable Transactions Analysis. DLJ analyzed publicly available
financial, operating and stock market information for selected domestic thrift
merger transactions and selected domestic commercial bank merger transactions
between $250.0 million and $1.0 billion in transaction value and selected
domestic commercial bank transactions greater than $100.0 million in transaction
value which were announced from January 1, 1997 through August 10, 1999. These
analyses were based on I/B/E/S estimates. For each category, DLJ calculated the
median values of the transactions taken together. The following table compares
information derived by DLJ with respect to the merger, which was based on
estimates of North Fork's
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<PAGE> 41
management, an implied price of $57.56 per share (based on the exchange ratio
and North Fork's closing stock price on August 10, 1999), and these medians:
<TABLE>
<CAPTION>
SELECTED THRIFT SELECTED BANK
TRANSACTIONS TRANSACTIONS SELECTED BANK
$250 MILLION -- $250 MILLION -- TRANSACTIONS OVER
$1.0 BILLION $1.0 BILLION $100 MILLION THE MERGER
--------------- --------------- ----------------- ----------
<S> <C> <C> <C> <C>
Implied premium of offer price to
market price on last trading day
prior to announcement........... 22.4% 17.2% 21.5% 4.4%
Ratio of implied offer price to:
Book value per share............ 2.34x 3.07x 2.97x 1.42x
Tangible book value per
share........................ 2.43x 3.31x 3.16x 1.42x
Last 12 months earnings per
share........................ 24.6x 24.4x 24.0x 18.8x
Forward 12 months earnings per
share........................ 20.7x 20.7x 20.6x 17.4x
</TABLE>
The implied premium of the offer price to JSB's market price on the last
trading day prior to announcement of 4.4% is below the median implied premiums
for: selected thrift transactions of between $250 million -- $1.0 billion of
22.4%; selected bank transactions of between $250 million -- $1.0 billion of
17.2%; and selected bank transactions over $100 million of 21.5%. The possible
takeover speculation in JSB's stock price as described above is a possible
explanation for this variance.
The multiples of the implied offer price to JSB's book value per share and
tangible book value per share of 1.42x and 1.42x, respectively, is below the
median multiples of implied offer price to book value and tangible book value
per share for: selected thrift transactions of between $250 million -- $1.0
billion of 2.34x and 2.43, respectively; selected bank transactions of between
$250 million -- $1.0 billion of 3.07x and 3.31x, respectively; and selected bank
transactions over $100 million of 2.97x and 3.16x, respectively. This variance
is likely due to JSB's excess capital as described above.
The multiples of the implied offer price to JSB's forward 12 months
earnings per share of 17.4x is below the median multiples of implied offer price
to forward 12 months earnings per share for: selected thrift transactions of
between $250 million -- $1.0 billion of 20.7x; selected bank transactions of
between $250 million -- $1.0 billion of 20.7x; and selected bank transactions
over $100 million of 20.6x. However, the transaction multiple is within the
range of multiples for the selected transactions.
Discounted Dividend Analysis. DLJ performed a discounted dividend analysis
to estimate a range of present values per share of North Fork common stock and
JSB common stock assuming each entity continued to operate as a stand-alone
entity. DLJ also performed a further sensitivity analysis to estimate the range
of present values per share of North Fork common stock based on the pro forma
combined company. Analyses were conducted with and without applying the
synergies estimated by the management of North Fork. These ranges were
determined by adding (1) the present value of the estimated future dividend
stream that each entity could generate through December 31, 2004 and (2) the
present value of the "terminal value" of each entity's common stock at December
31, 2004.
DLJ determined the range of present values per share of North Fork and JSB
common stock using the terminal year multiples and discount rates that DLJ
viewed as appropriate for companies with their risk characteristics. DLJ used
North Fork management's earnings estimates for 1999 and 2000 (in the case of
earnings estimates for JSB, North Fork used estimates published by Zacks). For
periods after 2000, earnings were grown at North Fork's management's estimated
long-term growth rate, adjusted to reflect an assumed constant ratio of tangible
common equity to assets that DLJ viewed as appropriate.
In calculating a terminal value of JSB common stock at December 31, 2004,
DLJ applied multiples ranging from 13.1x to 17.1x to forecasted cash earnings
for 2005. The dividend stream and terminal values were then discounted back to
March 31, 1999 using discount rates ranging from 10.7% to 14.7%. Based on these
assumptions, the stand-alone present value of JSB common stock ranged from
$51.46 to $69.60 per
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<PAGE> 42
share. DLJ also calculated the present value of JSB common stock using multiples
ranging from 13.1x to 17.1x and management assumptions provided to DLJ with
respect to merger cost savings and other operating synergies. Based on these
assumptions, the present value of JSB common stock ranged from $76.03 to $98.85.
With respect to the stand-alone JSB discounted cash flow ("DCF") calculated
without using estimated merger cost savings and other operating synergies
provided to DLJ by North Fork, the implied price per JSB share in the
transaction based on North Fork's closing stock price on August 10, 1999 falls
within the range of implied values per JSB share using this methodology.
With respect to the stand-alone JSB DCF calculated using estimated merger
cost savings and other operating synergies provided to DLJ by North Fork, the
implied price per JSB share in the transaction based on North Fork's closing
stock price on August 10, 1999 falls outside the range of implied values per JSB
share using this methodology. However, using this methodology to calculate the
range of implied values per JSB share assumes that 100% of the value of all
estimated merger cost savings and other operating synergies expected to result
from the merger would accrue to the benefit of JSB stockholders.
In calculating a terminal value of North Fork common stock at December 31,
2004, DLJ applied multiples ranging from 9.1x to 13.1x to forecasted cash
earnings for 2005. The dividend stream and terminal values were then discounted
back to March 31, 1999 using discount rates ranging from 11.1% to 15.1%. Based
on these assumptions, the stand-alone present value of North Fork common stock
ranged from $16.06 to $24.61 per share. DLJ also calculated the present value of
North Fork common stock using management assumptions provided to DLJ with
respect to merger cost savings and other operating synergies. Based on these
assumptions, the present value of North Fork common stock ranged from $18.29 to
$27.08 per share. These ranges of present values for North Fork common stock
implied values per share of JSB common stock based on the exchange ratio of
$48.18 to $73.82 per share (excluding management assumptions with respect to
merger cost savings and other operating synergies) and $54.87 to $81.25 per
share (including management assumptions with respect to merger cost savings and
other operating synergies).
With respect to the stand-alone North Fork DCF calculated without using
estimated merger cost savings and other operating synergies provided to DLJ by
North Fork, the implied price per JSB share in the transaction based on North
Fork's closing stock price on August 10, 1999 falls within the range of implied
values per JSB share using this methodology.
With respect to the stand-alone North Fork DCF calculated using estimated
merger cost savings and other operating synergies provided to DLJ by North Fork,
the implied price per JSB share in the transaction based on North Fork's closing
stock price on August 10, 1999 falls within the range of implied values per JSB
share using this methodology.
The following tables present the discounted dividend analysis as described
above:
STAND-ALONE JSB DCF
<TABLE>
<CAPTION>
IMPLIED VALUE PER JSB SHARE
---------------------------------------------------
ASSUMED TERMINAL MULTIPLE ON YEAR 6 CASH EARNINGS
---------------------------------------------------
ASSUMED COST OF EQUITY 13.1X 15.1X 17.1X
- ---------------------- --------------- --------------- ---------------
<S> <C> <C> <C>
10.7% $60.18 $64.89 $69.60
12.7% 55.58 59.83 64.08
14.7% 51.46 55.30 59.13
</TABLE>
35
<PAGE> 43
STAND-ALONE JSB FINANCIAL DCF WITH SYNERGIES
<TABLE>
<CAPTION>
IMPLIED VALUE PER JSB SHARE
---------------------------------------------------
ASSUMED TERMINAL MULTIPLE ON YEAR 6 CASH EARNINGS
---------------------------------------------------
ASSUMED COST OF EQUITY 13.1X 15.1X 17.1X
- ---------------------- --------------- --------------- ---------------
<S> <C> <C> <C>
10.7% $89.44 $94.14 $98.85
12.7% 82.37 86.61 90.86
14.7% 76.03 79.87 83.71
</TABLE>
STAND-ALONE NORTH FORK DCF
<TABLE>
<CAPTION>
IMPLIED VALUE PER JSB SHARE
IMPLIED VALUE PER NORTH FORK SHARE AT THE EXCHANGE RATIO
------------------------------------ ------------------------------
ASSUMED TERMINAL MULTIPLE ON ASSUMED TERMINAL MULTIPLE ON
YEAR 6 CASH EARNINGS YEAR 6 CASH EARNINGS
------------------------------------ ------------------------------
ASSUMED COST OF EQUITY 9.1X 11.1X 13.1X 9.1X 11.1X 13.1X
- ---------------------- ---------- ---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
11.1% $19.07 $21.84 $24.61 $57.20 $65.51 $73.82
13.1% 17.48 19.98 22.48 52.43 59.93 67.43
15.1% 16.06 18.32 20.58 48.18 54.96 61.74
</TABLE>
STAND-ALONE NORTH FORK DCF WITH SYNERGIES
<TABLE>
<CAPTION>
IMPLIED VALUE PER JSB SHARE
IMPLIED VALUE PER NORTH FORK SHARE AT THE EXCHANGE RATIO
------------------------------------ ------------------------------
ASSUMED TERMINAL MULTIPLE ON ASSUMED TERMINAL MULTIPLE ON
YEAR 6 CASH EARNINGS YEAR 6 CASH EARNINGS
------------------------------------ ------------------------------
ASSUMED COST OF EQUITY 9.1X 11.1X 13.1X 9.1X 11.1X 13.1X
- ---------------------- ---------- ---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
11.1% $21.64 $24.36 $27.08 $64.92 $73.08 $81.25
13.1% 19.87 22.33 24.78 59.62 66.98 74.35
15.1% 18.29 20.51 22.73 54.87 61.53 68.19
</TABLE>
The discounted dividend analyses are not necessarily indicative of actual
values or actual future results and do not purport to reflect the prices at
which any securities may trade at the present time or at any time in the future.
Dividend discount analysis is a widely used valuation methodology, but the
results of this methodology are highly dependent upon the numerous assumptions
that must be made, including earnings growth rates, dividend payout rates,
terminal values and discount rates.
Pro Forma Merger Analysis. DLJ analyzed the pro forma impact of the merger
on the combined company's market capitalization, excluding management estimates
of synergies; loan portfolio contribution by business line; deposit base
contribution; market share based on the dollar value of deposits in the counties
of New York in which JSB operates, the counties of New York in which North Fork
operates and the counties of New York in which both entities operate;
profitability, including management estimates of synergies; capitalization; and
credit quality.
DLJ analyzed the pro forma financial impact of the merger considering the
merger as a pooling-of-interests transaction under generally accepted accounting
principles ("GAAP") assuming the reissuance of North Fork's 7.3 million treasury
shares as required under GAAP. In addition, DLJ analyzed the pro forma financial
impact of the merger considering the merger as a pooling-of-interests assuming
no reissuance of the 7.3 million treasury shares, even though this reissuance
would be required under GAAP, in order to assess the transaction without the
dilutive effect of the reissuance of the treasury shares. DLJ also analyzed the
pro forma financial impact of the merger considering the merger as a purchase
transaction under GAAP. Under each of these three alternatives, DLJ analyzed the
pro forma financial impact of the merger on JSB's and North Fork's fully diluted
earnings per share ("EPS") on a GAAP basis, an incremental GAAP basis and a cash
basis and on the book value per share and the tangible book value per share. For
purposes of these analyses, DLJ assumed that the merger would close in the first
quarter of 2000. DLJ performed this analysis
36
<PAGE> 44
also using North Fork management's assumptions provided to DLJ with respect to
earnings estimates, merger cost savings and other merger synergies.
DLJ's analyses of the merger from North Fork's perspective, assuming a
pooling-of-interests transaction, showed that the merger, compared to continued
operation of North Fork on a stand-alone basis, would be accretive to North
Fork's GAAP estimated earnings, incremental GAAP estimated earnings, cash
earnings, book value per share and tangible book value per share starting in
2000, considered with and without the issuance of North Fork's treasury shares.
DLJ's analyses of the merger from JSB's perspective, assuming a
pooling-of-interests transaction, showed that the merger, compared to the
continued operation of JSB on a stand-alone basis, would be accretive to JSB's
GAAP estimated earnings, incremental GAAP estimated earnings and cash earnings
starting in 2000 and dilutive to JSB's book value per share and tangible book
value per share through 2002.
DLJ's analyses of the merger from North Fork's perspective, assuming a
purchase transaction, showed that the merger, compared to continued operation of
North Fork on a stand-alone basis, would be accretive to North Fork's cash
earnings, book value per share and tangible book value per share beginning in
2000 and to North Fork's GAAP estimated earnings and incremental GAAP estimated
earnings beginning in 2002. DLJ's analyses of the merger from JSB's perspective,
assuming a purchase transaction, showed that the merger, compared to the
continued operation of JSB on a stand-alone basis, would be accretive to JSB's
GAAP estimated earnings and cash earnings starting in 2000 and dilutive to JSB's
book value per share and tangible book value per share through 2002.
The following tables present the results of DLJ's pro forma merger analysis
as described above:
SUMMARY PRO FORMA POOLING ACCOUNTING RESULTS @ 3.00 EXCHANGE RATIO
ASSUMES RE-ISSUANCE OF 7.3 MILLION NORTH FORK TREASURY SHARES
<TABLE>
<CAPTION>
NORTH FORK PRO FORMA
ACCRETION /(DILUTION)
-----------------------
2000 2001 2002
----- ----- -----
<S> <C> <C> <C>
GAAP EPS.................................................... 1.2% 1.3% 1.3%
Incremental GAAP EPS........................................ 5.7 6.0 6.3
Cash EPS.................................................... 0.4 0.5 0.7
Book Value per Share........................................ 22.8 19.8 17.4
Tangible Book Value per Share............................... 26.1 22.1 19.0
</TABLE>
SUMMARY PRO FORMA POOLING ACCOUNTING RESULTS @ 3.00 EXCHANGE RATIO
ASSUMES RE-ISSUANCE OF 7.3 MILLION NORTH FORK TREASURY SHARES
<TABLE>
<CAPTION>
JSB PRO FORMA
ACCRETION/(DILUTION)
-----------------------
2000 2001 2002
----- ----- -----
<S> <C> <C> <C>
GAAP EPS.................................................... 56.4% 55.1% 53.8%
Cash EPS.................................................... 60.8 59.1 57.4
Book Value per Share........................................ (38.7) (32.9) (27.0)
Tangible Book Value per Share............................... (41.5) (35.2) (28.9)
</TABLE>
37
<PAGE> 45
SUMMARY PRO FORMA POOLING ACCOUNTING RESULTS @ 3.00 EXCHANGE RATIO
ASSUMES NO RE-ISSUANCE OF NORTH FORK TREASURY SHARES
<TABLE>
<CAPTION>
NORTH FORK PRO FORMA
ACCRETION/(DILUTION)
-----------------------
2000 2001 2002
----- ----- -----
<S> <C> <C> <C>
GAAP EPS.................................................... 3.2% 3.3% 3.5%
Incremental GAAP EPS........................................ 17.9 18.8 19.7
Cash EPS.................................................... 2.4 2.6 2.9
Book Value per Share........................................ 15.4 13.7 12.4
Tangible Book Value per Share............................... 17.9 15.5 13.6
</TABLE>
SUMMARY PRO FORMA POOLING ACCOUNTING RESULTS @ 3.00 EXCHANGE RATIO
ASSUMES NO RE-ISSUANCE OF NORTH FORK TREASURY SHARES
<TABLE>
<CAPTION>
JSB PRO FORMA
ACCRETION/(DILUTION)
-----------------------
2000 2001 2002
----- ----- -----
<S> <C> <C> <C>
GAAP EPS.................................................... 60.0% 58.8% 57.6%
Cash EPS.................................................... 64.6 62.9 61.4
Book Value per Share........................................ (42.2) (36.1) (29.9)
Tangible Book Value per Share............................... (45.1) (38.6) (31.9)
</TABLE>
SUMMARY PRO FORMA PURCHASE ACCOUNTING RESULTS @ 3.00 EXCHANGE RATIO
<TABLE>
<CAPTION>
NORTH FORK PRO FORMA
ACCRETION/(DILUTION)
-----------------------
2000 2001 2002
----- ----- -----
<S> <C> <C> <C>
GAAP EPS.................................................... (0.9)% (0.3)% 0.2%
Incremental GAAP EPS........................................ (5.2) (2.0) 1.0
Cash EPS.................................................... 2.9 3.2 3.4
Book Value per Share........................................ 31.0 26.6 23.0
Tangible Book Value per Share............................... 17.9 15.9 14.4
</TABLE>
SUMMARY PRO FORMA PURCHASE ACCOUNTING RESULTS @ 3.00 EXCHANGE RATIO
<TABLE>
<CAPTION>
JSB PRO FORMA
ACCRETION/(DILUTION)
-----------------------
2000 2001 2002
----- ----- -----
<S> <C> <C> <C>
GAAP EPS.................................................... 53.2% 52.6% 52.0%
Cash EPS.................................................... 64.8 63.2 61.6
Book Value per Share........................................ (34.6) (29.1) (23.4)
Tangible Book Value per Share............................... (45.3) (38.5) (31.7)
</TABLE>
Contribution Analysis. DLJ computed the contribution of North Fork and JSB
to various elements of the income statement, balance sheet and market
capitalization, excluding estimated cost savings and operating synergies,
resulting from a combination of North Fork and JSB. Projected earnings were
based on North Fork management's earnings estimates. The following table
compares the pro forma ownership of North Fork and JSB stockholders in a
combined company resulting from the merger of JSB and North Fork (based upon the
exchange ratio, the number of outstanding shares of North Fork common stock and
the number of fully-
38
<PAGE> 46
diluted shares of JSB common stock outstanding using the treasury stock method),
with each company's respective contribution to each element of this analysis:
<TABLE>
<CAPTION>
PRO FORMA OWNERSHIP OF PRO FORMA OWNERSHIP OF
NORTH FORK STOCKHOLDERS IN JSB STOCKHOLDERS IN NORTH
NORTH FORK/JSB COMBINED FORK/JSB COMBINED
COMPANY COMPANY
-------------------------- -------------------------
<S> <C> <C>
Implied pro forma ownership............. 82.6% 17.4%
</TABLE>
<TABLE>
<CAPTION>
NORTH FORK CONTRIBUTION TO JSB CONTRIBUTION TO
NORTH FORK/JSB COMBINED NORTH FORK/JSB
COMPANY COMBINED COMPANY
-------------------------- -------------------------
<S> <C> <C>
INCOME STATEMENT
12 months normalized net income at June
30, 1999................................ 87.8% 12.2%
Estimated 1999 net income............... 87.9 12.1
Estimated forward 12 months net
income................................ 87.9 12.1
Estimated 2000 net income............... 88.0 12.0
Estimated 2001 net income............... 87.9 12.1
Estimated 2002 net income............... 87.9 12.1
Estimated 2003 net income............... 87.8 12.2
Estimated 2004 net income............... 87.7 12.3
BALANCE SHEET AS OF JUNE 30, 1999
Total loans............................. 83.6 16.4
Total assets............................ 87.7 12.3
Total deposits.......................... 85.4 14.6
Tangible common equity.................. 65.8 34.2
Common equity........................... 68.2 31.8
Total tangible equity................... 65.8 34.2
Total equity............................ 68.2 31.8
MARKET CAPITALIZATION BASED ON:
Closing price on August 10, 1999........ 82.9 17.1
1-month average of closing prices ending
August 10, 1999....................... 84.2 15.8
3-month average of closing prices ending
August 10, 1999....................... 85.1 14.9
6-month average of closing prices ending
August 10, 1999....................... 85.4 14.6
1-year average of closing prices ending
August 10, 1999....................... 85.4 14.6
</TABLE>
In connection with giving the DLJ opinion dated as of the date of this
joint proxy statement-prospectus, DLJ performed procedures to update the
analyses described above as it deemed appropriate and reviewed the assumptions
on which these analyses were based and the factors considered by DLJ in
performing those analyses.
The preparation of a fairness opinion is a complex process involving
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of these methods to the particular
circumstances. Therefore, it is not necessarily susceptible to partial analysis
or summary description. Selecting portions of the analyses summarized above,
without considering these analyses as a whole, could create an incomplete view
of the processes underlying DLJ's opinion. In arriving at its fairness
determinations, DLJ considered the results of all those analyses and did not
attribute any particular weight to any factor or analysis considered by it.
Instead, DLJ made its determinations as to fairness on the basis of its
experience and professional judgment after considering the results of all those
analyses. No company or transaction used in the above analyses as a comparison
is directly comparable to North Fork or JSB or the merger. The analyses
39
<PAGE> 47
were prepared for purposes of DLJ providing its opinion to North Fork's board of
directors as to the fairness of the exchange ratio from a financial point of
view and do not purport to be appraisals or necessarily reflect the prices at
which businesses or securities actually may be sold. Analyses based upon
forecasts of future results are not necessarily indicative of actual future
results, which may be significantly more or less favorable than suggested by
those analyses.
As described above, DLJ's August 16, 1999 opinion to North Fork's board of
directors was among many factors taken into consideration by North Fork's board
of directors in making its determination to approve the merger agreement.
Consequently, the analyses described above should not be viewed as determinative
of the North Fork board of directors' or North Fork management's opinion with
respect to the value of JSB, a combination of North Fork and JSB, or of whether
North Fork's board of directors or North Fork's management would have been
willing to agree to a different exchange ratio. North Fork placed no limits on
the scope of the analysis performed, or opinion expressed, by DLJ.
OPINION OF JSB'S FINANCIAL ADVISOR
JSB retained Northeast Capital to act as its financial advisor in
connection with the proposed merger based upon Northeast Capital's
qualifications, expertise and reputation, as well as upon Northeast Capital's
prior investment banking relationship and general familiarity with JSB. At the
August 15, 1999 meeting of the JSB board of directors, Northeast Capital
delivered a written opinion to the JSB board of directors that, as of such date,
based upon the assumptions, limitations and qualifications set forth in its
opinion, the proposed exchange ratio was fair from a financial point of view to
the holders of JSB common stock. Northeast Capital subsequently delivered to the
JSB board of directors a written opinion, dated as of the date of this joint
proxy statement-prospectus, confirming its opinion of August 15, 1999.
The full text of the Northeast Capital opinion dated as of the date of this
joint proxy statement-prospectus, which sets forth, among other things, the
assumptions made, procedures followed, matters considered and limits on the
review undertaken by Northeast Capital, is attached as Appendix D to this
document. We urge you to carefully read the opinion in its entirety. The summary
set forth in this document of the Northeast Capital opinion is qualified in its
entirety by reference to the full text of the opinion attached as Appendix D to
this document.
The Northeast Capital opinion is directed to the JSB board of directors and
addresses only the fairness of the exchange ratio from a financial point of
view. It does not address the underlying business decision to proceed with the
merger and does not constitute, nor should it be construed as, a recommendation
to any JSB stockholder as to how such stockholder should vote at the JSB special
meeting.
In arriving at the Northeast Capital opinion, Northeast Capital, among
other things:
- reviewed the merger agreement and the related stock option agreement;
- reviewed JSB's Annual Reports on Form 10-K and related audited financial
information for the five years ended December 31, 1998;
- reviewed JSB's Quarterly Reports on Form 10-Q and related unaudited
financial information for the last two years;
- reviewed North Fork's Annual Reports on Form 10-K and related audited
financial information for the five years ended December 31, 1998;
- reviewed North Fork's Quarterly Reports on Form 10-Q and related
unaudited financial information for the last two years;
- reviewed certain other communications from JSB and North Fork to their
respective stockholders;
- reviewed certain internal financial analyses, including financial
forecasts relating to the business, earnings, cash flows, assets and
prospects of JSB and North Fork prepared by JSB and North Fork,
respectively, and furnished to Northeast Capital by JSB and North Fork,
respectively;
40
<PAGE> 48
- conducted discussions with members of senior management of JSB and North
Fork concerning the respective financial condition, business, earnings
and assets, and managements' respective views as to the future financial
performance, growth rates, business and prospects of JSB and North Fork
on both a stand-alone and a combined basis;
- reviewed the historical market prices and trading activity for the JSB
common stock and the North Fork common stock and compared them with those
of certain publicly traded companies which Northeast Capital deemed to be
relevant;
- compared the respective results of operations of JSB and North Fork with
those of certain publicly traded companies which Northeast Capital deemed
to be relevant;
- compared the proposed financial terms of the merger with the financial
terms of certain other mergers and acquisitions which Northeast Capital
deemed to be relevant;
- analyzed, based on information provided to Northeast Capital by senior
management of JSB and North Fork, the pro forma effect of the merger; and
- reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as
Northeast Capital deemed necessary to the rendering of its opinion,
including Northeast Capital's assessment of general economic, market, and
monetary conditions.
In conducting its review and arriving at its opinion, Northeast Capital
assumed and relied upon the accuracy and completeness of all financial and other
information supplied or otherwise made available to it and did not assume any
responsibility for any independent verification of such information. Northeast
Capital assumed that the financial forecasts for JSB and North Fork (including
projected cost savings, revenue enhancements, operating synergies and other
possible operating and financial benefits) prepared by the management of JSB and
North Fork, respectively, were reasonable, and that those projections and
forecasts would be realized in the amounts and time periods contemplated.
Northeast Capital assumes no responsibility for and expresses no view as to such
forecasts and projections or the assumptions on which they are based. Northeast
Capital also assumed the aggregate allowance for loan losses for North Fork and
JSB were adequate to cover such losses. Northeast Capital did not make or obtain
any evaluations or appraisals of the property of North Fork or JSB.
As a matter of policy, neither JSB nor North Fork publicly disclose
internal management forecasts, projections or estimates of the type furnished to
Northeast Capital in connection with their analysis of the merger, and such
forecasts, projections and estimates were not prepared with a view towards
public disclosure. These forecasts, projections and estimates were based upon
numerous variables and assumptions which are inherently uncertain and which may
not be within the control of management, including general economic, regulatory
and competitive positions. Accordingly, actual results could vary materially
from those set forth in such forecasts, projections and estimates. See
"Forward-Looking Statements" on page 91.
The Northeast Capital opinion is predicated on the merger receiving the
tax, regulatory and accounting treatment contemplated by the merger agreement.
The Northeast Capital opinion was necessarily based upon economic, market and
other conditions as in effect on, and the information made available to it as
of, the date of such opinion. No limitations were imposed by JSB on the scope of
Northeast Capital's investigation or on the procedures followed by Northeast
Capital in rendering its opinion.
In connection with rendering its opinion to the JSB board of directors,
Northeast Capital performed a variety of financial analyses in support of its
opinion, which are summarized below. The summary set forth below does not
purport to be a complete description of the analyses performed by Northeast
Capital in this regard, although it describes all material analyses performed by
Northeast Capital. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of these methods to the particular circumstances,
and therefore, such an opinion is not readily susceptible to a partial analysis
or summary description. Accordingly, notwithstanding the separate factors
summarized below, Northeast Capital believes that its analyses must be
considered in their entirety and that selecting portions of its analyses and the
factors considered by it, without consideration of all factors
41
<PAGE> 49
and analyses, could create a misleading or incorrect view of the analyses and
the processes underlying the Northeast Capital opinion. Northeast Capital
arrived at its opinion based on the results of all the analyses it undertook
assessed as a whole, the material ones of which are described below, and it did
not draw conclusions from or with regard to any one method of analysis or give
more weight to one analysis over any other analysis.
With respect to the comparable company analysis and the bank merger and
acquisition transaction analyses summarized below, no public company utilized as
a comparison is identical to JSB or North Fork, no transaction is identical in
nature or rationale to the contemplated transaction between JSB and North Fork
and such analyses necessarily involve complex considerations and judgments
concerning the differences in financial and operating characteristics of the
companies and other factors that could affect the acquisition or public trading
values of the companies concerned. Estimates of values of companies or assets
are not appraisals and do not necessarily reflect the prices at which companies
or their securities actually may be sold. In performing its analyses, Northeast
Capital made numerous assumptions with respect to industry performance, general
business and economic conditions and other matters, all of which are beyond the
control of Northeast Capital, JSB and North Fork. The analyses performed by
Northeast Capital are not necessarily indicative of actual values or actual
future results, which may be significantly more or less favorable than suggested
by such analyses. In addition, the analyses do not purport to be appraisals or
to reflect the prices at which any securities of JSB or North Fork may trade at
the present time or at any time in the future. Such analyses were prepared
solely as part of Northeast Capital's analysis of the fairness of the exchange
ratio to the JSB stockholders from a financial point of view and were provided
to the JSB board of directors in connection with the delivery of Northeast
Capital's opinion.
The following is a summary of the material analyses presented by Northeast
Capital to the JSB board of directors in connection with its August 15, 1999
opinion, which, as indicated above, was confirmed in writing as of the date of
this joint proxy statement-prospectus.
Offer Valuation. Northeast Capital reviewed the terms of the proposed
transaction, including the exchange ratio and the total transaction value. Based
upon the closing price of North Fork common stock on August 13, 1999 and the 3.0
exchange ratio, Northeast calculated the nominal value of the consideration
offered by North Fork to be approximately $61.31 per JSB share, or a total
transaction value of approximately $592.6 million. The total transaction value
is based upon 10,239,573 fully diluted shares of JSB common stock outstanding,
952,676 of which are options having an average exercise price of $36.94. The
nominal value represented a 4.4% premium over the August 13, 1999 closing price
of JSB common stock of $58.75 per share.
Based on the nominal value, Northeast Capital calculated the following
multiples:
<TABLE>
<S> <C>
Nominal value to tangible book value per share.............. 151.65%
Nominal value to implied core deposit premium............... 22.99%
Nominal value to JSB's trailing twelve-month recurring core
earnings.................................................. 20.04x
</TABLE>
Northeast Capital also calculated the pro forma dividend payable of $1.80
with respect to each share of JSB after giving effect of the merger, which is
equal to the current dividend per JSB share.
42
<PAGE> 50
Pro Forma Merger Analysis. Based on projections provided by JSB and North
Fork and modifying North Fork's projections to reflect certain other
assumptions, Northeast Capital analyzed certain pro forma effects resulting from
the merger as follows:
<TABLE>
<CAPTION>
PROJECTED
STATED PRO FORMA ------------------------------
6/30/99 6/30/99 12/31/99 6/30/00 6/30/01
------- --------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
NORTH FORK ALONE (BEFORE ANY STOCK
REPURCHASES)
Book value................................. $ 5.90 N/A $ 5.90 $ 6.81 $ 7.72
Tangible book value........................ 5.30 N/A 5.40 6.31 7.29
Earnings................................... 1.57 N/A 1.58 1.68 1.79
JSB ALONE (WITH SAVINGS)
Book value................................. 40.43 N/A 41.18 42.93 44.90
Tangible book value........................ 40.43 N/A 41.18 42.93 44.90
Earnings................................... 3.06 N/A 3.17 3.51 3.94
NORTH FORK AND JSB (INCLUDING ONE-TIME
MERGER EXPENSES)
Book value................................. N/A 7.23 7.12 7.97 8.87
Tangible book value........................ N/A 6.73 6.66 7.55 8.51
Earnings................................... N/A 1.66 1.37 1.69 1.81
</TABLE>
This analysis indicated that the transaction would be accretive to
projected EPS of North Fork common stock in 2000 and 2001, and that the merger
was accretive to North Fork's tangible book value per share.
Contribution Analysis. Northeast Capital analyzed the relative
contributions to, among other things, pro forma earnings, total assets, total
gross loans, total common equity and total deposits to be made by JSB and North
Fork to the combined entity and compared such relative contributions to JSB's
and North Fork's respective pro forma ownership of the outstanding shares of the
combined entity (before any reissued shares) based upon the 3.0 exchange ratio
(on a fully diluted basis). The results of this analysis were as follows:
<TABLE>
<CAPTION>
JSB NORTH FORK TOTAL
----- ---------- -----
<S> <C> <C> <C>
Pro forma LTM earnings.................................... 13.94% 86.06% 100%
Total assets.............................................. 12.33 87.67 100
Total gross loans......................................... 16.41 83.59 100
Total common equity....................................... 31.79 68.21 100
Total deposits............................................ 14.61 85.39 100
Pro forma ownership....................................... 18.26 81.74 100
</TABLE>
In a stock-for-stock transaction this analysis is intended to compare what
the merging entity is contributing to the combined company to the expected
ownership percentage that its stockholders will have in the combined company.
This analysis indicates that JSB is providing 13.94% of last twelve months
("LTM") earnings and 31.79% of stockholders' equity of the combined company, and
that its stockholders will have an 18.26% common stock ownership position in the
combined company. The earnings percentage suggests that North Fork is
compensating JSB stockholders for a significant portion of the efficiencies
expected to be realized in the merger, and the stockholders' equity percentage
reflects JSB's excess capital position.
Discounted Cash Flow Analysis. Using a discounted cash flow analysis,
Northeast Capital estimated (i) the present value of the future streams of
after-tax cash flows that JSB could produce on a stand-alone basis from 1999
through 2003 and distribute to stockholders and (ii) the present value of the
after-tax cash flows that North Fork could produce on a stand-alone basis from
1999 through 2003. In performing this analysis, Northeast Capital assumed that
JSB and North Fork each performed in accordance with the earnings forecasts
provided to Northeast Capital by their respective senior managements, as
adjusted in North Fork's case to reflect certain due diligence findings. The
earnings projections provided by North Fork to Northeast Capital forecasted
earnings per share of $1.63 in 1999, $1.71 in 2000, $1.82 in 2001, $1.94 in 2002
and $2.06 in 2003. These projections assumed an annual growth rate on earning
assets of 9.24% in 1999, 5.11%
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<PAGE> 51
in 2000 and 5.00% in subsequent years. The projections also assumed a net
interest spread of 3.50%, a provision for loan losses annually of 0.11% of
loans, non interest expense to deposits of 2.38% and 0.91% for non interest
income as a percentage of deposits and a 35% effective tax rate. The additional
assumptions used with respect to each of JSB and North Fork are as follows:
<TABLE>
<CAPTION>
JSB ALONE NORTH FORK ALONE
------------------------- -------------------------
PESSIMISTIC OPTIMISTIC PESSIMISTIC OPTIMISTIC
SCENARIO SCENARIO SCENARIO SCENARIO
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Discount rate................................... 15.00% 15.00% 15.00% 15.00%
Earnings multiple............................... 15.0x 15.0x 15.0x 15.0x
Annual loan growth rate*........................ 5.00% 13.80% 5.15% 5.15%
Annual deposit growth (decline) rate*........... (1.20) (1.20) 2.00 2.00
Tax rate........................................ 42.50 42.50 37.00 36.00
Borrowing rate.................................. 5.20 5.20 6.00 5.37
Present value per share......................... $40.82 $48.74 $21.49 $23.18
====== ====== ====== ======
Closing price on August 13, 1999................ $58.75 $58.75 $20.44 $20.44
====== ====== ====== ======
</TABLE>
- ---------------
* The 13.8% loan growth rate and 1.2% deposit decline rate are consistent with
JSB's performance since 1996, and the 5.0% loan growth rate is about 50% of
JSB's loan growth since 1989. The 5.15% loan growth rate and 2.00% deposit
growth rate are consistent with North Fork's projections.
Northeast Capital calculated the sum of (i) the terminal values per share
of JSB common stock based on an assumed multiple of JSB's projected 2004 net
income of 15.0x plus (ii) the projected 1999 through 2003 five-year after-tax
cash flows per share, in each case discounted to present values at an assumed
discount rate of 15.0%. This discounted cash flow analysis indicated a range of
$40.82 to $48.74 per share of JSB common stock, as compared to JSB's closing
price of $58.75 on August 13, 1999.
Northeast Capital then calculated the sum of (i) the terminal values per
share of North Fork common stock based on an assumed multiple of North Fork's
projected 2004 net income of 15.0x plus (ii) the projected 1999 through 2003
five-year after-tax cash flows per share using different tax rates and interest
rate spreads, in each case discounted to present values at an assumed discount
rate of 15.0%. This discounted cash flow analysis indicated a range of $21.49 to
$23.18 per share of North Fork common stock, as compared to North Fork's closing
price of $20.44 on August 13, 1999, or approximately $64.47 to $69.54 per JSB
share based on the 3.0 exchange ratio.
This analysis seeks to estimate the present value of North Fork and JSB as
independent entities based on reasonable earnings estimates and terminal values
for each entity on a stand-alone basis. This analysis produced a range of values
for JSB of $40.82 to $48.74 per share on a stand-alone basis. When compared to
JSB's stock price on August 13, 1999 of $58.75 and the implied value of North
Fork's indication of interest of $61.3125, the valuation range suggests that
independence would not produce the highest value for JSB shareholders.
The stand-alone value of North Fork under this analysis ranged from $21.49
to $23.18 per share. North Fork's stock price of $20.4375 on August 13, 1999
suggests that, under this valuation methodology, the market is undervaluing
North Fork's stock. Under this valuation methodology, the present value of North
Fork's indication of interest would be $64.47 to $69.54 per JSB share.
Analysis of Selected Acquisition Transactions. Northeast Capital also
performed an analysis of selected acquisition transactions. In performing this
analysis, Northeast Capital reviewed publicly available information regarding
reported transactions involving the acquisition of banks and thrifts nationally
in cases where the target institution had total assets of between $1 billion and
$2.5 billion and which had occurred since January 1, 1998, and reported
transactions involving the acquisition of banks and thrifts in New York State
which had occurred since January 1, 1998. Based upon a review of these selected
national and New York State acquisition transactions, Northeast Capital
determined the average and median (i) price to tangible
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<PAGE> 52
book multiples, (ii) price to trailing 12-month EPS multiples, (iii) price to
deposit ratios and (iv) ratio of the excess of the deal price over tangible book
divided by core deposits for the selected national and New York State
transactions and compared such averages and medians to the implied multiples for
JSB, as calculated by Northeast Capital based on the proposed offer value. The
results of this comparison were as follows:
<TABLE>
<CAPTION>
SELECTED NATIONAL SELECTED NEW YORK
TRANSACTIONS TRANSACTIONS IMPLIED
----------------- ----------------- MULTIPLES
AVERAGE MEDIAN AVERAGE MEDIAN FOR JSB
------- ------ ------- ------ ---------
<S> <C> <C> <C> <C> <C>
Price to tangible book multiple............... 311.1% 312.8% 242.9% 244.1% 151.7%
Price to tangible book multiple adjusted to
exclude JSB's capital in excess of an 8%
leverage capital ratio........................ N/A N/A N/A N/A 268.0%
Price to trailing 12-month EPS multiple....... 24.26x 24.15x 26.06x 24.79x 16.71x
Price to trailing 12-month EPS multiple
adjusted for extraordinary items............ N/A N/A N/A N/A 20.04x
Price to deposit ratio........................ 32.8% 33.9% 27.5% 25.9% 51.3%
Excess of the deal price over tangible book
divided by core deposits.................... 26.4% 26.7% 18.6% 17.8% 23.0%
</TABLE>
The comparable transaction analysis is used to determine if the pricing of
the proposed transaction is reasonably consistent with pricing in recent
comparable transactions. No company or transaction used in the above analysis as
a comparison is identical to JSB, North Fork or the contemplated transaction.
Accordingly, an analysis of the results of the foregoing necessarily involves
complex considerations and judgments concerning differences in financial and
operating characteristics of the companies and other factors that could affect
the value of the companies to which they are being compared.
The national comparable transactions provided multiples which were
reasonably proximate to the multiples resulting from the merger. The low price
to tangible book value ratio in the merger reflects JSB's excess capital. The
New York State comparable transactions generally reflected multiples which were
lower than figures from the national transactions by 20% - 30%. Multiples from
the merger were reasonably consistent with those from the more localized
comparables. Again, the low multiple of price to tangible book value in the
merger reflects JSB's excess capital. The low multiple of price to earnings for
the merger does not reflect the adjustment to JSB's earnings to adjust for
nonrecurring items. The high multiple of deposits reflects JSB's excess capital.
Comparison of Selected Companies' Trading Activity. Northeast Capital
reviewed and compared certain financial information, ratios, and public market
multiples relating to JSB to the publicly available corresponding data compiled
by Northeast Capital for a group of 19 selected banks with similar asset size
and location in New England, New York, New Jersey and Pennsylvania, which
Northeast Capital deemed to be relevant (collectively, the "JSB SELECTED
COMPANIES"). Based upon a review of such information regarding the JSB Selected
Companies, Northeast Capital calculated the implied values per JSB share (as
compared to the $61.31 nominal value of the consideration offered by North Fork,
based on North Fork's closing price on August 13, 1999 and the 3.0 exchange
ratio) using the median trailing 12-month EPS multiple (after-tax), the median
price to tangible book value ratio and the median market capitalization to
deposits ratio for the JSB Selected Companies. Northeast Capital then applied an
assumed premium of 20% and 30%, respectively, to the implied values per JSB
share to give effect to a hypothetical merger transaction. The results of this
analysis are as follows:
<TABLE>
<CAPTION>
IMPLIED VALUE PER JSB SHARE
JSB SELECTED ----------------------------------------
COMPANIES NO PREMIUM 20% PREMIUM 30% PREMIUM
------------ ---------- ----------- -----------
<S> <C> <C> <C> <C>
Median trailing 12-month EPS multiple
(after-tax)........................... 13.63x $50.02 $60.03 $65.03
Median price to tangible book value
ratio................................... 148.77% $60.14 $72.17 $78.19
Median market capitalization to deposits
ratio................................. 19.12% $22.89 $27.46 $29.75
</TABLE>
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<PAGE> 53
Northeast Capital also reviewed and compared certain financial information,
ratios, and public market multiples of North Fork to the publicly available
corresponding data for a selected group of 16 banks and thrifts, each with total
assets in excess of $1 billion, a current core return on average assets greater
than 1.4%, a five year average core return on average assets greater than 1.4%
and daily trading dollar volume between $1 and $15 million, which Northeast
Capital deemed to be relevant (collectively, the "NORTH FORK SELECTED
COMPANIES"). Based upon a review of such information regarding the North Fork
Selected Companies, Northeast Capital calculated the implied values per North
Fork share (as compared to North Fork's closing price of $20.44 on August 13,
1999) using the median trailing 12-month EPS multiple (after-tax), the median
price to tangible book value ratio and the median market capitalization to
deposits ratio for the North Fork Selected Companies. The results of this
analysis are as follows:
<TABLE>
<CAPTION>
NORTH FORK IMPLIED VALUE PER
SELECTED COMPANIES NORTH FORK SHARE
------------------ -----------------
<S> <C> <C>
Median trailing 12-month EPS multiple
(after-tax).............................. 15.55x $24.41
Median price to tangible book value
ratio...................................... 368.31% $19.16
Median market capitalization to deposits
ratio.................................... 39.76% $18.59
</TABLE>
Under the efficient market theory, the current stock price tends to reflect
all the information about a company then known. This analysis compares trading
multiples for each of JSB and North Fork to trading multiples for comparable
companies in their respective peer groups.
JSB's stock price performance exceeded that of its peer group. The JSB peer
group multiples suggested a range of values for JSB of between $27.46 and $60.14
per share. Applying a change of control premium of 20% - 30% to these levels,
JSB should expect to receive merger consideration between $27.46 and $78.19 per
share. The high valuation range resulting from peer group price to tangible book
value multiples reflects JSB's excess capital. The low multiple of market
capitalization to deposits for JSB also reflects JSB's excess capital.
North Fork's stock price performance also exceeded that of its peer group.
The North Fork peer group multiples suggested a range of values for North Fork
between $18.59 and $24.41 per share. North Fork's peer group's earnings
multiples implied a value for North Fork of $24.41, a higher value than North
Fork's then-current stock price of $20.4375.
Comparison with the Other Indication of Interest. In connection with
rendering the Northeast Capital opinion to the JSB board of directors, Northeast
Capital also compared the indications of interest received from North Fork and
the other institution with which JSB was engaged in discussions using several
valuation methodologies in order to analyze whether the long-term value of North
Fork's proposal was superior to the other institution's proposal. In performing
such analysis, Northeast Capital calculated the implied values of each
indication of interest, based on (i) discounted cash flows analysis, using a 15%
discount rate and a terminal multiple of 15 times, (ii) median peer group
trading multiples, using a peer group consisting of 16 U.S. banks and thrifts
with total assets exceeding $1 billion, a current core return on average assets
of at least 1.4%, a five-year average core return on average assets of at least
1.4% and an average daily trading volume of between $1 million and $15 million
(which included both North Fork and the other institution), and (iii) median
analyst target prices for North Fork and the other institution, as estimated by
six independent analysts for each. The results of this analysis based on such
valuation methodologies were as follows:
<TABLE>
<CAPTION>
NORTH FORK OTHER INSTITUTION
---------- -----------------
<S> <C> <C>
Nominal value of indication of interest per JSB share..... $61.31 $63.80
Implied value of indication of interest per JSB share:
- Based on discounted cash flows..................... $67.01 $49.13
- Based on median peer group trading multiples....... $74.01 $52.45
- Based on median analyst target prices.............. $88.14 $76.45
</TABLE>
Under each of these valuation methodologies, the implied value of North Fork's
indication of interest was superior to the implied value of the other
institution's indication of interest.
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<PAGE> 54
In addition, on August 10, 1999, Northeast Capital presented to the JSB
board of directors a pro forma forward-looking financial analysis of each of
North Fork and the other institution combined with JSB using estimated cash EPS,
giving effect to expected transaction cost savings, times a forward trading
multiple, plus expected dividends, where the estimated cash EPS and multiples
were based upon independent analyst reports for North Fork and the other
institution. Northeast Capital then estimated the projected values of the two
indications of interest per JSB share in 1999 and 2000, using projected values
for the common stock of each of North Fork and the other institution for 1999
and 2000, on both a nominal basis and as adjusted to reflect the expected
decline in the stock price of North Fork and the other institution,
respectively, following announcement of a transaction (based upon Northeast
Capital's proprietary regression analysis). The results of this analysis are as
follows:
<TABLE>
<CAPTION>
NORTH FORK OTHER INSTITUTION
---------------- ------------------
1999 2000 1999 2000
------ ------ ------- -------
(PER JSB SHARE)
<S> <C> <C> <C> <C>
Estimated projected value of indication of
interest...................................... $69.12 $77.30 $62.83 $70.67
Estimated projected value of indication of
interest, as adjusted to reflect expected
decline in stock price.......................... $57.05 $64.18 $53.46 $60.62
</TABLE>
In each case, the estimated value offered per JSB share under North Fork's
indication of interest was superior to the estimated value offered under the
other institution's indication of interest.
In connection with the Northeast Capital opinion, Northeast Capital
performed procedures to update, as necessary, certain of the analyses described
above and reviewed the assumptions on which such analyses described above were
based and the factors considered in connection therewith. Northeast Capital did
not perform any analyses in addition to those described in updating its August
15, 1999 opinion.
The Northeast Capital opinion does not address circumstances that may exist
after the date of this joint proxy statement-prospectus and before the
completion of the merger. If JSB has the right to terminate the merger agreement
pursuant to the termination provisions thereof, as described below under
"-- Termination of the Merger Agreement," the JSB board of directors may request
an additional fairness opinion prior to deciding whether to terminate the merger
agreement. If the JSB board of directors requests another fairness opinion as
part of the process of evaluating JSB's termination right and receives or does
not receive another fairness opinion, the JSB board will consider the fairness
opinion, or the lack thereof, and all other relevant facts and circumstances
then existing in determining whether terminating the merger agreement is in the
best interests of JSB and its stockholders.
Northeast Capital has been retained by the JSB board to act as financial
advisor to JSB with respect to the merger and will receive a fee for its
services. Northeast Capital is an investment banking firm which, among other
things, regularly engages in the valuation of businesses and securities,
including banking institutions, in connection with mergers and acquisitions.
Northeast Capital has in the past two years provided financial advisory,
investment banking and other services to JSB and has received an aggregate of
$190,000 in fees for the rendering of such services (excluding any fees paid or
to be paid in connection with the proposed merger, which are described below).
In addition, in the ordinary course of its securities business, Northeast
Capital or any of its affiliates may trade debt and/or equity securities of JSB
and North Fork for its own account and Northeast Capital, therefore, may from
time to time hold a long or short position in such securities.
JSB and Northeast Capital executed an engagement agreement, dated May 27,
1999, providing for the retention by JSB of Northeast Capital as its financial
advisor. Pursuant to the engagement agreement, Northeast Capital received a
retainer fee of $100,000 upon execution of the agreement, a fee of $250,000 upon
the delivery of its initial fairness opinion and a fee of $100,000 upon the
delivery of its updated fairness opinion. Northeast Capital will receive a
success fee of $1.1 million upon completion of the merger, subject to a possible
increase if the consideration to be received by JSB's stockholders exceeds $70
per share. In such case, the success fee will be $1.1 million plus 0.6% of the
total consideration in excess of $70 per share. The success fee will be offset
by the retainer fee and fairness opinion fees already paid. JSB also agreed to
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<PAGE> 55
reimburse Northeast Capital for all reasonable out-of-pocket expenses up to
$50,000 and to indemnify Northeast Capital against any losses, claims, damages,
liabilities or expenses related to its engagement.
CONVERSION OF STOCK
At the effective time of the merger, each share of JSB common stock
outstanding, other than the shares described in the following sentence, will be
converted into the right to receive 3.0 shares of North Fork common stock.
Shares of JSB common stock held by North Fork or JSB or any subsidiary of either
company will not be converted into the right to receive North Fork common stock,
except, in both cases, for shares held in a fiduciary capacity for the benefit
of third parties and shares held in respect of a debt previously contracted.
BECAUSE THE EXCHANGE RATIO IS FIXED AND BECAUSE THE MARKET PRICE OF NORTH
FORK COMMON STOCK MAY FLUCTUATE PRIOR TO THE EFFECTIVE TIME, THE VALUE OF THE
SHARES OF NORTH FORK COMMON STOCK THAT HOLDERS OF JSB COMMON STOCK WILL RECEIVE
IN THE MERGER MAY INCREASE OR DECREASE PRIOR TO AND FOLLOWING THE MERGER.
JSB can decide not to complete the merger if both of the following are
true:
(1) the average of the closing prices of North Fork's common stock over the
15-trading-day period ending on the day prior to the "valuation date"
(which is the date of receipt of the last of the required regulatory
and stockholder approvals, including any required regulatory waiting
periods) is less than $16.35, and
(2) the ratio obtained by comparing North Fork's average closing price
described in clause (1) above to North Fork's closing price of $20.44
on August 13, 1999, is more than ten percentage points less than the
ratio obtained by comparing the sum of the weighted average closing
prices of the stocks of an index group of selected banks and thrifts
for the same 15-trading-day period to the sum of the weighted closing
prices for these stocks on August 13, 1999.
Any decision by JSB not to complete the merger under this provision will not be
effective, however, if North Fork elects to increase the exchange ratio in
accordance with a formula in the merger agreement to provide JSB stockholders
with more shares of North Fork common stock in exchange for each share of JSB
common stock. See "-- Termination of the Merger Agreement" on page 57 for a more
complete description of this provision of the merger agreement.
No fractional shares of North Fork common stock will be issued to any
holder of JSB common stock upon completion of the merger. For each fractional
share that would otherwise be issued, North Fork will pay cash in an amount
equal to the fraction multiplied by the average of the closing sales prices of
North Fork common stock as reported on the NYSE for the 15 consecutive trading
days immediately preceding the valuation date. No interest will be paid or
accrued on cash payable in lieu of fractional shares of North Fork common stock.
Each share of North Fork common stock issued and outstanding immediately
prior to the effective time will remain issued and outstanding as one share of
common stock of the combined company immediately after completion of the merger.
For a description of the North Fork common stock and a description of the
differences between the rights of the holders of JSB common stock and the
holders of North Fork common stock, see "Description of North Fork Capital
Stock" on page 81 and "Comparison of Stockholder Rights" on page 82.
TREATMENT OF OPTIONS
Each outstanding option to acquire JSB common stock granted under JSB's
stock option plans will be converted automatically at the effective time of the
merger into an option to purchase North Fork common
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<PAGE> 56
stock, and will continue to be governed by the terms of the JSB stock plan under
which it was granted, except that:
- the number of shares of North Fork common stock subject to the new North
Fork stock option will be equal to the product of the number of shares of
JSB common stock subject to the JSB stock option and the exchange ratio,
rounded to the nearest whole share, and
- the exercise price per share of North Fork common stock subject to the
new North Fork stock option will be equal to the exercise price per share
of JSB common stock under the JSB stock option divided by the exchange
ratio, rounded to the nearest whole cent.
In any event, stock options that are incentive stock options under the Internal
Revenue Code of 1986, as amended, will be adjusted in the manner prescribed by
the Internal Revenue Code.
EXCHANGE OF STOCK CERTIFICATES
JSB Stockholders. At or prior to the completion of the merger, North Fork
will deposit with a bank or trust company certificates representing the shares
of North Fork common stock and the cash in lieu of any fractional shares to be
issued in the merger in exchange for outstanding shares of JSB common stock. The
bank or trust company will act as the exchange agent for the benefit of the
holders of certificates of JSB common stock.
As soon as practicable after the completion of the merger, but in no event
later than five business days thereafter, a transmittal letter will be mailed by
the exchange agent to each JSB stockholder. This transmittal letter will contain
instructions for the surrender of certificates representing JSB common stock in
exchange for shares of North Fork common stock.
YOU SHOULD NOT RETURN YOUR JSB COMMON STOCK CERTIFICATES WITH THE ENCLOSED
PROXY AND YOU SHOULD NOT FORWARD THEM TO THE EXCHANGE AGENT UNTIL YOU RECEIVE A
LETTER OF TRANSMITTAL AFTER COMPLETION OF THE MERGER.
Until you surrender your JSB stock certificates for exchange after
completion of the merger, you will accrue, but will not be paid, any dividends
or other distributions declared after the effective time with respect to North
Fork common stock into which your shares have been converted. When you surrender
your certificates, the combined company will pay any unpaid dividends or other
distributions, without interest. After the effective time, there will be no
transfers on the stock transfer books of JSB of any shares of JSB common stock.
If certificates representing shares of JSB common stock are presented for
transfer after the completion of the merger, they will be canceled and exchanged
for a certificate representing the applicable number of shares of North Fork
common stock.
If a certificate for JSB common stock has been lost, stolen or destroyed,
the exchange agent will issue the consideration properly payable under the
merger agreement upon receipt of appropriate evidence as to that loss, theft or
destruction, appropriate evidence as to the ownership of that certificate by the
claimant, and appropriate and customary indemnification.
North Fork Stockholders. Holders of North Fork common stock will not be
required to exchange certificates representing their shares of North Fork common
stock or otherwise take any action as a result of completion of the merger.
THERE IS NO NEED FOR NORTH FORK STOCKHOLDERS TO SUBMIT THEIR NORTH FORK COMMON
STOCK CERTIFICATES TO NORTH FORK, JSB, THE EXCHANGE AGENT OR ANY OTHER PERSON IN
CONNECTION WITH THE MERGER.
EFFECTIVE TIME
The effective time of the merger will be the time and date indicated on the
certificate of merger that we will file with the Secretary of State of the State
of Delaware on the day we complete the merger. We will complete the merger on a
date no later than five business days after all of the conditions to the merger
set forth in the merger agreement have first been satisfied or waived, unless we
agree otherwise.
North Fork intends to account for the merger using the pooling-of-interests
method of accounting, but will not be able to do so unless, prior to completion
of the merger, it reissues a sufficient number of shares of
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<PAGE> 57
its common stock currently held in its treasury. North Fork intends to do so by
reissuing treasury shares as consideration in the Reliance merger. Accordingly,
North Fork intends to complete the Reliance merger before completing the merger
with JSB so that the JSB merger will qualify for pooling-of-interests accounting
treatment.
North Fork expects to complete the Reliance merger in the first quarter of
2000. Completion of the Reliance merger is subject to a number of conditions,
including the receipt of all required regulatory approvals and the approval of
the stockholders of Reliance. North Fork has received all required regulatory
approvals required to complete the Reliance merger. However, North Fork cannot
assure you that all of the conditions to the Reliance merger will be satisfied
in the anticipated time frame or otherwise. If North Fork is unable to complete
its acquisition of Reliance in the anticipated time frame or otherwise,
completion of JSB's merger with North Fork will be delayed, and North Fork may
have to reissue the required number of treasury shares in a public or private
offering or in some other alternative transaction in order for the merger to
qualify for pooling-of-interests accounting treatment.
We anticipate that the merger will be completed during the first quarter of
2000. However, completion of the merger could be delayed if there is a delay in
completing the Reliance merger, in obtaining the required regulatory approvals
for the merger or in satisfying any other conditions to the merger. There can be
no assurances as to whether or when we will complete the merger. If the merger
is not completed on or before February 29, 2000, either North Fork or JSB may
terminate the merger agreement, unless the failure to complete the merger by
that date is due to the failure of the terminating party to perform its
covenants, or unless the failure to complete the merger by that date results
solely from the failure to obtain all required regulatory approvals, in which
case such date will be extended to April 30, 2000. See "-- Conditions to
Completion of the Merger" on page 50 and "-- Regulatory Approvals Required for
the Merger" on page 54.
CHANGING THE METHOD OF EFFECTING THE COMBINATION
North Fork may, at any time, change the method of effecting the combination
of JSB and North Fork. However, no change may (a) adversely affect the tax
effects or the economic benefit of the merger to the JSB stockholders or (b)
materially delay completion of the merger.
CONDITIONS TO THE COMPLETION OF THE MERGER
Completion of the merger is subject to various conditions. While it is
anticipated that all such conditions will be satisfied, there can be no
assurance as to whether or when all of such conditions will be satisfied or,
where permissible, waived.
The respective obligations of North Fork and JSB to complete the merger are
subject to the following conditions:
(1) approval of the merger agreement by JSB's stockholders and North Fork's
stockholders;
(2) receipt of all required regulatory approvals and expiration of all
related statutory waiting periods;
(3) absence of any order, decree or injunction of a court or agency of
competent jurisdiction which prohibits the completion of the merger or
the bank merger;
(4) absence of any statute, rule or regulation which prohibits, restricts
or makes illegal the completion of the merger or the bank merger;
(5) effectiveness of the registration statement for the North Fork shares
to be issued in the merger;
(6) approval by the NYSE of listing of the shares of North Fork common
stock to be issued in the merger;
(7) accuracy of the other party's representations and warranties contained
in the merger agreement as of the dates specified therein, except, in
the case of most of such representations and warranties, where the
failure to be so accurate would not be reasonably likely to have a
material adverse effect on the party making the representation or
warranty (see "-- Representations and Warranties" below), and
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<PAGE> 58
the performance by the other party of its obligations contained in the
merger agreement in all material respects;
(8) the receipt by such party of a legal opinion from its counsel
substantially to the effect that the merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code; and
(9) the receipt by the other party of all third-party consents and
approvals required for the merger or the bank merger, except where the
failure to obtain any such consents and approvals would not have a
material adverse effect on North Fork or upon the completion of the
merger and the bank merger.
REPRESENTATIONS AND WARRANTIES
Each of us has made representations and warranties to the other in the
merger agreement as to, among other things,
- corporate existence, good standing and qualification to conduct business,
- due authorization, execution, delivery and enforceability of the merger
agreement,
- capital structure,
- governmental and third party consents necessary to complete the merger,
- absence of any violation of agreements or law or regulation as a result
of the merger,
- compliance with laws,
- SEC and regulatory filings,
- financial statements,
- absence of material adverse changes,
- labor matters,
- employee benefit matters,
- environmental matters,
- asset quality,
- loan portfolio and allowances for possible loan losses,
- investment securities and borrowings,
- books and records,
- absence of legal proceedings and regulatory actions,
- fees payable to financial advisors in connection with the merger,
- tax and accounting matters,
- material agreements,
- insurance, and
- "Year 2000" matters.
North Fork has also made representations and warranties to JSB with respect
to the validity of the shares of North Fork common stock to be issued in
connection with the merger. Most of the representations and warranties of the
parties will be deemed to be true and correct unless the existence of any
condition, event, change or occurrence inconsistent with any such representation
or warranty has had or would be reasonably likely to have a material adverse
effect on the business, financial condition or results of operations of the
party making such representation or warranty and its subsidiaries taken as a
whole. Any effects resulting from any
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(i) changes in laws, rules or regulations or generally accepted accounting
principles or interpretations thereof that apply to both North Fork and North
Fork Bank or JSB and Jamaica Savings Bank, as the case may be, or (ii) changes
in interest rates will not be considered in determining if a material adverse
effect has occurred.
CONDUCT OF BUSINESS PENDING THE MERGER
Each of us has agreed, during the period from the date of the merger
agreement to the completion of the merger (except as expressly provided in the
merger agreement), to use commercially reasonable efforts to:
- conduct our business in the ordinary course consistent with past
practice;
- maintain our business organization, properties, leases, employees and
advantageous business relationships and retain the services of our
officers and key employees;
- take no action that would materially adversely affect or delay our
ability to perform our respective covenants and agreements on a timely
basis under the merger agreement;
- take no action that would adversely effect or delay our ability to obtain
any necessary approvals, consents or waivers of any governmental
authority required for the transactions contemplated by the merger
agreement or, in the case of JSB, which would reasonably be expected to
result in any such approvals, consents or waivers containing any material
condition or restriction; and
- take no action that results in or is reasonably likely to have a material
adverse effect on our company or our subsidiaries.
In addition, during the period from the date of the merger agreement to the
completion of the merger (except as specifically provided in the merger
agreement or as required by law or regulation or by regulatory authorities),
each of us has agreed that we will not, and will not permit any of our
subsidiaries to, without the prior consent of the other party, which consent
will not be unreasonably withheld, take certain actions, including the
following:
(1) effect any change in our certificate of incorporation or bylaws, or any
similar governing documents of our subsidiaries, except that North Fork
may increase its authorized capital stock and change the par value of
its common stock;
(2) issue any shares of our capital stock, except upon the exercise of
outstanding stock options, or grant any options or rights to purchase
any such shares, except (i) in the case of JSB, pursuant to the stock
option agreement, and (ii) in the case of North Fork, (a) in
acquisition transactions permitted by the terms of the merger
agreement, (b) the grant of options under North Fork's stock plans
consistent with past practice or (c) as is necessary to permit the
merger to be accounted for as a pooling-of-interests;
(3) declare or pay any dividend or make any distribution on any shares of
our capital stock, except (i) in the case of JSB, for its regular
quarterly dividend, which may not be increased by more than $.05 per
share from the current level per share and (ii) in the case of North
Fork, for its regular quarterly cash dividend, which may be increased
in its sole discretion;
(4) except as required by GAAP, change our methods of accounting; or
(5) take any action that would prevent or impede the merger from qualifying
as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code.
JSB has agreed to additional covenants that place restrictions on the
conduct of the business of JSB and its subsidiaries, including specific
covenants providing that JSB and its subsidiaries will not, without the prior
consent of North Fork, which consent will not be unreasonably withheld:
(1) other than in the ordinary course of business, sell, transfer,
mortgage, encumber or otherwise dispose of any material properties,
leases or assets;
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<PAGE> 60
(2) increase the compensation or fringe benefits of any of its employees
or directors, except for certain salary increases in the ordinary
course of business consistent with past practice and, upon
consultation with North Fork, the payment of reasonable "stay in
place" pay where necessary or appropriate to retain key employees in
an amount not to exceed $500,000 in the aggregate; pay any pension or
retirement allowance not required under existing agreements; commit to
the funding of accounts or trusts related to any employee benefit plan
or program maintained by JSB for its employees; or voluntarily
accelerate the vesting of any stock options or other compensation or
benefit;
(3) settle any claim, action or proceeding for money damages in excess of
$500,000 or which imposes material restrictions on the operations of
JSB;
(4) enter into any new line of business;
(5) other than in the ordinary course of business consistent with prudent
banking practices, incur any indebtedness for borrowed money or
assume, guarantee or endorse the obligations of any other individual
or entity;
(6) acquire any business or entity or any organization or division
thereof, or any assets that are material, individually or in the
aggregate, to JSB, except in satisfaction of debts previously
contracted;
(7) make any new capital expenditures other than those made in the
ordinary course of business or that are necessary to maintain existing
assets in good repair, and which do not exceed $500,000 in the
aggregate;
(8) make any equity investment or commitment to invest in real estate or
in any real estate development project, other than real estate
acquired in satisfaction of defaulted mortgage loans and in connection
with troubled debt restructurings in the ordinary course of business
consistent with prudent banking practices;
(9) make any new real estate loans secured by undeveloped land or real
estate (other than real estate secured by one- to four-family homes)
located outside the States of New York, New Jersey or Connecticut or
make any construction loan (other than construction loans secured by
one- to four-family homes) outside the states of New York, New Jersey
or Connecticut;
(10) restructure or materially change its investment securities portfolio
or the manner in which the portfolio is classified or reported;
(11) establish or commit to establish any new branch or other office
facilities, other than those for which all regulatory approvals have
been obtained; or
(12) take or fail to take any action that would cause the merger to fail to
qualify for pooling-of-interests accounting treatment.
North Fork has also agreed that, during the period from the date of the
merger agreement to the completion of the merger, it will not, without the prior
consent of JSB, (a) make any acquisition or take any action that individually or
in the aggregate could materially adversely affect the ability of North Fork to
complete the merger, or enter into any agreement providing for, or otherwise
participate in, any merger, consolidation or other transaction in which North
Fork or any surviving corporation may be required not to complete the merger or
any of the other transactions contemplated by the merger agreement in accordance
with its terms or (b) enter into an agreement with a third party to effect a
merger, consolidation or similar transaction involving North Fork unless such
action is, in North Fork's reasonable judgment, desirable in the conduct of its
business and would not, in North Fork's reasonable judgment, likely delay the
completion of the merger to a date subsequent to February 29, 2000 (or April 30,
2000, if all conditions to completion of the merger, other than the receipt of
all required regulatory approvals, have been satisfied by February 29, 2000) or
adversely affect the consideration to be received by JSB stockholders in the
merger. North Fork did not seek or obtain JSB's approval before entering into
the merger agreement with Reliance because, in North Fork's judgment, the
Reliance merger was desirable in the conduct of its business and would not delay
the
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effective time of the JSB merger beyond the dates specified above or adversely
affect the merger consideration to be received by JSB stockholders under the
merger agreement. JSB retains its rights under the merger agreement if it is
determined that North Fork was not reasonable in concluding that the Reliance
merger would not delay the effective time of the JSB merger beyond the dates
specified above or adversely affect the merger consideration to be received by
JSB stockholders under the merger agreement.
NO SOLICITATION BY JSB
JSB has agreed not to (i) solicit, directly or indirectly, any inquiries or
the making of any "acquisition proposal" or (ii) engage in any negotiations
concerning, or provide any confidential information or data to or have
discussions with any person relating to, an acquisition proposal, or otherwise
facilitate any attempt to make or implement an acquisition proposal.
"ACQUISITION PROPOSAL" means any proposal or offer to JSB or its stockholders
with respect to a merger, consolidation or similar transaction involving, or any
purchase of all or any significant portion of the assets or equity securities
of, JSB or any of its material subsidiaries. This restriction applies to JSB's
officers and directors as well.
Nothing in the merger agreement will prevent JSB or the JSB board of
directors from (a) complying with Rule 14e-2 under the Securities Exchange Act
of 1934 with regard to an acquisition proposal or (b)(1) providing information
in response to a request by a person who has made an unsolicited bona fide
written acquisition proposal if the JSB board of directors receives from such
person an executed confidentiality agreement on terms substantially equivalent
to those contained in the confidentiality agreement between North Fork and JSB,
or (2) engaging in any negotiations or discussions with any person who has made
an unsolicited bona fide written acquisition proposal, if and only to the extent
that, in each such case referred to in clause (1) or (2) above, (x) the JSB
board of directors, after consultation with and based upon the written opinion
of outside legal counsel, in good faith deems such action to be legally
necessary for the proper discharge of its fiduciary duties under applicable law
and (y) the JSB board of directors determines in good faith after consultation
with its financial advisor that such acquisition proposal, if accepted, is
reasonably likely to be completed, taking into account all legal, financial and
regulatory aspects of the proposal and the person making the proposal and would,
if completed, result in a more favorable transaction than the transaction
contemplated by the merger agreement, taking into account the prospects and
interests of JSB and its stockholders. JSB is required to notify North Fork
immediately if any such negotiations or discussions are sought to be initiated
or continued in respect of any such acquisition proposal, together with the
identity of the persons making such inquiry or proposal, requesting such
information or seeking such negotiations or discussions and the terms and
conditions thereof, and will keep North Fork informed of any developments with
respect thereto immediately upon occurrence thereof.
REGULATORY APPROVALS REQUIRED FOR THE MERGER
Completion of the merger and the bank merger is subject to a number of
regulatory approvals and consents.
The merger is subject to the prior approval of the Board of Governors of
the Federal Reserve System under the Bank Holding Company Act of 1956, as
amended (the "BHC ACT"), and regulations of the Federal Reserve Board, which
approval was granted on January 10, 2000. In reviewing applications under the
BHC Act, the Federal Reserve Board:
- considers whether the merger can reasonably be expected to produce
benefits to the public that outweigh possible adverse effects, and
- evaluates the financial and managerial resources of North Fork, including
its subsidiaries, and any company to be acquired, and the effect of the
merger on those resources.
The bank merger is subject to the prior approval of the Federal Deposit
Insurance Corporation under the Bank Merger Act, which approval was granted on
December 30, 1999. In reviewing applications under the Bank Merger Act, the FDIC
must consider, among other factors, the financial and managerial resources and
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future prospects of the existing and proposed institutions, and the convenience
and needs of the communities to be served. In addition, the FDIC may not approve
a transaction:
- that will result in a monopoly or be in furtherance of any combination or
conspiracy to monopolize or to attempt to monopolize the business of
banking in any part of the United States,
- if its effect in any section of the country may be substantially to
lessen competition or to tend to create a monopoly, or
- if it would in any other manner be a restraint of trade,
unless the FDIC finds that the anticompetitive effects of the transaction are
clearly outweighed by the public interests and the probable effect of the
transaction on meeting the convenience and needs of the communities to be
served. Any transaction approved by the FDIC may not be completed until 30 days
after such approval, during which time the Department of Justice may challenge
such transaction on antitrust grounds and seek the divestiture of certain assets
and liabilities. With the approval of the FDIC and the Department of Justice,
the waiting period may be reduced to no less than 15 days.
The bank merger also is subject to the notification requirements of the
Office of Thrift Supervision under the Home Owners' Loan Act of 1933, as
amended, and Office of Thrift Supervision regulations governing merger or
conversions by a savings association, because the resulting institution in the
bank merger will not be a savings bank.
In addition, the bank merger is also subject to the prior approval of the
New York State Banking Department under certain provisions of the New York
Banking Law (the "NYBL"), which approval was granted on December 30, 1999. In
determining whether to approve merger applications under the NYBL, the Banking
Department considers, among other factors:
- whether the merger would be consistent with adequate or sound banking and
would not result in concentration of assets beyond limits consistent with
effective competition, and
- whether the merger would result in such a lessening of competition as to
be injurious to the interest of the public or tend toward monopoly.
The Banking Department also considers the public interest and the needs and
convenience thereof. Further, it is the policy of the State of New York to:
- ensure the safe and sound conduct of banking organizations,
- conserve assets of banking organizations,
- prevent hoarding of money,
- eliminate unsound and destructive competition among banking
organizations, and
- maintain public confidence in the business of banking and protect the
public interest and the interests of depositors, creditors, and
stockholders.
Under the Community Reinvestment Act of 1977, as amended, and the
comparable provisions of the NYBL, the FDIC and the Banking Department must also
take into account the record of performance of each institution in meeting the
credit needs of the entire community, including low- and moderate-income
neighborhoods served by each institution. As part of the review process, the
banking agencies frequently receive comments and protests from community groups
and others.
North Fork filed the required regulatory applications and notices on
October 12, 1999. As of the date of this document, we have received all required
approvals. North Fork is not aware of any regulatory approvals that would be
required for completion of the merger or the bank merger, other than those
described above. If any other approvals are required, it is likely that we would
seek to obtain them. There can be no assurance, however, that any other
approvals, if required, will be obtained.
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The merger cannot proceed in the absence of the receipt of all requisite
regulatory approvals and the expiration of all related waiting periods. See
"-- Conditions to the Completion of the Merger" on page 50 and "-- Termination
of the Merger Agreement" on page 57. There can be no assurance that the
Department of Justice or the New York State Attorney General will not challenge
the merger or, if such a challenge is made, as to the result thereof.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of the federal income tax consequences of the
merger to North Fork, JSB and holders of JSB common stock. This discussion is
based upon the Internal Revenue Code, the regulations of the United States
Treasury Department, Internal Revenue Service rulings, and judicial and
administrative rulings and decisions in effect on the date of this joint proxy
statement-prospectus. These authorities may change at any time, possibly
retroactively, and any change could affect the continuing validity of this
discussion. This discussion summarizes the opinions of Skadden, Arps, Slate,
Meagher & Flom LLP, counsel to North Fork, and Thacher Proffitt & Wood, counsel
to JSB. This discussion does not address any tax consequences arising under the
laws of any state, locality or foreign jurisdiction, and, accordingly, is not a
comprehensive description of all of the tax consequences that may be relevant to
any given JSB stockholder.
This discussion assumes that JSB stockholders hold their shares of JSB
common stock as capital assets and does not address the tax consequences that
may be relevant to a particular stockholder receiving special treatment under
some United States federal income tax laws. Stockholders receiving this special
treatment include, but are not limited to:
- foreign persons;
- financial institutions;
- tax-exempt organizations;
- insurance companies;
- traders in securities that elect mark-to-market;
- dealers in securities or foreign currencies;
- persons who received their JSB common stock through the exercise of
employee stock options or otherwise as compensation; and
- persons who hold shares of JSB common stock as part of a hedge, straddle
or conversion transaction.
In connection with the filing of the registration statement that registers
the shares of North Fork common stock to be issued in the merger, North Fork
received an opinion of Skadden, Arps, Slate, Meagher & Flom LLP and JSB received
an opinion of Thacher Proffitt & Wood, in each case dated the date of this
document and rendered on the basis of facts, representations, covenants and
assumptions set forth or referred to in such opinions, which we have assumed
will be consistent with those existing at the time of the completion of the
merger. The respective opinions state that the merger will be treated for United
States federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code and, accordingly:
(1) no gain or loss will be recognized by North Fork or JSB as a result of
the merger;
(2) no gain or loss will be recognized by a stockholder of JSB who
exchanges all of such stockholder's shares of JSB common stock solely
for shares of common stock of the combined company, except for any gain
recognized with respect to cash received instead of a fractional share
of the combined company's common stock;
(3) the aggregate tax basis of the shares of the combined company's common
stock received by a JSB stockholder who exchanges all of the
stockholder's shares of JSB common stock for shares of common stock of
the combined company in the merger will be the same as the aggregate
tax basis of
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the shares of JSB common stock surrendered in exchange therefor
(reduced by any amount allocable to a fractional share of the combined
company's common stock for which cash is received);
(4) the holding period of the shares of the combined company's common stock
received by a JSB stockholder will include the holding period of shares
of JSB common stock surrendered in exchange therefor; and
(5) a JSB stockholder who receives cash instead of a fractional share of
the combined company's common stock should recognize capital gain or
loss equal to the difference between the cash amount received and the
portion of the stockholder's tax basis in shares of JSB common stock
allocable to the fractional share. This gain or loss will be long-term
capital gain or loss for United States federal income tax purposes if
the stockholder's holding period in the shares of JSB common stock
exchanged for the cash in lieu of a fractional share of the combined
company's common stock is more than one year at the effective time of
the merger.
Neither North Fork nor JSB will be obligated to complete the merger unless,
in the case of North Fork, it has received a further opinion of Skadden, Arps,
Slate, Meagher & Flom LLP and, in the case of JSB, it has received a further
opinion of Thacher Proffitt & Wood, dated as of the date of the completion of
the merger, each stating that the merger will be treated for United States
federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code. Such opinions will be rendered on the basis
of facts, representations, covenants and assumptions set forth or referred to in
such opinions.
In the event that (a) either North Fork or JSB fails to receive, on the
closing date of the merger, the tax opinion described above from its counsel,
(b) either North Fork or JSB decides to waive the tax opinion condition to its
obligation to complete the merger, and (c) North Fork and JSB determine that the
material federal income tax consequences of the merger are different from those
described above, North Fork and JSB will resolicit approval of their
stockholders prior to completing the merger.
Opinions of counsel are not binding on the Internal Revenue Service or the
courts. Neither North Fork nor JSB has requested, nor will they request, an
advance ruling from the Internal Revenue Service as to the tax consequences of
the merger. Accordingly, there can be no assurance that the Internal Revenue
Service will not challenge the conclusions reflected in such opinions or that a
court will not sustain such a challenge.
TAX MATTERS ARE VERY COMPLICATED, AND THE TAX CONSEQUENCES OF THE MERGER TO
EACH JSB STOCKHOLDER WILL DEPEND ON THE FACTS OF THAT STOCKHOLDER'S SITUATION.
JSB STOCKHOLDERS ARE ENCOURAGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE
SPECIFIC TAX CONSEQUENCES OF THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT
OF ANY FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
TERMINATION OF THE MERGER AGREEMENT
General. The merger agreement may be terminated at any time prior to
completion of the merger, whether before or after its approval by the
stockholders of North Fork or JSB, in any of the following ways:
- by our mutual written consent;
- by either one of us, if:
(a) either North Fork's or JSB's stockholders do not approve the merger
agreement;
(b) there has been a material breach by the other party of any
representation, warranty, covenant or agreement contained in the
merger agreement, which breach either is not timely cured or by its
nature cannot be cured prior to the closing date, and which breach
would result in the failure of the condition to the terminating
party's obligation to complete the merger;
(c) any approval, consent or waiver of a governmental entity required to
permit completion of the merger has been denied;
(d) any governmental authority issues a final, unappealable order
enjoining or otherwise prohibiting the completion of the merger;
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(e) the merger is not completed by February 29, 2000, unless the failure
to complete by such time is due to the breach of the merger
agreement by the party seeking to terminate, and provided that if
all regulatory approvals required to complete the merger have not
been obtained but all other conditions to the completion of the
merger have been fulfilled, such date will be extended to April 30,
2000; or
(f) the other party's board of directors withdraws, qualifies or revises
its recommendation that its stockholders approve the merger in any
respect materially adverse to the party seeking termination; or
- by JSB, if the price of North Fork common stock declines below certain
levels established by formulas set forth in the merger agreement, as
described in the following paragraphs.
Price-Based Termination. JSB may terminate the merger agreement, at any
time during the five-business-day period following the latest of (i) the
expiration of the last waiting period for any of the required regulatory
approvals, (ii) the receipt of the last of the required regulatory approvals,
and (iii) the receipt of the last of the required stockholder approvals (the
latest such day is called the "VALUATION DATE"), if both of the following
conditions are satisfied:
- the average of the closing sales prices of North Fork common stock, as
reported on the NYSE, for the 15 consecutive trading days immediately
preceding the valuation date (such average being the "AVERAGE NORTH FORK
CLOSING PRICE") is less than $16.35; and
- the quotient obtained by dividing the average North Fork closing price by
$20.44 (such quotient being the "NORTH FORK RATIO") is less than the
number obtained by dividing the "final index price" by the "initial index
price" (each as defined below) and subtracting 0.10 from the quotient
(such number being the "INDEX RATIO").
In order to exercise this termination right, JSB must give written notice
to North Fork during the five-business-day period beginning on the day following
the valuation date (and such election to terminate may be withdrawn by JSB at
any time during the fifteen-business-day period beginning on the day North Fork
receives JSB's notice). During the five-business-day period beginning with its
receipt of JSB's notice, North Fork has the option to avoid termination of the
merger agreement by electing to increase the exchange ratio to equal the lesser
of:
(1) the product of (a) the index ratio plus 0.10 and (b) 3.0, divided by
the North Fork ratio, or
(2) the quotient obtained by dividing $61.31 by the North Fork average
closing price described above.
If North Fork provides timely notice to JSB of its election and the revised
exchange ratio, no termination will occur and the merger agreement will remain
in full force and effect in accordance with its terms (except that the exchange
ratio will be so modified).
The term "FINAL INDEX PRICE" means the sum of the final prices for each
company comprising the index group below multiplied by the weighting set forth
opposite such company's name below.
The term "FINAL PRICE," with respect to any company belonging to the index
group, means the average of the daily closing sales prices of a share of common
stock of such company (and if there is no closing sales price on any such day,
then the mean between the closing bid and the closing asked prices on that day),
as reported on the consolidated transaction reporting system for the market or
exchange on which such common stock is principally traded, for the 15
consecutive trading days immediately preceding the valuation date.
The term "INITIAL INDEX PRICE" means the sum of the per share closing sales
prices of the common stock of each company comprising the index group multiplied
by the applicable weighting, as such prices are reported on the consolidated
transaction reporting system for the market or exchange on which such common
stock is principally traded on August 13, 1999.
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The term "INDEX GROUP" means the 23 financial institution holding companies
listed below, with weights assigned to such companies (based on outstanding
shares) as follows:
<TABLE>
<CAPTION>
HOLDING COMPANY WEIGHTING
- --------------- ---------
<S> <C>
Astoria Financial Corporation.............................. 4.26%
CCB Financial Corporation.................................. 3.10%
Charter One Financial, Inc................................. 12.85%
Chittenden Corporation..................................... 2.19%
City National Corporation.................................. 3.55%
Dime Community Bancshares, Inc............................. 0.99%
First Commonwealth Financial Corporation................... 2.41%
FirstMerit Corporation..................................... 7.03%
Fulton Financial Corporation............................... 5.37%
GreenPoint Financial Corp.................................. 8.48%
Independence Community Bank Corp........................... 5.29%
Keystone Financial, Inc.................................... 3.69%
M & T Bank Corporation..................................... 0.61%
Peoples Heritage Financial Group, Inc...................... 8.12%
Queens County Bancorp, Inc................................. 1.67%
Richmond County Financial Corp............................. 2.46%
State Bancorp, Inc......................................... 0.54%
Staten Island Bancorp, Inc................................. 3.19%
Suffolk Bancorp............................................ 0.47%
Summit Bancorp............................................. 13.19%
Susquehanna Bancshares, Inc................................ 2.88%
Valley National Bancorp.................................... 4.70%
Webster Financial Corporation.............................. 2.96%
-------
100.00%
</TABLE>
This description of JSB's right to terminate the merger agreement because
of a decline in North Fork's stock price is not complete and is qualified by
reference to the specific provisions of the merger agreement. The companies
comprising the index and the weights accorded those companies may change upon
the occurrence of certain events as set forth in the merger agreement.
It is not possible to know whether the price-based termination right will
be triggered until after the valuation date. Prior to making any decision under
the provision of the merger agreement described above, the board of directors of
each of JSB and North Fork would consult with its financial and other advisors
and would consider all financial and other information it deemed relevant to its
decision.
The JSB board of directors has made no decision as to whether it would
exercise its right to terminate the merger agreement if the termination right
were triggered. In considering whether to exercise its termination right, the
JSB board of directors would, consistent with its fiduciary duties, take into
account all relevant facts and circumstances that exist at such time and would
consult with its financial advisors and legal counsel. If JSB's stockholders
approve and adopt the merger agreement at the JSB special meeting and thereafter
the price-based termination right is triggered, the JSB board of directors will
have the authority, consistent with its fiduciary duties, to elect either to
complete the merger, whether or not there is any increase in the exchange ratio
and without any further action by or resolicitation of the stockholders of JSB,
or to terminate the merger agreement.
North Fork is under no obligation to increase the exchange ratio, and there
can be no assurance that North Fork would elect to increase the exchange ratio
if the JSB board of directors were to exercise its right to terminate the merger
agreement as set forth above. Any such decision would be made by North Fork in
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consultation with its financial and legal advisors in light of the circumstances
existing at the time North Fork has the opportunity to make such an election. If
North Fork's stockholders approve and adopt the merger agreement at the North
Fork special meeting and thereafter JSB exercises its termination right, the
North Fork board of directors will have the authority, consistent with its
fiduciary duties, to elect either to increase the exchange ratio as described
above and to complete the merger without any further action by or resolicitation
of the stockholders of North Fork, or to allow JSB to terminate the merger
agreement.
Effect of Termination. If the merger agreement is terminated, it will
thereafter become void and there will be no liability on the part of North Fork
or JSB or their respective officers or directors, except that:
- any such termination will be without prejudice to the rights of any party
arising out of the breach by the other party of any covenant,
representation or obligation contained in the merger agreement,
- certain provisions of the merger agreement relating to the payment of
fees and expenses and the confidential treatment of information will
survive the termination, and
- North Fork and JSB each will bear its own expenses in connection with the
merger agreement and the transactions contemplated thereby, except as
otherwise provided therein.
TERMINATION FEES
Termination Fees Payable by North Fork. North Fork has agreed to pay JSB a
termination fee of:
- $12.5 million, plus JSB's reasonable out-of-pocket expenses, if within 12
months after August 16, 1999, after a written bona fide proposal is made
to either North Fork or its stockholders by a third party to enter into
an acquisition transaction not permitted by the terms of the merger
agreement, any of the following occur:
- North Fork willfully breaches any covenant or obligation in the merger
agreement and such breach would entitle JSB to terminate the merger
agreement;
- North Fork's stockholders do not approve the merger agreement at the
North Fork special meeting or the North Fork special meeting is not
held or is canceled; or
- North Fork's board of directors withdraws or modifies its
recommendation to approve the merger agreement in a manner adverse to
JSB.
- $25 million, plus JSB's reasonable out-of-pocket expenses, if within 18
months after August 16, 1999 North Fork or any of its subsidiaries,
without first having received JSB's consent, enters into an agreement to
engage in an acquisition transaction not otherwise permitted by the terms
of the merger agreement, or the North Fork board of directors recommends
that North Fork stockholders approve an acquisition transaction not
otherwise permitted by the terms of the merger agreement.
If the $25 million fee becomes payable, the amount due will be reduced
dollar-for-dollar by any portion of the $12.5 million fee that has actually been
paid. North Fork will not be obligated to pay JSB the termination fees described
above if, at or prior to the time that the fee becomes payable, the merger
agreement is validly terminated by either party for any reason, other than a
termination by JSB as a result of a material breach of the merger agreement by
North Fork or after North Fork's board of directors withdraws or adversely
modifies its recommendation that North Fork stockholders approve the merger
agreement.
Termination Fees Payable by JSB. JSB has agreed to pay North Fork a
termination fee of:
- $12.5 million, plus North Fork's reasonable out-of-pocket expenses, if
within 12 months after August 16, 1999, after a written bona fide
proposal is made to either JSB or its stockholders by a third party to
enter into an acquisition transaction not permitted by the terms of the
merger agreement, any of the following occur:
- JSB willfully breaches any covenant or obligation in the merger
agreement and such breach would entitle North Fork to terminate the
merger agreement;
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- JSB's stockholders do not approve the merger agreement at the JSB
special meeting or the JSB special meeting is not held or is canceled;
or
- JSB's board of directors withdraws or modifies its recommendation to
approve the merger agreement in a manner adverse to North Fork.
- $25 million, plus North Fork's reasonable out-of-pocket expenses, if
within 18 months after August 16, 1999 JSB or any of its subsidiaries,
without having first received North Fork's consent, enters into an
agreement to engage in an acquisition transaction not otherwise permitted
by the terms of the merger agreement, or the JSB board of directors
recommends that JSB stockholders approve an acquisition transaction not
otherwise permitted by the terms of the merger agreement.
If the $25 million fee becomes payable, the amount due will be reduced
dollar-for-dollar by any portion of the $12.5 million fee that has actually been
paid. JSB will not be obligated to pay North Fork the termination fees described
above if, at or prior to the time that the fee becomes payable, the merger
agreement is validly terminated by either party for any reason, other than a
termination by North Fork as a result of a material breach of the merger
agreement by JSB or after JSB's board of directors withdraws or adversely
modifies its recommendation that JSB stockholders approve the merger agreement.
EXTENSION, WAIVER AND AMENDMENT OF THE MERGER AGREEMENT
Extension and Waiver. At any time prior to the completion of the merger,
North Fork and JSB may, to the extent legally allowed:
- extend the time for the performance of any of the other party's
obligations under the merger agreement;
- waive any inaccuracies in the other party's representations and
warranties contained in the merger agreement; and
- waive the other party's compliance with any of its agreements contained
in the merger agreement, or waive any conditions to its obligation to
complete the merger.
However, after the stockholders of North Fork or JSB approve the merger
agreement, neither North Fork nor JSB may, without further approval of those
stockholders, agree to any extension or waiver that reduces the amount of the
consideration to be delivered to the JSB stockholders or violates any provision
of the Delaware General Corporation Law (the "DGCL") or the federal banking
laws, rules and regulations.
Amendment. Subject to compliance with applicable law and the ability of
the parties to change the structure of the merger, North Fork and JSB may amend
the merger agreement at any time before or after approval of the merger
agreement by North Fork stockholders or JSB stockholders. However, after any
approval of the merger agreement by North Fork stockholders or JSB stockholders,
there may not be, without further approval of those stockholders, any amendment
of the merger agreement that reduces the amount of the consideration to be
delivered to the JSB stockholders or violates any provision of the DGCL or the
federal banking laws, rules and regulations.
STOCK EXCHANGE LISTING
The North Fork common stock is listed on the NYSE. North Fork has agreed to
use its reasonable best efforts to cause the shares of North Fork common stock
to be issued in the merger to be listed on the NYSE. It is a condition to
completion of the merger that those shares be listed on the NYSE, subject to
official notice of issuance.
EXPENSES
The merger agreement provides that each of North Fork and JSB will pay its
own expenses in connection with the transactions contemplated by the merger
agreement, other than as set forth in the merger agreement. See "-- Termination
Fees" above.
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DIVIDENDS
The merger agreement provides that, prior to the effective time:
- North Fork may declare and pay its regular quarterly cash dividend and
may increase this dividend in its discretion, and
- JSB may declare and pay its regular quarterly cash dividend, except that
JSB may not increase such dividend to more than $.50 per share.
JSB also has agreed to cause its regular quarterly dividend record dates
and payment dates for the JSB common stock to be the same as North Fork's
regular quarterly dividend record dates and payment dates for the North Fork
common stock. However, in no event will JSB stockholders receive two dividends
for any calendar quarter or fail to receive a dividend for any calendar quarter.
APPRAISAL RIGHTS
Both North Fork and JSB are organized under the DGCL. The DGCL generally
provides that appraisal rights are not available to the stockholders of a
constituent corporation in a merger if the shares of stock that they own are, as
of the record date, listed on a national securities exchange or held of record
by more than 2,000 stockholders, with certain exceptions not applicable to the
merger. Neither North Fork's nor JSB's stockholders are entitled to appraisal
rights in connection with the merger generally because the shares of North Fork
common stock and JSB common stock are listed on the NYSE.
ACCOUNTING TREATMENT
We expect that the merger will be accounted for as a pooling-of-interests
transaction. Under this method of accounting, North Fork stockholders and JSB
stockholders will be deemed to have combined their existing voting common stock
interests by virtue of the exchange of shares JSB common stock for shares of
North Fork common stock. Accordingly, the book value of the assets, liabilities
and stockholders' equity of each of North Fork and JSB, as reported on their
respective consolidated balance sheets, will be carried over to the consolidated
balance sheet of the combined company, and no goodwill will be created. The
combined company will be able to include in its consolidated income the
consolidated income of both companies for the entire fiscal year in which the
merger occurs. However, the combined company must treat certain expenses
incurred to effect the merger as charges against income, rather than as
adjustments to the combined company's balance sheet.
In addition to meeting all of the other criteria necessary to qualify for
pooling-of-interests accounting treatment, North Fork must reissue a sufficient
number of shares of its treasury stock prior to completing the merger in order
to enable the merger to qualify for pooling-of-interests accounting treatment.
North Fork intends to do so by reissuing treasury shares as consideration in the
Reliance merger. Accordingly, North Fork intends to complete the Reliance merger
before completing its merger with JSB so that the JSB merger will qualify for
pooling-of-interests accounting treatment. Completion of the merger is not
conditioned upon the merger qualifying for pooling-of-interests accounting
treatment.
The parties have prepared the unaudited pro forma financial information
contained in this joint proxy statement-prospectus using the
pooling-of-interests accounting method to account for the merger. See "Pro Forma
Condensed Combined Financial Statements (Unaudited)" on page 93.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of JSB's management and the JSB board of directors have
certain interests in the merger that are in addition to their interests as JSB
stockholders generally. The JSB board of directors was aware of these interests
and considered them, among other matters, in approving the merger agreement and
the transactions contemplated thereby.
Employment Agreements. Both JSB and Jamaica Savings Bank have entered into
separate employment agreements with each of Park T. Adikes, Edward P. Henson,
Joanne Corrigan, Thomas R. Lehmann,
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Lawrence J. Kane, John F. Bennett, Jack Connors, John J. Conroy, Bernice Glaz,
Teresa D. Covello, Joseph J. Hennessy, Daniel J. Huber, Philip Pepe and Laurel
M. Romito, each as amended and restated as of June 22, 1999. Under the terms of
the employment agreements, each individual will be entitled to certain payments
and benefits upon a change in control of JSB or Jamaica Savings Bank. For
purposes of the employment agreements, the merger will constitute a "change in
control."
North Fork has agreed to honor the employment agreements by permitting JSB
to pay to each individual on the closing date of the merger the lump sum amounts
that are due under each employment agreement and by providing any additional
payments or benefits in accordance with the terms of such employment agreements.
The lump sum amount payable to each individual generally will be equal to:
(i) the individual's earned but unpaid salary as of the closing date of the
merger, any compensation previously deferred by the individual
(together with any accrued interest or earnings thereon) and any
accrued vacation pay, in each case to the extent not yet paid;
(ii) a lump sum amount equal to the amount that the individual would have
earned in salary and bonus or other incentive compensation had the
individual continued working for the next three years, generally
determined as if the individual would have received an annual increase
in salary equal to
the average percentage increase received over the prior three years
and bonus or other incentive compensation equal to the highest
percentage rate paid during the prior three years; and
(iii) a lump sum equal to the present value of the additional benefits to
which the individual would have been entitled under JSB's or Jamaica
Savings Bank's Pension Plan and the retirement portion of the Benefit
Restoration Plan, and a lump sum equal to the value of the additional
benefits to which the individual would have been entitled under the
Jamaica Savings Bank Employee Stock Ownership Plan and 401(k) Plan
and the equivalent portions of the Benefit Restoration Plan,
generally determined as if the individual continued working for the
next three years receiving the salary and bonus or other incentive
compensation with the assumed increases described in (ii) above.
Each individual will generally also be entitled to (i) the benefits, if
any, to which the individual is entitled as a former employee under JSB's or
Jamaica Savings Bank's employee benefit plans and programs and compensation
plans and programs; (ii) continued group life, health, dental, accidental death
and dismemberment, travel accident and short-term disability insurance benefits
equivalent to the coverage the individual would have received if the individual
had continued working for three years following the merger, provided that if the
individual has obtained such insurance coverage from another source, the
individual may make an irrevocable election to forego such continued coverage
and receive an amount equal to the estimated cost to JSB of providing such
coverage during such period; and (iii) continued health and dental insurance
benefits, to the extent maintained by JSB or its successors for its employees or
retirees, for the remainder of the individual's lifetime and the lifetime of his
or her spouse for so long as the individual pays the cost of such continued
coverage.
The lump sum payment to be made to each individual pursuant to the
employment agreements on the closing date of the merger may result in an "excess
parachute payment" as defined under Section 280G of the Internal Revenue Code,
which may result in the imposition of a 20% federal excise tax on the individual
and a denial of the tax deduction to JSB and Jamaica Savings Bank or to North
Fork for certain payments and benefits payable by or to be provided by JSB and
Jamaica Savings Bank or North Fork. Under the employment agreements, each
individual will be indemnified for any such excise tax and for any additional
income, excise and employment taxes imposed as a result of such indemnification.
On December 31, 1999, each of the employment agreements between Messrs.
Henson, Connors and Pepe, and JSB and Jamaica Savings Bank, respectively, were
amended, with the approval of North Fork, to provide for the immediate payment
of all or a portion of the amounts that would become due to such officers under
their employment agreements upon the occurrence of a change in control. The
amendments further provided that certain amounts, if any, to which such officers
would become entitled under their amended employment agreements upon a change in
control would be fixed in accordance with the estimates of such amounts provided
to North Fork, and that the amounts payable upon a change in control would be
reduced by
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the accelerated payments made on December 31, 1999. The remaining terms and
conditions of such employment agreements remain in effect in all other respects.
By separate letter agreement, also dated December 31, 1999, North Fork
agreed, subject to certain requirements and exceptions, to indemnify JSB for the
full amount of such accelerated payments and to indemnify JSB and its directors
for any loss, liability or expense in respect of such accelerated payments and
all associated costs in the event that the merger agreement is terminated under
certain circumstances and the accelerated payments made to the officers are not
returned to JSB. Based upon the foregoing, on December 31, 1999, payments of
approximately $2.7 million in the aggregate were made to Messrs. Henson, Connors
and Pepe. The amount of the payments otherwise due to each of these three
officers under their amended employment agreements upon consummation of the
merger will be reduced by the amount of the accelerated payment for each
officer.
In addition, consulting agreements were entered into between North Fork and
each of Messrs. Henson and Connors, dated as of December 31, 1999, which provide
for each of them to act as a consultant to North Fork commencing as of the
effective date of the merger and terminating, in the case of Mr. Henson, on the
second anniversary thereof, and, in the case of Mr. Connors, on the six-month
anniversary thereof. These consulting agreements are intended to induce the
consultant to assist North Fork in effectuating an orderly and efficient
transition with respect to the merger and the transactions contemplated by the
merger agreement and to prevent such officers from engaging in activities which
are competitive with the business of North Fork. The consulting agreements may
also be terminated by North Fork if the consultant engages in willful conduct
that is materially injurious to North Fork, is convicted of a felony or becomes
employed on a full-time basis by a commercial banking institution headquartered
in the New York metropolitan area having total deposits of more than $2 billion
and less than $25 billion. Under the terms of these consulting agreements, upon
the request of North Fork, Mr. Henson is to provide services not to exceed 20
hours during any calendar month in the first year and 10 hours during any
calender month in the second year of the term of his consulting agreement, and
Mr. Connors is to provide, upon the request of North Fork, services not to
exceed 20 hours during any calender month of the term of his consulting
agreement. For purposes of the consulting agreements only, Messrs. Henson and
Connors are considered independent contractors and not employees of North Fork.
The consulting agreements, subject to certain exceptions, will terminate at the
end of their specified terms. During the term of their consulting agreements,
Messrs. Henson and Connors may not be employed by a commercial banking
institution headquartered in the New York metropolitan area having deposits of
more than $2 billion and less than $25 billion, nor may they solicit any
employee of North Fork or any of its affiliates to leave the employ of North
Fork or any of its affiliates or assist any other person in hiring any such
employee, for such period and one year thereafter. Mr. Henson is expected to
receive a total consulting fee of $538,000, payable in quarterly installments of
$88,750 during the first year and quarterly installments of $45,750 during the
second year of the term of the consulting agreement. Mr. Connors is expected to
receive a total consulting fee of $76,200, payable in two quarterly installments
of $38,100.
The estimated aggregate value of the payments and benefits to be provided
under the employment agreements, as amended, for the 14 above-referenced
officers of JSB is $16 million, which includes the payments made as of December
31, 1999, pursuant to the amendments to the employment agreements for Messrs.
Henson, Connors and Pepe.
JSB 1990 and 1996 Stock Option Plans. As a result of the execution of the
merger agreement, the directors and certain officers of JSB were granted an
aggregate of 142,000 options under the JSB 1996 stock option plan. These options
will become exercisable on the earlier of six months from the date of grant or
the effective date of the merger. Options to purchase shares of JSB common stock
granted under the JSB 1990 and 1996 stock option plans which are outstanding as
of the effective time of the merger will be converted into options to purchase
North Fork common stock. See "-- Treatment of Options" on page 48. As of
September 30, 1999, the directors and executive officers of JSB held options to
purchase 777,966 shares of JSB common stock.
North Fork Board of Directors. North Fork has agreed in the merger
agreement to cause Park T. Adikes to be elected or appointed as a director of
North Fork and North Fork Bank at, or promptly after, the
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effective time of the merger. North Fork has also agreed that, if Mr. Adikes
does not become a director of North Fork or North Fork Bank because of death,
disability or otherwise, or if Mr. Adikes shall cease to be a director of North
Fork or North Fork Bank at any time before the third anniversary of the
effective time of the merger, North Fork will cause a person who was a member of
the JSB board of directors as of August 16, 1999 to be elected or appointed as a
director of North Fork and North Fork Bank for at least such period.
Advisory Board. North Fork has agreed that, promptly following the
effective time of the merger, it will cause each member of the JSB board of
directors as of August 16, 1999 (other than Mr. Adikes or any JSB director who
becomes a director of North Fork or North Fork Bank in substitution for Mr.
Adikes), who is willing to serve, to be elected or appointed as a member of an
advisory board to be created by North Fork, the function of which shall be to
advise North Fork with respect to deposit and lending activities in JSB's former
market area and to maintain and develop customer relationships. The members of
the advisory board will be elected to serve an initial term of three years
beginning on the effective date of the merger. Each member of the advisory board
will receive an annual retainer fee for such service of $25,000.
Jamaica Savings Bank Outside Directors' Consultation and Retirement
Plan. North Fork has agreed to assume and honor the Jamaica Savings Bank
Outside Directors' Consultation and Retirement Plan in accordance with the terms
and conditions of such plan after the effective time of the merger, except that
the eligibility requirement under this plan will be reduced from 15 years to one
year so that all eight outside directors of Jamaica Savings Bank will be
participants under the plan. In addition, any outside member of the board of
directors of Jamaica Savings Bank who does not become a member of the North Fork
Bank board of directors from and after the effective time of the merger will
have the right to begin receiving benefits under this plan effective as of the
effective time and will not be required to provide consulting services in order
to receive these benefits. Individuals who were receiving benefits under this
plan prior to the effective time of the merger will continue to receive all the
benefits under the plan on the same terms and conditions after the effective
time.
Indemnification and Insurance. North Fork has agreed in the merger
agreement that, from and after the effective time of the merger through the
sixth anniversary of the effective time, North Fork will indemnify and hold
harmless each present and former director and officer of JSB and its
subsidiaries and each officer or employee of JSB and its subsidiaries that is
serving or has served as a director or trustee of another entity expressly at
JSB's request or direction against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of matters existing or occurring at or prior to the effective time of the
merger (including the transactions contemplated by the merger agreement,
including entering into the stock option agreement), whether asserted or claimed
prior to, at or after the effective time. North Fork has also agreed to advance
any such costs to each indemnified party as they are from time to time incurred,
in each case to the fullest extent such indemnified party would have been
indemnified as a director, officer or employee of JSB and its subsidiaries and
as then permitted under applicable law.
North Fork has also agreed in the merger agreement that, for a period of
six years after the effective time of the merger, it will cause the former
directors and officers of JSB to be covered by the policy of directors' and
officers' liability insurance currently maintained by JSB or by a policy of at
least the same coverage and containing terms no less advantageous to its
beneficiaries than JSB's policies, subject to certain maximum cost limits.
EMPLOYEE MATTERS
The merger agreement provides that each person who is employed by JSB or
Jamaica Savings Bank immediately prior to the effective time of the merger will
become an employee of North Fork or North Fork Bank, to serve in the same
capacity in which he or she served immediately prior to the merger and upon the
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same terms and conditions generally applicable to other North Fork employees
with comparable positions, with the following special provisions:
- JSB's continuing employees will not be, or have the authority to act as,
officers of North Fork or North Fork Bank unless elected or appointed as
an officer by North Fork or North Fork Bank;
- at or as soon as practicable following the effective time of the merger,
North Fork and North Fork Bank will establish and implement a program of
compensation and benefits designed to cover all similarly situated
employees on a uniform basis;
- each constituent part of the new compensation and benefits program shall
recognize, in the case of persons employed by North Fork, North Fork
Bank, JSB or Jamaica Savings Bank immediately prior to the effective time
who are also employed by North Fork or North Fork Bank immediately after
the effective time of the merger, all service with North Fork, North Fork
Bank, JSB or Jamaica Savings Bank as service with North Fork and North
Fork Bank for all purposes, including eligibility, vesting, benefit
accrual and level of matching contributions, except to the extent that
such recognition would result in a duplication of benefits; and
- each constituent part of the new compensation and benefits program which
is a life or health insurance plan: (A) shall not apply any pre-existing
condition limitations for conditions covered under the applicable life or
health insurance plans maintained by North Fork, North Fork Bank, JSB and
Jamaica Savings Bank as of the effective time of the merger, (B) shall
honor any deductible and out-of-pocket expenses incurred under the
applicable life or health insurance plans maintained by North Fork, North
Fork Bank, JSB and Jamaica Savings Bank as of the effective time of the
merger and (C) shall waive any medical certification otherwise required
in order to assure the continuation of coverage at a level not less than
the coverage in effect immediately prior to the implementation of such
plan (but subject to any overall limit on the maximum amount of coverage
allowed under such plans).
North Fork has also agreed to assume the obligations of JSB and Jamaica
Savings Bank with respect to any severance plans or agreements of JSB or Jamaica
Savings Bank in effect as of August 16, 1999 and to pay amounts thereunder when
due; provided, however, that in the event of the termination of employment of
former officers and employees of JSB or Jamaica Savings Bank within 15 months
following the effective time of the merger, such persons shall be provided
severance benefits equal to the greater of those provided under the Jamaica
Savings Bank Severance Plan or those provided by North Fork or North Fork Bank
under any severance plan maintained by North Fork or North Fork Bank.
The merger agreement also provides that officers and employees of JSB and
its subsidiaries who are covered under the JSB Pension Plan immediately prior to
the effective time of the merger and who continue to be employed by North Fork
or its subsidiaries on and after the effective time of the merger shall, if, as
of the effective time of the merger, they either:
(i) are within 10 years of their normal retirement age (as defined in the
JSB Pension Plan) and have a period of service (as defined in the JSB
Pension Plan) of at least 10 years with JSB or its subsidiaries, or
(ii) have a period of service (as defined in the JSB Pension Plan) of at
least 25 years with JSB or its subsidiaries,
have the right to elect to continue to accrue benefits under the benefit accrual
formula under the JSB Pension Plan rather than having their benefits be
determined under the North Fork Cash Balance Retirement Plan.
North Fork also has agreed in the merger agreement to use all reasonable
efforts to identify and offer employment opportunities to qualified,
satisfactorily performing officers and employees of JSB and its subsidiaries in
positions within the business operations of North Fork and its subsidiaries for
which such officers and employees are qualified, and to give priority
consideration to all such officers and employees of JSB and its subsidiaries
vis-a-vis all individuals other than the current officers and employees of North
Fork.
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In addition, the merger agreement contains provisions with respect to
several other matters relating to JSB and Jamaica Savings Bank employees, such
as the payment of bonuses, the continuation of the benefits under Jamaica
Savings Bank's employee loan program, and pro-rata contributions under JSB's and
Jamaica Savings Bank's employee benefit plans.
STOCK OPTION AGREEMENT
General. As a condition to entering into the merger agreement, North Fork
required that JSB enter into the stock option agreement, which allows North
Fork, under certain circumstances, to purchase up to 1,848,092 shares of JSB
common stock (representing approximately 19.9% of JSB's issued and outstanding
common stock), subject to adjustment so that in no event may North Fork acquire
shares of JSB common stock representing more than 19.9% of the issued and
outstanding shares of such stock, at an exercise price of $58.75 per share
(subject to adjustment). The option may only be exercised upon the occurrence of
certain events which are described below.
Effect of Stock Option Agreement. North Fork and JSB entered into the
stock option agreement to increase the likelihood that the merger will be
completed in accordance with its terms. The stock option agreement may have the
effect of discouraging persons who might be interested in acquiring all of or a
significant interest in JSB, even if such persons were prepared to pay a higher
price per share of JSB common stock than the value per share contemplated by the
merger agreement. The acquisition by a third party of JSB or a significant
interest in JSB or a significant portion of its consolidated assets, or an
agreement to do so, could cause the option to become exercisable and
significantly increase the cost of the acquisition to a potential acquiror. Such
increased costs might discourage a potential acquiror from considering or
proposing an acquisition or might result in a potential acquiror proposing to
pay a lower per share price to acquire JSB than it might otherwise have proposed
to pay. Moreover, the management of JSB believes that the exercise of the option
is likely to prohibit any acquiror of JSB from accounting for any acquisition of
JSB using the pooling-of-interests accounting method for a period of two years.
This could discourage or preclude an acquisition by certain other banking
organizations.
Terms of Stock Option Agreement. The following is a brief summary of
certain provisions of the stock option agreement, which is attached hereto as
Appendix B. The summary is not intended to be complete and is qualified by
reference to the complete text of the agreement.
If North Fork is not in material breach of the stock option agreement or
the merger agreement and if no injunction or other court order against delivery
of the shares covered by the option is in effect, North Fork may exercise the
option, in whole or in part, at any time and from time to time, upon the
occurrence of a "purchase event" as defined below. A "PURCHASE EVENT" means any
of the following events:
(i) without North Fork's prior written consent, JSB takes certain actions,
including authorizing, recommending or proposing, or entering into an
agreement with any third party to effect (A) a merger, consolidation or
similar transaction involving JSB or any of its significant
subsidiaries, (B) the disposition, by sale, lease, exchange or
otherwise, of assets or deposits of JSB or any of its significant
subsidiaries representing in either case 10% or more of the
consolidated assets or deposits of JSB and its subsidiaries or (C) the
issuance, sale or other disposition by JSB of (including by way of
merger, consolidation, share exchange or any similar transaction)
securities representing 10% or more of the voting power of JSB or any
of its significant subsidiaries (each an "ACQUISITION TRANSACTION"); or
(ii) any third party acquires or obtains the right to acquire 10% or more
of the voting power of JSB or any of its significant subsidiaries.
The option will terminate upon the earliest to occur of:
(i) the completion of the merger;
(ii) termination of the merger agreement in accordance with its terms prior
to the occurrence of a purchase event or a "preliminary purchase
event" (as defined below) other than a termination by
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North Fork as a result of a material breach of the merger agreement by
JSB (such termination is referred to as a "DEFAULT TERMINATION");
(iii) 18 months after a default termination; or
(iv) 18 months after termination of the merger agreement (other than a
default termination) following the occurrence of a purchase event or a
preliminary purchase event.
The term "PRELIMINARY PURCHASE EVENT" means any of the following events:
(i) commencement by any third party of a tender offer or exchange offer to
purchase 10% or more of the then outstanding shares of JSB common stock
(such an offer being referred to herein as a "TENDER OFFER" or an
"EXCHANGE OFFER," respectively);
(ii) failure of the JSB stockholders to approve the merger agreement,
failure of JSB to hold its special meeting, or withdrawal or
modification by the JSB board of directors, in a manner adverse to
North Fork, of its recommendation that JSB stockholders approve the
merger agreement, in each case after public announcement that a third
party (A) proposed to engage in an acquisition transaction with JSB,
(B) commenced a tender offer or filed a registration statement under
the Securities Act of 1933 with respect to an exchange offer or (C)
filed an application with any financial institution regulatory
authority to engage in a acquisition transaction;
(iii) a proposal is made by a third party to JSB or its stockholders,
publicly or in any writing that becomes disclosed publicly, to engage
in an acquisition transaction; or
(iv) after a proposal is made by a third party to JSB or its stockholders
to engage in an acquisition transaction, JSB breaches any
representation, warranty, covenant or agreement in the merger
agreement and such breach would entitle North Fork to terminate the
merger agreement.
In the event that JSB enters into an agreement:
(i) to consolidate with or merge into any person, other than North Fork or
one of its subsidiaries, and JSB will not be the continuing or
surviving corporation of such consolidation or merger;
(ii) to permit any person, other than North Fork or one of its
subsidiaries, to merge into JSB and JSB shall be the continuing or
surviving corporation, but, in connection with such merger, the then
outstanding shares of JSB common stock shall be changed into or
exchanged for stock or other securities of JSB or any other person or
cash or any other property, or the outstanding shares of JSB common
stock immediately prior to such merger shall after such merger
represent less than 50% of the outstanding shares and share
equivalents of the merged company; or
(iii) to sell or otherwise transfer all or substantially all of its assets
or deposits to any person, other than North Fork or one of its
subsidiaries,
then, and in each such case, the agreement governing such transaction must
provide that the option will, upon the completion of any such transaction, be
converted into or exchanged for a substitute option, at the election of North
Fork, to purchase shares of either (A) the corporation acquiring JSB, (B) any
person that controls the corporation acquiring JSB or (C) in the case of a
merger described in clause (ii), JSB.
Repurchase of the Option. The stock option agreement permits North Fork to
require that JSB repurchase the option (or the substitute option) and any shares
issued under the option, for an aggregate price computed in accordance with a
formula set forth in the stock option agreement, if:
(a) any person or group shall have acquired beneficial ownership of more
than 25% of the outstanding shares of JSB common stock,
(b) JSB completes a merger, consolidation or similar transaction or any
sale of substantially all of its assets, or
(c) any third party acquires beneficial ownership of 50% or more of the
outstanding JSB common stock.
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<PAGE> 76
Profit Limitation. The stock option agreement contains a provision that
limits the aggregate realizable profit to North Fork from the option and the
termination fees described in "-- Termination Fees" on page 60 to $30 million,
plus North Fork's reasonable out-of-pocket expenses incurred in connection with
the merger.
Adjustment. The stock option agreement provides for adjustment to the
number of shares and the exercise price of the option upon the occurrence of
certain changes to the capital structure of JSB or certain other events or
transactions.
Regulatory Matters. Some rights and obligations of JSB and North Fork
under the stock option agreement are subject to receipt of required regulatory
approvals. North Fork must obtain the approvals of the Board of Governors of the
Federal Reserve System and the Office of Thrift Supervision to acquire more than
5% of the outstanding shares of JSB common stock.
RESTRICTIONS ON RESALES BY AFFILIATES
Shares of North Fork common stock to be issued to JSB stockholders in the
merger have been registered under the Securities Act of 1933, as amended, and
may be traded freely and without restriction by those stockholders not deemed to
be affiliates (as that term is defined under the Securities Act) of JSB. Any
subsequent transfer of shares, however, by any person who is an affiliate of JSB
at the time the merger is submitted for a vote of the JSB stockholders will,
under existing law, require either:
- the further registration under the Securities Act of the North Fork
common stock to be transferred,
- compliance with Rule 145 promulgated under the Securities Act, which
permits limited sales under certain circumstances, or
- the availability of another exemption from registration.
An "AFFILIATE" of JSB is a person who directly, or indirectly through one
or more intermediaries, controls, is controlled by, or is under common control
with, JSB. These restrictions are expected to apply to the directors and
executive officers of JSB and the holders of 10% or more of the JSB common
stock. The same restrictions apply to certain relatives or the spouse of those
persons and any trusts, estates, corporations or other entities in which those
persons have a 10% or greater beneficial or equity interest. North Fork will
give stop transfer instructions to the transfer agent with respect to the shares
of North Fork common stock to be received by persons subject to these
restrictions, and the certificates for their shares will be appropriately
legended.
SEC guidelines regarding qualifying for the pooling-of-interests method of
accounting also limit sales of shares of the acquiring and acquired company by
affiliates of either company in a business combination. SEC guidelines indicate
that the pooling-of-interests method of accounting will generally not be
challenged on the basis of sales by affiliates of the acquiring or acquired
company if those affiliates do not dispose of any of the shares of the
corporation they own or shares of a corporation they receive in connection with
a merger during the period beginning 30 days before the completion of the merger
and ending when financial results covering at least 30 days of post-merger
operations of the combined entity have been published.
Each of JSB and North Fork has agreed in the merger agreement to cause each
person who is an affiliate of that party for purposes of Rule 145 under the
Securities Act, and for purposes of qualifying the merger for
pooling-of-interests accounting treatment, to deliver to the other party a
written agreement intended to ensure compliance with the Securities Act and
preserve the ability to treat the merger as a pooling-of-interests.
North Fork has agreed in the merger agreement to publish as soon as
practicable, but in no event later than 30 days after the end of the first
calendar month ending at least 30 days after the effective time of the merger,
financial results covering at least 30 days of post-merger combined operations.
69
<PAGE> 77
MANAGEMENT AND OPERATIONS FOLLOWING
THE MERGER AND THE RELIANCE MERGER
BOARD OF DIRECTORS FOLLOWING THE MERGER AND THE RELIANCE MERGER
Upon completion of the merger, North Fork's and North Fork Bank's board of
directors will be expanded by one member, and Park T. Adikes, Chairman and Chief
Executive Officer of JSB, will become a member of the North Fork and North Fork
Bank boards of directors. In addition, upon completion of the Reliance merger,
Raymond A. Nielson, the Chief Executive Officer and President of Reliance, will
become a member of the North Fork board of directors.
CONSOLIDATION OF OPERATIONS; ESTIMATED COST SAVINGS AND REVENUE ENHANCEMENTS;
ESTIMATED EARNINGS PER SHARE
THIS SECTION CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITH RESPECT TO
THE FINANCIAL CONDITION, RESULTS OF OPERATIONS, PLANS, OBJECTIVES, FUTURE
PERFORMANCE AND BUSINESS OF NORTH FORK FOLLOWING THE CONSUMMATION OF THE MERGER
AND THE RELIANCE MERGER THAT ARE SUBJECT TO VARIOUS FACTORS WHICH COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM SUCH PROJECTIONS OR ESTIMATES. SUCH
FACTORS INCLUDE, BUT ARE NOT LIMITED TO, THE POSSIBILITY THAT THE ANTICIPATED
COST SAVINGS, REVENUE ENHANCEMENTS AND TIMING MIGHT NOT BE REALIZED OR THE
ANTICIPATED ONE-TIME MERGER COSTS ARE GREATER THAN EXPECTED. SEE
"FORWARD-LOOKING STATEMENTS" ON PAGE 91.
North Fork expects to achieve significant cost savings following the merger
and the Reliance merger. The cost savings are expected to be derived from
reductions in personnel, elimination of selected branch offices located in
communities in which North Fork, JSB or Reliance branches are located, the
integration of JSB's and Reliance's data processing operations with those of
North Fork, and the integration of other facilities and back office operations.
Also, the separate corporate existences of JSB, Jamaica Savings Bank, Reliance
and Reliance Federal Savings Bank will cease following completion of the mergers
and the bank mergers. Consequently, the costs associated with operating JSB and
Reliance as separate publicly-held entities will also be eliminated.
The aggregate annual after-tax cost savings to be achieved in connection
with the mergers are estimated to be $28 million. Management of North Fork
believes that these cost savings will be fully phased in during the calendar
year 2000. There can be no assurance that all of the potential cost savings will
be realized or that they will be realized in the time frame currently estimated
or thereafter. The amounts and realization of any cost savings will depend upon
a number of factors, including, among others, competition in the financial
services industry, the economic and regulatory environments, and any business
changes implemented by North Fork's management. Some of these factors are beyond
North Fork's control.
Following the bank mergers, North Fork will convert the operations of
Jamaica Savings Bank and Reliance Federal to full-service commercial banks.
North Fork believes, based on its previous experience in acquiring savings banks
and branches of savings banks, that revenue enhancement opportunities exist by
offering commercial bank products to the customers of Jamaica Savings Bank and
Reliance Federal. These products include a variety of demand deposit accounts,
discount brokerage, investment management and trust services, cash management,
annuity and mutual fund products and commercial and installment loans to small
and mid-sized businesses. Management of North Fork estimates that revenue
enhancements resulting from the mergers will approximate $8.0 million after-tax
for the year 2000. The amounts and realization of any additional revenues will
depend upon a number of factors, including, among others, competition in the
financial services industry, the economic and regulatory environments, and any
business changes implemented by North Fork. Some of these factors are beyond
North Fork's control.
Based on the synergies anticipated, North Fork believes that the mergers
will result in earnings accretion of approximately $0.11 per share in 2000. The
table below sets forth in more detail North Fork's estimated pro forma earnings
per share.
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<PAGE> 78
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED
PRO FORMA PRO FORMA
NET INCOME(1) EARNINGS PER SHARE
-------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
North Fork net income and earnings per share(2)............. $237,160 $1.75
Plus: JSB net income(2)..................................... 32,198
Estimated North Fork/JSB merger benefits:
Cost savings........................................... 13,154
Revenue enhancements................................... 4,680
Tax efficiencies(3).................................... 4,707
Securities portfolio optimization(4)................... 5,655
Plus: Reliance net income(2)................................ 21,586
Estimated North Fork/Reliance merger benefits:
Cost savings........................................... 14,860
Revenue enhancements................................... 3,250
Tax efficiencies(3).................................... 2,070
Less: Impact of share purchase program(5).............. (8,904)
Incremental intangible asset amortization............ (8,594)
--------
Estimated North Fork/JSB/Reliance Pro Forma Combined Net
Income and Earnings Per Share(6).......................... $321,822 $1.86
======== =====
</TABLE>
- ---------------
(1) Excludes the effect of the merger and restructuring charge of $36.9 million
to be incurred in the JSB merger. See "Pro Forma Condensed Combined
Financial Statements (Unaudited)" on page 93. All figures for estimated
merger benefits are after tax.
(2) Based on mean I/B/E/S estimates as of August 30, 1999.
(3) Benefit derived from North Fork's lower effective tax rate (35%).
(4) Yield improvement on JSB's securities portfolio.
(5) Foregone earnings on cash used to purchase North Fork shares to be issued in
the Reliance merger.
(6) Assumes 172,900,000 shares outstanding after the JSB merger and the Reliance
merger. The Estimated Pro Forma Earnings Per Share assumes that North Fork
does not increase the amount of leverage on its balance sheet. If North Fork
were to increase the leverage on its balance sheet, earnings per share would
increase by approximately $0.06 per share for every additional $1 billion in
assets assuming a positive spread on such leveraged assets of 150 basis
points. North Fork has no current plans to increase the amount of leverage
on its balance sheet.
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<PAGE> 79
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
NORTH FORK
North Fork common stock is listed on the NYSE and traded under the symbol
"NFB." The following table sets forth, for the periods indicated, the high and
low reported closing prices per share of North Fork common stock on the NYSE
Composite Transactions reporting system, and the cash dividends declared per
share of North Fork common stock.
<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK DIVIDENDS
---------------- DECLARED
HIGH LOW PER SHARE(1)
------ ------ ------------
<S> <C> <C> <C>
1997
First Quarter....................................... $14.17 $11.38 $0.08
Second Quarter...................................... 15.33 12.08 0.10
Third Quarter....................................... 19.33 14.96 0.10
Fourth Quarter...................................... 22.50 18.71 0.10
1998
First Quarter....................................... 26.33 20.00 0.125
Second Quarter...................................... 27.33 23.79 0.125
Third Quarter....................................... 27.19 19.00 0.125
Fourth Quarter...................................... 23.94 16.31 0.275
1999
First Quarter....................................... 23.88 21.00 0.15
Second Quarter...................................... 23.63 20.13 0.15
Third Quarter....................................... 21.81 17.69 0.15
Fourth Quarter...................................... 21.63 17.13 0.18
2000
First Quarter (through January 10, 2000)............ 16.88 16.13 --
</TABLE>
- ---------------
(1) North Fork per share amounts for all applicable periods have been restated
to reflect the 3-for-2 common stock split effective May 15, 1998 and the
2-for-1 common stock split effective May 15, 1997.
JSB
JSB common stock is listed on the NYSE and traded under the symbol "JSB."
The following table sets forth, for the periods indicated, the high and low
reported closing prices per share of JSB common stock on the NYSE Composite
Transaction reporting system, and the cash dividends declared per share of JSB
common stock.
<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK DIVIDENDS
---------------- DECLARED
HIGH LOW PER SHARE
------ ------ ---------
<S> <C> <C> <C>
1997
First Quarter......................................... $43.00 $36.00 $0.35
Second Quarter........................................ 46.50 40.00 0.35
Third Quarter......................................... 49.38 41.00 0.35
Fourth Quarter........................................ 50.63 46.50 0.35
1998
First Quarter......................................... 55.94 46.00 0.40
Second Quarter........................................ 58.56 53.63 0.40
Third Quarter......................................... 59.69 45.00 0.40
Fourth Quarter........................................ 54.38 45.63 0.40
</TABLE>
72
<PAGE> 80
<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK DIVIDENDS
---------------- DECLARED
HIGH LOW PER SHARE
------ ------ ---------
<S> <C> <C> <C>
1999
First Quarter......................................... $58.75 $50.13 $0.45
Second Quarter........................................ 55.75 47.63 0.45
Third Quarter......................................... 58.75 51.19 0.45
Fourth Quarter........................................ 62.81 50.50 0.45
2000
First Quarter (through January 10, 2000).............. 51.88 47.63 --
</TABLE>
NORTH FORK DIVIDEND POLICY
The holders of North Fork common stock receive dividends if and when
declared by the North Fork board of directors out of legally available funds.
North Fork expects to continue paying quarterly cash dividends on North Fork
common stock. However, North Fork cannot be certain that its dividend policy
will remain unchanged after completion of the merger. The declaration and
payment of dividends after the merger will depend upon business conditions,
operating results, capital and reserve requirements and the North Fork board of
directors' consideration of other relevant factors.
INFORMATION ABOUT NORTH FORK
GENERAL
North Fork is a bank holding company organized under the laws of the State
of Delaware in 1980 and registered under the BHC Act. North Fork's primary
subsidiary, North Fork Bank, a New York State-chartered, FDIC-insured,
stock-form commercial bank, operates 112 retail banking facilities throughout
Suffolk and Nassau counties on Long Island, New York, as well as in the New York
City boroughs of Manhattan, Queens, Brooklyn and the Bronx and in Westchester
and Rockland counties north of New York City. At September 30, 1999, North Fork
had assets of $11.9 billion, deposits of $6.6 billion and stockholders' equity
of $717.6 million. North Fork, through North Fork Bank, provides a variety of
banking and financial services to middle market and small business
organizations, local governmental units, and retail customers in the
metropolitan New York area.
On August 30, 1999, North Fork entered into an agreement with Reliance
providing for the merger of Reliance with and into North Fork. As of September
30, 1999, Reliance had $2.5 billion in total assets, $1.6 billion in deposits,
$171.7 million in stockholders' equity and served customers from 29 branches
throughout Suffolk and Nassau counties on Long Island, New York, as well as in
the New York City boroughs of Manhattan and Queens. In the Reliance merger,
Reliance stockholders will receive 2.0 shares of North Fork common stock in
exchange for each share of Reliance common stock. Completion of the Reliance
merger is subject to a number of conditions, including the receipt of all
required regulatory approvals and the approval of the stockholders of Reliance.
The Reliance merger is expected to be completed during the first quarter of 2000
and will be accounted for under the purchase method of accounting. The pro forma
financial information in this document includes pro forma adjustments reflecting
the completion of the Reliance merger under the purchase method of accounting.
See "Pro Forma Condensed Combined Financial Statements (Unaudited)" on page 93.
From time to time, North Fork investigates and holds discussions and
negotiations concerning possible transactions with other financial institutions.
As of the date of this joint proxy statement-prospectus, North Fork has not
entered into any agreements or understandings with respect to any significant
business combination transactions except for the transactions described herein
and in documents incorporated herein by reference. See "Where You Can Find More
Information" on page 89. Any such transaction would be subject to stockholder
approval only if required under applicable law or the rules of the NYSE.
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<PAGE> 81
For more information about North Fork's business, reference is made to
North Fork's Annual Report on Form 10-K for the year ended December 31, 1998,
which is incorporated herein by reference. See "Where You Can Find More
Information" on page 89.
MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to executive compensation, various benefit
plans (including stock option plans), voting securities, including the principal
holders of those securities, certain relationships and related transactions and
other matters as to North Fork is incorporated by reference or set forth in
North Fork's Annual Report on Form 10-K for the year ended December 31, 1998,
which is incorporated herein by reference. Stockholders desiring copies of this
document and other documents relating to North Fork may contact North Fork at
its address or telephone number indicated under "Where You Can Find More
Information" on page 89.
SECURITY OWNERSHIP
Set forth below is certain information concerning beneficial ownership of
North Fork common stock, as of September 30, 1999 by (i) each director of North
Fork, (ii) each executive officer of North Fork, and (iii) all executive
officers and directors of North Fork as a group. As of the North Fork record
date there was no person known by the North Fork board of directors to be the
beneficial owner of more than 5% of the outstanding shares of North Fork common
stock.
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF BENEFICIALLY
NAME SHARES(1) OWNED
- ---- ------------ ------------
<S> <C> <C>
John Adam Kanas(2).......................................... 2,091,279 1.55%
John Bohlsen(3)............................................. 887,721 *
Thomas M. O'Brien(4)........................................ 993,190 *
Daniel M. Healy(5).......................................... 649,681 *
Irvin L. Cherashore......................................... 63,204 *
Allan C. Dickerson(6)....................................... 50,151 *
Lloyd A. Gerard(7).......................................... 177,677 *
Patrick E. Malloy, III...................................... 2,581,177 1.91%
James F. Reeve(8)........................................... 167,554 *
George H. Rowsom(9)......................................... 28,358 *
Kurt R. Schmeller........................................... 78,190 *
Raymond W. Terry, Jr.(10)................................... 108,000 *
All executive officers and directors as a group (12
persons)(11).............................................. 7,876,182 5.82%
</TABLE>
- ---------------
* Less than 1%
(1) Beneficial ownership of shares, as determined in accordance with applicable
SEC rules, includes shares as to which a person directly or indirectly has
or shares voting power and/or investment power (which includes the power to
dispose) and all shares which the person has a right to acquire within 60
days of the reporting date. Further, with respect to Messrs. Kanas, Bohlsen
and Healy, the number of shares beneficially owned includes shares held in
North Fork's 401(k) plan as of December 31, 1998.
(2) Includes 690,136 shares of restricted stock and options to purchase 413,677
shares previously granted to Mr. Kanas under North Fork's compensatory
stock plans, 55,300 shares held by him in joint tenancy with his wife,
62,823 shares held by his wife, 14,900 shares held by his dependent
children, 400 shares held by his wife in joint tenancy with his son and 400
shares held by his wife as custodian for their son. Excludes 95,000 shares
held by the John A. Kanas and Elaine M. Kanas Family Foundation, a
charitable foundation established by Mr. Kanas that is qualified under
section 501(c)(3) of the Internal Revenue Code, as to which Mr. Kanas
disclaims beneficial ownership.
74
<PAGE> 82
(3) Includes 239,899 shares of restricted stock and options to purchase 178,371
shares previously granted to Mr. Bohlsen under North Fork's compensatory
stock plans, 2,568 shares held by his wife and 33,416 shares held by his
dependent children. Excludes 40,000 shares held by the John and Linda
Bohlsen Family Foundation, a charitable foundation established by Mr.
Bohlsen that is qualified under section 501(c)(3) of the Internal Revenue
Code, as to which Mr. Bohlsen disclaims beneficial ownership.
(4) Includes 62,500 shares of restricted stock, 268,605 shares held in joint
tenancy with his wife, 648 shares in his name as custodian for his son,
options to purchase 108,583 shares previously granted to Mr. O'Brien under
North Fork's compensatory stock plans and 648 shares held by his dependent
son. Excludes 32,500 shares held by The Galway Bay Foundation, a charitable
foundation established by Mr. O'Brien that is qualified under section
501(c)(3) of the Internal Revenue Code, as to which Mr. O'Brien disclaims
beneficial ownership.
(5) Includes 125,985 shares of restricted stock and options to purchase 212,020
shares previously granted to Mr. Healy under North Fork's compensatory
stock options, 9,000 shares held by his wife and 6,000 shares held in his
name as custodian for a daughter.
(6) Includes 24,483 shares held by Mr. Dickerson's wife.
(7) Includes 5,983 shares held by Mr. Gerard in joint tenancy with his
daughter, 3,000 shares held by his wife and 300 shares held by his wife in
her capacity as custodian for a granddaughter.
(8) Includes 55,625 shares held by Mr. Reeve's wife.
(9) Includes 3,000 shares held by Mr. Rowsom in joint tenancy with his wife,
934 shares held by his wife and 9,000 shares held by the S.T. Preston &
Sons, Inc. Profit Sharing Trust, in which Mr. Rowsom shares voting power
with two others.
(10) Includes 45,000 shares held by Mr. Terry in joint tenancy with his wife.
(11) Includes 1,118,520 shares of restricted stock and options to purchase an
aggregate of 912,651 shares previously granted to such persons under North
Fork's compensatory stock plans.
INFORMATION ABOUT JSB
GENERAL
JSB is a unitary savings and loan holding company organized under the laws
of the State of Delaware in 1990. JSB's wholly owned subsidiary, Jamaica Savings
Bank FSB, a federally chartered, FDIC-insured, stock form savings bank, operates
13 retail banking facilities in Queens, Nassau, New York and Suffolk counties,
New York. Jamaica Savings Bank is a community-oriented financial institution,
serving its market area with a wide selection of loan products and retail
financial services. At September 30, 1999, JSB had total assets of $1.6 billion,
deposits of $1.1 billion and stockholders' equity of $374 million.
For more information about JSB's business, reference is made to JSB's
Annual Report on Form 10-K for the year ended December 31, 1998, which is
incorporated herein by reference. See "Where You Can Find More Information" on
page 89.
MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to executive compensation, various benefit
plans (including stock option plans), voting securities, including the principal
holders of those securities, certain relationships and related transactions and
other matters as to JSB is incorporated by reference or set forth in JSB's
Annual Report on Form 10-K for the year ended December 31, 1998, which is
incorporated herein by reference. Stockholders desiring copies of this document
and other documents relating to JSB may contact JSB at its address or telephone
number indicated under "Where You Can Find More Information" on page 89.
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<PAGE> 83
SECURITY OWNERSHIP
Owners of 5% of JSB Common Stock. Set forth below is certain information
as to those persons believed by JSB's management to be beneficial owners of more
than 5% of JSB's outstanding shares of common stock as of September 30, 1999.
Other than those persons listed below, JSB is not aware of any person who is the
beneficial owner of more than 5% of the outstanding shares of JSB common stock
as of September 30, 1999.
<TABLE>
<CAPTION>
TITLE OF CLASS AMOUNT AND NATURE OF
OF SECURITY NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS(1)
-------------- --------------------------------------- -------------------- -------------------
<C> <S> <C> <C>
Common Stock Jamaica Savings Bank FSB 835,846(2) 9.0%
Employee Stock Ownership Plan and Trust
c/o Jamaica Savings Bank FSB
303 Merrick Road
Lynbrook, New York 11563
</TABLE>
- ---------------
(1) The total number of shares of JSB common stock outstanding on September 30,
1999 was 9,289,793.
(2) An unrelated corporate trustee, HSBC Bank USA, has been appointed trustee
for the ESOP. The ESOP trustee, subject to its fiduciary duty and the
requirements of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), must vote all allocated shares held in the ESOP in
accordance with the instructions of participants, former participants and
beneficiaries. As of September 30, 1999, 825,975 shares have been allocated
to participant's accounts. Under the ESOP, unallocated shares held in the
suspense account will be voted in a manner determined to most accurately
reflect the instructions it has received from participants, former
participants and beneficiaries regarding the allocated stock, so long as
such vote is in accordance with the requirements of ERISA.
Security Ownership of Management of JSB. Set forth below is certain
information concerning beneficial ownership of JSB common stock, as of September
30, 1999, by (i) each director of JSB, (ii) the Chief Executive Officer and the
four other highest paid executive officers of JSB and (iii) all directors and
executive officers of JSB as a group. Shares subject to options that are not
exercisable within 60 days of September 30, 1999 are excluded from the table.
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER BENEFICIALLY
NAME TITLE OF SHARES(1) OWNED(2)
- ---- ----- ------------ ------------
<S> <C> <C> <C>
Chairman of the Board, Chief Executive
Officer and Director
Park T. Adikes 438,071(3) 4.6%
President and Director
Edward P. Henson 146,771(3) 1.6%
Director
Joseph C. Cantwell 21,584(4) *
Director
Richard M. Cummins 14,384(4) *
Director
Howard J. Dirkes, Jr. 42,958(4) *
Director
Cynthia Gibbons 18,384(4) *
Director
James E. Gibbons, Jr. 71,385(4) *
Director
Alfred F. Kelly 30,635(4) *
Director
Richard W. Meyer 33,085(4) *
Director
Arnold B. Pritcher 51,185(4) *
Executive Vice President
Thomas R. Lehmann 67,489(3) *
Executive Vice President
Lawrence J. Kane 61,348(3) *
Senior Vice President
John F. Bennett 99,050(3) 1.1%
All executive officers and directors as a group (17 persons) 1,344,801(5) 13.5%
</TABLE>
- ---------------
* Less than 1.0%
(1) Each person effectively exercises sole (or shared with spouse or other
immediate family members) voting and dispositive power as to the shares
reported. Excluded are 196,823 shares held by a trust which was
76
<PAGE> 84
established for the Benefit Restoration Plan in connection with JSB's and
Jamaica Savings Bank's benefit plans. Shares held in this trust are voted at
the direction of the Employee Benefits Committee of the board of directors
of Jamaica Savings Bank. The assets held by the trust, including JSB's
shares, are subject to the claims of the general creditors of JSB and
Jamaica Savings Bank. The above table does not include the 127,850 options
granted to officers and directors of JSB pursuant to the 1996 Stock Option
Plan on August 16, 1999 as a result of the execution of the merger
agreement, which options are not exercisable until they vest on the earlier
of six months from the date of grant or the effective date of the merger.
(2) The total number of shares of JSB common stock outstanding on September 30,
1999 was 9,289,793. Exercisable options for each individual are included in
shares beneficially owned and are added to common stock outstanding in
determining the percent of class.
(3) Includes 167,500, 64,000, 42,500, 42,500 and 69,293 shares for Messrs.
Adikes, Henson, Lehmann, Kane and Bennett, respectively, which may be
acquired through the exercise of stock options granted under the JSB stock
option plans.
(4) Includes 21,000, 14,000, 22,073, 17,000, 16,000, 22,250, 16,000 and 16,000
shares for directors Cantwell, Cummins, Dirkes, C. Gibbons, J. Gibbons,
Kelly, Meyer and Pritcher, respectively, which may be acquired through the
exercise of stock options granted under the JSB stock option plans.
(5) Includes 650,116 shares which may be acquired through the exercise of stock
options granted under the JSB stock option plans.
REGULATION AND SUPERVISION OF NORTH FORK
GENERAL
North Fork is a bank holding company subject to supervision and regulation
by the Board of Governors of the Federal Reserve System under the BHC Act. As a
bank holding company, North Fork's activities and those of its banking and
nonbanking subsidiaries are limited to the business of banking and activities
closely related or incidental to banking, and North Fork may not directly or
indirectly acquire the ownership or control of more than five percent of any
class of voting shares or substantially all of the assets of any company,
including a bank, without the prior approval of the Federal Reserve Board.
North Fork Bank, as a New York State-chartered, FDIC-insured depository
institution, is subject to the supervision, regulation and examination of the
New York State Banking Department and the FDIC. The FDIC has broad enforcement
authority over federally-insured depository institutions, including the power to
terminate deposit insurance, to appoint a conservator or receiver if any of a
number of conditions are met, and to impose substantial fines and other civil
penalties. Almost every aspect of the operations and financial condition of
North Fork Bank is subject to extensive regulation and supervision and to
various requirements and restrictions under federal and state law, including
requirements governing capital adequacy, liquidity, earnings, dividends,
reserves against deposits, management practices, branching, loans, investments,
and the provision of services. Various consumer protection laws and regulations
also affect the operations of North Fork Bank. The deposits of North Fork Bank
are insured up to applicable limits by the FDIC.
Supervision and regulation of bank holding companies and their subsidiaries
is intended primarily for the protection of depositors, the deposit insurance
funds of the FDIC and the banking system as a whole, not for the protection of
bank holding company stockholders or creditors.
The following description summarizes some of the laws to which North Fork
and North Fork Bank are subject. To the extent statutory or regulatory
provisions or proposals are described, the description is qualified in its
entirety by reference to the particular statutory or regulatory provisions or
proposals.
PAYMENT OF DIVIDENDS
North Fork is a legal entity separate and distinct from its subsidiaries.
The principal source of North Fork's cash revenues is dividends from North Fork
Bank, and there are various legal and regulatory limitations
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<PAGE> 85
under federal and state law on the extent to which banking subsidiaries can
finance or otherwise supply funds to their holding company.
Federal Reserve Board policy provides that, as a matter of prudent banking,
a bank holding company generally should not maintain a rate of cash dividends
unless its net income available to common stockholders has been sufficient to
fully fund the dividends, and the prospective rate of earnings retention appears
to be consistent with the holding company's capital needs, asset quality and
overall financial condition. In addition, among other things, dividends from a
New York State-chartered bank, such as North Fork Bank, are limited by the NYBL
and by the regulations of the Banking Department to an amount equal to the
bank's net profits for the current year plus its prior two years' retained net
profits, less any required transfer to surplus or to a fund for the retirement
of any preferred stock.
Under federal law, a depository institution is prohibited from paying a
dividend if the depository institution would thereafter be "undercapitalized" as
determined by the federal bank regulatory agencies. The relevant federal
regulatory agencies, and the state regulatory agency, the Banking Department,
also have authority to prohibit a bank or bank holding company from engaging in
what, in the opinion of such regulatory body, constitutes an unsafe or unsound
practice in conducting its business. The payment of dividends could, depending
upon the financial condition of North Fork Bank, be deemed to constitute such an
unsafe or unsound practice.
TRANSACTIONS WITH AFFILIATES
North Fork Bank is subject to restrictions under federal law which limit
certain transactions with North Fork and its nonbanking subsidiaries, including
loans, other extensions of credit, investments or asset purchases. Such
transactions by a banking subsidiary with any one affiliate are limited in
amount to ten percent of the bank's capital and surplus and, with all affiliates
together, to an aggregate of twenty percent of the bank's capital and surplus.
Furthermore, such loans and extensions of credit, as well as certain other
transactions, are required to be secured in specified amounts. These and certain
other transactions, including any payment of money to North Fork, must be on
terms and conditions that are, or in good faith would be, offered to
nonaffiliated companies.
HOLDING COMPANY LIABILITY
Under Federal Reserve Board policy, a bank holding company is expected to
act as a source of financial strength to each of its banking subsidiaries and
commit resources to their support. Such support may be required at times when,
absent this Federal Reserve Board policy, a holding company may not be inclined
to provide it. As discussed below under "-- Prompt Corrective Action," a bank
holding company in certain circumstances could be required to guarantee the
capital plan of an undercapitalized banking subsidiary.
In the event of a bank holding company's bankruptcy under Chapter 11 of the
U.S. Bankruptcy Code, the trustee will be deemed to have assumed, and is
required to cure immediately, any deficit under any commitment by the debtor
holding company to any of the federal banking agencies to maintain the capital
of an insured depository institution, and any claim for breach of such
obligation will generally have priority over most other unsecured claims.
PROMPT CORRECTIVE ACTION
Under the Federal Deposit Insurance Corporation Improvement Act of 1991,
the federal banking agencies must take prompt supervisory and regulatory actions
against undercapitalized depository institutions. Depository institutions are
assigned one of five capital categories: "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized," and
"critically undercapitalized," and are subject to different regulation
corresponding to the capital category within which the institution falls. Under
certain circumstances, a well capitalized, adequately capitalized or
undercapitalized institution may be treated as if the institution were in the
next lower capital category. A depository institution is generally prohibited
from making capital distributions (including paying dividends) or paying
management fees to a holding company if the institution would thereafter be
undercapitalized. Adequately capitalized institutions cannot accept, renew
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<PAGE> 86
or roll over brokered deposits except with a waiver from the FDIC, and are
subject to restrictions on the interest rates that can be paid on such deposits.
Undercapitalized institutions may not accept, renew or roll over brokered
deposits.
The banking regulatory agencies are permitted or, in certain cases,
required to take certain actions with respect to institutions falling within one
of the three undercapitalized categories. Depending on the level of an
institution's capital, the agency's corrective powers include, among other
things:
- prohibiting the payment of principal and interest on subordinated debt,
- prohibiting the holding company from making distributions without prior
regulatory approval,
- placing limits on asset growth and restrictions on activities; placing
additional restrictions on transactions with affiliates,
- restricting the interest rate the institution may pay on deposits;
prohibiting the institution from accepting deposits from correspondent
banks, and
- in the most severe cases, appointing a conservator or receiver for the
institution.
A banking institution that is undercapitalized is required to submit a
capital restoration plan, and such a plan will not be accepted unless, among
other things, the banking institution's holding company guarantees the plan up
to a certain specified amount. Any such guarantee from a depository
institution's holding company is entitled to a priority of payment in
bankruptcy. As of September 30, 1999, North Fork Bank exceeded the required
capital ratios for classification as "well capitalized." See "-- Capital
Adequacy" below.
CAPITAL ADEQUACY
RISK-BASED CAPITAL AND LEVERAGE RATIOS
<TABLE>
<CAPTION>
RISK-BASED RATIOS
------------------
TIER I TOTAL LEVERAGE
AS OF SEPTEMBER 30, 1999 CAPITAL CAPITAL RATIO(1)
- ------------------------ ------- ------- --------
<S> <C> <C> <C>
North Fork................................................ 12.76% 13.75% 7.65%
North Fork Bank........................................... 10.95 11.96 6.45
JSB(2).................................................... 26.14 28.32 20.97
Jamaica Savings Bank...................................... 23.41 25.44 18.98
Reliance(2)............................................... 16.86 17.72 7.34
Reliance Federal Savings Bank............................. 16.34 17.20 7.08
Minimum required ratio.................................... 4.00 8.00 4.00
"Well capitalized" minimum ratio.......................... 6.00 10.00 5.00
</TABLE>
- ---------------
(1) For all but the most highly-rated bank holding companies and banks, the
leverage ratio is 3 percent plus an additional percentage of at least 100 to
200 basis points.
(2) Each of JSB and Reliance is a unitary thrift holding company and,
accordingly, neither is subject to any minimum required risk-based and
leverage ratios.
The Federal Reserve Board has adopted risk-based capital guidelines for
bank holding companies. The minimum ratio of total capital to risk-weighted
assets (which are the credit risk equivalents of balance sheet assets and
certain off balance sheet items such as standby letters of credit) is 8 percent.
At least half of the total capital must be composed of common stockholders'
equity (including retained earnings), qualifying non-cumulative perpetual
preferred stock (and, for bank holding companies only, a limited amount of
qualifying cumulative perpetual preferred stock), and minority interests in the
equity accounts of consolidated subsidiaries, less goodwill, other disallowed
intangibles and disallowed deferred tax assets, among other items. The remainder
may consist of a limited amount of subordinated debt, other perpetual preferred
stock, hybrid
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<PAGE> 87
capital instruments, mandatory convertible debt securities that meet certain
requirements, as well as a limited amount of reserves for loan losses. The
Federal Reserve Board has also adopted a minimum leverage ratio for bank holding
companies, requiring Tier 1 capital of at least 3 percent of average total
consolidated assets.
The FDIC has also established risk-based and leverage capital guidelines
which state non-member banks are required to meet. These regulations are
generally similar to those established by the Federal Reserve Board for bank
holding companies. The capital ratios for North Fork, North Fork Bank, JSB and
Jamaica Savings Bank are provided in the chart above.
The federal bank regulatory agencies' risk-based and leverage ratios are
minimum supervisory ratios generally applicable to banking organizations that
meet certain specified criteria, assuming that they have the highest regulatory
rating. Banking organizations not meeting these criteria are expected to operate
with capital positions well above the minimum ratios. The federal bank
regulatory agencies may set capital requirements for a particular banking
organization that are higher than the minimum ratios when circumstances warrant.
Federal Reserve Board guidelines also provide that banking organizations
experiencing internal growth or making acquisitions will be expected to maintain
strong capital positions substantially above the minimum supervisory levels,
without significant reliance on intangible assets. In addition, the regulations
of the Federal Reserve Board provide that concentration of credit risk, interest
rate risk and certain risks arising from nontraditional activities, as well as
an institution's ability to manage these risks, are important factors to be
taken into account by regulatory agencies in assessing an organization's overall
capital adequacy. The agencies have also adopted an adjustment to the risk-based
capital calculations to cover market risk in trading accounts of certain
institutions.
The federal bank regulatory agencies recently adopted amendments to their
risk-based capital regulations to provide for the consideration of interest rate
risk in the agencies' determination of a banking institution's capital adequacy.
The amendments require such institutions to effectively measure and monitor
their interest rate risk and to maintain capital adequate for that risk.
As discussed below under "-- Enforcement Powers of the Federal Banking
Agencies," failure to meet the minimum regulatory capital requirements could
subject a banking institution to a variety of enforcement remedies available to
federal regulatory authorities, including, in the most severe cases, the
termination of deposit insurance by the FDIC and the placement of the
institution into conservatorship or receivership.
ENFORCEMENT POWERS OF THE FEDERAL BANKING AGENCIES
The federal bank regulatory agencies have broad enforcement powers,
including the power to terminate deposit insurance, impose substantial fines and
other civil and criminal penalties and appoint a conservator or receiver.
Failure to comply with applicable laws, regulations and supervisory agreements
could subject North Fork, North Fork Bank, JSB or Jamaica Savings Bank, as well
as officers, directors and other institution-affiliated parties of these
organizations, to administrative sanctions and potentially substantial civil
money penalties. In addition to the grounds discussed under "-- Prompt
Corrective Action" above, the appropriate federal banking agency may appoint the
FDIC as conservator or receiver for a banking institution (or the FDIC may
appoint itself, under certain circumstances) if any one or more of a number of
circumstances exist, including, without limitation, the fact that the banking
institution (i) is undercapitalized and has no reasonable prospect of becoming
adequately capitalized; (ii) fails to become adequately capitalized when
required to do so; (iii) fails to submit a timely and acceptable capital
restoration plan; or (iv) materially fails to implement an accepted capital
restoration plan.
CONTROL ACQUISITIONS
The Change in Bank Control Act prohibits a person or group of persons from
acquiring "control" of a bank holding company unless the Federal Reserve Board
has been notified and has not objected to the transaction. Under a rebuttable
presumption established by the Federal Reserve Board, the acquisition of 10% or
more of a class of voting stock of a bank holding company with a class of
securities registered under Section 12 of the Securities Exchange Act of 1934,
such as North Fork, would, under the circumstances set forth in the presumption,
constitute acquisition of control of North Fork.
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<PAGE> 88
In addition, any company is required to obtain the approval of the Federal
Reserve Board under the BHC Act before acquiring 25% (5% in the case of an
acquiror that is a bank holding company) or more of the outstanding common stock
of North Fork, or otherwise obtaining control or a "controlling influence" over
North Fork.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
permits an adequately capitalized and adequately managed bank holding company,
with Federal Reserve Board approval, to acquire banking institutions located in
states other than the bank holding company's home state without regard to
whether the transaction is prohibited under state law. In addition, effective
June 1, 1997, national banks and state banks with different home states are
permitted to merge across state lines, with the approval of the appropriate
federal banking agency, unless the home state of a participating banking
institution has passed legislation prior to that date that expressly prohibits
interstate mergers. De novo interstate branching is permitted if the laws of the
host state so authorizes.
FUTURE LEGISLATION
Various legislation is from time to time introduced in Congress, including
proposals to overhaul the bank regulatory system, expand the powers of banking
institutions and bank holding companies and limit the investments that a
depository institution may make with insured funds. Such legislation may change
banking statutes and the operating environment of North Fork and its
subsidiaries in substantial and unpredictable ways. North Fork cannot determine
the ultimate effect that potential legislation, if enacted, or implementing
regulations, would have upon the financial condition or results of operations of
North Fork or its subsidiaries.
DESCRIPTION OF NORTH FORK CAPITAL STOCK
GENERAL
The authorized capital stock of North Fork consists of 200 million shares
of North Fork common stock, par value $2.50 per share, and 10 million shares of
North Fork preferred stock, par value $1.00 per share. The preferred stock may
be issued in one or more series with such terms and at such times and for such
consideration as the North Fork board of directors determines. At the North Fork
special meeting, North Fork stockholders will vote upon a proposal to amend the
North Fork certificate of incorporation to increase the number of authorized
shares of common stock to 500 million and to reduce the par value per share of
the common stock to $0.01. See "Proposed Amendment to North Fork's Certificate
of Incorporation" on page 87.
As of the North Fork record date, 128,439,378 shares of North Fork common
stock were outstanding, and no shares of North Fork preferred stock were
outstanding.
As of the North Fork record date, 28,047,000 shares of North Fork common
stock were reserved for issuance in accordance with the merger agreement,
2,668,719 shares of North Fork common stock had been reserved for issuance upon
the exercise of outstanding stock options under various employee stock option
plans, and 569,148 shares of North Fork common stock were reserved for issuance
pursuant to North Fork's dividend reinvestment and stock purchase plans.
The following summary of the terms of the capital stock of North Fork is
not intended to be complete and is subject in all respects to the applicable
provisions of the DGCL and is qualified by reference to the certificate of
incorporation and bylaws of North Fork. To obtain copies of these documents, see
"Where You Can Find More Information" on page 89.
COMMON STOCK
The outstanding shares of North Fork common stock are fully paid and
nonassessable. Holders of North Fork common stock are entitled to one vote for
each share held of record on all matters submitted to a vote of the
stockholders. Holders of North Fork common stock do not have preemptive rights
and are not entitled to
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<PAGE> 89
cumulative voting rights with respect to the election of directors. The North
Fork common stock is neither redeemable nor convertible into other securities,
and there are no sinking fund provisions.
Subject to the preferences applicable to any shares of North Fork preferred
stock outstanding at the time, holders of North Fork common stock are entitled
to dividends when and as declared by the North Fork board of directors from
funds legally available therefor and are entitled, in the event of liquidation,
to share ratably in all assets remaining after payment of liabilities.
PREFERRED STOCK
No shares of preferred stock are outstanding. The board of directors of
North Fork may, without further action by the stockholders of North Fork, issue
a series of North Fork preferred stock and fix the rights and preferences of
those shares, including the dividend rights, dividend rates, conversion rights,
exchange rights, voting rights, terms of redemption, redemption price or prices,
liquidation preferences, the number of shares constituting any series and the
designation of such series.
ANTI-TAKEOVER PROVISIONS
The North Fork certificate of incorporation and North Fork's bylaws provide
that the North Fork board of directors is to be divided into three classes as
nearly equal in number as possible. Directors are elected by classes to
three-year terms, so that approximately one-third of the directors of North Fork
are elected at each annual meeting of the stockholders. In addition, North
Fork's bylaws provide that the power to fill vacancies is vested in the North
Fork board of directors. The overall effect of such provisions may be to prevent
a person or entity from seeking to acquire control of North Fork through an
increase in the number of directors on the North Fork board and the election of
designated nominees to fill such newly created vacancies.
COMPARISON OF STOCKHOLDER RIGHTS
North Fork and JSB are incorporated under the laws of the State of
Delaware. If the merger is completed, JSB stockholders, whose rights are
currently governed by the DGCL, the certificate of incorporation of JSB and the
bylaws of JSB, will, upon completion of the merger, become stockholders of North
Fork, and their rights as such will be governed by the DGCL, the North Fork
certificate of incorporation and the bylaws of North Fork. The material
differences between the rights of holders of JSB common stock and the rights of
holders of North Fork common stock, resulting from the differences in their
governing documents, are summarized below.
The following summary does not purport to be a complete statement of the
rights of holders of North Fork common stock under applicable Delaware law, the
North Fork certificate of incorporation and the North Fork bylaws or the rights
of the holders of JSB common stock under applicable Delaware law, the JSB
certificate of incorporation and the JSB bylaws, or a complete description of
the specific provisions referred to herein. This summary contains a list of the
material differences but is not meant to be relied upon as an exhaustive list or
a detailed description of the provisions discussed and is qualified in its
entirety by reference to the DGCL and North Fork's and JSB's governing corporate
instruments, to which the holders of JSB common stock are referred. Copies of
such governing corporate instruments of North Fork and JSB are available,
without charge, to any person, including any beneficial owner to whom this joint
proxy statement-prospectus is delivered, by following the instructions listed
under "Where You Can Find More Information" on page 89.
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SUMMARY OF MATERIAL DIFFERENCES BETWEEN THE
RIGHTS OF NORTH FORK STOCKHOLDERS AND RIGHTS OF JSB STOCKHOLDERS
<TABLE>
<CAPTION>
NORTH FORK STOCKHOLDER RIGHTS JSB STOCKHOLDER RIGHTS
-------------------------------- --------------------------------
<S> <C> <C>
STOCKHOLDER ACTION BY North Fork stockholders may act JSB stockholders may not act by
WRITTEN CONSENT: by written consent. written consent.
STOCKHOLDER NOMINA- North Fork's bylaws permit JSB's bylaws permit stockholders
TIONS AND PROPOSALS FOR stockholders of record to of record to nominate candidates
BUSINESS: nominate candidates for election for election to JSB's board and
to North Fork's board and to to introduce other business that
introduce other business that is is a proper matter for
a proper matter for stockholder stockholder action in con-
action in connection with any nection with any annual meeting
annual meeting of stockholders. of stockholders. In either case,
In either case, the stockholder the stockholder must provide
must provide timely notice to timely notice to the Secretary
the Secretary of North Fork, and of JSB, and the notice must
the notice must contain specific contain specific information as
information as further de- further delineated in JSB's
lineated in North Fork's bylaws. bylaws.
To be timely, notice must be To be timely, notice must be
given to North Fork's Secretary delivered to and received by JSB
not less than 60 days in the not less than 90 days prior to
case of a notice of a nominee the meeting at which directors
and 45 days in the case of a are to be elected or the pro-
notice of a proposed item of posed business is to be
business, nor more than 90 days, conducted, or, if JSB gives less
in either case, before the than 100 days' notice or prior
anniversary of the date of the public disclosure of the meet-
prior year's annual meeting of ing date, then notice by the
stockholders in the case of a stockholder must be received by
notice of a nominee, and the the close of business on the
anniversary of the date on which 10th day following the date on
North Fork first mailed its which notice of the meeting was
proxy materials for the mailed to stockholders or pub-
preceding annual meeting, in the lic disclosure was made,
case of a notice of a proposed whichever occurs first.
item of business. However, in
either case, if the annual
meeting is held on a date that
is not within 30 days before or
after the anniversary of the
date of the prior year's annual
meeting, the notice must be
received no later than the close
of business on the 10th day
following the day on which
notice of the date of the annual
meeting was mailed or public
disclosure of the date of the
annual meeting was made,
whichever first occurs.
BUSINESS COMBINATIONS Delaware law prohibits a JSB has not opted out of the
INVOLVING INTERESTED corporation from engaging in any interested stockholder
STOCKHOLDERS: business combination with an provisions of Delaware law.
interested stockholder (defined
as a 15% stockholder) for a In addition, JSB's certificate
period of three years after the of incorporation provides that
date that stockholder became an the affirmative vote of the
interested stockholder unless owners of at least 80% of
(i) before that
</TABLE>
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<TABLE>
<CAPTION>
NORTH FORK STOCKHOLDER RIGHTS JSB STOCKHOLDER RIGHTS
-------------------------------- --------------------------------
<S> <C> <C>
date, the board of directors of all outstanding shares of JSB
the corporation approved the common stock is necessary to
business combination or the approve a business combination
transaction transforming the transaction with any 10%
stockholder into an interested stockholder. The requirement
stockholder, (ii) upon does not apply if the business
completion of the transaction combination transaction with the
which resulted in the 10% stockholder is approved by a
stockholder becoming an majority of "disinterested
interested stockholder, that directors," which are those
stockholder owned at least 85% directors not affiliated or
of the outstanding voting stock associated with the 10%
(excluding shares owned by stockholder and who were members
directors, officers and certain of the board or recommended to
employee stock ownership plans) be members of the board before
or (iii) on or after the date the 10% stockholder became a 10%
the stockholder became an stockholder.
interested stockholder, the
business combination received This requirement does not apply
the approval of both the cor- if the consideration offered to
poration's directors and the stockholders of JSB in the
holders of two-thirds of the business combination meets the
outstanding voting shares not minimum price requirements set
owned by the interested forth in JSB's certificate of
stockholder voted at a meeting incorporation.
and not by written consent. A
Delaware corporation may opt out
of this provision through an
amendment to its certificate of
incorporation or bylaws adopted
by a majority of the outstand-
ing voting shares. North Fork
has not adopted any such
amendment.
REMOVAL OF DIRECTORS: North Fork stockholders may The JSB certificate provides
remove a director only for cause that JSB stockholders may only
by a vote of the holders of a remove a director for cause and
majority of the then- only by the affirmative vote of
outstanding shares entitled to at least 80% of the outstanding
vote thereon. shares entitled to vote.
CONSIDERATION OF OTHER The North Fork certificate of JSB is also governed by the
CONSTITUENCIES: incorporation does not contain provisions of Delaware law. In
any provision specifically addition, the JSB certificate of
authorizing or requiring the incorporation provides that when
North Fork board to consider the evaluating any offer by a third
interests of any constituencies party for a merger or similar
of North Fork other than its transaction, the JSB board may,
stockholders in considering in connection with the exercise
whether to approve or oppose any of its judgment in determining
corporate action, including a what is in the best interest of
merger or similar transaction. JSB and its stockholders, give
Pursuant to case law due consideration to all
interpreting statutory relevant factors, including,
provisions of Delaware law, the without limitation, the social
board of directors of a Delaware and economic effect of
corporation such as North Fork acceptance of the offer on the
generally may consider the current and future customers and
impact of such a transaction on employees of JSB and its sub-
North Fork's other constituen- sidiaries, on the communities in
cies, provided that doing so which JSB and its subsidiaries
bears some reasonable operate, on the ability of JSB
relationship to general to fulfill its objectives as a
stockholder interests. savings and loan holding company
and
</TABLE>
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<TABLE>
<CAPTION>
NORTH FORK STOCKHOLDER RIGHTS JSB STOCKHOLDER RIGHTS
-------------------------------- --------------------------------
<S> <C> <C>
on the ability of Jamaica
Savings Bank to fulfill the
objectives of a federally-
chartered stock form savings
bank under applicable statutes
and regulations.
PERSONAL LIABILITY OF Subject to Delaware law, the The JSB certificate of
DIRECTORS: North Fork certificate of incorporation limits the
incorporation limits the personal liability of directors
personal liability of directors of JSB for monetary damages
to North Fork or its resulting from a breach of
stockholders for monetary fiduciary duty as a director to
damages for breach of fidu- the fullest extent permitted
ciary duty as a director to under Delaware law.
$25,000 per occurrence.
AMENDMENT OF North Fork's bylaws may be The JSB certificate of
BY-LAWS: amended by the affirmative vote incorporation provides that the
of the holders of a majority of JSB board is empowered to adopt,
the outstanding shares of North amend or repeal the bylaws, by a
Fork capital stock present and vote of the majority of the
voting at a meeting at which a total number of authorized
quorum is present. The North directors (regardless of any
Fork certificate of vacancies existing at such
incorporation also authorizes time). The certificate of
the board to adopt, amend or incorporation further provides
repeal the bylaws. that JSB's stockholders may
adopt, amend or repeal the
bylaws by the affirmative vote
of the holders of at least 80%
of the voting stock, voting
together as a single class.
AMENDMENT OF The DGCL provides that amend- The JSB certificate of
CERTIFICATE: ments to a corporation's incorporation provides that, in
certificate of incorporation addition to the requirements
generally require a resolution imposed by the DGCL and
by the corporation's board of discussed above, the affirmative
directors setting forth the vote of the holders of at least
amendment proposed and declaring 80% of the outstanding JSB
its advisability and the voting stock, voting together as
adoption of such amendment by a single class, is required to
the affirmative vote of the amend or repeal those provisions
holders of a majority of the of the JSB certificate of
corporation's outstanding stock incorporation relating to, among
entitled to vote thereon. The other things, (i) the amendment
North Fork certificate of of any provisions of the JSB
incorporation contains no certificate of incorporation or
further provisions concerning the JSB bylaws, (ii) the
the amendment of the North Fork prohibition on stockholder
certificate of incorporation. action by written consent, (iii)
the persons authorized to call
special meetings of
stockholders, (iv) the
classification of the JSB board
of directors and the election
and removal of directors, (v)
the requirements for
authorization of a business
combination with an interested
stockholder or (vi) the in-
demnification of JSB's directors
and officers.
</TABLE>
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<TABLE>
<CAPTION>
NORTH FORK STOCKHOLDER RIGHTS JSB STOCKHOLDER RIGHTS
-------------------------------- --------------------------------
<S> <C> <C>
SPECIAL MEETING OF Special meetings of North Fork Special meetings of JSB
STOCKHOLDERS: stockholders may be called by stockholders may be called by
the board, the Chairman or the the board pursuant to a
President. resolution adopted by a majority
of the total number of
authorized directors (regardless
of any vacancies existing at
such time).
LIMIT ON STOCKHOLDER The North Fork certificate of The JSB certificate of
VOTING: incorporation has no provision incorporation contains a
specifically limiting provision limiting the voting
stockholder voting rights. rights of any person owning more
than 10% of the outstanding JSB
voting shares. Any record holder
of shares of JSB voting stock
that are beneficially owned by a
person who beneficially owns
more than 10% of the then-
outstanding JSB voting shares is
not entitled or permitted to
vote such record holders' pro
rata portion of the shares of
JSB voting stock held by such
beneficial owner in excess of
the 10% limit. The number of
votes which may be cast by any
such record holder equals the
total number of votes which a
single record holder of all JSB
voting stock owned by such
beneficial owner would be
entitled to cast, multiplied by
a fraction, the numerator of
which is the number of shares of
JSB voting stock both
beneficially owned by such
beneficial owner and held of
record by such record holder and
the denominator of which is the
total number of shares of JSB
voting stock beneficially owned
by such beneficial owner.
</TABLE>
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<PAGE> 94
PROPOSED AMENDMENT TO NORTH FORK'S CERTIFICATE OF INCORPORATION
At the North Fork special meeting, North Fork stockholders will be asked to
approve an amendment to North Fork's certificate of incorporation. The amendment
will increase the number of authorized shares of North Fork common stock and
reduce the par value of North Fork's common stock.
Approval by North Fork stockholders of this amendment is not a condition to
completing the merger.
Increase of Authorized Common Stock. North Fork's certificate of
incorporation currently authorizes North Fork to issue up to 200 million shares
of common stock. The amendment to the certificate of incorporation would
increase the number of authorized shares of North Fork common stock to 500
million shares. As of December 15, 1999, 145,126,522 shares of North Fork common
stock were issued, including 16,687,144 shares held in North Fork's treasury.
North Fork expects that it will issue approximately 28 million shares to
JSB stockholders in the merger and that approximately 4.8 million shares of the
combined company will be required to be reserved for issuance under North Fork
employee stock options, JSB employee stock options converted into North Fork
employee stock options in connection with the merger and other stock-based
awards and for similar purposes. While the 200 million shares of North Fork
common stock currently authorized for issuance under North Fork's certificate of
incorporation are sufficient to complete the merger and to meet obligations to
deliver shares under employee stock options and similar arrangements, after the
merger is completed the combined company would have only approximately 22
million shares available for future issuance if the proposed amendment to North
Fork's certificate of incorporation is not approved by North Fork stockholders.
Reason for Increase in Common Stock. At present, North Fork has no plans
to issue additional authorized but unissued shares of its common stock for any
purpose other than to satisfy its obligations in connection with the merger and
to meet its obligations to deliver shares under employee stock options and
similar arrangements. North Fork believes, however, it is desirable to have
additional shares available for other corporate reasons that might arise in the
future, such as mergers, acquisitions, stock splits or capital raising. Under
some circumstances, it is possible for a company to use unissued shares for
antitakeover purposes, but North Fork has no present intention to do so. Whether
or not any future issuance of shares unrelated to the merger would be submitted
for a stockholder vote depends upon the nature of the issuance, Delaware law,
NYSE requirements and the judgment of North Fork's board of directors at that
time.
Reduction of Par Value of Common Stock. North Fork's certificate of
incorporation currently provides for common stock with a par value of $2.50 per
share. The amendment to the certificate of incorporation would reduce the par
value per share of North Fork common stock to $0.01 in order to reduce the total
aggregate par value of North Fork's capital stock to a nominal amount.
Reason for Reduction of Par Value. North Fork is proposing a reduction of
the par value of its common stock so that the aggregate par value of its issued
common stock will be reduced to a nominal amount. The reduction in par value
will have the effect of increasing the amount of North Fork's surplus legally
available for distribution to stockholders. As of September 30, 1999, North Fork
had 145,126,522 shares of common stock issued, which represented $362,816,305 in
capital ($2.50 multiplied by the number of shares issued) as that term is
defined under Delaware law. This $362,816,305 of capital is not available to be
distributed to stockholders under applicable Delaware law. The effect of the
reduction of par value would be to increase the amount of surplus legally
available for distribution to stockholders. If the reduction in par value had
been effected as of September 30, 1999, the amount of capital would have been
reduced to $1,451,265. Although North Fork has no current plan or intention to
increase its current quarterly dividend or to pay any special cash or in-kind
distribution, North Fork believes that it is desirable to have a nominal par
value and the additional dividend capacity associated therewith.
If the amendment to North Fork's certificate of incorporation is approved,
Section (a) of Article Fourth of the North Fork certificate of incorporation
would read in its entirety as follows:
FOURTH: Capital Stock. (a) The authorized shares which the Corporation has
authority to issue shall be five hundred ten million (510,000,000), divided
into five hundred million (500,000,000) shares
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<PAGE> 95
of common stock, par value of one cent ($.01) each, and ten million
(10,000,000) shares of Preferred Stock, par value of one dollar ($1.00) each
which Preferred Stock may be divided into and issued in series as described
herein.
The North Fork board of directors believes that the proposed amendment to
the North Fork certificate of incorporation is advisable and in the best
interests of North Fork stockholders and recommends that North Fork stockholders
vote "FOR" the proposed amendment to the certificate of incorporation.
LEGAL MATTERS
The validity of the North Fork common stock to be issued in connection with
the merger will be passed upon for North Fork by Skadden, Arps, Slate, Meagher &
Flom LLP, New York, New York. In addition, certain federal income tax matters
relating to the merger will be passed upon for North Fork by Skadden, Arps,
Slate, Meagher & Flom LLP, New York, New York, and for JSB by Thacher Proffitt &
Wood, New York, New York.
EXPERTS
The consolidated financial statements of North Fork and its subsidiaries
incorporated in this joint proxy statement-prospectus by reference to North
Fork's Annual Report on Form 10-K for the year ended December 31, 1998 have been
so incorporated by reference in reliance on the report with respect to those
financial statements of KPMG LLP, independent accountants, given upon the
authority of that firm as experts in accounting and auditing.
The consolidated financial statements of JSB and its subsidiaries
incorporated in this joint proxy statement-prospectus by reference to JSB's
Annual Report on Form 10-K for the year ended December 31, 1998 have been so
incorporated by reference in reliance on the report with respect to those
financial statements of KPMG LLP, independent accountants, given upon the
authority of that firm as experts in accounting and auditing.
The consolidated statement of condition of Reliance and subsidiary as of
June 30, 1999 and the related consolidated statements of income, changes in
stockholders' equity, comprehensive income and cash flows for the year then
ended, incorporated in this joint proxy statement-prospectus by reference to
North Fork's Current Report on Form 8-K filed on December 30, 1999, have been so
incorporated by reference in reliance on the report with respect to those
financial statements of Arthur Andersen LLP, independent accountants, given upon
the authority of that firm as experts in accounting and auditing.
The consolidated statement of condition of Reliance and subsidiary as of
June 30, 1998 and the related consolidated statements of income, changes in
stockholders' equity, comprehensive income and cash flows for each of the years
in the two-year period then ended, incorporated in this joint proxy
statement-prospectus by reference to North Fork's Current Report on Form 8-K
filed on December 30, 1999, have been so incorporated by reference in reliance
on the report with respect to those financial statements of KPMG LLP,
independent accountants, given upon the authority of that firm as experts in
accounting and auditing.
STOCKHOLDER PROPOSALS
North Fork stockholders may submit proposals to be considered for
stockholder action at North Fork's 2000 Annual Meeting of Stockholders if they
do so in accordance with applicable regulations of the SEC and applicable
provisions of North Fork's bylaws. Any of these proposals must have been
received by the Secretary of North Fork no later than November 25, 1999 in order
to be considered for inclusion in the proxy materials for North Fork's 2000
Annual Meeting of stockholders. If a stockholder desires to bring business
before the 2000 Annual Meeting of Stockholders that is not a proposal submitted
to North Fork for inclusion in North Fork's proxy statement, notice must be
received by the Secretary of North Fork no earlier than December 25, 1999 and no
later than February 8, 2000.
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<PAGE> 96
JSB will hold a 2000 Annual Meeting of Stockholders only if the merger is
not consummated before the time of such meeting. Any proposals of stockholders
intended to be presented at the 2000 Annual Meeting of Stockholders, if such
meeting is held, must have been received by the Corporate Secretary of JSB no
later than November 30, 1999 in order to be considered for inclusion in the JSB
proxy materials relating to that meeting. In order for a stockholder to properly
bring business before the 2000 Annual Meeting, if held, the stockholder must
give written notice to the Corporate Secretary of JSB not less than 90 days
before the time originally fixed for such meeting; provided that, in the event
that less than 100 days' notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be timely
must be received not later than the close of business on the tenth day following
the day on which such notice of the annual meeting was mailed or such public
disclosure was made. The notice must include certain substantive information
required by JSB's bylaws.
OTHER MATTERS
As of the date of this joint proxy statement-prospectus, neither the North
Fork board of directors nor the JSB board of directors knows of any matters that
will be presented for consideration at the North Fork special meeting or the JSB
special meeting other than as described in this joint proxy
statement-prospectus. If any other matters do properly come before the North
Fork special meeting or the JSB special meeting and are voted upon, the enclosed
proxy will be deemed to confer discretionary authority on the individuals named
as proxies to vote the shares represented by such proxy as to any of those other
matters. The individuals named as proxies intend to vote or not to vote in
accordance with the recommendation of management.
WHERE YOU CAN FIND MORE INFORMATION
North Fork has filed with the SEC a registration statement under the
Securities Act of 1933 that registers the distribution of the shares of North
Fork common stock to be issued to JSB stockholders in connection with the
merger. The registration statement, including the attached exhibits and
schedules, contains additional relevant information about North Fork and North
Fork common stock. The rules and regulations of the SEC allow us to omit certain
information included in the registration statement from this joint proxy
statement-prospectus.
In addition, North Fork, JSB and Reliance file reports, proxy statements
and other information with the SEC under the Securities Exchange Act of 1934.
You may read and copy this information at the following locations of the SEC:
<TABLE>
<S> <C> <C>
Public Reference Room Northeast Regional Midwest Regional Office
450 Fifth Street, N.W. Office 500 West Madison Street
Room 1024 7 World Trade Center Suite 1400
Washington, D.C. 20549 Suite 1300 Chicago, Illinois 60661-2511
New York, New York 10048
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates.
The SEC also maintains an Internet world wide web site that contains
reports, proxy statements and other information about issuers, like North Fork,
JSB and Reliance, who file electronically with the SEC. The address of that site
is http://www.sec.gov.
You can also inspect reports, proxy statements and other information about
North Fork and JSB at the offices of the NYSE, 20 Broad Street, New York, New
York 10005, and information about Reliance at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
The SEC allows North Fork and JSB to "incorporate by reference" information
into this joint proxy statement-prospectus. This means that the companies can
disclose important information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is considered
to be a part of this joint proxy statement-prospectus, except for any
information that is superseded by information that is included directly in this
document.
89
<PAGE> 97
This joint proxy statement-prospectus incorporates by reference the
documents listed below that North Fork and JSB have previously filed with the
SEC. They contain important information about our companies and their financial
condition.
<TABLE>
<CAPTION>
NORTH FORK SEC FILINGS PERIOD
- ---------------------- --------------------------------------------
<S> <C>
Annual Report on Form 10-K.................. Year ended December 31, 1998, as filed on
March 29, 1999
Quarterly Report on Form 10-Q............... Quarter ended March 31, 1999, as filed on
May 14, 1999
Quarterly Report on Form 10-Q............... Quarter ended June 30, 1999, as filed on
August 6, 1999
Quarterly Report on Form 10-Q............... Quarter ended September 30, 1999, as filed
on November 15, 1999
The description of North Fork common stock
set forth in North Fork's registration
statements filed by North Fork pursuant to
Section 12 of the Exchange Act including any
amendment or report filed for purposes of
updating any such description
The portions of North Fork's proxy statement
for the annual meeting of stockholders held
on April 27, 1999 that have been
incorporated by reference in the 1998 North
Fork Form 10-K
Current Reports on Form 8-K................. Filed on August 16, 1999, August 31, 1999
and December 30, 1999
</TABLE>
<TABLE>
<CAPTION>
JSB SEC FILINGS PERIOD
- --------------- --------------------------------------------
<S> <C>
Annual Report on Form 10-K.................. Year ended December 31, 1998, as filed on
March 29, 1999
Quarterly Report on Form 10-Q............... Quarter ended March 31, 1999, as filed on
May 13, 1999
Quarterly Report on Form 10-Q............... Quarter ended June 30, 1999, as filed on
August 9, 1999
Quarterly Report on Form 10-Q............... Quarter ended September 30, 1999, as filed
on November 10, 1999
The description of JSB's common stock set
forth in JSB's registration statement on
Form 8-A.................................... Filed on July 2, 1997
The portions of JSB's proxy statement for
the annual meeting of stockholders held on
May 11, 1999 that have been incorporated by
reference in the 1998 JSB Form 10-K
Current Report on Form 8-K.................. Filed on August 18, 1999 (as amended on
August 31, 1999)
</TABLE>
All documents and reports filed by North Fork and JSB with the SEC between
the date of this joint proxy statement-prospectus and the dates of the North
Fork special meeting and the JSB special meeting are incorporated by reference
into this document. These documents include periodic reports, such as Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form
8-K, as well as proxy statements.
North Fork has supplied all information contained or incorporated by
reference in this joint proxy statement-prospectus relating to North Fork, as
well as all pro forma financial information, and JSB has supplied all relevant
information relating to JSB.
You can obtain any of the documents incorporated by reference in this
document through North Fork or JSB, as the case may be, or from the SEC through
the SEC's Internet world wide web site at the address described above. Documents
incorporated by reference are available from the companies without charge,
excluding any exhibits to those documents, unless the exhibit is specifically
incorporated by reference as an
90
<PAGE> 98
exhibit in this joint proxy statement-prospectus. You can obtain documents
incorporated by reference in this joint proxy statement-prospectus by requesting
them in writing or by telephone from the appropriate company at the following
addresses:
<TABLE>
<S> <C>
NORTH FORK BANCORPORATION, INC. JSB FINANCIAL, INC.
275 Broad Hollow Road 303 Merrick Road
Melville, New York 11747 Lynbrook, New York 11563
(631) 844-1004 (516) 887-7000, ext. 372
Attention: Aurelie S. Graf Attention: Edward Lekstutis
Corporate Secretary Vice President
</TABLE>
If you would like to request documents, please do so by February 3, 2000,
to receive them before the special meetings. If you request any incorporated
documents from us, we will mail them to you by first class mail, or another
equally prompt means, within one business day after we receive your request.
We have not authorized anyone to give any information or make any
representation about the merger or our companies that is different from, or in
addition to, that contained in this joint proxy statement-prospectus or in any
of the materials that we have incorporated into this joint proxy
statement-prospectus. Therefore, if anyone gives you this type of information,
you should not rely on it. If you are in a jurisdiction where offers to exchange
or sell, or solicitations of offers to exchange or purchase, the securities
offered by this document or the solicitation of proxies is unlawful, or if you
are a person to whom it is unlawful to direct these types of activities, then
the offer presented in this document does not extend to you. The information
contained in this document speaks only as of the date of this document unless
the information specifically indicates that another date applies.
FORWARD-LOOKING STATEMENTS
This joint proxy statement-prospectus, including information included or
incorporated by reference in this document, contains certain forward-looking
statements with respect to the financial condition, results of operations,
plans, objectives, future performance and business of each of North Fork, JSB
and Reliance, as well as certain information relating to the merger and/or the
Reliance merger, including, without limitation:
- statements relating to the cost savings and accretion to reported
earnings estimated to result from the merger or the Reliance merger,
- statements relating to revenues of the combined company after the merger
or the Reliance merger,
- statements relating to the restructuring charges estimated to be incurred
in connection with the merger or the Reliance merger, and
- statements preceded by, followed by or that include the words "believes,"
"expects," "anticipates," "estimates" or similar expressions.
These forward-looking statements involve certain risks and uncertainties.
Actual results may differ materially from those contemplated by the
forward-looking statements due to, among others, the following factors:
- expected cost savings from the merger and/or the Reliance merger may not
be fully realized or realized within the expected time frame,
- revenues following the merger and/or the Reliance merger may be lower
than expected,
- competitive pressures among financial services companies may increase
significantly,
- costs or difficulties related to the integration of the businesses of
North Fork, JSB and/or Reliance may be greater than expected,
- changes in the interest rate environment may reduce interest margins,
91
<PAGE> 99
- general economic conditions, whether internationally, nationally or in
the regional and local market areas in which North Fork, JSB and/or
Reliance are doing business, may be less favorable than expected,
- legislative or regulatory changes may adversely affect the businesses in
which North Fork, JSB and/or Reliance are engaged,
- technological changes, including year 2000 data systems compliance
issues, may be more difficult or expensive than anticipated, and
- changes may occur in the securities markets.
See "Where You Can Find More Information" on page 89.
92
<PAGE> 100
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)
The following pro forma condensed combined financial statements are based
on the historical financial statements of North Fork, JSB and Reliance, under
the assumptions and adjustments set forth in the accompanying notes. The Pro
Forma Condensed Combined Balance Sheets give effect to the merger and the
Reliance merger as if such transactions had become effective as of September 30,
1999. The Pro Forma Condensed Combined Statements of Income give effect to the
merger as if it had become effective as of the beginning of each of the periods
for which information is presented and the Reliance merger as if it had become
effective as of January 1, 1998. The pro forma information assumes that the
merger is accounted for using the pooling-of-interests method of accounting and
the Reliance merger is accounted for using the purchase method of accounting.
Reliance's annual reporting periods are as of and for the year ended June
30, whereas North Fork and JSB utilize a calendar year reporting period.
Reliance's financial results for the nine months ended September 30, 1999 and
1998, and the twelve months ended December 31, 1998 have been utilized in order
to conform to the calendar year reporting period of North Fork.
The unaudited pro forma condensed combined financial statements should be
read in conjunction with and are qualified in their entirety by the historical
financial statements, including the notes thereto, of North Fork, JSB and
Reliance incorporated by reference into this document. See "Where You Can Find
More Information" on page 89. Certain JSB and Reliance financial information has
been reclassified to conform with North Fork's financial information.
The unaudited pro forma condensed combined financial statements do not give
effect to the anticipated cost savings and revenue enhancement opportunities
that could result from the merger or the Reliance merger. The pro forma
information is not necessarily indicative of the combined financial position or
the results of operations of the companies in the future or of the combined
financial position or the results of operations which would have been realized
had the mergers been consummated during the periods or as of the dates for which
the pro forma information is presented.
93
<PAGE> 101
NORTH FORK BANCORPORATION, INC.
COMBINED WITH RELIANCE BANCORP, INC. & JSB FINANCIAL, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEETS
(UNAUDITED)
SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA NORTH
ADJUSTMENTS FORK/
NORTH -------------------- RELIANCE
FORK RELIANCE DEBITS CREDITS PRO FORMA JSB
----------- ---------- -------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash & Due from Banks................... $ 164,416 $ 29,623 $124,731(6) $124,731(3a) $ 170,153 $ 12,753
23,886(3c)
Money Market Investments................ 200,156 -- 200,156 32,500
Securities:
Available-for-Sale..................... 3,598,197 1,012,881 412(5) 14,370(3b) 4,467,180 90,006
209(3b)
5,000(5)
124,731(6)
Held-to-Maturity....................... 1,279,978 309,679 1,589,657 193,540
----------- ---------- -------- -------- ----------- ----------
Total Securities....................... 4,878,175 1,322,560 412 144,310 6,056,837 283,546
----------- ---------- -------- -------- ----------- ----------
Loans, Net of Unearned Income........... 6,386,042 1,007,594 7,393,636 1,232,745
Allowance for Loan Losses.............. 68,950 9,068 78,018 5,937
----------- ---------- -------- -------- ----------- ----------
Net Loans.............................. 6,317,092 998,526 -- -- 7,315,618 1,226,808
----------- ---------- -------- -------- ----------- ----------
Premises & Equipment, Net............... 73,600 17,779 91,379 18,310
Accrued Interest Receivable............. 71,989 14,148 86,137 8,840
Intangible Assets....................... 81,052 53,232 342,516 --
305,524(3b) 171,702(3d)
14,370(3b)
18,574(3c)
41,466(4)
Other Assets............................ 128,367 43,031 89(3b) 176(5) 186,307 13,013
5,312(3c)
9,684(4)
Total Assets..................... $11,914,847 $2,478,899 $520,162 $464,805 $14,449,103 $1,595,770
=========== ========== ======== ======== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand Deposits......................... $ 1,461,517 $ 62,615 $ 1,524,132 $ 54,925
Savings, N.O.W. & Money Market
Deposits............................... 2,893,521 651,252 3,544,773 647,948
Time Deposits........................... 2,215,860 853,985 3,069,845 427,803
----------- ---------- -------- -------- ----------- ----------
Total Deposits................... 6,570,898 1,567,852 -- -- 8,138,750 1,130,676
----------- ---------- -------- -------- ----------- ----------
Federal Funds Purchased & Securities
Sold Under Agreements to Repurchase.... 2,676,416 328,334 3,004,750 --
Other Borrowings........................ 1,494,000 333,655 1,827,655 50,000
Accrued Expenses & Other Liabilities.... 256,649 27,356 -- 51,150(4) 335,155 40,862
----------- ---------- -------- -------- ----------- ----------
Total Liabilities................ 10,997,963 2,257,197 -- 51,150 13,306,310 1,221,538
----------- ---------- -------- -------- ----------- ----------
Capital Securities...................... $ 199,308 $ 50,000 $ 5,000(5) $ -- $ 244,308 $ --
STOCKHOLDERS' EQUITY
Preferred Stock......................... $ -- $ -- $ -- $ -- $ -- $ --
Common Stock............................ 362,816 108 108(3d) -- 362,816 160
Additional Paid in Capital.............. 34,685 121,309 42,501(3b) -- (7,816) 170,219
121,309(3d)
Retained Earnings....................... 646,373 119,607 119,607(3d) -- 646,373 345,616
Accumulated Other Comprehensive
Income -- Unrealized (Losses)/Gains on
Securities Available-for-Sale, Net of
Taxes.................................. (51,018) (14,654) 120(3b) 14,654(3d) (50,902) 38,388
236(5)
Deferred Compensation................... (21,944) (4,093) -- 4,093(3d) (21,944) (4,758)
Treasury Stock.......................... (253,336) (50,575) 124,731(3a) 348,025(3b) (30,042) (175,393)
50,575(3d)
----------- ---------- -------- -------- ----------- ----------
Total Stockholders' Equity....... $ 717,576 $ 171,702 $408,376 $417,583 $ 898,485 $ 374,232
----------- ---------- -------- -------- ----------- ----------
Total Liabilities and
Stockholders' Equity............ $11,914,847 $2,478,899 $413,376 $468,733 $14,449,103 $1,595,770
=========== ========== ======== ======== =========== ==========
<CAPTION>
PRO FORMA ALL
ADJUSTMENTS COMBINED
-------------------- TRANSACTIONS
DEBITS CREDITS PRO FORMA
-------- -------- ------------
<S> <C> <C> <C>
ASSETS
Cash & Due from Banks................... $ 182,906
Money Market Investments................ 232,656
Securities:
Available-for-Sale..................... 4,557,186
Held-to-Maturity....................... 1,783,197
-------- -------- -----------
Total Securities....................... -- -- 6,340,383
-------- -------- -----------
Loans, Net of Unearned Income........... 8,626,381
Allowance for Loan Losses.............. 83,955
-------- -------- -----------
Net Loans.............................. -- -- 8,542,426
-------- -------- -----------
Premises & Equipment, Net............... 109,689
Accrued Interest Receivable............. 94,977
Intangible Assets....................... 342,516
Other Assets............................ $ 6,357(8) -- $ 205,677
Total Assets..................... $ 6,357 $ -- $16,051,230
======== ======== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand Deposits......................... $ 1,579,057
Savings, N.O.W. & Money Market
Deposits............................... 4,192,721
Time Deposits........................... 3,497,648
-------- -------- -----------
Total Deposits................... -- -- 9,269,426
-------- -------- -----------
Federal Funds Purchased & Securities
Sold Under Agreements to Repurchase.... 3,004,750
Other Borrowings........................ 1,877,655
Accrued Expenses & Other Liabilities.... -- 43,223(8) 419,240
-------- -------- -----------
Total Liabilities................ -- 43,223 14,571,071
-------- -------- -----------
Capital Securities...................... $ -- $ -- $ 244,308
STOCKHOLDERS' EQUITY
Preferred Stock......................... $ -- $ -- $ --
Common Stock............................ $430,760(10) 69,513(7a) 1,729
Additional Paid in Capital.............. 69,513(7a) 430,760(10) 343,499
175,393(7b)
4,758(7c)
Retained Earnings....................... 36,866(8) 955,123
Accumulated Other Comprehensive
Income -- Unrealized (Losses)/Gains on
Securities Available-for-Sale, Net of
Taxes.................................. (12,514)
Deferred Compensation................... -- 4,758(7c) (21,944)
Treasury Stock.......................... -- 175,393(7b) (30,042)
-------- -------- -----------
Total Stockholders' Equity....... $717,290 $680,424 $ 1,235,851
-------- -------- -----------
Total Liabilities and
Stockholders' Equity............ $717,290 $723,647 $16,051,230
======== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
NORTH
FORK/
NORTH RELIANCE
FORK RELIANCE PRO FORMA JSB
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED CAPITAL RATIOS:
Tier 1 Capital Ratio...................... 12.76% 16.86% 10.12% 26.14%
Risk Adjusted Capital Ratio............... 13.75 17.72 11.10 28.32
Leverage Ratio............................ 7.65 7.34 5.86 20.93
<CAPTION>
ALL
COMBINED
TRANSACTIONS
PRO FORMA
------------
<S> <C> <C>
SELECTED CAPITAL RATIOS:
Tier 1 Capital Ratio...................... 12.39%
Risk Adjusted Capital Ratio............... 13.58
Leverage Ratio............................ 7.46
</TABLE>
See "Notes to the Pro Forma Condensed Combined Financial Statements"
94
<PAGE> 102
NORTH FORK BANCORPORATION, INC.
COMBINED WITH RELIANCE BANCORP, INC. & JSB FINANCIAL, INC.
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA ALL
ADJUSTMENTS NORTH FORK/ COMBINED
------------------ RELIANCE TRANSACTIONS
NORTH FORK RELIANCE DEBITS CREDITS PRO FORMA JSB PRO FORMA
---------- -------- ------- ------- ----------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Income................. $604,444 $124,034 $13,165 --(6) $715,313 $84,526 $799,839
Interest Expense................ 267,591 68,367 335,958 27,981 363,939
-------- -------- ------- ------ -------- ------- --------
Net Interest Income........... 336,853 55,667 13,165 -- 379,355 56,545 435,900
Provision for Loan Losses....... 3,750 150 3,900 13 3,913
-------- -------- ------- ------ -------- ------- --------
Net Interest Income after
Provision for Loan Losses... 333,103 55,517 13,165 -- 375,455 56,532 431,987
Non-Interest Income............. 44,314 4,203 48,517 1,212 49,729
Real Estate Operations, net..... -- -- -- 1,223 1,223
Income from Money Centers....... -- 2,071 2,071 -- 2,071
Net Securities Gains............ 9,900 112 10,012 -- 10,012
Other Non-Interest Expense...... 112,943 27,744 140,687 21,175 161,862
Capital Securities Costs........ 12,633 3,073 15,706 -- 15,706
Amortization of Intangible
Assets........................ 6,267 3,423 9,805 $3,423(2) 16,072 -- 16,072
-------- -------- ------- ------ -------- ------- --------
Income before Income Taxes.... 255,474 27,663 22,970 3,423 263,590 37,792 301,382
Provision for Income Taxes...... 89,416 12,120 -- 4,608(6) 96,928 16,218 113,146
-------- -------- ------- ------ -------- ------- --------
Net Income.................... $166,058 $ 15,543 $22,970 $8,031 $166,662 $21,574 $188,236
======== ======== ======= ====== ======== ======= ========
Earnings Per Share -- Basic..... $1.21 $1.88 $1.17 $2.32 $1.11
Earnings Per Share -- Diluted... $1.20 $1.78 $1.16 $2.27 $1.09
Weighted Average Shares
Outstanding -- Basic.......... 137,342 8,261 142,012 9,319 169,969
Weighted Average Shares
Outstanding -- Diluted........ 138,197 8,715 143,775 9,520 172,335
</TABLE>
See "Notes to the Pro Forma Condensed Combined Financial Statements"
95
<PAGE> 103
NORTH FORK BANCORPORATION, INC.
COMBINED WITH RELIANCE BANCORP, INC. & JSB FINANCIAL, INC.
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA ALL
ADJUSTMENTS NORTH FORK/ COMBINED
------------------ RELIANCE TRANSACTIONS
NORTH FORK RELIANCE DEBITS CREDITS PRO FORMA JSB PRO FORMA
---------- -------- ------- ------- ----------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Income..................... $560,984 $121,362 $18,676 --(6) $663,670 $89,466 $753,136
Interest Expense.................... 245,888 68,500 314,388 29,098 343,486
-------- -------- ------- ------ -------- ------- --------
Net Interest Income............... 315,096 52,862 18,676 -- 349,282 60,368 409,650
Provision for Loan Losses........... 14,500 600 15,100 41 15,141
-------- -------- ------- ------ -------- ------- --------
Net Interest Income after
Provision for Loan Losses....... 300,596 52,262 18,676 -- 334,182 60,327 394,509
Non-Interest Income................. 41,588 3,649 45,237 4,461 49,698
Real Estate Operations, net......... -- -- -- 287 287
Income from Money Centers........... -- 1,944 1,944 -- 1,944
Net Securities Gains................ 2,318 58 2,376 -- 2,376
Other Non-Interest Expense.......... 111,681 27,636 139,317 20,818 160,135
Capital Securities Costs............ 12,633 1,746 14,379 -- 14,379
Amortization & Write-down of
Intangible Assets................. 12,403 3,422 9,804 $3,422(2) 22,207 -- 22,207
Merger Related Restructure Charge... 52,452 -- 52,452 -- 52,452
-------- -------- ------- ------ -------- ------- --------
Income before Income Taxes........ 155,333 25,109 28,480 3,422 155,384 44,257 199,641
Provision for Income Taxes.......... 44,394 11,237 -- 6,537(6) 49,094 10,030 59,124
-------- -------- ------- ------ -------- ------- --------
Net Income........................ $110,939 $ 13,872 $28,480 $9,959 $106,290 $34,227 $140,517
======== ======== ======= ====== ======== ======= ========
Earnings Per Share -- Basic......... $0.79 $1.52 $0.75 $3.47 $0.82
Earnings Per Share -- Diluted....... $0.78 $1.44 $0.74 $3.37 $0.80
Weighted Average Shares
Outstanding -- Basic.............. 140,547 9,107 141,947 9,864 171,539
Weighted Average Shares
Outstanding -- Diluted............ 141,680 9,651 144,168 10,159 174,645
</TABLE>
See "Notes to the Pro Forma Condensed Combined Financial Statements"
96
<PAGE> 104
NORTH FORK BANCORPORATION, INC.
COMBINED WITH RELIANCE BANCORP, INC. & JSB FINANCIAL, INC.
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA ALL
ADJUSTMENTS NORTH FORK/ COMBINED
----------------- RELIANCE TRANSACTIONS
NORTH FORK RELIANCE DEBITS CREDITS PRO FORMA JSB PRO FORMA
---------- -------- ------- ------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Income........................ $753,100 $163,762 $24,513 --(6) $892,349 $117,813 $1,010,162
Interest Expense....................... 328,456 92,272 420,728 38,476 459,204
-------- -------- ------- ------- -------- -------- ----------
Net Interest Income.................. 424,644 71,490 24,513 -- 471,621 79,337 550,958
Provision for Loan Losses.............. 15,500 950 16,450 51 16,501
-------- -------- ------- ------- -------- -------- ----------
Net Interest Income after Provision
for Loan Losses.................... 409,144 70,540 24,513 -- 455,171 79,286 534,457
Non-Interest Income.................... 54,885 4,949 59,834 5,134 64,968
Real Estate Operations, net............ -- -- -- 714 714
Income from Money Centers.............. -- 2,614 2,614 -- 2,614
Net Securities Gains/(Losses).......... 9,433 (1) 9,432 -- 9,432
Other Non-Interest Expense............. 146,607 36,412 183,019 27,458 210,477
Capital Securities Costs............... 16,843 2,748 19,591 -- 19,591
Amortization & Write-down of Intangible
Assets............................... 14,479 4,563 13,073 $ 4,563(2) 27,552 -- 27,552
Merger Related Restructure Charge...... 52,452 -- 52,452 -- 52,452
-------- -------- ------- ------- -------- -------- ----------
Income before Income Taxes........... 243,081 34,379 37,586 4,563 244,437 57,676 302,113
Provision for Income Taxes............. 75,106 15,288 -- 8,580(6) 81,814 13,288 95,102
-------- -------- ------- ------- -------- -------- ----------
Net Income........................... $167,975 $ 19,091 $37,586 $13,143 $162,623 $ 44,388 $ 207,011
======== ======== ======= ======= ======== ======== ==========
Earnings Per Share -- Basic............ $1.19 $2.14 $1.15 $4.53 $1.21
Earnings Per Share -- Diluted.......... $1.18 $2.03 $1.13 $4.41 $1.19
Weighted Average Shares Outstanding --
Basic................................ 140,706 8,908 142,016 9,793 171,395
Weighted Average Shares Outstanding --
Diluted.............................. 141,766 9,425 144,110 10,074 174,332
</TABLE>
See "Notes to the Pro Forma Condensed Combined Financial Statements"
97
<PAGE> 105
NORTH FORK BANCORPORATION, INC.
COMBINED WITH JSB FINANCIAL, INC.
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS NORTH FORK/
----------------- JSB
NORTH FORK JSB DEBITS CREDITS PRO FORMA
---------- -------- ------ ------- -----------
<S> <C> <C> <C> <C> <C>
Interest Income......................... $724,424 $109,611 $834,035
Interest Expense........................ 326,803 39,874 366,677
-------- -------- ---- ---- --------
Net Interest Income................... 397,621 69,737 -- -- 467,358
Provision for Loan Losses............... 8,100 648 8,748
-------- -------- ---- ---- --------
Net Interest Income after Provision
for Loan Losses.................... 389,521 69,089 -- -- 458,610
Non-Interest Income..................... 50,915 2,627 53,542
Real Estate Operations, net............. -- 10,442 10,442
Net Securities Gains.................... 8,407 6,991 15,398
Other Non-Interest Expense.............. 157,182 27,434 184,616
Capital Securities Costs................ 9,235 -- 9,235
Amortization of Intangible Assets....... 7,292 -- 7,292
-------- -------- ---- ---- --------
Income before Income Taxes............ 275,134 61,715 -- -- 336,849
Provision for Income Taxes.............. 104,613 24,625 129,238
-------- -------- ---- ---- --------
Net Income............................ $170,521 $ 37,090 -- -- $207,611
======== ======== ==== ==== ========
Earnings Per Share -- Basic............. $1.24 $3.76 $1.25
Earnings Per Share -- Diluted........... $1.22 $3.64 $1.22
Weighted Average Shares Outstanding --
Basic................................. 136,761 9,858 166,335
Weighted Average Shares Outstanding --
Diluted............................... 139,333 10,190 169,903
</TABLE>
See "Notes to the Pro Forma Condensed Combined Financial Statements"
98
<PAGE> 106
NORTH FORK BANCORPORATION, INC.
COMBINED WITH JSB FINANCIAL, INC.
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS NORTH FORK/
----------------- JSB
NORTH FORK JSB DEBITS CREDITS PRO FORMA
---------- -------- ------ ------- -----------
<S> <C> <C> <C> <C> <C>
Interest Income......................... $613,762 $108,345 $722,107
Interest Expense........................ 281,107 40,217 321,324
-------- -------- ---- ---- --------
Net Interest Income................... 332,655 68,128 -- -- 400,783
Provision/(Recovery) for Loan Losses.... 8,000 (1,400) 6,600
-------- -------- ---- ---- --------
Net Interest Income after Provision
for Loan Losses.................... 324,655 69,528 -- -- 394,183
Non-Interest Income..................... 38,602 2,578 41,180
Real Estate Operations, net............. -- 1,767 1,767
Net Securities Gains.................... 6,224 2 6,226
Other Non-Interest Expense.............. 154,643 27,598 182,241
SAIF Recapitalization Charge.......... 17,782 -- 17,782
Capital Securities Costs................ 25 -- 25
Amortization of Intangible Assets....... 6,364 -- 6,364
Merger Related Restructure Charge....... 21,613 -- 21,613
-------- -------- ---- ---- --------
Income before Income Taxes............ 169,054 46,277 -- -- 215,331
Provision for Income Taxes.............. 74,606 19,552 94,158
-------- -------- ---- ---- --------
Net Income............................ $ 94,448 $ 26,725 -- -- $121,173
======== ======== ==== ==== ========
Earnings Per Share -- Basic............. $0.69 $2.66 $0.73
Earnings Per Share -- Diluted........... $0.68 $2.56 $0.71
Weighted Average Shares Outstanding --
Basic................................. 136,504 10,062 166,690
Weighted Average Shares Outstanding --
Diluted............................... 138,707 10,436 170,015
</TABLE>
See "Notes to the Pro Forma Condensed Combined Financial Statements"
99
<PAGE> 107
NOTES TO THE PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
NOTE (1) BASIS OF PRESENTATION
The pro forma information presented is not necessarily indicative of the
results of operations or the combined financial position that would have
resulted had the JSB merger become effective at the beginning of each of the
periods indicated and the Reliance merger become effective as of January 1,
1998. The pro forma information presented is not necessarily indicative of the
results of operations in future periods or the future financial position of the
combined entities. It is anticipated that the mergers will be completed during
the first quarter of 2000, with the Reliance merger completed prior to the JSB
merger.
The JSB merger will be accounted for using the pooling-of-interests method
of accounting and, as such, the assets and liabilities of JSB will be combined
with those of North Fork at their historical values. Accordingly, the financial
statements of JSB will be combined with the financial statements of North Fork
as of the earliest period presented.
The Reliance merger will be accounted for using the purchase method of
accounting and, as such, the assets and liabilities of Reliance will be recorded
at their estimated fair values. The pro forma financial statements do not
reflect adjustments necessary to allocate a portion of the purchase price paid
for Reliance to the individual assets and liabilities assumed in the merger. For
purposes of the pro forma financial statements, the full amount of the purchase
price has been reflected as an intangible asset. Management is currently
assessing the purchase price allocation to Reliance's assets and liabilities.
However, these adjustments are not expected to materially impact the pro forma
financial statements.
The Pro Forma Condensed Combined Balance Sheets give effect to the Reliance
and JSB mergers as if such transactions had become effective as of September 30,
1999. The Pro Forma Condensed Combined Statements of Income give effect to the
JSB merger as if it had become effective as of the beginning of each of the
periods for which information is presented and the Reliance merger as if it had
become effective as of January 1, 1998.
Reliance's annual reporting periods are as of and for the year ended June
30, whereas North Fork and JSB utilize a calendar year basis. Reliance's
financial results for the nine months ended September 30, 1999 and 1998, and the
twelve months ended December 31, 1998 have been conformed to the calendar year
reporting period of North Fork and JSB. In order to conform Reliance's
Statements of Income for the aforementioned periods, the following adjustments
have been made to Reliance's financial statements: (a) the nine months ended
September 30, 1999 were derived by removing the six months ended December 31,
1998 from the year ended June 30, 1999 and adding the three months ended
September 30, 1999, (b) the nine months ended September 30, 1998 were derived by
removing the six months ended December 31, 1997 from the year ended June 30,
1998 and adding the three months ended September 30, 1998; and (c) the year
ended December 31, 1998 was derived by adding the six months ended December 31,
1998, to the year ended June 30, 1998, and removing the six months ended
December 31, 1997.
RELIANCE BANCORP, INC. PRO FORMA ADJUSTMENTS
NOTE (2)
The Reliance purchase transaction creates an increase in the consolidated
intangible asset of $261.5 million. The entries that give rise to the increase
are more fully described in their detailed components in the following notes 3
through 6. The incremental intangible asset will be amortized on a straight-line
basis over a 20 year period.
100
<PAGE> 108
NOTE (3)
Pro forma adjustments to stockholders' equity at September 30, 1999 reflect
the Reliance merger accounted for in accordance with the purchase method of
accounting through:
(a) The assumed purchase of 6,008,500 shares of North Fork common stock in
order to complete the 8.5 million share purchase program to be used to
fund the merger at an average cost of $20.76. As of September 30, 1999,
11,811,004 shares were held by North Fork in treasury stock;
(b) The issuance of 16,403,980 shares of North Fork's treasury stock
(assumed to be held at an average per share cost of $21.22) at $18.625
(the average market price of North Fork common stock for the period
from August 26, 1999 through September 1, 1999) in exchange for the
8,201,990 outstanding common shares of Reliance based on the exchange
ratio of 2.0. This excludes 387,500 shares of Reliance common stock
held by North Fork in its available-for-sale portfolio (at an average
per share cost of $37.08), which are assumed to be retired at cost. For
purposes of the pro forma adjustments, the unrealized gain on these
securities of $209,000 has been reversed against other assets and
stockholders' equity;
(c) A cash payment of $23.9 million and $5.3 million in related tax
benefits, for the satisfaction of all Reliance stock options
outstanding at September 30, 1999; and
(d) The elimination of Reliance's stockholders' equity at September 30,
1999.
NOTE (4)
Transaction costs of approximately $41.5 million, net of $9.7 million in
related tax benefits, will be incurred upon consummation of the Reliance merger
and reflected as part of the purchase price for financial reporting purposes. A
summary of the transaction costs, based on North Fork's and Reliance's
preliminary estimates, are as follows:
<TABLE>
<CAPTION>
EXPECTED COSTS
--------------
TYPE OF COST (IN THOUSANDS)
- ------------
<S> <C>
Transaction Costs...................................... $ 6,226
Merger Related Compensation and Severance Costs........ 37,360
Facilities and Systems Costs........................... 6,689
Other Merger Related Costs............................. 875
--------
Total Pre-Tax Transaction Costs........................ 51,150
Less: Related Tax Benefit.............................. (11,634)
Add: State and Local Tax Bad Debt Recapture,
Net of Federal Benefit............................... 1,950
--------
Total Transaction Costs, Net of Taxes.................. $ 41,466
========
</TABLE>
Transaction costs consist primarily of investment banking, legal and other
professional fees, and expenses associated with stockholder and customer
notifications. Merger related compensation and severance costs consist primarily
of employee severance, compensation arrangements, transitional staffing and
related employee benefit expenses. Facility and systems costs consist primarily
of lease termination charges and equipment write-offs resulting from the
consolidation of overlapping branch locations, duplicate headquarters and
operational facilities. Also reflected are the costs associated with the
cancellation of certain data and item processing contracts and the deconversion
of Reliance's computer systems. Other merger related costs arise primarily from
the application of North Fork's accounting practices to the accounts of Reliance
and other expenses associated with the integration of operations. Refinements to
the foregoing estimates may occur subsequent to the completion of the Reliance
merger.
The effect of the proposed charge has been reflected in the pro forma
condensed combined balance sheet as of September 30, 1999; however, it has not
been reflected in the pro forma combined statements of income. Although no
assurance can be given, North Fork expects that cost savings will be achieved at
an annual rate of
101
<PAGE> 109
approximately $14.9 million on an after-tax basis by the end of 2000 as a result
of steps to be taken to integrate operations and to achieve efficiencies in
certain combined lines of business. These anticipated merger related cost
savings were determined based upon preliminary estimates. The pro forma
financial information does not give effect to these expected cost savings, nor
does it include any estimates of revenue enhancements that could be realized as
a result of the Reliance merger. See "Management and Operations Following the
Merger and the Reliance Merger" on page 70.
NOTE (5)
Reflects the elimination of $5.0 million in Reliance Capital Securities
owned by North Fork in its securities available-for-sale portfolio. For purposes
of the pro forma adjustments, the unrealized loss on these securities of
$412,000 has been reversed against other assets and stockholders' equity.
NOTE (6)
Treasury shares acquired for purposes of funding the Reliance merger are
assumed to have been acquired and reissued in accordance with the following
assumptions:
A) The Pro Forma Condensed Combined Balance Sheets at September 30, 1999
assume that the remaining 6,008,500 shares necessary to fund the
transaction were acquired at an average cost of $20.76 (see note (3) for
more detail). The cash proceeds are assumed to have been obtained from
the liquidation of mortgage backed securities held in the
available-for-sale portfolio at their carrying values.
B) The Pro Forma Condensed Combined Statements of Income assume that the
shares necessary to fund the transaction were acquired and reissued in
accordance with the assumptions contained in note (3) above, as of
January 1, 1998. The cash proceeds are assumed to have been obtained
from the liquidation of mortgage backed securities held in the
available-for-sale portfolio, totaling $251.4 million, $350.2 million
and $356.7 million at September 30, 1999, December 31, 1998 and
September 30, 1998, respectively. These securities are assumed to be
liquidated at their respective book values and to have a weighted
average yield of 7.00% for all periods indicated. North Fork utilized
its effective tax rate of 35%, exclusive of merger related restructure
charge and special items, for all periods indicated.
JSB FINANCIAL, INC. PRO FORMA ADJUSTMENTS
NOTE (7)
Pro forma adjustments to stockholders' equity, at September 30, 1999,
reflect:
(a) The JSB merger accounted for in accordance with the pooling-of-interest
method of accounting through the exchange of 27,869,379 shares of North
Fork common stock (using an exchange ratio of 3.0) for 9,289,793 actual
outstanding shares of JSB;
(b) The retirement of JSB treasury stock of $175,393,000 (6,710,207 shares
with an average cost of $26.14 per share); and
(c) The retirement of JSB's benefit restoration plan of $4,758,000 (196,823
shares with an average cost of $24.17 per share).
Pro forma adjustments do not include any shares of North Fork common stock
to be received upon consummation of the JSB merger by holders of JSB options.
NOTE (8)
The Pro Forma Condensed Combined Balance Sheets reflect a merger and
restructuring charge of $36.9 million, net of taxes, which will be recognized
upon consummation of the JSB merger. Such charge will reduce diluted earnings
per share for the period in which such charge is recognized by approximately
$0.21
102
<PAGE> 110
(based on pro forma diluted weighted average shares outstanding of approximately
172,335,000 as of September 30,1999). A summary of the merger and restructuring
charge, based on North Fork's and JSB's best estimates, are as follows:
<TABLE>
<CAPTION>
EXPECTED COSTS
--------------
TYPE OF COST (IN THOUSANDS)
- ------------
<S> <C>
Merger Expenses........................................ $ 4,148
Restructuring Charge:
Merger Related Compensation and Severance Costs........ 32,566
Facilities and Systems Costs........................... 5,635
Other Merger Related Costs............................. 875
--------
Total Pre-Tax Merger and Restructuring Charge.......... 43,224
Less: Related Tax Benefit.............................. (13,858)
Add: State and Local Tax Bad Debt Recapture,
Net of Federal Benefit............................... 7,500
--------
Total Merger and Restructuring Charge, Net of Taxes.... $ 36,866
========
</TABLE>
Merger expenses consist primarily of investment banking, legal and other
professional fees, and expenses associated with stockholder and customer
notifications. Merger related compensation and severance costs consist primarily
of employee severance, compensation arrangements, transitional staffing and the
related employee benefits expenses. Facility and systems costs consist primarily
of lease termination charges and equipment write-offs resulting from the
consolidation of overlapping branch locations and duplicate headquarters and
operational facilities. Also reflected are the costs associated with the
cancellation of certain data and item processing contracts and the deconversion
of existing JSB computer systems. Other merger related costs arise primarily
from the application of North Fork's accounting practices to the accounts of JSB
and other expenses associated with the integration of operations. Refinements to
the foregoing estimates may occur subsequent to the completion of the JSB
merger.
The effect of the proposed charge has been reflected in the pro forma
condensed combined balance sheet as of September 30, 1999; however, it has not
been reflected in the Pro Forma Combined Statements of Income. Although no
assurance can be given, North Fork expects that cost savings will be achieved at
an annual rate of approximately $13.2 million on an after-tax basis by the end
of 2000 as a result of steps to be taken to integrate operations and to achieve
efficiencies in certain combined lines of business. These anticipated cost
savings were determined based upon preliminary estimates. The pro forma
financial information does not give effect to these expected cost savings, nor
does it include any estimates of revenue enhancements that could be realized as
a result of the JSB merger. See "Management and Operations Following the Merger
and the Reliance Merger" on page 70.
NOTE (9)
PRO FORMA WEIGHTED AVERAGE SHARES OUTSTANDING
The pro forma weighted average shares outstanding for the nine-month
periods ended September 30, 1999 and 1998, and for the year ended December 31,
1998, reflect: (a) an exchange ratio of 2.0 shares of North Fork common stock
for each average share of Reliance common stock outstanding during such periods
(all Reliance options are assumed to have been settled for cash in accordance
with the provisions of the limited rights associated therewith); (b) the assumed
purchase of all additional shares not held by North Fork in treasury needed to
fund the Reliance transaction; and (c) the reissuance by North Fork of treasury
shares necessary to fund the Reliance transaction. The pro forma weighted
average shares outstanding for all periods presented reflect the assumed
issuance of 3.0 shares of North Fork common stock for each average equivalent
share of JSB common stock outstanding during such periods.
103
<PAGE> 111
NOTE (10)
An adjustment to reflect the assumed reduction in the par value of North
Fork's common stock from $2.50 to $0.01. Pro forma shares outstanding, inclusive
of pro forma shares issued in the JSB merger, total 172,995,901 at September 30,
1999.
104
<PAGE> 112
APPENDIX A
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
DATED AS OF AUGUST 16, 1999
BY AND BETWEEN
NORTH FORK BANCORPORATION, INC.
AND
JSB FINANCIAL, INC.
<PAGE> 113
TABLE OF CONTENTS
<TABLE>
INTRODUCTORY STATEMENT
ARTICLE I
THE MERGER
PAGE
----
<S> <C> <C>
Section 1.1. Structure of the Merger..................................... A-1
Section 1.2. Effect on Outstanding Shares of JSB Common Stock............ A-1
Section 1.3. Exchange Procedures......................................... A-2
Section 1.4. Stock Options............................................... A-4
Section 1.5. Bank Merger................................................. A-4
Section 1.6. Directors of NFB after Effective Time....................... A-5
Section 1.7. Alternative Structure....................................... A-5
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. Disclosure Letters.......................................... A-5
Section 2.2. Standards................................................... A-5
Section 2.3. Representations and Warranties of JSB....................... A-6
Section 2.4. Representations and Warranties of NFB....................... A-17
ARTICLE III
CONDUCT PENDING THE MERGER
Section 3.1. Conduct of JSB's Business Prior to the Effective Time....... A-25
Section 3.2. Forbearance by JSB.......................................... A-25
Section 3.3. Conduct of NFB's Business Prior to the Effective Time....... A-27
Section 3.4. Forbearance by NFB.......................................... A-27
ARTICLE IV
COVENANTS
Section 4.1. Acquisition Proposals....................................... A-28
Section 4.2. Certain Policies of JSB..................................... A-29
Section 4.3. Access and Information...................................... A-29
Section 4.4. Certain Filings, Consents and Arrangements.................. A-30
Section 4.5. Antitakeover Provisions..................................... A-31
Section 4.6. Additional Agreements....................................... A-31
Section 4.7. Publicity................................................... A-31
Section 4.8. Stockholders Meetings....................................... A-31
Section 4.9. Proxy Statements; Comfort Letters........................... A-31
Section 4.10. Registration of NFB Common Stock............................ A-32
Section 4.11. Affiliate Letters........................................... A-32
Section 4.12. Notification of Certain Matters............................. A-32
Section 4.13. Directors and Officers...................................... A-32
Section 4.14. Indemnification; Directors' and Officers' Insurance......... A-33
Section 4.15. Employees; Benefit Plans and Programs....................... A-34
Section 4.16. Advisory Board.............................................. A-37
</TABLE>
i
<PAGE> 114
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE V
CONDITIONS TO CONSUMMATION
<CAPTION>
PAGE
----
<S> <C> <C>
Section 5.1. Conditions to Each Party's Obligations...................... A-37
Section 5.2. Conditions to the Obligations of NFB and NFB Bank........... A-38
Section 5.3. Conditions to the Obligations of JSB and JSB Bank........... A-38
ARTICLE VI
TERMINATION
Section 6.1. Termination................................................. A-39
Section 6.2. Effect of Termination....................................... A-42
Section 6.3 Termination Fee............................................. A-42
ARTICLE VII
CLOSING, EFFECTIVE DATE AND EFFECTIVE TIME
Section 7.1. Effective Date and Effective Time........................... A-43
Section 7.2. Deliveries at the Closing................................... A-44
ARTICLE VIII
CERTAIN OTHER MATTERS
Section 8.1. Certain Definitions; Interpretation......................... A-44
Section 8.2. Survival.................................................... A-44
Section 8.3. Waiver; Amendment........................................... A-44
Section 8.4. Counterparts................................................ A-44
Section 8.5. Governing Law............................................... A-44
Section 8.6. Expenses.................................................... A-44
Section 8.7. Notices..................................................... A-44
Section 8.8. Entire Agreement; etc....................................... A-45
Section 8.9. Assignment.................................................. A-46
</TABLE>
ii
<PAGE> 115
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Acquisition Proposal........................................ A-28
Acquisition Transaction..................................... A-28
Advisory Board.............................................. A-37
Agreement................................................... A-1
Bank Merger................................................. A-1
Bank Regulator.............................................. A-9
BHCA........................................................ A-17
BIF......................................................... A-6
Closing..................................................... A-43
Closing Date................................................ A-43
Code........................................................ A-1
Converted Options........................................... A-4
Costs....................................................... A-34
Covered Person.............................................. A-15
Date Data................................................... A-16
Date-Sensitive System....................................... A-16
Derivatives Contract........................................ A-15
Disclosure Letter........................................... A-5
Effective Date.............................................. A-43
Effective Time.............................................. A-43
Environmental Law........................................... A-13
ERISA....................................................... A-10
Exchange Act................................................ A-15
Exchange Agent.............................................. A-2
Exchange Ratio.............................................. A-2
Excluded Shares............................................. A-2
FDIA........................................................ A-6
FDIC........................................................ A-6
FHLB........................................................ A-15
Final Index Price........................................... A-40
Final Price................................................. A-40
FRB......................................................... A-8
GAAP........................................................ A-8
GATT........................................................ A-36
Governmental Entity......................................... A-9
Hazardous Material.......................................... A-13
HOLA........................................................ A-6
Indemnified Party........................................... A-33
Index Group................................................. A-40
Index Ratio................................................. A-40
Initial Index Price......................................... A-42
Initial NFB Market Value.................................... A-42
Initial Termination Date.................................... A-40
IRS......................................................... A-11
Joint Proxy Statement-Prospectus............................ A-16
JSB......................................................... A-1
JSB Bank.................................................... A-1
JSB Bank BRP................................................ A-36
JSB Bank ESOP............................................... A-37
</TABLE>
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
JSB Bank Outside Directors' Plan............................ A-33
JSB Certificate............................................. A-2
JSB Common Stock............................................ A-1
JSB Employee................................................ A-34
JSB Employee Plans.......................................... A-10
JSB ERISA Affiliate......................................... A-11
JSB Option.................................................. A-4
JSB Option Agreement........................................ A-1
JSB Option Plans............................................ A-4
JSB Pension Plan............................................ A-11
JSB Preferred Stock......................................... A-6
JSB Qualified Plan.......................................... A-11
JSB Y2K Plan................................................ A-16
JSB's Reports............................................... A-8
Letter of Transmittal....................................... A-2
Loan........................................................ A-14
Loan Property............................................... A-13
Material Adverse Effect..................................... A-5
Maximum Agreement........................................... A-34
Merger...................................................... A-1
Merger Consideration........................................ A-2
Named Individual............................................ A-12
New Compensation and Benefits Program....................... A-35
New NFB Director............................................ A-32
NFB......................................................... A-1
NFB Bank.................................................... A-1
NFB Common Stock............................................ A-2
NFB Employee Plans.......................................... A-21
NFB ERISA Affiliate......................................... A-21
NFB Market Value............................................ A-2
NFB Pension Plan............................................ A-21
NFB Preferred Stock......................................... A-17
NFB Qualified Plan.......................................... A-21
NFB Ratio................................................... A-40
NFB Stock Plans............................................. A-17
NFB Y2K Plan................................................ A-25
NFB's Reports............................................... A-19
NYSBD....................................................... A-8
NYSE........................................................ A-2
OREO........................................................ A-14
OTS......................................................... A-8
Participation Facility...................................... A-13
PBGC........................................................ A-11
Permitted Transaction....................................... A-42
Registration Statement...................................... A-16
Requisite Regulatory Approvals.............................. A-8
SEC......................................................... A-8
Securities Act.............................................. A-16
Skadden..................................................... A-38
Specified Compensation and Benefit Programs................. A-12
SRO......................................................... A-8
</TABLE>
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Stock Adjustment............................................ A-2
Stockholder Meeting......................................... A-31
Subsidiary.................................................. A-6
Superfund................................................... A-13
Superlien................................................... A-13
Thacher Proffitt............................................ A-39
Unsolicited Acquisition Proposal............................ A-29
Valuation Date.............................................. A-2
Voting Debt................................................. A-7
Year 2000 Compliance........................................ A-16
</TABLE>
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AGREEMENT AND PLAN OF MERGER
This is an AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of
the 16th day of August, 1999 ("Agreement"), by and between NORTH FORK
BANCORPORATION, INC., a Delaware corporation ("NFB"), and JSB FINANCIAL, INC., a
Delaware corporation ("JSB").
INTRODUCTORY STATEMENT
The Board of Directors of NFB (i) has determined that this Agreement and
the business combination and related transactions contemplated hereby are in the
best interests of NFB and its stockholders, (ii) has determined that this
Agreement and the transactions contemplated hereby are consistent with, and in
furtherance of, its business strategy and (iii) has approved this Agreement.
The Board of Directors of JSB (i) has determined that this Agreement and
the business combination and related transactions contemplated hereby are in the
best interests of JSB and in the best long-term interests of its stockholders,
(ii) has determined that this Agreement and the transactions contemplated hereby
are consistent with, and in furtherance of, its business strategy and (iii) has
approved this Agreement.
Concurrently with the execution and delivery of this Agreement, and as a
condition and inducement to NFB's willingness to enter into this Agreement, NFB
and JSB have entered into a stock option agreement ("JSB Option Agreement"),
pursuant to which JSB has granted to NFB an option to purchase shares of JSB's
common stock, par value $.01 per share ("JSB Common Stock"), upon the terms and
conditions therein contained.
Following the consummation of the Merger (as defined below), Jamaica
Savings Bank, a wholly owned subsidiary of JSB Financial, Inc. ("JSB Bank"), may
be merged with and into North Fork Bank, a wholly owned subsidiary of North Fork
Bancorporation, Inc. ("NFB Bank"), with NFB Bank being the surviving entity
("Bank Merger").
The parties hereto intend that the Merger and the Bank Merger, if effected,
each shall qualify as a reorganization under the provisions of Section 368(a) of
the Internal Revenue Code of 1986, as amended ("Code"), for federal income tax
purposes, and that the Merger shall be accounted for as a pooling-of-interests
for financial accounting purposes.
NFB and JSB desire to make certain representations, warranties and
agreements in connection with the business combination and related transactions
provided for herein and to prescribe various conditions to such transactions.
In consideration of their mutual promises and obligations hereunder, the
parties hereto adopt and make this Agreement and prescribe the terms and
conditions hereof and the manner and basis of carrying it into effect, which
shall be as follows:
ARTICLE I
THE MERGER
Section 1.1. Structure of the Merger. On the Effective Date (as defined in
Section 7.1), JSB will merge with and into NFB ("Merger"), with NFB being the
surviving entity, pursuant to the provisions of, and with the effect provided
in, the Delaware General Corporation Law. Upon consummation of the Merger, the
separate corporate existence of JSB shall cease. NFB shall continue to be
governed by the laws of the State of Delaware and its name and separate
corporate existence, with all of its rights, privileges, immunities, powers and
franchises, shall continue unaffected by the Merger.
Section 1.2. Effect on Outstanding Shares of JSB Common Stock.
(a) By virtue of the Merger, automatically and without any action on the
part of the holder thereof, each share of JSB Common Stock issued and
outstanding at the Effective Time (as defined in Section 7.1), other than (i)
shares held directly or indirectly by NFB (other than shares held in a fiduciary
capacity or in
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satisfaction of a debt previously contracted) and (ii) shares held by JSB as
treasury stock (such shares referred to in clauses (i) and (ii) being referred
to herein as the "Excluded Shares"), shall become and be converted into the
right to receive 3.0 shares (the "Exchange Ratio") of NFB's common stock, par
value $2.50 per share ("NFB Common Stock"); provided, however, that,
notwithstanding any other provision hereof, no fraction of a share of NFB Common
Stock and no certificates or scrip therefor will be issued in the Merger;
instead, NFB shall pay to each holder of JSB Common Stock who would otherwise be
entitled to a fraction of a share of NFB Common Stock an amount in cash, rounded
to the nearest cent, determined by multiplying such fraction by the NFB Market
Value (as defined below). The shares of NFB Common Stock and any cash for
fractional shares are collectively referred to in this Agreement as the "Merger
Consideration."
(b) As used herein, "NFB Market Value" shall be the average of the daily
closing sales prices of a share of NFB Common Stock (and if there is no closing
sales price on any such day, then the mean between the closing bid and the
closing asked prices on that day), as reported on the New York Stock Exchange
("NYSE"), for the 15 consecutive trading days immediately preceding the
Valuation Date.
(c) As used herein, "Valuation Date" shall mean the date that is the latest
of (i) the day of expiration of the last waiting period with respect to any of
the Requisite Regulatory Approvals (as defined in Section 2.3(e)), (ii) the day
on which the last of the Requisite Regulatory Approvals is obtained and (iii)
the day on which the last of the required stockholder approvals have been
obtained.
(d) If, between the date of this Agreement and the Effective Time, the
outstanding shares of NFB Common Stock shall have been changed into a different
number of shares or into a different class by reason of any stock dividend,
subdivision, reclassification, recapitalization, split, combination or exchange
of shares (each, a "Stock Adjustment"), the Exchange Ratio shall be adjusted
correspondingly to the extent appropriate to reflect the Stock Adjustment.
(e) As of the Effective Time, each Excluded Share shall be canceled and
retired and shall cease to exist, and no exchange or payment shall be made with
respect thereto. All shares of NFB Common Stock and NFB Preferred Stock (as
defined in Section 2.4(b)) that are held by JSB, if any, other than shares held
in a fiduciary capacity or in satisfaction of a debt previously contracted,
shall become treasury stock of NFB.
Section 1.3. Exchange Procedures.
(a) Appropriate transmittal materials ("Letter of Transmittal") shall be
mailed as soon as reasonably practicable after the Effective Time, and in no
event later than 5 business days thereafter, to each holder of record of JSB
Common Stock as of the Effective Time. A Letter of Transmittal will be deemed
properly completed only if accompanied by certificates representing all shares
of JSB Common Stock to be converted thereby.
(b) At and after the Effective Time, each certificate ("JSB Certificate")
previously representing shares of JSB Common Stock (except as specifically set
forth in Section 1.2) shall represent only the right to receive the Merger
Consideration.
(c) Prior to the Effective Time, NFB shall deposit, or shall cause to be
deposited, with such bank or trust company that is selected by NFB and is
reasonably acceptable to JSB to act as exchange agent ("Exchange Agent"), for
the benefit of the holders of shares of JSB Common Stock, for exchange in
accordance with this Section 1.3, an estimated amount of cash sufficient to pay
the aggregate amount of cash in lieu of fractional shares to be paid pursuant to
Section 1.2, and NFB shall reserve for issuance with its transfer agent and
registrar a sufficient number of shares of NFB Common Stock to provide for
payment of the Merger Consideration.
(d) The Letter of Transmittal shall (i) specify that delivery shall be
effected, and risk of loss and title to the JSB Certificates shall pass, only
upon delivery of the JSB Certificates to the Exchange Agent, (ii) be in a form
and contain any other provisions as NFB may reasonably determine and (iii)
include instructions for use in effecting the surrender of the JSB Certificates
in exchange for the Merger Consideration. Upon the proper surrender of the JSB
Certificates to the Exchange Agent, together with a properly completed and duly
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executed Letter of Transmittal, the holder of such JSB Certificates shall be
entitled to receive in exchange therefor (m) a certificate representing that
number of whole shares of NFB Common Stock that such holder has the right to
receive pursuant to Section 1.2 and (n) a check in the amount equal to the cash
in lieu of fractional shares, if any, that such holder has the right to receive
pursuant to Section 1.2 and any dividends or other distributions to which such
holder is entitled pursuant to this Section 1.3. JSB Certificates so surrendered
shall forthwith be canceled. As soon as practicable, but no later than 10
business days following receipt of the properly completed Letter of Transmittal
and any necessary accompanying documentation, the Exchange Agent shall
distribute NFB Common Stock and cash as provided herein. The Exchange Agent
shall not be entitled to vote or exercise any rights of ownership with respect
to the shares of NFB Common Stock held by it from time to time hereunder, except
that it shall receive and hold all dividends or other distributions paid or
distributed with respect to such shares for the account of the persons entitled
thereto. If there is a transfer of ownership of any shares of JSB Common Stock
not registered in the transfer records of JSB, the Merger Consideration shall be
issued to the transferee thereof if the JSB Certificates representing such JSB
Common Stock are presented to the Exchange Agent, accompanied by all documents
required, in the reasonable judgment of NFB and the Exchange Agent, (x) to
evidence and effect such transfer and (y) to evidence that any applicable stock
transfer taxes have been paid.
(e) No dividends or other distributions declared or made after the
Effective Time with respect to NFB Common Stock shall be remitted to any person
entitled to receive shares of NFB Common Stock hereunder until such person
surrenders his or her JSB Certificates in accordance with this Section 1.3. Upon
the surrender of such person's JSB Certificates, such person shall be entitled
to receive any dividends or other distributions, without interest thereon, which
theretofore had become payable with respect to shares of NFB Common Stock
represented by such person's JSB Certificates.
(f) From and after the Effective Time there shall be no transfers on the
stock transfer records of JSB of any shares of JSB Common Stock. If, after the
Effective Time, JSB Certificates are presented to NFB, they shall be canceled
and exchanged for the Merger Consideration deliverable in respect thereof
pursuant to this Agreement in accordance with the procedures set forth in this
Section 1.3.
(g) Any portion of the aggregate amount of cash to be paid in lieu of
fractional shares pursuant to Section 1.2, any dividends or other distributions
to be paid pursuant to this Section 1.3 or any proceeds from any investments
thereof that remain unclaimed by the stockholders of JSB for six months after
the Effective Time shall be repaid by the Exchange Agent to NFB upon the written
request of NFB. After such request is made, any stockholders of JSB who have not
theretofore complied with this Section 1.3 shall look only to NFB for the Merger
Consideration deliverable in respect of each share of JSB Common Stock such
stockholder holds, as determined pursuant to Section 1.2 of this Agreement,
without any interest thereon. If outstanding JSB Certificates are not
surrendered prior to the date on which such payments would otherwise escheat to
or become the property of any governmental unit or agency, the unclaimed items
shall, to the extent permitted by any abandoned property, escheat or other
applicable laws, become the property of NFB (and, to the extent not in its
possession, shall be paid over to it), free and clear of all claims or interest
of any person previously entitled to such claims. Notwithstanding the foregoing,
none of NFB, NFB Bank, the Exchange Agent or any other person shall be liable to
any former holder of JSB Common Stock for any amount delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(h) NFB and the Exchange Agent shall be entitled to rely upon JSB's stock
transfer books to establish the identity of those persons entitled to receive
the Merger Consideration, which books shall be conclusive with respect thereto.
In the event of a dispute with respect to ownership of stock represented by any
JSB Certificate, NFB and the Exchange Agent shall be entitled to deposit any
Merger Consideration represented thereby in escrow with an independent third
party and thereafter be relieved with respect to any claims thereto.
(i) If any JSB Certificate shall have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming such JSB
Certificate to be lost, stolen or destroyed and, if required by the Exchange
Agent, the posting by such person of a bond in such amount as the Exchange Agent
may direct as indemnity against any claim that may be made against it with
respect to such JSB Certificate, the Exchange
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Agent will issue in exchange for such lost, stolen or destroyed JSB Certificate
the Merger Consideration deliverable in respect thereof pursuant to Section 1.2.
Section 1.4. Stock Options.
(a) Each option to purchase shares of JSB Common Stock issued by JSB and
outstanding at the Effective Time (a "JSB Option") pursuant to the JSB 1990
Incentive Stock Option Plan, the JSB 1990 Stock Option Plan for Outside
Directors and the JSB 1996 Stock Option Plan (collectively, the "JSB Option
Plans") shall be converted into an option to purchase shares of NFB Common Stock
as follows:
(i) the aggregate number of shares of NFB Common Stock issuable upon
the exercise of the converted JSB Option after the Effective Time shall be
equal to the product of the Exchange Ratio multiplied by the number of
shares of JSB Common Stock issuable upon exercise of the JSB Option
immediately prior to the Effective Time, such product to be rounded to the
nearest whole share of NFB Common Stock; and
(ii) the exercise price per share of each converted JSB Option shall
be equal to the quotient of the exercise price of such JSB Option at the
Effective Time divided by the Exchange Ratio, such quotient to be rounded
to the nearest whole cent;
provided, however, that, in the case of any JSB Option that is intended to
qualify as an incentive stock option under Section 422 of the Code, the number
of shares of NFB Common Stock issuable upon exercise of and the exercise price
per share for such converted JSB Option determined in the manner provided above
shall be further adjusted in such manner as NFB may determine to be necessary to
conform to the requirements of Section 424(b) of the Code. Options to purchase
shares of NFB Common Stock that arise from the operation of this Section 1.4
shall be referred to as the "Converted Options." All Converted Options shall be
exercisable for the same period and otherwise have the same terms and conditions
applicable to the JSB Options that they replace; provided, however, that such
exercise period, terms and conditions shall be further modified if and to the
extent necessary to enable the Merger to qualify for pooling-of-interests
accounting treatment. Prior to the Effective Time, NFB shall take, or cause to
be taken, all necessary action to effect the intent of the provisions set forth
in this Section 1.4.
(b) Prior to the date of the JSB stockholders meeting contemplated by
Section 4.8, JSB shall take, or cause to be taken, appropriate action under the
terms of any stock option plan, agreement or arrangement under which JSB Options
have been granted to provide for the conversion of JSB Options outstanding at
the Effective Time into Converted Options and to effect any other modifications
contemplated by Section 1.4(a).
(c) Concurrently with the reservation of shares of NFB Common Stock to
provide for the payment of the Merger Consideration, NFB shall take all
corporate action necessary to reserve for future issuance a sufficient
additional number of shares of NFB Common Stock to provide for the satisfaction
of its obligations with respect to the Converted Options. On or before the
Effective Time, NFB shall file a registration statement on Form S-8 (or any
successor or other appropriate form) and make any state filings or obtain state
exemptions with respect to the NFB Common Stock issuable upon exercise of the
Converted Options. Within 15 days after the Effective Time, NFB shall cause to
be executed and delivered to each holder of a Converted Option an agreement,
certificate or other instrument, in such form and of such substance as NFB may
reasonably determine, evidencing such holder's rights with respect to the
Converted Options. JSB shall use its best efforts to obtain from each person
holding JSB Options, within 30 days after the date of this Agreement, a waiver
of such person's limited stock appreciation rights for purposes of the Merger,
in the form mutually agreed to by the parties.
Section 1.5. Bank Merger. At the election of NFB, concurrently with or
within 60 days after the execution and delivery of this Agreement, NFB Bank and
JSB Bank shall enter into the Plan of Bank Merger, in the form attached hereto
as Exhibit A, pursuant to which the Bank Merger will be effected. The parties
hereto intend that, if the Plan of Bank Merger is entered into, the Bank Merger
shall become effective promptly following consummation of the Merger. The Plan
of Bank Merger shall provide that the directors of NFB Bank as the surviving
entity of the Bank Merger shall be all of the directors of NFB Bank serving
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immediately prior to the Bank Merger and the additional person who shall become
a director of NFB Bank in accordance with Section 4.13.
Section 1.6. Directors of NFB after Effective Time. At and after the
Effective Time, the directors of NFB shall consist of all of the directors of
NFB serving immediately prior to the Effective Time and the additional person
who shall become a director of NFB in accordance with Section 4.13.
Section 1.7. Alternative Structure. Notwithstanding anything to the
contrary contained in this Agreement, prior to the Effective Time, NFB may
specify that the structure of the transactions contemplated hereby be revised
and the parties shall enter into such alternative transactions as NFB may
determine to effect the purposes of this Agreement; provided, however, that such
revised structure shall not adversely affect the tax effects or economic
benefits of the transactions contemplated hereby to the holders of JSB Common
Stock, and, further, such revised structure shall not materially delay the
Closing Date (as defined in Section 7.1). This Agreement and any related
documents shall be appropriately amended in order to reflect any such revised
structure.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. Disclosure Letters. On or prior to the execution and delivery
of this Agreement, JSB and NFB each shall have delivered to the other a letter
(each, its "Disclosure Letter") setting forth, among other things, facts,
circumstances and events the disclosure of which is required or appropriate in
relation to any or all of their respective representations and warranties (and
making specific reference to the Section of this Agreement to which they
relate), other than Section 2.3(g) and Section 2.4(g); provided, that (a) no
such fact, circumstance or event is required to be set forth in the Disclosure
Letter as an exception to a representation or warranty if its absence is not
reasonably likely to result in the related representation or warranty being
deemed untrue or incorrect under the standards established by Section 2.2 and
(b) the mere inclusion of a fact, circumstance or event in a Disclosure Letter
shall not be deemed an admission by a party that such item represents a material
exception or that such item is reasonably likely to result in a Material Adverse
Effect (as defined in Section 2.2(b)).
Section 2.2. Standards.
(a) No representation or warranty of JSB or NFB contained in Sections 2.3
or 2.4, respectively, shall be deemed untrue or incorrect, and no party hereto
shall be deemed to have breached a representation or warranty, on account of the
existence of any fact, circumstance or event unless, as a direct or indirect
consequence of such fact, circumstance or event, individually or taken together
with all other facts, circumstances or events inconsistent with any paragraph of
Sections 2.3 or 2.4, as applicable, there is reasonably likely to exist a
Material Adverse Effect. JSB's representations, warranties and covenants
contained in this Agreement shall not be deemed to be untrue or breached as a
result of effects arising solely from actions taken in compliance with a written
request of NFB.
(b) As used in this Agreement, the term "Material Adverse Effect" means
either:
(i) an effect which is material and adverse to the business, financial
condition or results of operations of JSB or NFB, as the context may
dictate, and its Subsidiaries taken as a whole; provided, however, that any
such effect resulting from any (A) changes in laws, rules or regulations or
generally accepted accounting principles or interpretations thereof that
apply to both NFB and NFB Bank and JSB and JSB Bank, as the case may be, or
(B) changes in the general level of market interest rates shall not be
considered in determining if a Material Adverse Effect has occurred; or
(ii) the failure of (x) a representation or warranty contained in
Section 2.3(a)(i) and (iv), Section 2.3(d), Section 2.3(g)(iii), Section
2.4(a)(i) and (iv), Section 2.4(d), Section 2.4(g)(ii) or Section 2.4(l) to
be true and correct or (y) a representation or warranty contained in
Section 2.3(b)(i), Section 2.3(c), clause (ii) of Section 2.3(e), the last
sentence of Section 2.3(e), Section 2.3(f), Section 2.3(j), the first
sentence of Section 2.3(m), Section 2.3(q), Section 2.3(u), Section 2.3(v),
the
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first two sentences of Section 2.3(bb), Section 2.4(b)(i), Section 2.4(c),
clause (ii) of Section 2.4(e), the last sentence of Section 2.4(e), Section
2.4(f), Section 2.4(j), the first sentence of Section 2.4(n), Section
2.4(q), Section 2.4(t) and the first two sentences of 2.4(w) to be true and
correct in all material respects.
(c) For purposes of this Agreement, "knowledge" shall mean, with
respect to a party hereto, actual knowledge of the members of the Board of
Directors of that party, its counsel, any officer of that party with the
title ranking not less than senior vice president and, with respect to JSB,
any Vice President of JSB whose name is listed in Section 4.13(d) hereof.
Section 2.3. Representations and Warranties of JSB. Subject to Sections
2.1 and 2.2, JSB represents and warrants to NFB that, except as disclosed in
JSB's Disclosure Letter:
(a) Organization. (i) JSB is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and
is duly registered as a savings and loan holding company under the Home
Owners' Loan Act of 1933, as amended ("HOLA"). JSB Bank is a savings
association duly organized, validly existing and in good standing under the
laws of the United States of America and is a wholly owned Subsidiary (as
defined below) of JSB. Each Subsidiary of JSB, other than JSB Bank, is a
corporation, limited liability company or partnership duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization. Each of JSB and its Subsidiaries has all
requisite power and authority to own, lease and operate its properties and
to carry on its business as now being conducted. As used in this Agreement,
unless the context requires otherwise, the term "Subsidiary" when used with
respect to any party means any corporation or other organization, whether
incorporated or unincorporated, which is consolidated with such party for
financial reporting purposes or which is controlled, directly or
indirectly, by such party.
(ii) JSB and each of its Subsidiaries has the requisite corporate
power and authority, and is duly qualified and is in good standing, to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary.
(iii) JSB's Disclosure Letter sets forth all of JSB's Subsidiaries and
all entities (whether corporations, partnerships or similar organizations),
including the corresponding percentage ownership, in which JSB owns,
directly or indirectly, 5% or more of the ownership interests as of the
date of this Agreement and indicates for each of JSB's Subsidiaries, as of
such date, its jurisdiction of organization and the jurisdiction(s) wherein
it is qualified to do business. All such Subsidiaries and ownership
interests are in compliance with all applicable laws, rules and regulations
relating to direct investments in equity ownership interests. JSB owns,
either directly or indirectly, all of the outstanding capital stock of each
of its Subsidiaries. No Subsidiary of JSB other than JSB Bank is an
"insured depository institution" as defined in the Federal Deposit
Insurance Act, as amended ("FDIA"), and the applicable regulations
thereunder. All of the shares of capital stock of each of the Subsidiaries
of JSB are duly authorized and validly issued, fully paid and nonassessable
and not subject to any preemptive rights and are owned by JSB or a
Subsidiary of JSB free and clear of any claims, liens, encumbrances or
restrictions (other than those imposed by applicable federal and state
securities laws), and there are no agreements or understandings with
respect to the voting or disposition of any such shares.
(iv) The deposits of JSB Bank are insured by the Bank Insurance Fund
("BIF") of the Federal Deposit Insurance Corporation ("FDIC") to the extent
provided in the FDIA. JSB Bank is a member of the Federal Home Loan Bank of
New York.
(b) Capital Structure. (i) The authorized capital stock of JSB
consists of 65,000,000 shares of JSB Common Stock and 15,000,000 shares of
preferred stock, par value $.01 per share ("JSB Preferred Stock"). As of
the date of this Agreement: (A) 9,286,897 shares of JSB Common Stock were
issued and outstanding, (B) no shares of JSB Preferred Stock were issued
and outstanding, (C) no shares of JSB Common Stock were reserved for
issuance, except that 952,676 shares of JSB Common Stock were reserved for
issuance pursuant to the JSB Option Plans, which includes 810,676 shares
reserved for issuance upon the exercise of options that have already been
granted under the JSB Option Plans, plus
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142,000 shares reserved for issuance upon the exercise of options that will
be automatically granted pursuant to the terms of the JSB 1996 Option Plan
as a result of the execution of this Agreement, (D) no shares of JSB
Preferred Stock were reserved for issuance and (E) 6,713,103 shares of JSB
Common Stock were held by JSB in its treasury or by its Subsidiaries. The
authorized capital stock of JSB Bank consists of 40,000,000 shares of
common stock, par value $1.00 per share, and 20,000,000 shares of preferred
stock, par value $1.00 per share. As of the date of this Agreement, 1,000
shares of such common stock were outstanding, no shares of such preferred
stock were outstanding and all outstanding shares of such common stock
were, and as of the Effective Time will be, owned by JSB. All outstanding
shares of capital stock of JSB and JSB Bank are duly authorized and validly
issued, fully paid and nonassessable and not subject to any preemptive
rights and, with respect to shares held by JSB in its treasury or by its
Subsidiaries, are free and clear of all claims, liens, encumbrances or
restrictions (other than those imposed by applicable federal or state
securities laws) and there are no agreements or understandings with respect
to the voting or disposition of any such shares. JSB's Disclosure Letter
sets forth a complete and accurate list of all outstanding options to
purchase JSB Common Stock that have been granted pursuant to the JSB Option
Plans, including the dates of grant, exercise prices, dates of vesting,
dates of termination and shares subject to each grant, and all options to
purchase JSB Common Stock that will be automatically granted as a result of
the execution of this Agreement.
(ii) No bonds, debentures, notes or other indebtedness having the
right to vote on any matters on which stockholders may vote ("Voting Debt")
of JSB are issued or outstanding.
(iii) As of the date of this Agreement, except for this Agreement, the
JSB Option Agreement, the JSB Option Plans and as set forth in JSB's
Disclosure Letter, neither JSB nor any of its Subsidiaries has or is bound
by any outstanding options, warrants, calls, rights, convertible
securities, commitments or agreements of any character obligating JSB or
any of its Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, any additional shares of capital stock of JSB or any of
its Subsidiaries or obligating JSB or any of its Subsidiaries to grant,
extend or enter into any such option, warrant, call, right, convertible
security, commitment or agreement. As of the date hereof, there are no
outstanding contractual obligations of JSB or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of JSB
or any of its Subsidiaries.
(c) Authority. Each of JSB and JSB Bank has the requisite corporate
power and authority to enter into this Agreement and the Plan of Bank
Merger, respectively, and, subject to approval of this Agreement by the
requisite vote of JSB's stockholders and receipt of all required regulatory
or governmental approvals, as contemplated by Section 5.1(b) of this
Agreement, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement, and, subject to the approval of
this Agreement by JSB's stockholders, the consummation of the transactions
contemplated hereby, have been duly authorized by all necessary corporate
actions on the part of JSB and JSB Bank. This Agreement has been duly
executed and delivered by JSB and constitutes a valid and binding
obligation of JSB, enforceable in accordance with its terms subject to
applicable bankruptcy, insolvency and similar laws affecting creditors'
rights and remedies generally and subject, as to enforceability, to general
principles of equity, whether applied in a court of law or a court of
equity.
(d) Stockholder Approval; Fairness Opinion. The affirmative vote of
the holders of a majority of the outstanding shares of JSB Common Stock
entitled to vote on this Agreement is the only vote of the stockholders of
JSB required for approval of this Agreement by JSB and the consummation by
JSB of the Merger and the related transactions contemplated hereby. JSB has
received the written opinion of Northeast Capital & Advisory, Inc. to the
effect that, as of the date hereof, the Exchange Ratio is fair, from a
financial point of view, to JSB's stockholders.
(e) No Violations. The execution, delivery and performance of this
Agreement by JSB do not, and the consummation of the transactions
contemplated hereby will not, constitute (i) assuming receipt of all
Requisite Regulatory Approvals (as defined below) and requisite stockholder
approvals, a breach or violation of, or a default under, any law, rule or
regulation or any judgment, decree, order, governmental permit or license,
or agreement, indenture or instrument of JSB or any of its Subsidiaries, or
to which
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JSB or any of its Subsidiaries (or any of their respective properties) is
subject, (ii) a breach or violation of, or a default under, the certificate
of incorporation or bylaws of JSB or the similar organizational documents
of any of its Subsidiaries or (iii) a breach or violation of, or a default
under (or an event which, with due notice or lapse of time or both, would
constitute a default under), or result in the termination of, accelerate
the performance required by, or result in the creation of any lien, pledge,
security interest, charge or other encumbrance upon any of the properties
or assets of JSB or any of its Subsidiaries, under, any of the terms,
conditions or provisions of any note, bond, indenture, deed of trust, loan
agreement or other agreement, instrument or obligation to which JSB or any
of its Subsidiaries is a party, or to which any of their respective
properties or assets may be subject; and the consummation of the
transactions (including the Bank Merger) contemplated hereby (exclusive of
the effect of any changes effected pursuant to Section 1.7) will not
require any approval, consent or waiver under any such law, rule,
regulation, judgment, decree, order, governmental permit or license or the
approval, consent or waiver of any other party to any such agreement,
indenture or instrument, other than (x) the approval of the holders of a
majority of the outstanding shares of JSB Common Stock and the approval of
JSB as the sole stockholder of JSB Bank and (y) the provision of notice to
or the approval of, if required, the Office of Thrift Supervision ("OTS")
under HOLA, the approval, if required, of the Federal Deposit Insurance
Corporation under Section 18(c) of the FDIA, the approval of the Board of
Governors of the Federal Reserve System ("FRB") under the Bank Holding
Company Act of 1956, as amended, and the approval of the New York State
Banking Department ("NYSBD") under the Banking Law of the State of New York
(collectively, the "Requisite Regulatory Approvals"), and (z) such
approvals, consents or waivers as are required under the federal and state
securities or "blue sky" laws in connection with the transactions
contemplated by this Agreement. As of the date hereof, the executive
officers of JSB know of no reason pertaining to JSB why any of the
approvals referred to in this Section 2.3(e) should not be obtained.
(f) Reports. (i) As of their respective dates, none of the reports or
other statements filed by JSB or JSB Bank on or subsequent to December 31,
1997 with the Securities and Exchange Commission ("SEC") (collectively,
"JSB's Reports"), contained, or will contain, any untrue statement of a
material fact or omitted or will omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in
light of the circumstances under which they were made, not misleading. Each
of the financial statements of JSB included in JSB's Reports complied as to
form, as of their respective dates of filing with the SEC, in all material
respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto and have been
prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved ("GAAP") (except
as may be indicated in the notes thereto or, in the case of unaudited
financial statements, as permitted by Form 10-Q of the SEC). Each of the
consolidated statements of condition, consolidated statements of
operations, consolidated statements of cash flows and consolidated
statements of changes in stockholders' equity contained or incorporated by
reference in JSB's Reports (including in each case any related notes and
schedules) fairly presented, or will fairly present, as the case may be,
the financial position, results of operations, cash flows and stockholders'
equity, as the case may be, of the entity or entities to which it relates
for the periods set forth therein (subject, in the case of unaudited
interim statements, to normal year-end audit adjustments that are not
material in amount or effect), in each case in accordance with GAAP, except
as may be noted therein.
(ii) JSB and its Subsidiaries have each timely filed all material
reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to file
since December 31, 1996 with (A) the OTS, (B) the FDIC, (C) the SEC, (D)
the NYSE and (E) any other self-regulatory organization ("SRO"), and have
paid all fees and assessments due and payable in connection therewith.
(g) Absence of Certain Changes or Events. Except as disclosed in
JSB's Reports filed on or prior to the date of this Agreement, since
December 31, 1998, (i) JSB and its Subsidiaries have not incurred any
liability, except in the ordinary course of their businesses consistent
with past practice, (ii) JSB and
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its Subsidiaries have conducted their respective businesses only in the
ordinary and usual course of such businesses and (iii) there has not been
any Material Adverse Effect with respect to JSB.
(h) Absence of Claims. Except as disclosed in JSB's Disclosure
Letter, no litigation, proceeding, controversy, claim or action before any
court or any federal, state, local or foreign governmental or regulatory
body (each, a "Governmental Entity") is pending against JSB or any of its
Subsidiaries and, to the best of JSB's knowledge, no such litigation,
proceeding, controversy, claim or action has been threatened.
(i) Absence of Regulatory Actions. Neither JSB nor any of its
Subsidiaries is a party to any cease and desist order, written agreement or
memorandum of understanding with, or any commitment letter or similar
written undertaking to, or is subject to any action, proceeding, order or
directive by, or is a recipient of any extraordinary supervisory letter
from any federal or state governmental authority charged with the
supervision or regulation of depository institutions or depository
institution holding companies or engaged in the insurance of bank and/or
savings and loan deposits (each, a "Bank Regulator"), or has adopted any
board resolutions at the request of any Bank Regulator, nor has it been
advised by any Bank Regulator that it is contemplating issuing or
requesting (or is considering the appropriateness of issuing or requesting)
any such action, proceeding, order, directive, written agreement,
memorandum of understanding, extraordinary supervisory letter, commitment
letter, board resolutions or similar written undertaking.
(j) Taxes. All federal, state, local and foreign tax returns required
to be filed by or on behalf of JSB or any of its Subsidiaries have been
timely filed or requests for extensions have been timely filed and any such
extension shall have been granted and not have expired, and all such filed
returns are complete and accurate in all material respects. All taxes shown
on such returns, all taxes required to be shown on returns for which
extensions have been granted and all other taxes required to be paid by JSB
or any of its Subsidiaries have been paid in full or adequate provision has
been made for any such taxes on JSB's balance sheet (in accordance with
GAAP). For purposes of this Section 2.3(j), the term "taxes" shall include
all federal, state, local or foreign taxes, charges or other assessments,
including, without limitation, income, franchise, gross receipts, real and
personal property, real property transfer and gains, wage and employment
taxes, and the term "tax return" shall mean any return or other report
(including elections, declarations, disclosures, schedules, estimates and
information returns) required to be filed with respect to any tax. Except
as disclosed in JSB's Disclosure Letter, as of the date of this Agreement,
there is no audit examination, deficiency assessment, tax investigation or
refund litigation with respect to any taxes of JSB or any of its
Subsidiaries, and no claim has been made by any authority in a jurisdiction
where JSB or any of its Subsidiaries do not file tax returns that JSB or
any such Subsidiary is subject to taxation in that jurisdiction. All taxes,
interest, additions and penalties due with respect to completed and settled
examinations or concluded litigation relating to JSB or any of its
Subsidiaries have been paid in full or adequate provision has been made for
any such taxes on JSB's balance sheet (in accordance with GAAP). JSB and
its Subsidiaries have not executed an extension or waiver of any statute of
limitations on the assessment or collection of any material tax due that is
currently in effect. JSB and each of its Subsidiaries has withheld and paid
all taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party, and JSB and each of its Subsidiaries has
timely complied with all applicable information reporting requirements
under Part III, Subchapter A of Chapter 61 of the Code and similar
applicable state and local information reporting requirements. Neither JSB
nor any of its Subsidiaries (i) has made an election under Section 341(f)
of the Code, (ii) has issued or assumed any obligation under Section 279 of
the Code, any high yield discount obligation as described in Section 163(i)
of the Code or any registration-required obligation within the meaning of
Section 163(f)(2) of the Code that is not in registered form or (iii) is or
has been a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code.
(k) Agreements. (i) Except for the JSB Option Agreement and
arrangements made in the ordinary course of business, and except as
disclosed in JSB's Disclosure Letter, JSB and its Subsidiaries are not
bound by any material contract (as defined in Item 601(b)(10) of Regulation
S-K) to be
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performed after the date hereof that has not been filed with or
incorporated by reference in JSB's Reports. Except as disclosed in JSB's
Reports filed prior to the date of this Agreement or as disclosed in JSB's
Disclosure Letter, neither JSB nor any of its Subsidiaries is a party to an
oral or written (A) consulting agreement (other than data processing,
software programming and licensing contracts entered into in the ordinary
course of business) not terminable on 60 days' or less notice, (B)
agreement with any executive officer or other key employee of JSB or any of
its Subsidiaries the benefits of which are contingent, or the terms of
which are materially altered, upon the occurrence of a transaction
involving JSB or any of its Subsidiaries of the nature contemplated by this
Agreement or the JSB Option Agreement, (C) agreement with respect to any
employee or director of JSB or any of its Subsidiaries providing any term
of employment or compensation guarantee extending for a period longer than
60 days or for the payment of in excess of $50,000 per annum, (D) agreement
or plan, including any stock option plan, phantom stock or stock
appreciation rights plan, restricted stock plan or stock purchase plan, any
of the benefits of which will be increased, or the vesting or payment of
the benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the JSB Option Agreement or
the value of any of the benefits of which will be calculated on the basis
of any of the transactions contemplated by this Agreement or the JSB Option
Agreement or (E) agreement containing covenants that limit the ability of
JSB or any of its Subsidiaries to compete in any line of business or with
any person, or that involve any restriction on the geographic area in
which, or method by which, JSB (including any successor thereof) or any of
its Subsidiaries may carry on its business (other than as may be required
by law or any regulatory agency).
(ii) Neither JSB nor any of its Subsidiaries is in default under or in
violation of any provision of any note, bond, indenture, mortgage, deed of
trust, loan agreement, lease or other agreement to which it is a party or
by which it is bound or to which any of its respective properties or assets
is subject.
(iii) JSB and each of its Subsidiaries owns or possesses valid and
binding licenses and other rights to use without payment all patents,
copyrights, trade secrets, trade names, servicemarks and trademarks used in
its businesses, and neither JSB nor any of its Subsidiaries has received
any notice of conflict with respect thereto that asserts the right of
others. Each of JSB and its Subsidiaries has performed all the obligations
required to be performed by it and are not in default under any contact,
agreement, arrangement or commitment relating to any of the foregoing.
(l) Labor Matters. Neither JSB nor any of its Subsidiaries is or has
ever been a party to, or is or has ever been bound by, any collective
bargaining agreement, contract or other agreement or understanding with a
labor union or labor organization with respect to its employees, nor is JSB
or any of its Subsidiaries the subject of any proceeding asserting that it
has committed an unfair labor practice or seeking to compel it to bargain
with any labor organization as to wages and conditions of employment, nor
is there any strike, other labor dispute or organizational effort involving
JSB or any of its Subsidiaries pending or, to the best of JSB's knowledge,
threatened. JSB and its Subsidiaries are in compliance with applicable laws
regarding employment of employees and retention of independent contractors
and are in compliance with applicable employment tax laws.
(m) Employee Benefit Plans. JSB's Disclosure Letter contains a
complete and accurate list of all pension, retirement, stock option, stock
purchase, stock ownership, savings, stock appreciation right, profit
sharing, deferred compensation, consulting, bonus, group insurance,
severance and other benefit plans, contracts, agreements and arrangements,
including, but not limited to, "employee benefit plans," as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), incentive and welfare policies, contracts, plans and
arrangements and all trust agreements related thereto with respect to any
present or former directors, officers or other employees of JSB or any of
its Subsidiaries (hereinafter collectively referred to as the "JSB Employee
Plans"). Except as disclosed in JSB's Disclosure Letter:
(i) all of the JSB Employee Plans comply in all material respects
with all applicable requirements of ERISA, the Code and other applicable
laws; there has occurred no "prohibited transaction" (as defined in
Section 406 of ERISA or Section 4975 of the Code) which is likely to
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result in the imposition of any penalties or taxes under Section 502(i)
of ERISA or Section 4975 of the Code upon JSB or any of its
Subsidiaries.
(ii) no liability to the Pension Benefit Guaranty Corporation
("PBGC") has been or is expected by JSB or any of its Subsidiaries to be
incurred with respect to any JSB Employee Plan which is subject to Title
IV of ERISA ("JSB Pension Plan"), or with respect to any "single-
employer plan" (as defined in Section 4001(a) of ERISA) currently or
formerly maintained by JSB or any entity which is considered one
employer with JSB under Section 4001(b)(1) of ERISA or Section 414 of
the Code (a "JSB ERISA Affiliate");
(iii) no JSB Pension Plan had an "accumulated funding deficiency"
(as defined in Section 302 of ERISA), whether or not waived, as of the
last day of the end of the most recent plan year ending prior to the
date hereof; the fair market value of the assets of each JSB Pension
Plan exceeds the present value of the "benefit liabilities" (as defined
in Section 4001(a)(16) of ERISA) under such JSB Pension Plan as of the
end of the most recent plan year with respect to the respective JSB
Pension Plan ending prior to the date hereof, calculated on the basis of
the actuarial assumptions used in the most recent actuarial valuation
for such JSB Pension Plan as of the date hereof; and no notice of a
"reportable event" (as defined in Section 4043 of ERISA) for which the
30-day reporting requirement has not been waived has been required to be
filed for any JSB Pension Plan within the 12-month period ending on the
date hereof;
(iv) neither JSB nor any of its Subsidiaries has provided, or is
required to provide, security to any JSB Pension Plan or to any
single-employer plan of a JSB ERISA Affiliate pursuant to Section
401(a)(29) of the Code;
(v) neither JSB, its Subsidiaries, nor any JSB ERISA Affiliate has
contributed to any "multiemployer plan," as defined in Section 3(37) of
ERISA, on or after September 26, 1980;
(vi) each JSB Employee Plan that is an "employee pension benefit
plan" (as defined in Section 3(2) of ERISA) and which is intended to be
qualified under Section 401(a) of the Code ("JSB Qualified Plan") has
received a favorable determination letter from the Internal Revenue
Service ("IRS"), and JSB and its Subsidiaries are not aware of any
circumstances likely to result in revocation of any such favorable
determination letter;
(vii) there is no pending or, to JSB's knowledge, threatened
litigation, administrative action or proceeding relating to any JSB
Employee Plan;
(viii) there has been no announcement or commitment by JSB or any
of its Subsidiaries to create an additional JSB Employee Plan, or to
amend any JSB Employee Plan, except for amendments required by
applicable law which do not materially increase the cost of such JSB
Employee Plan; and, except as specifically identified in JSB's
Disclosure Letter, JSB and its Subsidiaries do not have any obligations
for post-retirement or post-employment benefits under any JSB Employee
Plan that cannot be amended or terminated upon 60 days' notice or less
without incurring any liability thereunder, except for coverage required
by Part 6 of Title I of ERISA or Section 4980B of the Code, or similar
state laws, the cost of which is borne by the insured individuals;
(ix) neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will result in any
payment or series of payments by JSB or any of its Subsidiaries to any
person which is an "excess parachute payment" (as defined in Section
280G of the Code), increase or secure (by way of a trust or other
vehicle) any benefits payable under any JSB Employee Plan or accelerate
the time of payment or vesting of any such benefit; and
(x) with respect to each JSB Employee Plan, JSB has made available
to NFB a true and correct copy of (A) the annual report on the
applicable form of the Form 5500 series filed with the IRS for the most
recent three plan years, if required to be filed, (B) such JSB Employee
Plan, including amendments thereto, (C) each trust agreement, insurance
contract or other funding
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arrangement relating to such JSB Employee Plan, including amendments
thereto, (D) the most recent summary plan description and summary of
material modifications thereto for such JSB Employee Plan, if the JSB
Employee Plan is subject to Title I of ERISA, (E) the most recent
actuarial report or valuation if such JSB Employee Plan is a JSB Pension
Plan and any subsequent changes to the actuarial assumptions contained
therein and (F) the most recent determination letter issued by the IRS
if such JSB Employee Plan is a Qualified Plan.
(n) Termination Benefits. JSB's Disclosure Letter contains a schedule
identifying the types of benefits and other payments due under the
Specified Compensation and Benefit Programs (as defined herein) for each
Named Individual (as defined herein) individually and for all persons other
than the Named Individuals as a group. For purposes hereof, "Specified
Compensation and Benefit Programs" shall include all employment agreements,
change in control agreements, severance or special termination agreements,
severance plans, pension, retirement or deferred compensation plans for
non-employee directors, supplemental executive retirement programs, tax
indemnification agreements, outplacement programs, cash bonus programs,
deferred compensation plans, all performance and/or bonus plans, stock
appreciation right, phantom stock or stock unit plan, and health, life,
disability and other insurance or welfare plans, but shall not include any
tax-qualified pension, profit-sharing or employee stock ownership plan or
any JSB Option Plans. For purposes hereof, "Named Individual" shall include
each non-employee director of JSB or any of its Subsidiaries and each
executive officer of JSB.
(o) Title to Assets. JSB and each of its Subsidiaries has good and
marketable title to its properties and assets (including any intellectual
property asset such as any trademark, servicemark, trade name or copyright)
and property acquired in a judicial foreclosure proceeding or by way of a
deed in lieu of foreclosure or similar transfer, other than property as to
which it is lessee, in which case the related lease is valid and in full
force and effect. Each lease pursuant to which JSB or any of its
Subsidiaries is lessor is valid and in full force and effect and no lessee
under any such lease is in material default or violation of any provisions
of any such lease. All material tangible properties of JSB and each of its
Subsidiaries are in a good state of maintenance and repair, conform with
all applicable ordinances, regulations and zoning laws and are considered
by JSB to be adequate for the current business of JSB and its Subsidiaries.
(p) Compliance with Laws. JSB and each of its Subsidiaries has all
permits, licenses, certificates of authority, orders and approvals of, and
has made all filings, applications and registrations with, all Governmental
Entities that are required in order to permit it to carry on its business
as it is presently conducted; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect, and, to the
best knowledge of JSB, no suspension or cancellation of any of them is
threatened. Since the date of its incorporation, the corporate affairs of
JSB have not been conducted in violation of any law, ordinance, regulation,
order, writ, rule, decree or approval of any Governmental Entity. The
businesses of JSB and its Subsidiaries are not being conducted in violation
of any law, ordinance, regulation, order, writ, rule, decree or condition
to approval of any Governmental Entity.
(q) Fees. Other than financial advisory services performed for JSB by
Northeast Capital & Advisory, Inc. pursuant to an agreement dated May 27,
1999, a true and complete copy of which has been previously delivered to
NFB, neither JSB nor any of its Subsidiaries, nor any of their respective
officers, directors, employees or agents, has employed any broker or finder
or incurred any liability for any financial advisory fees, brokerage fees,
commissions or finder's fees, and no broker or finder has acted directly or
indirectly for JSB or any of its Subsidiaries in connection with this
Agreement or the transactions contemplated hereby.
(r) Environmental Matters. (i) With respect to JSB and each of its
Subsidiaries, except as disclosed in JSB's Disclosure Letter:
(A) each of JSB and its Subsidiaries and, to JSB's knowledge, the
Participation Facilities (as defined herein) and the Loan Properties (as
defined herein) are, and have been, in substantial compliance with, and
are not liable under, all Environmental Laws (as defined herein);
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(B) there is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or,
to the best of JSB's knowledge, threatened, before any court,
Governmental Entity or board or other forum against it or any of its
Subsidiaries or any Participation Facility (x) for alleged noncompliance
(including by any predecessor) with, or liability under, any
Environmental Law or (y) relating to the presence of or release into the
environment of any Hazardous Material (as defined herein), whether or
not occurring at or on a site owned, leased or operated by it or any of
its Subsidiaries or any Participation Facility;
(C) to the best of JSB's knowledge, there is no suit, claim,
action, demand, executive or administrative order, directive,
investigation or proceeding pending or threatened before any court,
Governmental Entity or board or other forum relating to or against any
Loan Property (or JSB or any of its Subsidiaries in respect of such Loan
Property) (x) relating to alleged noncompliance (including by any
predecessor) with, or liability under, any Environmental Law or (y)
relating to the presence of or release into the environment of any
Hazardous Material, whether or not occurring at or on a site owned,
leased or operated by a Loan Property; and
(D) to the best of JSB's knowledge, during the period of (l) JSB's
or any of its Subsidiaries' ownership or operation of any of their
respective current properties or (m) JSB's or any of its Subsidiaries'
participation in the management of any Participation Facility, there has
been no contamination by or release of Hazardous Materials in, on, under
or affecting such properties.
(ii) The following definitions apply for purposes of this Section
2.3(r) and Section 2.4(r): (w) "Loan Property" means any property in which
the applicable party (or any of its Subsidiaries) holds a security
interest, and, where required by the context, includes the owner or
operator of such property, but only with respect to such property; (x)
"Participation Facility" means any facility in which the applicable party
(or any of its Subsidiaries) participates in the management (including all
property held as trustee or in any other fiduciary capacity) and, where
required by the context, includes the owner or operator of such property,
but only with respect to such property; (y) "Environmental Law" means (i)
any federal, state or local law, statute, ordinance, rule, regulation,
code, license, permit, authorization, approval, consent, legal doctrine,
order, directive, executive or administrative order, judgment, decree,
injunction, legal requirement or agreement with any Governmental Entity
relating to (A) the protection, preservation or restoration of the
environment (which includes, without limitation, air, water vapor, surface
water, groundwater, drinking water supply, structures, soil, surface land,
subsurface land, plant and animal life or any other natural resource), or
to human health or safety as it relates to Hazardous Materials, or (B) the
exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or
disposal of, Hazardous Materials, in each case as amended and as now in
effect. The term Environmental Law includes all federal, state and local
laws, rules, regulations or requirements relating to the protection of the
environment or health and safety, including, without limitation, (i) the
Federal Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, the
Federal Water Pollution Control Act of 1972, the Federal Clean Air Act, the
Federal Clean Water Act, the Federal Resource Conservation and Recovery Act
of 1976 (including, but not limited to, the Hazardous and Solid Waste
Amendments thereto and Subtitle I relating to underground storage tanks),
the Federal Solid Waste Disposal and the Federal Toxic Substances Control
Act, the Federal Insecticide, Fungicide and Rodenticide Act, the Federal
Occupational Safety and Health Act of 1970 as it relates to Hazardous
Materials, the Federal Hazardous Substances Transportation Act, the
Emergency Planning and Community Right-To-Know Act, the Safe Drinking Water
Act, the Endangered Species Act, the National Environmental Policy Act, the
Rivers and Harbors Appropriation Act or any so-called "Superfund" or
"Superlien" law, each as amended and as now or hereafter in effect, and
(ii) any common law or equitable doctrine (including, without limitation,
injunctive relief and tort doctrines such as negligence, nuisance, trespass
and strict liability) that may impose liability or obligations for injuries
or damages due to, or threatened as a result of, the presence of or
exposure to any Hazardous Material; and (z) "Hazardous Material" means any
substance (whether solid, liquid or gas) which is or could be detrimental
to human health or safety or to the environment, currently or hereafter
listed, defined,
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designated or classified as hazardous, toxic, radioactive or dangerous, or
otherwise regulated, under any Environmental Law, whether by type or by
quantity, including any substance containing any such substance as a
component. Hazardous Material includes, without limitation, any toxic
waste, pollutant, contaminant, hazardous substance, toxic substance,
hazardous waste, special waste, industrial substance, oil or petroleum, or
any derivative or by-product thereof, radon, radioactive material,
asbestos, asbestos-containing material, urea formaldehyde foam insulation,
lead and polychlorinated biphenyl.
(s) Loan Portfolio; Allowance; Asset Quality. (i) With respect to
each loan owned by JSB or its Subsidiaries in whole or in part (each, a
"Loan"), to the best knowledge of JSB:
(A) the note and the related security documents are each legal,
valid and binding obligations of the maker or obligor thereof,
enforceable against such maker or obligor in accordance with their
terms;
(B) neither JSB nor any of its Subsidiaries, nor any prior holder
of a Loan, has modified the note or any of the related security
documents in any material respect or satisfied, canceled or subordinated
the note or any of the related security documents except as otherwise
disclosed by documents in the applicable Loan file;
(C) JSB or a Subsidiary is the sole holder of legal and beneficial
title to each Loan (or JSB's applicable participation interest, as
applicable), except as otherwise referenced on the books and records of
JSB;
(D) the note and the related security documents, copies of which
are included in the Loan files, are true and correct copies of the
documents they purport to be and have not been suspended, amended,
modified, canceled or otherwise changed, except as otherwise disclosed
by documents in the applicable Loan file;
(E) there is no pending or threatened condemnation proceeding or
similar proceeding affecting the property that serves as security for a
Loan, except as otherwise referenced on the books and records of JSB;
(F) there is no litigation or proceeding pending or threatened
relating to the property that serves as security for a Loan that would
have a material adverse effect upon the related Loan; and
(G) with respect to a Loan held in the form of a participation, the
participation documentation is legal, valid, binding and enforceable.
(ii) The allowance for possible losses reflected in JSB's audited
statement of condition at December 31, 1998 was, and the allowance for
possible losses shown on the balance sheets in JSB's Reports for periods
ending after December 31, 1998 will be, adequate, as of the dates thereof,
under GAAP.
(iii) JSB's Disclosure Letter sets forth by category the amounts of
all loans, leases, advances, credit enhancements, other extensions of
credit, commitments and interest-bearing assets of JSB and its Subsidiaries
that have been classified by any bank examiner (whether regulatory or
internal) as "Special Mention," "Substandard," "Doubtful," "Loss" or words
of similar import, and JSB and its Subsidiaries shall promptly after the
end of any month inform NFB of any such classification arrived at any time
after the date hereof. The other real estate owned ("OREO") included in any
non-performing assets of JSB or any of its Subsidiaries is carried net of
reserves at the lower of cost or fair value, less estimated selling costs,
based on current management appraisals or evaluations to the extent
material; provided, however, that "current" shall mean within the past 12
months. JSB's Disclosure Letter sets forth a list of the unsold
co-operative shares owned by JSB or its Subsidiaries.
(t) Deposits. None of the deposits of JSB or any of its Subsidiaries
is a "brokered" deposit.
(u) Accounting Matters. Except as disclosed in JSB's Disclosure
Letter, neither JSB nor any of its Subsidiaries or, to the best of its
knowledge, any of its other affiliates has, through the date hereof, taken
or agreed to take any action that would prevent NFB from accounting for the
business combination to be
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effected by the Merger as a pooling-of-interests, and JSB has no knowledge
of any fact or circumstance that would prevent such accounting treatment.
(v) Antitakeover Provisions Inapplicable. JSB and its Subsidiaries
have taken all actions required to exempt JSB, the Agreement, the Plan of
Bank Merger, the Merger, the Bank Merger and the JSB Option Agreement from
any provisions of an antitakeover nature in their organization certificates
and bylaws, including Article Eighth of JSB's certificate of incorporation,
and the provisions of any federal or state "antitakeover," "fair price,"
"moratorium," "control share acquisition" or similar laws or regulations.
(w) Material Interests of Certain Persons. Except as disclosed in
JSB's Proxy Statement for its 1999 Annual Meeting of Stockholders, no
officer or director of JSB, or any "associate" (as such term is defined in
Rule 12b-2 under the Securities Exchange Act of 1934, as amended ("Exchange
Act")) of any such officer or director, has any material interest in any
material contract or property (real or personal), tangible or intangible,
used in or pertaining to the business of JSB or any of its Subsidiaries. No
such interest has been created or modified since the date of the last
regulatory examination of JSB or its Subsidiaries.
(x) Insurance. JSB and its Subsidiaries are presently insured, and
since December 31, 1996, have been insured, for reasonable amounts with
financially sound and reputable insurance companies, against such risks as
companies engaged in a similar business would, in accordance with good
business practice, customarily be insured. All of the insurance policies
and bonds maintained by JSB and its Subsidiaries are in full force and
effect, JSB and its Subsidiaries are not in default thereunder and all
material claims thereunder have been filed in due and timely fashion.
(y) Investment Securities; Borrowings. (i) Except for investments in
Federal Home Loan Bank ("FHLB") stock and pledges to secure FHLB borrowings
and reverse repurchase agreements entered into in arms-length transactions
pursuant to normal commercial terms and conditions and entered into in the
ordinary course of business and restrictions that exist for securities to
be classified as "held to maturity," none of the investments reflected in
the consolidated balance sheet of JSB included in JSB's Report on Form 10-K
for the year ended December 31, 1998, and none of the investment securities
held by it or any of its Subsidiaries since December 31, 1998, is subject
to any restriction (contractual or statutory) that would materially impair
the ability of the entity holding such investment freely to dispose of such
investment at any time.
(ii) Neither JSB nor any Subsidiary is a party to or has agreed to
enter into an exchange-traded or over-the-counter equity, interest rate,
foreign exchange or other swap, forward, future, option, cap, floor or
collar or any other contract that is not included on the consolidated
statements of condition and is a derivative contract (including various
combinations thereof) (each, a "Derivatives Contract") or owns securities
that (A) are referred to generically as "structured notes," "high risk
mortgage derivatives," "capped floating rate notes" or "capped floating
rate mortgage derivatives" or (B) are likely to have changes in value as a
result of interest or exchange rate changes that significantly exceed
normal changes in value attributable to interest or exchange rate changes,
except for those Derivatives Contracts and other instruments legally
purchased or entered into in the ordinary course of business, consistent
with safe and sound banking practices and regulatory guidance, and listed
(as of the date hereof) in JSB's Disclosure Letter or disclosed in JSB's
Reports filed on or prior to the date hereof.
(iii) Set forth in JSB's Disclosure Letter is a true and complete list
of JSB's borrowed funds (excluding deposit accounts) as of the date hereof.
(z) Indemnification. Except as provided in JSB's Disclosure Letter,
JSB's Employment Agreements or the organization certificate or bylaws of
JSB and its Subsidiaries, neither JSB nor any Subsidiary is a party to any
indemnification agreement with any of its present or future directors,
officers, employees, agents or other persons who serve or served in any
other capacity with any other enterprise at the request of JSB (a "Covered
Person"), and, except as disclosed in JSB's Disclosure Letter, to the best
knowledge of JSB, there are no claims for which any Covered Person would be
entitled to indemnification
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under the organization certificate or bylaws of JSB or any of its
Subsidiaries, under any applicable law or regulation or under any
indemnification agreement.
(aa) Books and Records. The books and records of JSB and its
Subsidiaries on a consolidated basis have been, and are being, maintained
in accordance with applicable legal and accounting requirements and reflect
in all material respects the substance of events and transactions that
should be included therein.
(bb) Corporate Documents. JSB has made available to NFB true and
complete copies of its certificate of incorporation and bylaws and of JSB
Bank's organization certificate and bylaws. The minute books of JSB and JSB
Bank constitute a complete and correct record of all actions taken by their
respective boards of directors (and each committee thereof) and their
stockholders. The minute books of each of JSB's Subsidiaries constitutes a
complete and correct record of all actions taken by the respective boards
of directors (and each committee thereof) and the stockholders of each such
Subsidiary.
(cc) Liquidation Account. Neither the Merger nor the Bank Merger will
result in any payment or distribution payable out of the liquidation
account of JSB Bank established in connection with JSB Bank's conversion
from mutual to stock form.
(dd) Tax Treatment of the Merger. As of the date hereof, JSB has no
knowledge of any fact or circumstance that would prevent the Merger or the
Bank Merger, if effected, from qualifying as a reorganization under Section
368(a) of the Code.
(ee) Beneficial Ownership of NFB Common Stock. As of the date hereof,
JSB does not beneficially own any shares of NFB Common Stock and does not
have any option, warrant or right of any kind to acquire the beneficial
ownership of any shares of NFB Common Stock.
(ff) Year 2000 Matters. (i) JSB's Disclosure Letter sets forth a true
and complete copy of JSB's plan to cause all of the Date-Sensitive Systems
owned, leased or used by JSB or any of its Subsidiaries intended and
necessary for use after December 31, 1999, or licensed to JSB or any of its
Subsidiaries for use by JSB or any of its Subsidiaries, and all of the Date
Data of JSB or any of its Subsidiaries to be Year 2000 Compliant (the "JSB
Y2K Plan"). JSB believes that the JSB Y2K Plan can be substantially
achieved on or before September 30, 1999, with aggregate expenditures under
the JSB Y2K Plan not materially in excess of $200,000.
(ii) The following definitions apply for purposes of this Section
2.3(ff) and Section 2.4(z): (x) "Date Data" means any data of any type that
includes date information or that is otherwise derived from, dependent on
or related to date information; (y) "Date-Sensitive System" means, with
respect to a particular entity, any software, microcode or hardware system
or component, including any electronic or electronically controlled system
or component, that processes any Date Data and that is installed in a
development or on order by such entity or any Subsidiary of such entity for
its internal use; and (z) "Year 2000 Compliance" means, (A) with respect to
Date Data, that such data are in proper format for all dates in the
twentieth and twenty-first centuries and (B) with respect to Date-Sensitive
Systems, that such system accurately processes all Date Data, including for
the twentieth and twenty-first centuries, without loss of any functionality
or performance, including calculating, comparing, sequencing, storing and
displaying such Date Data (including all leap-year considerations), when
used as a stand-alone system or in combination with other software or
hardware.
(gg) Registration Statement. The information regarding JSB to be
supplied by JSB for inclusion in (i) the Registration Statement on Form S-4
and/or such other form(s) as may be appropriate to be filed under the
Securities Act of 1933, as amended ("Securities Act"), with the SEC by NFB
for the purpose of, among other things, registering the NFB Common Stock to
be issued to JSB's stockholders in the Merger (as amended or supplemented
from time to time, the "Registration Statement"), or (ii) the joint proxy
statement to be filed with the SEC by JSB and NFB under the Exchange Act
and distributed in connection with JSB's and NFB's respective meeting of
stockholders to vote upon this Agreement (together with the prospectus
included in the Registration Statement, the "Joint Proxy Statement-
Prospectus") will not, at the time such Registration Statement becomes
effective, contain any untrue
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statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
Section 2.4. Representations and Warranties of NFB. Subject to Sections
2.1 and 2.2, NFB represents and warrants to JSB that, except as disclosed in
NFB's Disclosure Letter:
(a) Organization. (i) NFB is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and
is duly registered as a bank holding company under the Bank Holding Company
Act of 1956, as amended ("BHCA"). NFB Bank is a bank duly organized,
validly existing and in good standing under the laws of the State of New
York and is a wholly owned Subsidiary of NFB. Each Subsidiary of NFB, other
than NFB Bank, is a corporation, limited liability company or partnership
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization. Each of NFB and its
Subsidiaries has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
(ii) NFB and each of its Subsidiaries has the requisite corporate
power and authority, and is duly qualified and is in good standing, to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary.
(iii) NFB's Disclosure Letter sets forth all of NFB's Subsidiaries and
all entities (whether corporations, partnerships or similar organizations),
including the corresponding percentage ownership, in which NFB owns,
directly or indirectly, 5% or more of the ownership interests as of the
date of this Agreement and indicates for each of NFB's Subsidiaries, as of
such date, its jurisdiction of organization and the jurisdiction(s) wherein
it is qualified to do business. All such Subsidiaries and ownership
interests are in compliance with all applicable laws, rules and regulations
relating to direct investments in equity ownership interests. NFB owns,
either directly or indirectly, all of the outstanding capital stock of each
of its Subsidiaries. No Subsidiary of NFB other than NFB Bank and Superior
Savings of New England is an "insured depository institution" as defined in
the FDIA and the applicable regulations thereunder. All of the shares of
capital stock of each of the Subsidiaries of NFB are duly authorized and
validly issued, fully paid and nonassessable and not subject to any
preemptive rights and are owned by NFB or a Subsidiary of NFB free and
clear of any claims, liens, encumbrances or restrictions (other than those
imposed by applicable federal and state securities laws) and there are no
agreements or understandings with respect to the voting or disposition of
any such shares.
(iv) The deposits of NFB Bank are insured by the BIF or the Savings
Association Insurance Fund of the FDIC to the extent provided in the FDIA.
(b) Capital Structure. (i) The authorized capital stock of NFB
consists of 200,000,000 shares of NFB Common Stock and 10,000,000 shares of
preferred stock, par value $1.00 per share ("NFB Preferred Stock"). As of
the date of this Agreement, (A) 135,767,087 shares of NFB Common Stock were
issued and outstanding, (B) no shares of NFB Preferred Stock were issued
and outstanding, (C) no shares of NFB Common Stock were reserved for
issuance, except that 2,000,000 shares of NFB Common Stock were reserved
for issuance pursuant to the NFB Dividend Reinvestment and Stock Purchase
Plan and 1,973,140 shares of NFB Common Stock were reserved for issuance
pursuant to the NFB 1985 Incentive Stock Option Plan, the NFB 1987
Long-Term Incentive Plan, the NFB 1989 Executive Management and
Compensation Plan, the NFB 1994 Key Employee Stock Plan, the NFB 1997 Non-
Officer Stock Plan and the NFB 1998 Stock Compensation Plan (the "NFB Stock
Plans"), (D) no shares of NFB Preferred Stock were reserved for issuance
and (E) 9,359,435 shares of NFB Common Stock were held by NFB in its
treasury or by its Subsidiaries. The authorized capital stock of NFB Bank
consists of 5,500,000 shares of common stock, par value $1.00 per share,
and no shares of preferred stock. As of the date of this Agreement,
5,500,000 shares of such common stock were outstanding, no shares of such
preferred stock were outstanding and all outstanding shares of such common
stock were, and as of the Effective Time will be, owned by NFB. All
outstanding shares of capital stock of NFB and NFB Bank are duly authorized
and validly issued, fully paid and nonassessable and not subject to any
preemptive rights and, with respect to shares held by NFB in its treasury
or by its Subsidiaries, are free
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and clear of all claims, liens, encumbrances or restrictions (other than
those imposed by applicable federal or state securities laws) and there are
no agreements or understandings with respect to the voting or disposition
of any such shares.
(ii) No Voting Debt of NFB is issued or outstanding.
(iii) As of the date of this Agreement, except for this Agreement, the
NFB Stock Plans and as set forth in NFB's Disclosure Letter, neither NFB
nor any of its Subsidiaries has or is bound by any outstanding options,
warrants, calls, rights, convertible securities, commitments or agreements
of any character obligating NFB or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, any additional
shares of capital stock of NFB or any of its Subsidiaries or obligating NFB
or any of its Subsidiaries to grant, extend or enter into any such option,
warrant, call, right, convertible security, commitment or agreement. As of
the date hereof, there are no outstanding contractual obligations of NFB or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any
shares of capital stock of NFB or any of its Subsidiaries.
(c) Authority. Each of NFB and NFB Bank has the requisite corporate
power and authority to enter into this Agreement and the Plan of Bank
Merger, respectively and, subject to approval of this Agreement by the
requisite vote of NFB's stockholders and receipt of all required regulatory
or governmental approvals, as contemplated by Section 5.1(b) of this
Agreement, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement, and, subject to the approval of
this Agreement by NFB's stockholders, the consummation of the transactions
contemplated hereby, have been duly authorized by all necessary corporate
actions on the part of NFB and NFB Bank. This Agreement has been duly
executed and delivered by NFB and constitutes a valid and binding
obligation of NFB, enforceable in accordance with its terms subject to
applicable bankruptcy, insolvency and similar laws affecting creditors'
rights and remedies generally and subject, as to enforceability, to general
principles of equity, whether applied in a court of law or a court of
equity.
(d) Stockholder Approval; Fairness Opinion. The affirmative vote of
the holders of a majority of the outstanding shares of NFB Common Stock
entitled to vote on this Agreement is the only vote of the stockholders of
NFB required for approval of this Agreement by NFB and the consummation by
NFB of the Merger and the related transactions contemplated hereby. NFB has
received the written opinion of Donaldson, Lufkin & Jenrette Securities
Corporation to the effect that, as of the date hereof, the Exchange Ratio
is fair, from a financial point of view, to NFB's stockholders.
(e) No Violations. The execution, delivery and performance of this
Agreement by NFB do not, and the consummation of the transactions
contemplated hereby will not, constitute (i) assuming receipt of all
Requisite Regulatory Approvals and requisite stockholder approvals, a
breach or violation of, or a default under, any law, rule or regulation or
any judgment, decree, order, governmental permit or license, or
agreement,indenture or instrument of NFB or any of its Subsidiaries, or to
which NFB or any of its Subsidiaries (or any of their respective
properties) is subject, (ii) a breach or violation of, or a default under,
the certificate of incorporation or bylaws of NFB or the similar
organizational documents of any of its Subsidiaries or (iii) a breach or
violation of, or a default under (or an event which, with due notice or
lapse of time or both, would constitute a default under), or result in the
termination of, accelerate the performance required by, or result in the
creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the properties or assets of NFB or any of its
Subsidiaries, under, any of the terms, conditions or provisions of any
note, bond, indenture, deed of trust, loan agreement or other agreement,
instrument or obligation to which NFB or any of its Subsidiaries is a
party, or to which any of their respective properties or assets may be
subject; and the consummation of the transactions (including the Bank
Merger) contemplated hereby (exclusive of the effect of any changes
effected pursuant to Section 1.7) will not require any approval, consent or
waiver under any such law, rule, regulation, judgment, decree, order,
governmental permit or license or the approval, consent or waiver of any
other party to any such agreement, indenture or instrument, other than (x)
the approval of the holders of a majority of the outstanding shares of NFB
Common Stock, (y) the Requisite Regulatory Approvals and (z) such
approvals, consents or waivers as are required under the federal and state
securities or "blue
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sky" laws in connection with the transactions contemplated by this
Agreement. As of the date hereof, the executive officers of NFB know of no
reason pertaining to NFB why any of the approvals referred to in this
Section 2.4(e) should not be obtained.
(f) Reports. (i) As of their respective dates, none of the reports or
other statements filed by NFB or NFB Bank on or subsequent to December 31,
1997 with the SEC (collectively, "NFB's Reports"), contained, or will
contain, any untrue statement of a material fact or omitted or will omit to
state a material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances under which they
were made, not misleading. Each of the financial statements of NFB included
in NFB's Reports complied as to form, as of their respective dates of
filing with the SEC, in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto and have been prepared in accordance with GAAP (except as
may be indicated in the notes thereto or, in the case of unaudited
financial statements, as permitted by Form 10-Q of the SEC). Each of the
consolidated statements of condition, consolidated statements of
operations, consolidated statements of cash flows and consolidated
statements of changes in stockholders' equity contained or incorporated by
reference in NFB's Reports (including in each case any related notes and
schedules) fairly presented, or will fairly present, as the case may be,
the financial position, results of operations, cash flows and stockholders'
equity, as the case may be, of the entity or entities to which it relates
for the periods set forth therein (subject, in the case of unaudited
interim statements, to normal year-end audit adjustments that are not
material in amount or effect), in each case in accordance with GAAP, except
as may be noted therein.
(ii) NFB and its Subsidiaries have each timely filed all material
reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to file
since December 31, 1996 with (A) the NYSBD, (B) FRB (C) the FDIC, (D) the
SEC, (E) the NYSE and (F) any other SRO, and have paid all fees and
assessments due and payable in connection therewith.
(g) Absence of Certain Changes or Events. Except as disclosed in
NFB's Reports filed on or prior to the date of this Agreement, since
December 31, 1998, (i) NFB and its Subsidiaries have not incurred any
liability, except in the ordinary course of their businesses consistent
with past practice and (ii) there has not been any Material Adverse Effect
with respect to NFB.
(h) Absence of Claims. Except as disclosed in NFB's Disclosure
Letter, no litigation, proceeding, controversy, claim or action before any
court or Governmental Entity is pending against NFB or any of its
Subsidiaries, and, to the best of NFB's knowledge, no such litigation,
proceeding, controversy, claim or action has been threatened.
(i) Absence of Regulatory Actions. Neither NFB nor any of its
Subsidiaries is a party to any cease and desist order, written agreement or
memorandum of understanding with, or any commitment letter or similar
written undertaking to, or is subject to any action, proceeding, order or
directive by, or is a recipient of any extraordinary supervisory letter
from any Bank Regulator, or has adopted any board resolutions at the
request of any Bank Regulator, nor has it been advised by any Bank
Regulator that it is contemplating issuing or requesting (or is considering
the appropriateness of issuing or requesting) any such action, proceeding,
order, directive, written agreement, memorandum of understanding,
extraordinary supervisory letter, commitment letter, board resolutions or
similar written undertaking.
(j) Taxes. All federal, state, local and foreign tax returns required
to be filed by or on behalf of NFB or any of its Subsidiaries have been
timely filed or requests for extensions have been timely filed and any such
extension shall have been granted and not have expired, and all such filed
returns are complete and accurate in all material respects. All taxes shown
on such returns, all taxes required to be shown on returns for which
extensions have been granted and all other taxes required to be paid by NFB
or any of its Subsidiaries have been paid in full or adequate provision has
been made for any such taxes on NFB's balance sheet (in accordance with
GAAP). For purposes of this Section 2.4(j), the terms "taxes" and "tax
return" shall have the meanings assigned to such terms in Section 2.3(j) of
this Agreement. Except as disclosed in NFB's Disclosure Letter, as of the
date of this Agreement, there is no audit examination,
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deficiency assessment, tax investigation or refund litigation with respect
to any taxes of NFB or any of its Subsidiaries, and no claim has been made
by any authority in a jurisdiction where NFB or any of its Subsidiaries do
not file tax returns that NFB or any such Subsidiary is subject to taxation
in that jurisdiction. All taxes, interest, additions and penalties due with
respect to completed and settled examinations or concluded litigation
relating to NFB or any of its Subsidiaries have been paid in full or
adequate provision has been made for any such taxes on NFB's balance sheet
(in accordance with GAAP). NFB and its Subsidiaries have not executed an
extension or waiver of any statute of limitations on the assessment or
collection of any material tax due that is currently in effect. NFB and
each of its Subsidiaries has withheld and paid all taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other third
party, and NFB and each of its Subsidiaries has timely complied with all
applicable information reporting requirements under Part III, Subchapter A
of Chapter 61 of the Code and similar applicable state and local
information reporting requirements. Neither NFB nor any of its Subsidiaries
(i) has made an election under Section 341(f) of the Code, (ii) has issued
or assumed any obligation under Section 279 of the Code, any high yield
discount obligation as described in Section 163(i) of the Code or any
registration-required obligation within the meaning of Section 163(f)(2) of
the Code that is not in registered form or (iii) is or has been a United
States real property holding corporation within the meaning of Section
897(c)(2) of the Code.
(k) Agreements. (i) Except for arrangements made in the ordinary
course of business, and except as disclosed in NFB's Disclosure Letter, NFB
and its Subsidiaries are not bound by any material contract (as defined in
Item 601(b)(10) of Regulation S-K) to be performed after the date hereof
that has not been filed with or incorporated by reference in NFB's Reports.
Except as disclosed in NFB's Reports filed prior to the date of this
Agreement or as disclosed in NFB's Disclosure Letter, neither NFB nor any
of its Subsidiaries is a party to an oral or written agreement containing
covenants that limit the ability of NFB or any of its Subsidiaries to
compete in any line of business or with any person, or that involve any
restriction on the geographic area in which, or method by which, NFB
(including any successor thereof) or any of its Subsidiaries may carry on
its business (other than as may be required by law or any regulatory
agency).
(ii) Neither NFB nor any of its Subsidiaries is in default under or in
violation of any provision of any note, bond, indenture, mortgage, deed of
trust, loan agreement, lease or other agreement to which it is a party or
by which it is bound or to which any of its respective properties or assets
is subject.
(iii) NFB and each of its Subsidiaries owns or possesses valid and
binding licenses and other rights to use without payment all patents,
copyrights, trade secrets, trade names, servicemarks and trademarks used in
its businesses, and neither NFB nor any of its Subsidiaries has received
any notice of conflict with respect thereto that asserts the right of
others. Each of NFB and its Subsidiaries has performed all the obligations
required to be performed by it and are not in default under any contact,
agreement, arrangement or commitment relating to any of the foregoing.
(l) NFB Common Stock. The shares of NFB Common Stock to be issued
pursuant to this Agreement, when issued in accordance with the terms of
this Agreement, will be duly authorized and validly issued, fully paid and
nonassessable and not subject to any preemptive rights.
(m) Labor Matters. Neither NFB nor any of its Subsidiaries is or has
ever been a party to, or is or has ever been bound by, any collective
bargaining agreement, contract or other agreement or understanding with a
labor union or labor organization with respect to its employees, nor is NFB
or any of its Subsidiaries the subject of any proceeding asserting that it
has committed an unfair labor practice or seeking to compel it to bargain
with any labor organization as to wages and conditions of employment, nor
is there any strike, other labor dispute or organizational effort involving
NFB or any of its Subsidiaries pending or, to the best of NFB's knowledge,
threatened. NFB and its Subsidiaries are in compliance with applicable laws
regarding employment of employees and retention of independent contractors
and are in compliance with applicable employment tax laws.
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(n) Employee Benefit Plans. NFB's Disclosure Letter contains a
complete and accurate list of all pension, retirement, stock option, stock
purchase, stock ownership, savings, stock appreciation right, profit
sharing, deferred compensation, consulting, bonus, group insurance,
severance and other benefit plans, contracts, agreements and arrangements,
including, but not limited to, "employee benefit plans," as defined in
Section 3(3) of ERISA, incentive and welfare policies, contracts, plans and
arrangements and all trust agreements related thereto with respect to any
present or former directors, officers or other employees of NFB or any of
its Subsidiaries (hereinafter collectively referred to as the "NFB Employee
Plans"). Except as disclosed in NFB's Disclosure Letter:
(i) all of the NFB Employee Plans comply in all material respects
with all applicable requirements of ERISA, the Code and other applicable
laws; there has occurred no "prohibited transaction" (as defined in
Section 406 of ERISA or Section 4975 of the Code) which is likely to
result in the imposition of any penalties or taxes under Section 502(i)
of ERISA or Section 4975 of the Code upon NFB or any of its
Subsidiaries;
(ii) no liability to the PBGC has been or is expected by NFB or any
of its Subsidiaries to be incurred with respect to any NFB Employee Plan
which is subject to Title IV of ERISA ("NFB Pension Plan"), or with
respect to any "single-employer plan" (as defined in Section 4001(a) of
ERISA) currently or formerly maintained by NFB or any entity which is
considered one employer with NFB under Section 4001(b)(1) of ERISA or
Section 414 of the Code (a "NFB ERISA Affiliate");
(iii) no NFB Pension Plan had an "accumulated funding deficiency"
(as defined in Section 302 of ERISA), whether or not waived, as of the
last day of the end of the most recent plan year ending prior to the
date hereof; the fair market value of the assets of each NFB Pension
Plan exceeds the present value of the "benefit liabilities" (as defined
in Section 4001(a)(16) of ERISA) under such NFB Pension Plan as of the
end of the most recent plan year with respect to the respective NFB
Pension Plan ending prior to the date hereof, calculated on the basis of
the actuarial assumptions used in the most recent actuarial valuation
for such NFB Pension Plan as of the date hereof; and no notice of a
"reportable event" (as defined in Section 4043 of ERISA) for which the
30-day reporting requirement has not been waived has been required to be
filed for any NFB Pension Plan within the 12-month period ending on the
date hereof;
(iv) neither NFB nor any of its Subsidiaries has provided, or is
required to provide, security to any NFB Pension Plan or to any
single-employer plan of a NFB ERISA Affiliate pursuant to Section
401(a)(29) of the Code;
(v) neither NFB, its Subsidiaries, nor any NFB ERISA Affiliate has
contributed to any "multiemployer plan," as defined in Section 3(37) of
ERISA, on or after September 26, 1980;
(vi) each NFB Employee Plan that is an "employee pension benefit
plan" (as defined in Section 3(2) of ERISA) and which is intended to be
qualified under Section 401(a) of the Code ("NFB Qualified Plan") has
received a favorable determination letter from the IRS, and NFB and its
Subsidiaries are not aware of any circumstances likely to result in
revocation of any such favorable determination letter;
(vii) there is no pending or, to NFB's knowledge, threatened
litigation, administrative action or proceeding relating to any NFB
Employee Plan;
(viii) there has been no announcement or commitment by NFB or any
of its Subsidiaries to create an additional NFB Employee Plan, or to
amend any NFB Employee Plan, except for amendments required by
applicable law which do not materially increase the cost of such NFB
Employee Plan; and, except as specifically identified in NFB's
Disclosure Letter, NFB and its Subsidiaries do not have any obligations
for post-retirement or post-employment benefits under any NFB Employee
Plan that cannot be amended or terminated upon 60 days' notice or less
without incurring any liability thereunder, except for coverage required
by Part 6 of Title I of ERISA or
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Section 4980B of the Code, or similar state laws, the cost of which is
borne by the insured individuals;
(ix) neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will result in any
payment or series of payments by NFB or any of its Subsidiaries to any
person which is an "excess parachute payment" (as defined in Section
280G of the Code), increase or secure (by way of a trust or other
vehicle) any benefits payable under any NFB Employee Plan or accelerate
the time of payment or vesting of any such benefit; and
(x) with respect to each NFB Employee Plan, NFB has made available
to JSB a true and correct copy of (A) the annual report on the
applicable form of the Form 5500 series filed with the IRS for the most
recent three plan years, if required to be filed, (B) such NFB Employee
Plan, including amendments thereto, (C) each trust agreement, insurance
contract or other funding arrangement relating to such NFB Employee
Plan, including amendments thereto, (D) the most recent summary plan
description and summary of material modifications thereto for such NFB
Employee Plan, if the NFB Employee Plan is subject to Title I of ERISA,
(E) the most recent actuarial report or valuation if such NFB Employee
Plan is an NFB Pension Plan and any subsequent changes to the actuarial
assumptions contained therein and (F) the most recent determination
letter issued by the IRS if such NFB Employee Plan is a Qualified Plan.
(o) Title to Assets. NFB and each of its Subsidiaries has good and
marketable title to its properties and assets (including any intellectual
property asset such as any trademark, servicemark, trade name or copyright)
and property acquired in a judicial foreclosure proceeding or by way of a
deed in lieu of foreclosure or similar transfer, other than property as to
which it is lessee, in which case the related lease is valid and in full
force and effect. Each lease pursuant to which NFB or any of its
Subsidiaries is lessor is valid and in full force and effect and no lessee
under any such lease is in material default or violation of any provisions
of any such lease. All material tangible properties of NFB and each of its
Subsidiaries are in a good state of maintenance and repair, conform with
all applicable ordinances, regulations and zoning laws and are considered
by NFB to be adequate for the current business of NFB and its Subsidiaries.
(p) Compliance with Laws. NFB and each of its Subsidiaries has all
permits, licenses, certificates of authority, orders and approvals of, and
has made all filings, applications and registrations with, all Governmental
Entities that are required in order to permit it to carry on its business
as it is presently conducted; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect, and, to the
best knowledge of NFB, no suspension or cancellation of any of them is
threatened. Since the date of its incorporation, the corporate affairs of
NFB have not been conducted in violation of any law, ordinance, regulation,
order, writ, rule, decree or approval of any Governmental Entity. The
businesses of NFB and its Subsidiaries are not being conducted in violation
of any law, ordinance, regulation, order, writ, rule, decree or condition
to approval of any Governmental Entity.
(q) Fees. Other than financial advisory services performed for NFB by
Donaldson, Lufkin & Jenrette Securities Corporation pursuant to an
agreement dated July 29, 1999, a true and complete copy of which has been
previously delivered to JSB, neither NFB nor any of its Subsidiaries, nor
any of their respective officers, directors, employees or agents, has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or finder's fees, and no broker
or finder has acted directly or indirectly for NFB or any of its
Subsidiaries in connection with this Agreement or the transactions
contemplated hereby.
(r) Environmental Matters. With respect to NFB and each of its
Subsidiaries, except as disclosed in NFB's Disclosure Letter:
(i) each of NFB and its Subsidiaries and, to NFB's knowledge, the
Participation Facilities and the Loan Properties are, and have been, in
substantial compliance with, and are not liable under, all Environmental
Laws;
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(ii) there is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or,
to the best of NFB's knowledge, threatened, before any court,
Governmental Entity or board or other forum against it or any of its
Subsidiaries or any Participation Facility (x) for alleged noncompliance
(including by any predecessor) with, or liability under, any
Environmental Law or (y) relating to the presence of or release into the
environment of any Hazardous Material, whether or not occurring at or on
a site owned, leased or operated by it or any of its Subsidiaries or any
Participation Facility;
(iii) to the best of NFB's knowledge, there is no suit, claim,
action, demand, executive or administrative order, directive,
investigation or proceeding pending or threatened before any court,
Governmental Entity or board or other forum relating to or against any
Loan Property (or NFB or any of its Subsidiaries in respect of such Loan
Property) (x) relating to alleged noncompliance (including by any
predecessor) with, or liability under, any Environmental Law or (y)
relating to the presence of or release into the environment of any
Hazardous Material, whether or not occurring at or on a site owned,
leased or operated by a Loan Property; and
(iv) to the best of NFB's knowledge, during the period of (l) NFB's
or any of its Subsidiaries' ownership or operation of any of their
respective current properties or (m) NFB's or any of its Subsidiaries'
participation in the management of any Participation Facility, there has
been no contamination by or release of Hazardous Materials in, on, under
or affecting such properties.
(s) Loan Portfolio; Allowance; Asset Quality. (i) With respect to
each Loan owned by NFB or its Subsidiaries in whole or in part, to the best
knowledge of NFB:
(A) the note and the related security documents are each legal,
valid and binding obligations of the maker or obligor thereof,
enforceable against such maker or obligor in accordance with their
terms;
(B) neither NFB nor any of its Subsidiaries nor any prior holder of
a Loan has modified the note or any of the related security documents in
any material respect or satisfied, canceled or subordinated the note or
any of the related security documents except as otherwise disclosed by
documents in the applicable Loan file;
(C) NFB or a Subsidiary is the sole holder of legal and beneficial
title to each Loan (or NFB Bank's applicable participation interest, as
applicable); except as otherwise referenced on the books and records of
NFB;
(D) the note and the related security documents, copies of which
are included in the Loan files, are true and correct copies of the
documents they purport to be and have not been suspended, amended,
modified, canceled or otherwise changed, except as otherwise disclosed
by documents in the applicable Loan file;
(E) there is no pending or threatened condemnation proceeding or
similar proceeding affecting the property that serves as security for a
Loan, except as otherwise referenced on the books and records of NFB;
(F) there is no litigation or proceeding pending or threatened,
relating to the property that serves as security for a Loan that would
have a material adverse effect upon the related Loan; and
(G) with respect to a Loan held in the form of a participation, the
participation documentation is legal, valid, binding and enforceable.
(ii) The allowance for possible losses reflected in NFB's audited
statement of condition at December 31, 1998 was, and the allowance for
possible losses shown on the balance sheets in NFB's Reports for periods
ending after December 31, 1998 will be, adequate, as of the dates thereof,
under GAAP.
(iii) NFB's Disclosure Letter sets forth by category the amounts of
all loans, leases, advances, credit enhancements, other extensions of
credit, commitments and interest-bearing assets of NFB and its
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Subsidiaries that have been classified by any bank examiner (whether
regulatory or internal) as "Special Mention," "Substandard," "Doubtful,"
"Loss" or words of similar import, and NFB and its Subsidiaries shall
promptly after the end of any month inform JSB of any such classification
arrived at any time after the date hereof. The OREO included in any
non-performing assets of NFB or any of its Subsidiaries is carried net of
reserves at the lower of cost or fair value, less estimated selling costs,
based on current independent appraisals or evaluations or current
management appraisals or evaluations; provided, however, that "current"
shall mean within the past 12 months.
(t) Accounting Matters. Except as disclosed in NFB's Disclosure
Letter, neither NFB nor any of its Subsidiaries or, to the best of its
knowledge, any of its other affiliates has, through the date hereof, taken
or agreed to take any action that would prevent NFB from accounting for the
business combination to be effected by the Merger as a
pooling-of-interests, and NFB has no knowledge of any fact or circumstance
that would prevent such accounting treatment.
(u) Insurance. NFB and its Subsidiaries are presently insured, and
since December 31, 1996, have been insured, for reasonable amounts with
financially sound and reputable insurance companies, against such risks as
companies engaged in a similar business would, in accordance with good
business practice, customarily be insured. All of the insurance policies
and bonds maintained by NFB and its Subsidiaries are in full force and
effect, NFB and its Subsidiaries are not in default thereunder and all
material claims thereunder have been filed in due and timely fashion.
(v) Investment Securities; Borrowings. (i) Except for investments in
FHLB Stock and pledges to secure FHLB borrowings and reverse repurchase
agreements entered into in arms-length transactions pursuant to normal
commercial terms and conditions and entered into in the ordinary course of
business and restrictions that exist for securities to be classified as
"held to maturity," none of the investments reflected in the consolidated
balance sheet of NFB included in NFB's Report on Form 10-K for the year
ended December 31, 1998, and none of the investment securities held by it
or any of its Subsidiaries since December 31, 1998 is subject to any
restriction (contractual or statutory) that would materially impair the
ability of the entity holding such investment freely to dispose of such
investment at any time.
(ii) Neither NFB nor any Subsidiary is a party to or has agreed to
enter into any Derivatives Contract or owns securities that (A) are
referred to generically as "structured notes," "high risk mortgage
derivatives," "capped floating rate notes" or "capped floating rate
mortgage derivatives" or (B) are likely to have changes in value as a
result of interest or exchange rate changes that significantly exceed
normal changes in value attributable to interest or exchange rate changes,
except for those Derivatives Contracts and other instruments legally
purchased or entered into in the ordinary course of business, consistent
with safe and sound banking practices and regulatory guidance, and listed
(as of the date hereof) in NFB's Disclosure Letter or disclosed in NFB's
Reports filed on or prior to the date hereof.
(iii) Set forth in NFB's Disclosure Letter is a true and complete list
of NFB's borrowed funds (excluding deposit accounts) as of the date hereof.
(w) Corporate Documents. NFB has made available to JSB true and
complete copies of its certificate of incorporation and bylaws and of NFB
Bank's organization certificate and bylaws. The minute books of NFB and NFB
Bank constitute a complete and correct record of all actions taken by their
respective boards of directors (and each committee thereof) and their
stockholders. The minute books of each of NFB's Subsidiaries constitutes a
complete and correct record of all actions taken by the respective boards
of directors (and each committee thereof) and the stockholders of each such
Subsidiary.
(x) Tax Treatment of the Merger. As of the date hereof, NFB has no
knowledge of any fact or circumstance that would prevent the Merger or the
Bank Merger, if effected, from qualifying as a reorganization under Section
368(a) of the Code.
(y) Beneficial Ownership of JSB Common Stock. As of the date hereof,
NFB does not beneficially own any shares of JSB Common Stock and, other
than as contemplated by the JSB Option Agreement,
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does not have any option, warrant or right of any kind to acquire the
beneficial ownership of any shares of JSB Common Stock.
(z) Year 2000 Matters. NFB's Disclosure Letter sets forth a true and
complete copy of NFB's plan to cause all of the Date-Sensitive Systems
owned, leased or used by NFB or any of its Subsidiaries intended and
necessary for use after December 31, 1999, or licensed to NFB or any of its
Subsidiaries for use by NFB or any of its Subsidiaries, and all of the Date
Data of NFB or any of its Subsidiaries to be Year 2000 Compliant (the "NFB
Y2K Plan"). NFB believes that the NFB Y2K Plan can be substantially
achieved on or before September 30, 1999, with aggregate expenditures under
the NFB Y2K Plan not materially in excess of $2 million.
(aa) Registration Statement. The information to be supplied by NFB
for inclusion in (i) the Registration Statement or (ii) the Joint Proxy
Statement-Prospectus will not, at the time such Registration Statement
becomes effective, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they are made, not misleading.
ARTICLE III
CONDUCT PENDING THE MERGER
Section 3.1. Conduct of JSB's Business Prior to the Effective Time. Except
as expressly provided in this Agreement, during the period from the date of this
Agreement to the Effective Time, JSB shall, and shall cause its Subsidiaries to,
use commercially reasonable efforts to (i) conduct its business in the regular,
ordinary and usual course consistent with past practice; (ii) maintain and
preserve intact its business organization, properties, leases, employees and
advantageous business relationships and retain the services of its officers and
key employees, (iii) take no action which would materially adversely affect or
delay the ability of JSB or NFB to perform their respective covenants and
agreements on a timely basis under this Agreement, (iv) take no action which
would adversely affect or delay the ability of JSB, JSB Bank, NFB or NFB Bank to
obtain any necessary approvals, consents or waivers of any governmental
authority required for the transactions contemplated hereby or which would
reasonably be expected to result in any such approvals, consents or waivers
containing any material condition or restriction, and (v) take no action that
results in or is reasonably likely to have a Material Adverse Effect on JSB or
JSB Bank.
Section 3.2. Forbearance by JSB. Without limiting the covenants set forth
in Section 3.1 hereof, except as otherwise provided in this Agreement and except
to the extent required by law or regulation or any Bank Regulators, during the
period from the date of this Agreement to the Effective Time, JSB shall not, and
shall not permit any of its Subsidiaries to, without the prior consent of NFB,
which consent shall not be unreasonably withheld:
(a) change any provisions of the certificate of incorporation or
bylaws of JSB or the similar governing documents of its Subsidiaries;
(b) issue any shares of capital stock or change the terms of any
outstanding stock options or warrants or issue, grant or sell any option,
warrant, call, commitment, stock appreciation right, right to purchase or
agreement of any character relating to the authorized or issued capital
stock of JSB, except pursuant to (i) the exercise of stock options or
warrants outstanding as of the date of this Agreement, (ii) the automatic
grant of 142,000 stock options under the JSB 1996 Stock Option Plan as a
result of the execution of this Agreement or (iii) the JSB Option
Agreement; adjust, split, combine or reclassify any capital stock; make,
declare or pay any dividend (except for JSB's regular quarterly dividend,
which shall not be increased by more than $.05 per share from the current
level) or make any other distribution on, or directly or indirectly redeem,
purchase or otherwise acquire, any shares of its capital stock or any
securities or obligations convertible into or exchangeable for any shares
of its capital stock. As promptly as practicable following the date of this
Agreement, the Board of Directors of JSB shall cause its regular quarterly
dividend record dates and payment dates to be the same as NFB's regular
quarterly dividend record dates and payments dates for NFB Common Stock,
and JSB shall not thereafter change its regular
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dividend payment dates and record dates. Nothing contained in this Section
3.2(b) or in any other Section of this Agreement shall be construed to
permit holders of shares of JSB Common Stock to receive two dividends from
either JSB or from JSB and NFB in any one quarter or to deny or prohibit
such holders from receiving one dividend from either JSB or NFB in any
quarter. Subject to applicable regulatory restrictions, if any, JSB Bank
may pay a cash dividend that is, in the aggregate, sufficient to fund any
dividend by JSB permitted hereunder and to allow JSB to make the payments
required under Section 4.13(d) of this Agreement;
(c) other than in the ordinary course of business consistent with past
practice and pursuant to policies currently in effect, sell, transfer,
mortgage, encumber or otherwise dispose of any of its material properties,
leases or assets to any individual, corporation or other entity other than
a direct or indirect wholly owned Subsidiary of JSB or cancel, release or
assign any indebtedness of any such individual, corporation or other
entity, except pursuant to contracts or agreements in force at the date of
this Agreement and which have been disclosed to NFB and except for the sale
of unsold cooperative shares owned by JSB or its Subsidiaries, as disclosed
in JSB's Disclosure Letter;
(d) except to the extent required by law or as disclosed in JSB's
Disclosure Letter or specifically provided for elsewhere herein, (i)
increase the compensation or fringe benefits of any of its employees or
directors, other than general increases in compensation in the ordinary
course of business consistent with past practice and, upon consultation
with NFB, the payment of reasonable "stay in place" pay where necessary or
appropriate to retain key employees in an amount not to exceed $500,000 in
the aggregate; (ii) pay any pension or retirement allowance not required by
any existing plan or agreement to any such employees or directors, or
become a party to, amend or commit itself to fund or otherwise establish
any trust or account related to any JSB Employee Plan (as defined in
Section 2.3(m)) with or for the benefit of any employee or director; or
(iii) voluntarily accelerate the vesting of any stock options or other
compensation or benefit;
(e) except as contemplated by Section 4.2, change its method of
accounting as in effect at December 31, 1998, except as required by changes
in GAAP as concurred in by JSB's independent auditors;
(f) settle any claim, action or proceeding involving any liability of
JSB or any of its Subsidiaries for money damages in excess of $500,000 or
impose material restrictions upon the operations of JSB or any of its
Subsidiaries;
(g) acquire or agree to acquire, by merging or consolidating with, or
by purchasing a substantial equity interest in or a substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof
or otherwise acquire or agree to acquire any assets, in each case which are
material, individually or in the aggregate, to JSB, except in satisfaction
of debts previously contracted;
(h) except pursuant to commitments existing at the date hereof which
have previously been disclosed to NFB, make any real estate loans secured
by undeveloped land or real estate located outside the States of New York,
New Jersey or Connecticut (other than real estate secured by one-to-four
family homes) or make any construction loan (other than construction loans
secured by one-to-four family homes) outside the States of New York, New
Jersey or Connecticut;
(i) establish or commit to the establishment of any new branch or
other office facilities other than those for which all regulatory approvals
have been obtained;
(j) take, fail to take, or cause to be taken or not taken any action
that would prevent or impede the Merger from qualifying (A) for
pooling-of-interests accounting treatment or (B) as a reorganization within
the meaning of Section 368(a) of the Code; or
(k) make any capital expenditures other than those which (i) are made
in the ordinary course of business or are necessary to maintain existing
assets in good repair and (ii) in any event are in an amount of no more
than $500,000 in the aggregate;
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(l) enter into any new line of business;
(m) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect, or any of the
conditions to the Merger set forth in Article V not being satisfied;
(n) other than in the ordinary course of business consistent with
prudent banking practices, incur any indebtedness for borrowed money or
assume, guarantee, endorse or otherwise as an accommodation become
responsible for the obligations of any other individual, corporation or
other entity;
(o) make any equity investment or commitment to make such an
investment in real estate or in any real estate development project, other
than in connection with foreclosures, settlements in lieu of foreclosure or
troubled loan or debt restructurings in the ordinary course of business
consistent with prudent banking practices;
(p) other than in prior consultation with NFB, restructure or
materially change its investment securities portfolio, through purchases,
sales or otherwise, or the manner in which the portfolio is classified or
reported; or
(q) agree or commit to take any action that is prohibited by this
Section 3.2.
In the event that NFB does not respond in writing to JSB within five business
days of receipt by NFB of a written request for JSB to engage in any of the
actions for which NFB's prior written consent is required pursuant to this
Section 3.2, NFB shall be deemed to have consented to such action. Any request
by JSB or response thereto by NFB shall be made in accordance with the notice
provisions of Section 8.7, shall note that it is a request pursuant to this
Section 3.2 and shall state that a failure to respond within five business days
shall constitute consent.
Section 3.3. Conduct of NFB's Business Prior to the Effective Time. Except
as expressly provided in this Agreement, during the period from the date of this
Agreement to the Effective Time, NFB shall, and shall cause its Subsidiaries to,
use commercially reasonable efforts to (i) conduct its business in the regular,
ordinary and usual course consistent with past practice; (ii) maintain and
preserve intact its business organization, properties, leases, employees and
advantageous business relationships and retain the services of its officers and
key employees, (iii) take no action which would materially adversely affect or
delay the ability of JSB or NFB to perform their respective covenants and
agreements on a timely basis under this Agreement, (iv) take no action which
would adversely affect or delay the ability of JSB, NFB, JSB Bank or NFB Bank to
obtain any necessary approvals, consents or waivers of any Governmental Entity
required for the transactions contemplated hereby and (v) take no action that
results in or is reasonably likely to have a Material Adverse Effect on NFB.
Section 3.4. Forbearance by NFB. Without limiting the covenants set forth
in Section 3.3 hereof, except as otherwise provided in this Agreement and except
to the extent required by law or regulation or any Bank Regulators, during the
period from the date of this Agreement to the Effective Time, NFB shall not, and
shall not permit any of its Subsidiaries to, without the prior consent of JSB,
which consent shall not be unreasonably withheld:
(a) change any provisions of the certificate of incorporation of NFB
or the organization certificate of NFB Bank, other than to increase the
authorized capital stock of NFB or to change the par value of NFB Common
Stock;
(b) issue any shares of capital stock or change the terms of any
outstanding stock options or warrants or issue, grant or sell any option,
warrant, call, commitment, stock appreciation right, right to purchase or
agreement of any character relating to the authorized or issued capital
stock of NFB except (i) in transactions permitted under Section 3.4(e),
(ii) pursuant to the exercise of stock options or warrants outstanding as
of the date of this Agreement or granted in accordance with this Section
3.4(b), (iii) for the grant of options under the NFB Stock Plans consistent
with NFB's past practice or (iv) for the issuance of such number of shares
of NFB Common Stock as is necessary to permit the Merger to be accounted
for as a pooling-of-interests; adjust, split, combine or reclassify any
capital stock; or, solely in
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the case of NFB, make, declare or pay any dividend (except for NFB's
regular quarterly cash dividend) or make any other distribution on any
shares of its capital stock or any securities or obligations convertible
into or exchangeable for any shares of its capital stock; provided,
however, that nothing contained herein shall prohibit NFB from increasing
the quarterly cash dividend on NFB Common Stock;
(c) make any acquisition or take any other action that individually or
in the aggregate could materially adversely affect the ability of NFB to
consummate the transactions contemplated hereby, or enter into any
agreement providing for, or otherwise participate in, any merger,
consolidation or other transaction in which NFB or any surviving
corporation may be required not to consummate the Merger or any of the
other transactions contemplated hereby in accordance with the terms of this
Agreement;
(d) take, fail to take, or cause to be taken or not taken any action
that would prevent or impede the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code; provided, however, that
nothing contained herein shall limit the ability of NFB to exercise its
rights under the JSB Option Agreement;
(e) enter into an agreement with respect to an Acquisition Transaction
(as defined below) with a third party; provided, that the foregoing shall
not prevent NFB or any of its Subsidiaries from entering into any agreement
with respect to an Acquisition Transaction if such action is, in the
reasonable judgment of NFB, desirable in the conduct of the business of NFB
and its Subsidiaries and would not, in the reasonable judgment of NFB,
likely delay the Effective Time to a date subsequent to the date set forth
in Section 6.1(d) of this Agreement or adversely affect the Merger
Consideration to be received by JSB's stockholders pursuant to this
Agreement. For purposes of this Agreement, "Acquisition Transaction" shall
mean (x) a merger or consolidation, or any similar transaction, involving
NFB, (y) a purchase, lease or other acquisition of all or substantially all
of the assets of NFB or (z) a purchase or other acquisition (including by
way of merger, consolidation, share exchange or otherwise) of securities
representing 10% or more of the voting power of NFB; provided, that the
term "Acquisition Transaction" does not include (i) any internal merger or
consolidation involving only NFB and its Subsidiaries or (ii) any
acquisition or acquisitions by NFB subsequent to August 15, 1999 involving
in the aggregate, for all such acquisitions, the issuance of up to the
difference between (1) 10% of the shares of NFB Common Stock outstanding as
of the date hereof and (2) the number of shares, if any, issued pursuant to
Section 3.4(b)(iv), or cash consideration equal to such number of shares
multiplied by $20.44 per share;
(f) change its method of accounting as in effect at December 31, 1998,
except as required by changes in GAAP as concurred in by JSB's independent
auditors;
(g) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect, or any of the
conditions to the Merger set forth in Article V not being satisfied; or
(h) agree or commit to take any action that is prohibited by this
Section 3.4.
ARTICLE IV
COVENANTS
Section 4.1. Acquisition Proposals. JSB agrees that neither it nor any of
its Subsidiaries, nor any of the respective officers and directors of JSB or any
of its Subsidiaries, shall, and JSB shall not authorize or permit any of its
employees, agents or representatives (including, without limitation, any
investment banker, attorney or accountant retained by it or any of its
Subsidiaries) to, (a) initiate, solicit or encourage, directly or indirectly,
any inquiries or the making of any proposal or offer (including, without
limitation, any proposal or offer to JSB's stockholders) with respect to a
merger, consolidation or similar transaction involving, or any purchase of all
or any significant portion of the assets or any equity securities of, JSB or any
of its material Subsidiaries (any such proposal or offer being hereinafter
referred to as an "Acquisition Proposal") or (b) engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to an Acquisition Proposal, or otherwise
facilitate any effort or attempt to
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make or implement an Acquisition Proposal; provided, however, that nothing
contained in this Agreement shall prevent JSB or its Board of Directors from (i)
complying with Rule 14e-2 promulgated under the Exchange Act with regard to an
Acquisition Proposal or (ii) (A) providing information in response to a request
therefor by a person who has made an unsolicited bona fide written Acquisition
Proposal (an "Unsolicited Acquisition Proposal") if the Board of Directors
receives from the person so requesting such information an executed
confidentiality agreement on terms substantially equivalent to those contained
in the confidentiality agreement between NFB and JSB, dated as of July 13, 1999;
or (B) engaging in any negotiations or discussions with any person who has made
an Unsolicited Acquisition Proposal, if and only to the extent that, in each
such case referred to in clause (A) or (B) above, (x) the Board of Directors of
JSB, after consultation with and based upon the written opinion of outside legal
counsel, in good faith deems such action to be legally necessary for the proper
discharge of its fiduciary duties under applicable law and (y) the Board of
Directors of JSB, after consultation with its financial advisor, determines in
good faith that such Unsolicited Acquisition Proposal, if accepted, is
reasonably likely to be consummated, taking into account all legal, financial
and regulatory aspects of the proposal and the person making the proposal and
would, if consummated, result in a more favorable transaction than the
transaction contemplated by this Agreement, taking into account the prospects
and interests of JSB and its stockholders. JSB will notify NFB immediately
orally (within one day) and in writing (within three days) if any such
Unsolicited Acquisition Proposals are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with JSB after the date hereof, the identity of the
person making such inquiry, proposal or offer and the substance thereof and will
keep NFB informed of any developments with respect thereto immediately upon the
occurrence thereof. Subject to the foregoing, JSB will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any of the foregoing. JSB will
take the necessary steps to inform the appropriate individuals or entities
referred to in the first sentence hereof of the obligations undertaken in this
Section 4.1. JSB will promptly request each person (other than NFB) that has
executed a confidentiality agreement prior to the date hereof in connection with
its consideration of a business combination with JSB or any of its Subsidiaries
to return or destroy all confidential information previously furnished to such
person by or on behalf of JSB or any of its Subsidiaries. JSB shall take all
steps necessary to enforce all such confidentiality agreements.
Section 4.2. Certain Policies of JSB.
(a) At the request of NFB, JSB shall cause JSB Bank to modify and change
its loan, litigation and real estate valuation policies and practices (including
loan classifications and levels of reserves) and investment and asset/liability
management policies and practices after the date on which all Requisite
Regulatory Approvals and stockholder approvals are received, and after receipt
of written confirmation from NFB that it is not aware of any fact or
circumstance that would prevent completion of the Merger, and prior to the
Effective Time so as to be consistent on a mutually satisfactory basis with
those of NFB Bank; provided, however, that JSB shall not be required to take
such action more than 30 days prior to the Effective Date; and provided,
further, that such policies and procedures are not prohibited by GAAP or any
applicable laws and regulations.
(b) JSB's representations, warranties and covenants contained in this
Agreement shall not be deemed to be untrue or breached in any respect for any
purpose as a consequence of any modifications or changes undertaken solely on
account of this Section 4.2. NFB agrees to hold harmless, indemnify and defend
JSB and its Subsidiaries, and their respective directors, officers and
employees, for any loss, claim, liability or other damage caused by or resulting
from compliance with this Section 4.2.
Section 4.3. Access and Information.
(a) Upon reasonable notice, JSB and NFB shall (and shall cause their
respective Subsidiaries to) afford to the other and their respective
representatives (including, without limitation, directors, officers and
employees of such party and its affiliates and counsel, accountants and other
professionals retained by such party) such reasonable access during normal
business hours throughout the period prior to the Effective Time to the books,
records (including, without limitation, tax returns and work papers of
independent auditors), properties, personnel and to such other information as
either party may reasonably request; provided, however,
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that no investigation pursuant to this Section 4.3 shall affect or be deemed to
modify any representation or warranty made herein. In furtherance, and not in
limitation of the foregoing, JSB shall make available to NFB all information
necessary or appropriate for the preparation and filing of all real property and
real estate transfer tax returns and reports required by reason of the Merger or
the Bank Merger. NFB and JSB will not, and will cause their respective
representatives not to, use any information obtained pursuant to this Section
4.3 for any purpose unrelated to the consummation of the transactions
contemplated by this Agreement. Subject to the requirements of applicable law,
each of NFB and JSB will keep confidential, and will cause their respective
representatives to keep confidential, all information and documents obtained
pursuant to this Section 4.3 unless such information (i) was already known to
such party or an affiliate of such party, other than pursuant to a
confidentiality agreement or other confidential relationship, (ii) becomes
available to such party or an affiliate of such party from other sources not
known by such party to be bound by a confidentiality agreement or other
obligation of secrecy, (iii) is disclosed with the prior written approval of the
other party or (iv) is or becomes readily ascertainable from published
information or trade sources. In the event that this Agreement is terminated or
the transactions contemplated by this Agreement shall otherwise fail to be
consummated, each party shall promptly cause all copies of documents or extracts
thereof containing information and data as to another party hereto (or an
affiliate of any party hereto) to be returned to the party that furnished the
same.
(b) During the period of time beginning on the day application materials to
obtain the Requisite Regulatory Approvals for the Merger are initially filed and
continuing to the Effective Time, including weekends and holidays, JSB shall
cause JSB Bank to provide NFB, NFB Bank and their authorized agents and
representatives full access to JSB Bank's offices after normal business hours
for the purpose of installing necessary wiring and equipment to be utilized by
NFB Bank after the Effective Time; provided, that:
(i) reasonable advance notice of each entry shall be given to JSB Bank
and JSB Bank approves of each entry, which approval shall not be
unreasonably withheld;
(ii) JSB Bank shall have the right to have its employees or
contractors present to inspect the work being done;
(iii) to the extent practicable, such work shall be done in a manner
that will not interfere with JSB Bank's business conducted at any affected
branch offices;
(iv) all such work shall be done in compliance with all applicable
laws and government regulations, and NFB Bank shall be responsible for the
procurement, at NFB Bank's expense, of all required governmental or
administrative permits and approvals;
(v) NFB Bank shall maintain appropriate insurance satisfactory to JSB
Bank in connection with any work done by NFB Bank's agents and
representatives pursuant to this Section 4.3;
(vi) NFB Bank shall reimburse JSB Bank for any material out-of-pocket
costs or expenses incurred by JSB Bank in connection with this undertaking;
and
(vii) in the event this Agreement is terminated in accordance with
Article VI hereof, NFB Bank, within a reasonable time period and at its
sole cost and expense, will restore such offices to their condition prior
to the commencement of any such installation.
Section 4.4. Certain Filings, Consents and Arrangements. NFB and JSB shall
(a) as soon as practicable (and in any event within 45 days after the date
hereof) make, or cause to be made, any filings and applications and provide any
notices required to be filed or provided in order to obtain all approvals,
consents and waivers of Governmental Entities and third parties necessary or
appropriate for the consummation of the transactions contemplated hereby or by
the JSB Option Agreement; (b) cooperate with one another in promptly (i)
determining what filings and notices are required to be made or approvals,
consents or waivers are required to be obtained under any relevant federal or
state law or regulation or under any relevant agreement or other document and
(ii) making any such filings and notices, furnishing information required in
connection therewith and seeking timely to obtain any such approvals, consents
or waivers; and (c) deliver to
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the other copies of the publicly available portions of all such filings, notices
and applications promptly after they are filed.
Section 4.5. Antitakeover Provisions. JSB and its Subsidiaries shall take
all steps required by any relevant federal or state law or regulation or under
any relevant agreement or other document to exempt or continue to exempt NFB,
the Agreement, the Plan of Bank Merger, the Merger, the Bank Merger and the JSB
Option Agreement from any provisions of an antitakeover nature in JSB's or its
Subsidiaries' organization certificates and bylaws and the provisions of any
federal or state antitakeover laws.
Section 4.6. Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all reasonable efforts
to take promptly, or cause to be taken promptly, all actions and to do promptly,
or cause to be done promptly, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement (including, if the Plan of Bank
Merger is executed, the Bank Merger) as expeditiously as possible, including
using efforts to obtain all necessary actions or non-actions, extensions,
waivers, consents and approvals from all applicable Governmental Entities,
effecting all necessary registrations, applications and filings (including,
without limitation, filings under any applicable state securities laws) and
obtaining any required contractual consents and regulatory approvals.
Section 4.7. Publicity. The initial press release announcing this
Agreement shall be a joint press release and thereafter JSB and NFB shall
consult with each other in issuing any press releases or otherwise making public
statements with respect to the Merger and any other transaction contemplated
hereby and in making any filings with any Governmental Entity or with any
national securities exchange with respect thereto.
Section 4.8. Stockholders Meetings. JSB and NFB each shall take all action
necessary, in accordance with applicable law and its respective corporate
documents, to convene a meeting of its respective stockholders (each, a
"Stockholder Meeting") as promptly as practicable for the purpose of considering
and voting on approval and adoption of the transactions provided for in this
Agreement. Except to the extent legally required for the discharge by the Board
of Directors of its fiduciary duties as advised by such Board's counsel in
writing, the Board of Directors of each of JSB and NFB shall (a) recommend at
its Stockholder Meeting that the stockholders vote in favor of and approve the
transactions provided for in this Agreement and (b) use its best efforts to
solicit such approvals. JSB and NFB, in consultation with the other, shall each
employ professional proxy solicitors to assist in contacting stockholders in
connection with soliciting favorable votes on the Merger. JSB and NFB shall
coordinate and cooperate with respect to the timing of their respective
Stockholder Meetings.
Section 4.9. Proxy Statements; Comfort Letters. (i) As soon as practicable
after the date hereof, NFB and JSB shall cooperate with respect to the
preparation of a Joint Proxy Statement-Prospectus for the purpose of taking
stockholder action on the Merger and this Agreement and file the Joint Proxy
Statement-Prospectus with the SEC, respond to comments of the staff of the SEC
and, promptly after the Registration Statement is declared effective by the SEC,
mail the Joint Proxy Statement-Prospectus to the respective holders of record
(as of the applicable record date) of shares of voting stock of each of JSB and
NFB. NFB and JSB each represents and covenants to the other that the Joint Proxy
Statement-Prospectus, and any amendment or supplement thereto, with respect to
the information pertaining to it or its Subsidiaries at the date of mailing to
its stockholders and the date of its Stockholder Meeting will be in compliance
with the Exchange Act and all relevant rules and regulations of the SEC and will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(ii) NFB shall cause KPMG LLP, its independent public accounting firm, to
deliver to JSB, and JSB shall cause KPMG LLP, its independent public accounting
firm, to deliver to NFB and to its officers and directors who sign the
Registration Statement for this transaction, a "comfort letter" or "agreed upon
procedures" letter, in the form customarily issued by such accountants at such
time in transactions of this type, dated (a) the date of the mailing of the
Joint Proxy Statement-Prospectus for the Stockholders Meeting of JSB and the
date of mailing of the Joint Proxy Statement-Prospectus for the Stockholders
meeting of NFB,
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respectively, and (b) a date not earlier than five business days preceding the
date of the Closing (as defined in Section 7.1).
Section 4.10. Registration of NFB Common Stock.
(a) NFB shall, as promptly as practicable following the preparation
thereof, file the Registration Statement (including any pre-effective or
post-effective amendments or supplements thereto) with the SEC under the
Securities Act in connection with the transactions contemplated by this
Agreement, and NFB and JSB shall use all reasonable efforts to have the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing. NFB will advise JSB promptly after NFB
receives notice of the time when the Registration Statement has become effective
or any supplement or amendment has been filed, of the issuance of any stop order
or the suspension of the qualification of the shares of capital stock issuable
pursuant to the Registration Statement, or the initiation or threat of any
proceeding for any such purpose, or of any request by the SEC for the amendment
or supplement of the Registration Statement or for additional information. NFB
will provide JSB with as many copies of such Registration Statement and all
amendments thereto promptly upon the filing thereof as JSB may reasonably
request.
(b) NFB shall use its reasonable best efforts to obtain, prior to the
effective date of the Registration Statement, all necessary state securities
laws or "blue sky" permits and approvals required to carry out the transactions
contemplated by this Agreement.
(c) NFB shall use its reasonable best efforts to list, prior to the
Effective Time, on the NYSE, or on such other exchange as NFB Common Stock shall
then be trading, subject only to official notice of issuance, the shares of NFB
Common Stock to be issued by NFB in exchange for the shares of JSB Common Stock.
Section 4.11. Affiliate Letters. Promptly, but in any event within two
weeks after the execution and delivery of this Agreement, JSB shall deliver to
NFB a letter identifying all persons who, to the knowledge of JSB, may be deemed
to be "affiliates" of JSB under Rule 145 of the Securities Act and the
pooling-of-interests accounting rules, including, without limitation, all
directors and executive officers of JSB. Within two weeks after delivery of such
letter, JSB shall deliver executed letter agreements, each substantially in the
form attached hereto as Exhibit B, executed by each such person so identified as
an affiliate of JSB agreeing (i) to comply with Rule 145, (ii) to refrain from
transferring shares as required by the pooling-of-interests accounting rules and
(iii) to be present in person or by proxy and vote in favor of the Merger at the
JSB Stockholders Meeting. Within four weeks after the date hereof, NFB shall
cause its directors and executive officers to enter into letter agreements, in
the form attached hereto as Exhibit C, with NFB concerning the
pooling-of-interests accounting rules. NFB hereby agrees to publish, or file a
Form 8-K, Form 10-K or Form 10-Q containing, financial results covering at least
30 days of post-Merger combined operations of NFB and JSB as soon as
practicable, but in no event later than 30 days following the end of the first
calendar month ending at least 30 days after the Effective Time, in form and
substance sufficient to remove the restrictions in connection with the
pooling-of-interests accounting rules contained therein.
Section 4.12. Notification of Certain Matters. Each party shall give
prompt notice to the others of: (a) any event or notice of, or other
communication relating to, a default or event that, with notice or lapse of time
or both, would become a default, received by it or any of its Subsidiaries
subsequent to the date of this Agreement and prior to the Effective Time, under
any contract material to the financial condition, properties, businesses or
results of operations of each party and its Subsidiaries taken as a whole to
which each party or any Subsidiary is a party or is subject; and (b) any event,
condition, change or occurrence which individually or in the aggregate has, or
which, so far as reasonably can be foreseen at the time of its occurrence, is
reasonably likely to result in a Material Adverse Effect. Each of JSB and NFB
shall give prompt notice to the other party of any notice or other communication
from any third party alleging that the consent of such third party is or may be
required in connection with any of the transactions contemplated by this
Agreement.
Section 4.13. Directors and Officers.
(a) NFB agrees to cause Park T. Adikes (the "New NFB Director") to be
elected or appointed as a director of NFB and NFB Bank at, or as promptly as
practicable after, the Effective Time; provided, however, that if Mr. Adikes
does not become a director of NFB or NFB Bank because of death, disability or
otherwise,
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or if Mr. Adikes shall cease to be a director of NFB or NFB Bank at any time
before the third anniversary of the Effective Time, NFB agrees to cause a person
who is a member of the Board of Directors of JSB as of the date hereof to be
elected or appointed as the New NFB Director.
(b) At the Effective Time, NFB shall cause NFB Bank, or, if the Bank Merger
is not effected, JSB Bank, to assume and honor the JSB Bank Outside Directors'
Consultation and Retirement Plan ("JSB Bank Outside Directors' Plan") in
accordance with the terms and conditions of such plan as of the date hereof;
provided, however, that, notwithstanding any provision of such plan to the
contrary, (i) effective immediately prior to the Effective Time, the references
to "fifteen (15) years" in Section 3 of the JSB Bank Outside Directors' Plan
regarding eligibility shall be amended so as to refer to "one (1) year" for the
purpose of making all eight outside directors of JSB Bank participants under
such plan and (ii) any outside member of the JSB Bank Board of Directors who
does not become a member of the Board of Directors of NFB Bank from and after
the Effective Time shall have the right to commence receiving benefits under the
JSB Bank Outside Directors' Plan effective as of the Effective Time and shall
not be required to provide consulting services in order to receive such
benefits; provided, further, that in no event shall any amendment or termination
of the JSB Bank Outside Directors' Plan on or after the Effective Time adversely
affect the right of any plan participant, former participant or beneficiary
thereof to receive any benefits under such plan in respect of participation for
any period ending on or before the date on which such amendment or termination
is adopted or, if later, the date on which it is made effective. NFB Bank and
JSB Bank also agree that all individuals who, prior to the Effective Time, were
receiving benefits under the JSB Bank Outside Directors' Plan shall continue to
receive all such benefits from this plan on the same terms and conditions from
and after the Effective Time.
(c) NFB shall use all reasonable efforts to identify and offer employment
opportunities to qualified, satisfactorily performing officers and employees of
JSB and its Subsidiaries in positions within the business operations of NFB and
its Subsidiaries for which such officers and employees are qualified. NFB shall
give, and shall cause its Subsidiaries to give, priority consideration to all
such officers and employees of JSB and its Subsidiaries vis-a-vis all
individuals other than current officers and employees of NFB; provided, however,
that officers and employees of JSB and its Subsidiaries who become employed by
NFB or its Subsidiaries shall then be treated on an equal basis with the
officers and employees of NFB and its Subsidiaries.
(d) NFB shall honor (i) the Employment Agreements between JSB and,
respectively, Park T. Adikes, Edward P. Henson, Joanne Corrigan, Thomas R.
Lehmann, Lawrence J. Kane, John F. Bennett, Jack Connors, John J. Conroy,
Bernice Glaz, Teresa D. Covello, Joseph J. Hennessy, Philip Pepe, Daniel J.
Huber and Laurel M. Romito, each as amended and restated as of June 22, 1999 and
(ii) the Employment Agreements between JSB Bank and, respectively, Park T.
Adikes, Edward P. Henson, Joanne Corrigan, Thomas R. Lehmann, Lawrence J. Kane,
John F. Bennett, Jack Connors, John J. Conroy, Bernice Glaz, Teresa D. Covello,
Joseph J. Hennessy, Philip Pepe, Daniel J. Huber and Laurel M. Romito, each as
amended and restated as of June 22, 1999, by permitting JSB to pay to each such
individual on the Closing Date the lump sum amounts that are due under each
agreement and by providing any additional payments or benefits in accordance
with the terms of such Employment Agreements, regardless of whether or not the
individual officer continues employment with NFB or NFB Bank. NFB and JSB have
delivered to each other a good faith reasonable estimate of the amounts payable
on the Closing Date under the Employment Agreements, based upon procedures and
information available at the date of this Agreement, and the procedures used in
preparing such estimates shall be followed in determining the actual amounts
payable under the Employment Agreements on the Closing Date, which estimate is
attached hereto as Schedule 4.13(d).
Section 4.14. Indemnification; Directors' and Officers' Insurance.
(a) From and after the Effective Time through the sixth anniversary of the
Effective Date, NFB agrees to indemnify and hold harmless each present and
former director and officer of JSB and its Subsidiaries and each officer or
employee of JSB and its Subsidiaries that is serving or has served as a director
or trustee of another entity expressly at JSB's request or direction (each, an
"Indemnified Party"), against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
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(collectively, "Costs") incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of matters existing or occurring at or prior to the
Effective Time (including the transactions contemplated by this Agreement,
including the entering into of the JSB Option Agreement), whether asserted or
claimed prior to, at or after the Effective Time, and to advance any such Costs
to each Indemnified Party as they are from time to time incurred, in each case
to the fullest extent such Indemnified Party would have been indemnified as a
director, officer or employee of JSB and its Subsidiaries and as then permitted
under applicable law.
(b) Any Indemnified Party wishing to claim indemnification under Section
4.14(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify NFB thereof, but the failure to so notify
shall not relieve NFB of any liability it may have hereunder to such Indemnified
Party if such failure does not materially prejudice the indemnifying party. In
the event of any such claim, action, suit, proceeding or investigation, (i) NFB
shall have the right to assume the defense thereof with counsel reasonably
acceptable to the Indemnified Party and NFB shall not be liable to such
Indemnified Party for any legal expenses of other counsel subsequently incurred
by such Indemnified Party in connection with the defense thereof, except that if
NFB does not elect to assume such defense within a reasonable time or counsel
for the Indemnified Party at any time advises that there are issues which raise
conflicts of interest between NFB and the Indemnified Party (and counsel for NFB
does not disagree), the Indemnified Party may retain counsel satisfactory to
such Indemnified Party, and NFB shall remain responsible for the reasonable fees
and expenses of such counsel as set forth above, to be paid promptly as
statements therefor are received; provided, however, that NFB shall be obligated
pursuant to this paragraph (b) to pay for only one firm of counsel for all
Indemnified Parties in any one jurisdiction with respect to any given claim,
action, suit, proceeding or investigation unless the use of one counsel for such
Indemnified Parties would present such counsel with a conflict of interest; (ii)
the Indemnified Party will reasonably cooperate in the defense of any such
matter; and (iii) NFB shall not be liable for any settlement effected by an
Indemnified Party without its prior written consent, which consent may not be
withheld unless such settlement is unreasonable in light of such claims,
actions, suits, proceedings or investigations against, or defenses available to,
such Indemnified Party.
(c) NFB shall pay all reasonable Costs, including attorneys' fees, that may
be incurred by any Indemnified Party in successfully enforcing the indemnity and
other obligations provided for in this Section 4.14 to the fullest extent
permitted under applicable law. The rights of each Indemnified Party hereunder
shall be in addition to any other rights such Indemnified Party may have under
applicable law.
(d) For a period of six years after the Effective Time, NFB shall cause the
former directors and officers of JSB to be covered by the policy of directors
and officers liability insurance currently maintained by JSB; provided, however,
that NFB may substitute therefor a policy of at least the same coverage and
containing terms no less advantageous to the beneficiaries thereof than such
policies (including, without limitation, by providing coverage under its
existing policy); provided, however, that in no event shall NFB be obligated to
expend, in order to maintain or provide insurance coverage pursuant to this
Section 4.14(d), any premium per annum in excess of 175% of the amount of the
annual premiums paid as of the date hereof by JSB for such insurance ("Maximum
Agreement"); provided, further, that if the amount of the annual premiums
necessary to maintain or procure such insurance coverage exceeds the Maximum
Amount, NFB shall obtain the most advantageous coverage of directors' and
officers' insurance obtainable for an annual premium equal to the Maximum
Amount; and provided, further, that officers and directors of JSB may be
required to make application and provide customary representations and
warranties to NFB's insurance carrier for the purpose of obtaining such
insurance.
Section 4.15. Employees; Benefit Plans and Programs.
(a) Each person who is employed by JSB or JSB Bank immediately prior to the
Effective Time (a "JSB Employee") shall, at the Effective Time, become an
employee of NFB or NFB Bank (unless the Bank Merger is not effected, in which
case the references in this Section 4.15 to NFB Bank shall mean JSB Bank).
Beginning at the Effective Time, each of the JSB Employees shall serve NFB or
NFB Bank in the same capacity in which he or she served immediately prior to the
Effective Time and upon the same terms and
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conditions generally applicable to other employees of NFB or NFB Bank with
comparable positions, with the following special provisions:
(i) No JSB Employee shall be, or have or exercise the authority of, an
officer of NFB or NFB Bank unless and until elected or appointed an officer
of NFB or NFB Bank in accordance with NFB's or NFB Bank's bylaws.
(ii) At or as soon as practicable following the Effective Time, NFB
and NFB Bank shall establish and implement a program of compensation and
benefits designed to cover all similarly situated employees on a uniform
basis ("New Compensation and Benefits Program"). The New Compensation and
Benefits Program may contain any combination of new plans, continuations of
plans maintained by NFB or NFB Bank immediately prior to the Effective Time
and continuation of plans maintained by JSB or JSB Bank immediately prior
to the Effective Time as NFB, in its discretion, may determine. To the
extent that it is not practicable to implement any constituent part of the
New Compensation and Benefits Program at the Effective Time, NFB and NFB
Bank shall continue in effect any comparable plan maintained immediately
prior to the Effective Time for the respective employees of NFB, JSB, NFB
Bank and JSB Bank for a transition period. During the transition period,
the persons who were employees of JSB or JSB Bank immediately prior to the
Effective Time who become employees of NFB or NFB Bank at the Effective
Time shall continue to participate in the plans of JSB and JSB Bank that
are continued for transitional purposes, and all other employees of NFB or
NFB Bank will participate only in the comparable plans of NFB and NFB Bank
that are continued for transitional purposes.
(iii) Each constituent part of the New Compensation and Benefits
Program shall recognize, in the case of persons employed by NFB, NFB Bank,
JSB or JSB Bank immediately prior to the Effective Time who are also
employed by NFB or NFB Bank immediately after the Effective Time, all
service with NFB, NFB Bank, JSB or JSB Bank as service with NFB and NFB
Bank for all purposes, including eligibility, vesting, benefit accrual and
level of matching contributions; provided, however, that such service shall
not be recognized to the extent that such recognition would result in a
duplication of benefit; provided further, however, that in no event will
such recognition result in any current or former employees of JSB or any of
its Subsidiaries being covered under the post-retirement medical benefits
plan of NFB or any of its Subsidiaries to the extent such coverage is
provided at the expense of NFB or any of its Subsidiaries.
(iv) In the case of any constituent part of the New Compensation and
Benefits Program which is a life or health insurance plan: (A) such plan
shall not apply any preexisting condition limitations for conditions
covered under the applicable life or health insurance plans maintained by
NFB, NFB Bank, JSB and JSB Bank as of the Effective Time, (B) each such
plan which is a life or health insurance plan shall honor any deductible
and out of pocket expenses incurred under the applicable life or health
insurance plans maintained by NFB, NFB Bank, JSB and JSB Bank as of the
Effective Time and (C) each such plan which is a life insurance plan shall
waive any medical certification otherwise required in order to assure the
continuation of coverage at a level not less than that in effect
immediately prior to the implementation of such plan (but subject to any
overall limit on the maximum amount of coverage under such plans).
(b) NFB shall assume the obligations of JSB and JSB Bank with respect to
any severance plans or agreements identified in JSB's Disclosure Letter, as they
may be in effect at the Effective Time, and shall pay amounts thereunder when
due; provided, however, that in the event of the termination of employment of
officers and employees of JSB or JSB Bank within 15 months following the
Effective Time, such persons shall be provided severance benefits equal to the
greater of those provided under the JSB Bank Severance Plan or those provided by
NFB or NFB Bank under any severance plan maintained by NFB or NFB Bank.
(c) Notwithstanding any other provision in this Agreement to the contrary,
officers and employees of JSB and its Subsidiaries who are covered under the JSB
Pension Plan immediately prior to the Effective Time
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and who continue to be employed by NFB or its Subsidiaries on and after the
Effective Time shall, if, as of the Effective Time, they either:
(i) are within 10 years of their normal retirement age (as defined in
the JSB Pension Plan) and have a period of service (as defined in the JSB
Pension Plan) of at least 10 years with JSB or its Subsidiaries, or
(ii) have a period of service (as defined in the JSB Pension Plan) of
at least 25 years with JSB or its Subsidiaries,
have the right to elect to continue to accrue benefits under the benefit accrual
formula under the JSB Pension Plan rather than having their benefits be
determined under the NFB Cash Balance Retirement Plan.
(d) Notwithstanding any other provision in this Agreement to the contrary,
if the Closing Date occurs after December 31, 1999, the amounts payable to any
officer or employee of JSB under the Benefit Restoration Plan of Jamaica Savings
Bank FSB ("JSB Bank BRP") shall be determined under the actuarial factors and
interest rate assumptions in effect on December 31, 1999 even if such factors
and assumptions would otherwise have changed by the express terms of the JSB
Bank BRP, the JSB Pension Plan, by changes in the law (such as the pension and
benefit provisions of the Uruguay Round Agreements Act of the General Agreement
on Tariffs and Trade ("GATT")), or otherwise, the purpose of this Section
4.15(d) being that any benefits payable under the JSB Bank BRP shall be
determined under the actuarial factors and interest rate assumptions in effect
on December 31, 1999. JSB shall, and shall cause JSB Bank to, take all actions
as shall be necessary to provide that no change-in-control, termination or
severance payments or benefits (including without limitation any amounts paid
under the agreements listed in Section 4.13(d)) will be taken into account for
purposes of determining any amounts payable under the JSB Bank BRP.
(e) In the event that the Closing Date occurs on or before December 31,
1999, the employees of JSB Bank shall receive bonuses in accordance with JSB
Bank's past practices (and the amount of such bonuses shall be based upon such
employees' compensation for the entire year of 1999), and such bonuses shall be
paid at least five business days prior to the Closing Date. In the event that
the Closing Date occurs on or after January 1, 2000, (i) the employees of JSB
Bank shall be paid bonuses in accordance with JSB Bank's past practices (and the
amount of such bonuses shall be based upon such employees' compensation for the
entire year of 1999) for 1999, which shall be paid in December 1999 in
accordance with JSB Bank's past practices, and (ii) the employees of JSB Bank
shall be paid additional bonuses equal to the amounts payable to each such
employee as a bonus for 1999 multiplied by a fraction, the numerator of which is
the number of days in 2000 through and including the Closing Date and the
denominator of which is 366, and such additional bonuses shall be paid at least
five business days prior to the Closing Date. A schedule showing the aggregate
bonus estimates for 1999 is attached hereto as Schedule 4.15(e).
(f) Employees of JSB Bank who have obtained or who have received approval
to obtain, at any time prior to the Closing Date, a loan or a mortgage loan
under the existing JSB Bank employee loan program shall continue to receive the
benefits of such employee loan program, subject to the terms and conditions of
such program; provided, however, that if the employment of any such employee
with JSB Bank or, after the Closing Date, NFB Bank, shall terminate for any
reason other than cause, the interest rate reduction under the employee loan
shall continue in effect notwithstanding such termination of employment.
(g) Employees of JSB Bank (other than officers) shall be entitled to
receive attendance bonuses in accordance with JSB Bank's past practices for
1999, and, if the Closing Date occurs after December 31, 1999, such persons
shall be entitled to attendance bonuses in accordance with JSB Bank's past
practices for 2000, pro-rated through the Closing Date in the manner described
in Section 4.15(e).
(h) Employees of JSB Bank shall be entitled to receive payment for accrued
but unused vacation days in accordance with JSB Bank's past practices, and any
accrued but unused vacation days of employees of JSB Bank as of the Closing Date
shall, at the employee's option, either be paid immediately prior to the Closing
Date or taken as vacation time as soon as practicable following the Closing
Date; provided, however, that JSB shall deliver to NFB, not later than 15
business days after the date of this Agreement, a schedule of employees
indicating their accrued but unused vacation days as of the most recent date
practicable. Life insurance and
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continued health insurance for retirees of JSB Bank shall be continued in
accordance with JSB Bank's past practices, to the extent that such continued
coverage does not result in a material increase in the costs of such continued
coverage to NFB Bank over the costs of such coverage to JSB Bank. JSB and NFB
agree to use all reasonable efforts to review the tax-qualified defined benefit
plans of both banks with a view towards, effective as of the Closing Date,
continuing, to the extent practicable, the types and forms of benefits under the
JSB Pension Plan for participants in such JSB Pension Plan whose employment is
terminated upon or within one-year following the Closing Date, particularly with
respect to the 100% joint and survivor form of benefits provided in the event
that the participant dies prior to the commencement of the participant's benefit
payments. JSB Bank shall make a contribution to the JSB Bank Employee Stock
Ownership Plan ("JSB Bank ESOP") for 1999 in accordance with its past practices
and such contribution shall be allocated in accordance with the terms of the JSB
Bank ESOP. A pro-rated JSB Bank contribution shall be made to the JSB Bank ESOP
for the portion of the year 2000 through the Closing Date.
Section 4.16. Advisory Board. NFB shall, promptly following the Effective
Time, cause all of the members of JSB's Board of Directors as of the date of
this Agreement, other than the New NFB Director, who are willing to so serve to
be elected or appointed as members of NFB's advisory board ("Advisory Board"),
the function of which shall be to advise NFB with respect to deposit and lending
activities in JSB's former market area and to maintain and develop customer
relationships. The members of the Advisory Board who are willing to so serve
shall be elected to serve an initial term of three years beginning on the
Effective Date. Each member of the Advisory Board shall receive an annual
retainer fee for such service of $25,000, payable in monthly installments or in
one lump sum at any time in advance at the option of NFB, notwithstanding that
such Advisory Board members are receiving benefits under the JSB Bank Outside
Directors' Plan. Service on the Advisory Board shall be considered service as a
director of NFB for purposes of any stock option plan of JSB or NFB.
ARTICLE V
CONDITIONS TO CONSUMMATION
Section 5.1. Conditions to Each Party's Obligations. The respective
obligations of each party to effect the Merger, the Bank Merger and any other
transactions contemplated by this Agreement shall be subject to the satisfaction
of the following conditions:
(a) this Agreement shall have been approved by (i) the requisite vote
of JSB's stockholders in accordance with applicable law and regulations and
(ii) the requisite vote of NFB's stockholders in accordance with applicable
law and regulations;
(b) the Requisite Regulatory Approvals and any necessary regulatory
consents and waivers with respect to this Agreement and the transactions
contemplated hereby shall have been obtained and shall remain in full force
and effect, and all statutory waiting periods shall have expired;
(c) no party hereto shall be subject to any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of the Merger or the Bank Merger;
(d) no statute, rule or regulation shall have been enacted, entered,
promulgated, interpreted, applied or enforced by any Governmental Entity
which prohibits, restricts or makes illegal consummation of the Merger or
the Bank Merger;
(e) the Registration Statement shall have been declared effective by
the SEC and no proceedings shall be pending or threatened by the SEC to
suspend the effectiveness of the Registration Statement; all required
approvals by state securities or "blue sky" authorities with respect to the
transactions contemplated by this Agreement shall have been obtained; and
(f) NFB shall have caused to be listed on the NYSE, or on such other
market on which shares of NFB Common Stock shall then be trading, subject
only to official notice of issuance, the shares of NFB Common Stock to be
issued by NFB in exchange for the shares of JSB Common Stock.
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Section 5.2. Conditions to the Obligations of NFB and NFB Bank. The
obligations of NFB and NFB Bank to effect the Merger, the Bank Merger and any
other transactions contemplated by this Agreement shall be further subject to
the satisfaction of the following additional conditions, any one or more of
which may be waived by NFB:
(a) each of the obligations of JSB and JSB Bank, respectively,
required to be performed by it at or prior to the Closing pursuant to the
terms of this Agreement shall have been duly performed and complied with in
all material respects and the representations and warranties of JSB and JSB
Bank contained in this Agreement shall be true and correct, subject to
Sections 2.1 and 2.2, as of the date of this Agreement and as of the
Effective Time as though made at and as of the Effective Time (except as to
any representation or warranty which specifically relates to an earlier
date). NFB shall have received a certificate to the foregoing effect signed
by the chief executive officer and the chief financial or principal
accounting officer of JSB;
(b) all action required to be taken by, or on the part of, JSB and JSB
Bank to authorize the execution, delivery and performance of this Agreement
and the consummation by JSB and JSB Bank of the transactions contemplated
hereby shall have been duly and validly taken by the Board of Directors and
stockholders of JSB or JSB Bank, as the case may be, and NFB shall have
received certified copies of the resolutions evidencing such authorization;
(c) JSB shall have obtained the consent, waiver or approval of each
person (other than the regulatory approvals or consents referred to in
Section 5.1(b)) whose consent, waiver or approval shall be required in
order to consummate the Merger or the Bank Merger or to permit the
succession by the surviving corporation pursuant to the Merger to any
obligation, right or interest of JSB or its Subsidiaries under any loan or
credit agreement, note, mortgage, indenture, lease, license or other
agreement or instrument to which JSB or its Subsidiaries is a party or is
otherwise bound, except those for which failure to obtain such consents,
waivers and approvals would not, individually or in the aggregate, have a
Material Adverse Effect on NFB (after giving effect to the consummation of
the transactions contemplated hereby) or upon the consummation of the
transactions contemplated hereby;
(d) NFB shall have received certificates (such certificates to be
dated as of a day as close as practicable to the Closing Date) from
appropriate authorities as to the corporate existence and good standing of
JSB and JSB Bank; and
(e) NFB shall have received an opinion of Skadden, Arps, Slate,
Meagher & Flom LLP ("Skadden"), counsel to NFB, dated as of the Effective
Date, in form and substance reasonably satisfactory to NFB, substantially
to the effect that on the basis of the facts, representations and
assumptions set forth in such opinion which are consistent with the state
of facts existing at the Effective Time, the Merger will be treated for
federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code. In rendering its opinion, Skadden may require
and rely upon, in addition to the review of such matters of fact and law as
Skadden considers appropriate, representations and covenants, including
those contained in certificates of officers of NFB, NFB Bank, JSB, JSB Bank
and others, reasonably satisfactory in form and substance to Skadden.
Section 5.3. Conditions to the Obligations of JSB and JSB Bank. The
obligations of JSB and JSB Bank to effect the Merger, the Bank Merger and any
other transactions contemplated by this Agreement shall be further subject to
the satisfaction of the following additional conditions, any one or more of
which may be waived by JSB:
(a) each of the obligations of NFB and NFB Bank, respectively,
required to be performed by it at or prior to the Closing pursuant to the
terms of this Agreement shall have been duly performed and complied with in
all material respects and the representations and warranties of NFB and NFB
Bank contained in this Agreement shall be true and correct, subject to
Sections 2.1 and 2.2, as of the date of this Agreement and as of the
Effective Time as though made at and as of the Effective Time (except as to
any representation or warranty which specifically relates to an earlier
date). JSB shall have received a
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certificate to the foregoing effect signed by the chief executive officer
and the chief financial or principal accounting officer of NFB;
(b) all action required to be taken by, or on the part of, NFB and NFB
Bank to authorize the execution, delivery and performance of this Agreement
and the consummation by NFB and NFB Bank of the transactions contemplated
hereby shall have been duly and validly taken by the Board of Directors and
stockholders of NFB or NFB Bank, as the case may be, and JSB shall have
received certified copies of the resolutions evidencing such authorization;
(c) NFB shall have obtained the consent, waiver or approval of each
person (other than the governmental approvals or consents referred to in
Section 5.1(b)) whose consent, waiver or approval shall be required in
connection with the transactions contemplated hereby under any loan or
credit agreement, note, mortgage, indenture, lease, license or other
agreement or instrument to which NFB or its Subsidiaries is a party or is
otherwise bound, except those for which failure to obtain such consents,
waivers and approvals would not, individually or in the aggregate, have a
Material Adverse Effect on NFB (after giving effect to the transactions
contemplated hereby) or upon the consummation of the transactions
contemplated hereby;
(d) JSB shall have received certificates (such certificates to be
dated as of a day as close as practicable to the Closing Date) from
appropriate authorities as to the corporate existence and good standing of
NFB and NFB Bank; and
(e) JSB shall have received an opinion of Thacher Proffitt & Wood
("Thacher Proffitt"), counsel to JSB, dated as of the Effective Date, in
form and substance reasonably satisfactory to JSB, substantially to the
effect that on the basis of the facts, representations and assumptions set
forth in such opinion which are consistent with the state of facts existing
at the Effective Time, the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Code. In rendering its opinion, Thacher Proffitt may require and rely upon,
in addition to the review of such matters of fact and law as Thacher
Proffitt considers appropriate, representations and covenants, including
those contained in certificates of officers of NFB, NFB Bank, JSB, JSB Bank
and others, reasonably satisfactory in form and substance to Thacher
Proffitt.
ARTICLE VI
TERMINATION
Section 6.1. Termination. This Agreement may be terminated, and the Merger
abandoned, at or prior to the Effective Date, either before or after its
approval by the stockholders of JSB and NFB:
(a) by the mutual consent of NFB and JSB, if the Board of Directors of
each so determines by vote of a majority of the members of its entire
Board;
(b) by NFB or JSB, if its Board of Directors so determines by vote of
a majority of the members of its entire Board, in the event of (i) the
failure of the stockholders of JSB or NFB to approve the Agreement at its
Stockholder Meeting called to consider such approval; provided, however,
that JSB or NFB, as the case may be, shall only be entitled to terminate
the Agreement pursuant to this clause (i) if it has complied in all
material respects with its obligations under Sections 4.8 and 4.9, or (ii)
a material breach by the other party hereto of any representation,
warranty, covenant or agreement contained herein which causes the
conditions set forth in Section 5.2(a) (in the case of termination by NFB)
and Section 5.3(a) (in the case of the termination by JSB) not to be
satisfied and such breach is not cured within 25 business days after
written notice of such breach is given to the party committing such breach
by the other party or which breach is not capable of being cured by the
date set forth in Section 6.1(d) or any extension thereof;
(c) by NFB or JSB, by written notice to the other party, if either (i)
any approval, consent or waiver of a Governmental Entity required to permit
consummation of the transactions contemplated hereby shall have been denied
or (ii) any governmental authority of competent jurisdiction shall have
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issued a final, unappealable order enjoining or otherwise prohibiting
consummation of the transactions contemplated by this Agreement;
(d) by NFB or JSB, if its Board of Directors so determines by vote of
a majority of the members of its entire Board, in the event that the Merger
is not consummated by February 29, 2000 ("Initial Termination Date"),
unless the failure to so consummate by such time is due to the breach of
any representation, warranty or covenant contained in this Agreement by the
party seeking to terminate; provided, that if, as of such date, all
necessary regulatory or governmental approvals, consents or waivers
required to consummate the transactions contemplated hereby shall not have
been obtained but all other conditions to the consummation of the Merger
(other than the delivery of executed documents at the Closing) shall be
fulfilled, the Initial Termination Date shall be extended to April 30,
2000;
(e) by NFB or JSB, if the Board of Directors of the other party does
not publicly recommend in the Joint Proxy Statement-Prospectus that its
stockholders approve and adopt this Agreement or if, after recommending in
the Joint Proxy Statement-Prospectus that its stockholders approve and
adopt this Agreement, the Board of Directors of the other party shall have
withdrawn, qualified or revised such recommendation in any respect
materially adverse to the party seeking to terminate this Agreement; or
(f) by JSB, if its Board of Directors so determines by a majority vote
of the members of its entire Board, if both of the following conditions are
satisfied:
(i) the NFB Market Value on the Valuation Date is less than $16.35;
and
(ii) (A) the number obtained by dividing the NFB Market Value as of
the Valuation Date by the Initial NFB Market Value ("NFB Ratio") shall
be less than (B) the number obtained by dividing the Final Index Price
by the Initial Index Price and subtracting 0.10 from the quotient in
this clause (ii)(B) ("Index Ratio");
subject, however, to the following three sentences. If JSB elects to
exercise its termination right pursuant to this Section 6.1(f), it shall
give written notice thereof to NFB at any time during the five business day
period commencing on the day following the Valuation Date; provided, that
such notice of election to terminate may be withdrawn at any time during
the 15 business day period commencing on the day such notice is received by
NFB. During the five business day period commencing with its receipt of
such notice, NFB shall have the option to increase the consideration to be
received by the holders of JSB Common Stock hereunder by increasing the
Exchange Ratio from 3.0 to a number equal to the lesser of (1) the product
of (x) the Index Ratio plus 0.10 and (y) 3.0, divided by the NFB Ratio or
(2) the quotient obtained by dividing $61.31 by the NFB Market Value. If
NFB so elects, it shall give, within such five business day period, written
notice to JSB of such election and the revised Exchange Ratio, whereupon no
termination shall be deemed to have occurred pursuant to this Section
6.1(f) and this Agreement shall remain in full force and effect in
accordance with its terms (except as the Exchange Ratio shall have been so
modified).
For purposes of this Section 6.1(f), the following terms shall have the
meanings indicated below:
"Acquisition Transaction" shall have the meaning set forth in Section
3.4(e), without regard to subsection (ii) of the proviso set forth therein.
"Final Index Price" means the sum of the Final Prices for each company
comprising the Index Group multiplied by the weighting set forth opposite such
company's name in the definition of Index Group below.
"Final Price," with respect to any company belonging to the Index Group,
means the average of the daily closing sales prices of a share of common stock
of such company (and if there is no closing sales price on any such day, then
the mean between the closing bid and the closing asked prices on that day), as
reported on the consolidated transaction reporting system for the market or
exchange on which such common stock is principally traded, for the 15
consecutive trading days immediately preceding the Valuation Date.
"Index Group" means the 23 financial institution holding companies listed
below, the common stock of all of which shall be publicly traded and as to which
there shall not have been an Acquisition Transaction
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involving any of such companies publicly announced at any time during the period
beginning on the date of this Agreement and ending on the day immediately
preceding the Valuation Date. In the event that:
(i) the common stock of any of such companies ceases to be publicly
traded, or
(ii) an Acquisition Transaction involving any of such companies is
announced at any time during the period beginning on the date of this
Agreement and ending on the day immediately preceding the Valuation Date,
or
(iii) any such company shall announce at any time during the period
beginning on the date of this Agreement and ending on the day immediately
preceding the Valuation Date that it has entered into a definitive
agreement to acquire insured deposits from another financial institution in
excess of 20% of its deposit base as of the most recent quarter end for
which information is available or intends to issue additional capital
securities in excess of 10% of the total value of its Tier 1 capital
securities outstanding as of the most recent quarter end for which
information is available,
then such company or companies will be removed from the Index Group, and the
weights attributed to the remaining companies will be adjusted proportionately
for purposes of determining the Final Index Price and the Initial Index Price;
provided, however, that, in the event an Acquisition Transaction is publicly
announced which involves only companies that are listed below, none of such
companies shall be removed from the Index Group. The 23 financial institution
holding companies and the weights attributed to them are as follows:
<TABLE>
<CAPTION>
HOLDING COMPANY SYMBOL WEIGHTING
- --------------- ------ ---------
<S> <C> <C>
Astoria Financial Corporation............................... ASFC 4.26%
CCB Financial Corporation................................... CCB 3.10%
Charter One Financial, Inc. ................................ COFI 12.85%
Chittenden Corporation...................................... CHZ 2.19%
City National Corporation................................... CYN 3.55%
Dime Community Bancshares, Inc.............................. DCOM 0.99%
First Commonwealth Financial Corporation.................... FCF 2.41%
FirstMerit Corporation...................................... FMER 7.03%
Fulton Financial Corporation................................ FULT 5.37%
GreenPoint Financial Corp. ................................. GPT 8.48%
Independence Community Bank Corp. .......................... ICBC 5.29%
Keystone Financial, Inc. ................................... KSTN 3.69%
M & T Bank Corporation...................................... MTB 0.61%
Peoples Heritage Financial Group, Inc. ..................... PHBK 8.12%
Queens County Bancorp, Inc. ................................ QCSB 1.67%
Richmond County Financial Corp. ............................ RCBK 2.46%
State Bancorp, Inc. ........................................ STB 0.54%
Staten Island Bancorp, Inc. ................................ SIB 3.19%
Suffolk Bancorp............................................. SUBK 0.47%
Summit Bancorp.............................................. SUB 13.19%
Susquehanna Bancshares, Inc. ............................... SUSQ 2.88%
Valley National Bancorp..................................... VLY 4.70%
Webster Financial Corporation............................... WBST 2.96%
------
100.00%
</TABLE>
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"Initial Index Price" means the sum of the per share closing sales price of
the common stock of each company comprising the Index Group multiplied by the
applicable weighting, as such prices are reported on the consolidated
transaction reporting system for the market or exchange on which such common
stock is principally traded on the trading day immediately preceding the public
announcement of this Agreement.
"Initial NFB Market Value" means the closing sales price of a share of NFB
Common Stock, as reported on the NYSE, on the trading day immediately preceding
the public announcement of this Agreement, adjusted as indicated in the last
sentence of this Section 6.1(f).
"NFB Market Value" shall have the meaning set forth in Section 1.2(b)
hereof.
"Valuation Date" shall have the meaning set forth in Section 1.2(c) hereof.
If NFB or any company belonging to the Index Group declares or effects a
stock dividend, reclassification, recapitalization, split-up, combination,
exchange of shares or similar transaction between the date of this Agreement and
the Valuation Date, the prices for the common stock of such company shall be
appropriately adjusted for the purposes of applying this Section 6.1(f).
Section 6.2. Effect of Termination. In the event of the termination of
this Agreement by either NFB or JSB, as provided above, this Agreement shall
thereafter become void and, subject to Section 6.3, there shall be no liability
on the part of any party hereto or their respective officers or directors,
except that (a) any such termination shall be without prejudice to the rights of
any party hereto arising out of the breach by any other party of any covenant,
representation or obligation contained in this Agreement and (b) the obligations
of the parties under the last three sentences in Section 4.3(a) and under
Section 8.6 shall survive.
Section 6.3. Termination Fee. In recognition of the efforts, expenses and
other opportunities foregone by NFB and JSB, respectively, while structuring the
Merger, the parties hereto agree that:
(a) NFB shall pay to JSB a termination fee of Twelve Million, Five
Hundred Thousand Dollars ($12,500,000) plus JSB's documented, reasonable
out-of-pocket expenses (including fees and expenses of legal, financial and
accounting advisors) in cash on demand if, within 12 months after the date
of this Agreement, after a written bona fide proposal is made after the
date of this Agreement by a third party to NFB or its stockholders to
engage in an Acquisition Transaction (as defined in Section 3.4(e)), other
than any Acquisition Transaction permitted pursuant to the terms of this
Agreement, including without limitation Section 3.4(e) (a "Permitted
Transaction"), any of the following occur:
(i) NFB shall have willfully breached any covenant or obligation
contained in this Agreement and such breach would entitle JSB to
terminate the Agreement;
(ii) the stockholders of NFB shall not have approved the Agreement
at the meeting of such stockholders held for the purpose of voting on
the Agreement, such meeting shall not have been held or shall have been
canceled prior to termination of the Agreement; or
(iii) NFB's Board of Directors shall have withdrawn or modified in
a manner adverse to JSB the recommendation of NFB's Board of Directors
with respect to the Agreement; and
(b) NFB shall pay to JSB a termination fee of Twenty-Five Million
Dollars ($25,000,000) plus JSB's documented, reasonable out-of-pocket
expenses (including fees and expenses of legal, financial and accounting
advisors) in cash on demand if, during a period of 18 months after the date
hereof, NFB or any of its Subsidiaries, without having received JSB's prior
written consent, shall have entered into an agreement to engage in an
Acquisition Transaction (as defined in Section 3.4(e)), other than a
Permitted Transaction, with any person (the term "person" for purposes of
this Agreement having the meaning assigned thereto in Sections 3(a)(9) and
13(d)(3) of the Exchange Act and the rules and regulations thereunder)
other than JSB or any of its Subsidiaries or the Board of Directors of NFB
shall have recommended that the stockholders of NFB approve or accept an
Acquisition Transaction other than a Permitted Transaction with any person
other than JSB or any of its Subsidiaries. Any fee payable to JSB pursuant
to Section 6.3(b) shall be reduced dollar for dollar to the extent that any
fee is actually paid pursuant to Section 6.3(a). Notwithstanding the
foregoing, NFB shall not be obligated to pay to JSB the
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termination fee described in Section 6.3(a) or Section 6.3(b) in the event
that at or prior to such time as such fee becomes payable (i) NFB and JSB
validly terminate this Agreement pursuant to Section 6.1(a), (ii) NFB or
JSB validly terminates this Agreement pursuant to Sections 6.1(c) or
6.1(d), (iii) NFB validly terminates this Agreement pursuant to Section
6.1(b) or Section 6.1(e) or (iv) JSB validly terminates this Agreement
pursuant to Section 6.1(f).
(c) JSB shall pay to NFB a termination fee of Twelve Million, Five
Hundred Thousand Dollars ($12,500,000) plus NFB's documented, reasonable
out-of-pocket expenses (including fees and expenses of legal, financial and
accounting advisors) in cash on demand if, within 12 months after the date
of this Agreement, after a bona fide proposal is made after the date of
this Agreement by a third party to JSB or its stockholders to engage in an
Acquisition Transaction (as defined in the JSB Option Agreement), any of
the following occur:
(i) JSB shall have willfully breached any covenant or obligation
contained in this Agreement and such breach would entitle NFB to
terminate the Agreement;
(ii) the stockholders of JSB shall not have approved the Agreement
at the meeting of such stockholders held for the purpose of voting on
the Agreement, such meeting shall not have been held or shall have been
canceled prior to termination of the Agreement; or
(iii) JSB's Board of Directors shall have withdrawn or modified in
a manner adverse to NFB the recommendation of JSB's Board of Directors
with respect to the Agreement; and
(d) JSB shall pay to NFB a termination fee of Twenty-Five Million
Dollars ($25,000,000) plus NFB's documented, reasonable out-of-pocket
expenses (including fees and expenses of legal, financial and accounting
advisors) in cash on demand if, during a period of 18 months after the date
hereof, JSB or any of its Subsidiaries, without having received NFB's prior
written consent, shall have entered into an agreement to engage in an
Acquisition Transaction (as defined in the JSB Option Agreement) with any
person other than NFB or any of its Subsidiaries or the Board of Directors
of JSB shall have recommended that the stockholders of JSB approve or
accept an Acquisition Transaction (as defined in the JSB Option Agreement)
with any person other than NFB or any of its Subsidiaries. Any fee payable
to NFB pursuant to this Section 6.3(d) shall be reduced dollar for dollar
to the extent that any fee is actually paid pursuant to Section 6.3(c).
Notwithstanding the foregoing, JSB shall not be obligated to pay to NFB the
termination fee described in Section 6.3(c) or Section 6.3(d) in the event
that at or prior to such time as such fee becomes payable (i) NFB and JSB
validly terminate this Agreement pursuant to Section 6.1(a), (ii) NFB or
JSB validly terminates this Agreement pursuant to Sections 6.1(c) or 6.1(d)
or (iii) JSB validly terminates this Agreement pursuant to Section 6.1(b),
Section 6.1(e) or Section 6.1(f).
ARTICLE VII
CLOSING, EFFECTIVE DATE AND EFFECTIVE TIME
Section 7.1. Effective Date and Effective Time. The closing of the
transactions contemplated hereby ("Closing") shall take place at the offices of
Thacher Proffitt & Wood, Two World Trade Center, New York, New York 10048, on a
date ("Closing Date") that is no later than five business days following the
date on which the expiration of the last applicable waiting period in connection
with notices to and approvals of regulatory and governmental authorities shall
occur and all conditions to the consummation of this Agreement are satisfied or
waived, or on such other date as may be agreed to by the parties. Prior to the
Closing Date, NFB and JSB shall execute a Certificate of Merger in accordance
with all appropriate legal requirements, which shall be filed as required by law
on the Closing Date, and the Merger provided for therein shall become effective
upon such filing or on such date as may be specified in such Certificate of
Merger. The date of such filing or such later effective date as specified in the
Certificate of Merger is herein referred to as the "Effective Date." The
"Effective Time" of the Merger shall be as set forth in the Certificate of
Merger.
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Section 7.2. Deliveries at the Closing. Subject to the provisions of
Articles V and VI, on the Closing Date there shall be delivered to NFB and JSB
the documents and instruments required to be delivered under Article V.
ARTICLE VIII
CERTAIN OTHER MATTERS
Section 8.1. Certain Definitions; Interpretation. As used in this
Agreement, the following terms shall have the meanings indicated:
"material" means material to NFB or JSB (as the case may be) and its
respective Subsidiaries, taken as a whole.
"person" includes an individual, corporation, limited liability company,
partnership, association, trust or unincorporated organization.
When a reference is made in this Agreement to Sections, Exhibits or Schedules,
such reference shall be to a Section of, Exhibit or Schedule to, this Agreement
unless otherwise indicated. The table of contents and headings contained in this
Agreement are for ease of reference only and shall not affect the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed followed by the
words "without limitation." Any singular term in this Agreement shall be deemed
to include the plural, and any plural term the singular. Any reference to gender
in this Agreement shall be deemed to include any other gender.
Section 8.2. Survival. Only those agreements and covenants of the parties
that are by their terms applicable in whole or in part after the Effective Time,
including Sections 4.3(a), 4.13, 4.14, 4.15, 4.16, 4.17 and 8.6 of this
Agreement, shall survive the Effective Time. All other representations,
warranties, agreements and covenants shall not survive the Effective Time. If
the Agreement shall be terminated, the agreements of the parties in the last
three sentences of Section 4.3(a) and in Section 8.6 shall survive such
termination.
Section 8.3. Waiver; Amendment. Prior to the Effective Time, any provision
of this Agreement may be: (i) waived in writing by the party benefitted by the
provision or (ii) amended or modified at any time (including the structure of
the transaction) by an agreement in writing between the parties hereto except
that, after the vote by the stockholders of JSB or NFB, no amendment or
modification may be made that would reduce the Merger Consideration or
contravene any provision of the Delaware General Corporation Law or the federal
banking laws, rules and regulations.
Section 8.4. Counterparts. This Agreement may be executed in counterparts
each of which shall be deemed to constitute an original, but all of which
together shall constitute one and the same instrument.
Section 8.5. Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of New York, without
regard to conflicts of laws principles.
Section 8.6. Expenses. Each party hereto will bear all expenses incurred
by it in connection with this Agreement and the transactions contemplated
hereby.
Section 8.7. Notices. All notices, requests, acknowledgments and other
communications hereunder to a party shall be in writing and shall be deemed to
have been duly given when delivered by hand, overnight courier or facsimile
transmission (confirmed in writing) to such party at its address or facsimile
number set forth below or such other address or facsimile transmission as such
party may specify by notice to the other party hereto.
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If to JSB, to:
JSB Financial, Inc.
303 Merrick Road
Lynbrook, New York 11563
Facsimile: (516) 887-6007
Attention: Mr. Park T. Adikes
Chairman of the Board and
Chief Executive Officer
With copies to:
JSB Financial, Inc.
303 Merrick Road
Lynbrook, New York 11563
Facsimile: (516) 887-6007
Attention: Mr. Lawrence J. Kane
Executive Vice President
and
Douglas J. McClintock, Esq.
Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
Facsimile: 212-432-2898
If to NFB, to:
North Fork Bancorporation, Inc.
275 Broad Hollow Road
Melville, New York 11747
Facsimile: (516) 844-1471
Attention: Mr. John Adam Kanas
Chairman, President and
Chief Executive Officer
With copies to:
North Fork Bancorporation, Inc.
275 Broad Hollow Road
Melville, New York 11747
Facsimile: (516) 844-1471
Attention: Mr. Daniel M. Healy
Executive Vice President and
Chief Financial Officer
and
William S. Rubenstein, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Facsimile: (212) 735-2000
Section 8.8. Entire Agreement; etc. This Agreement, together with the Plan
of Bank Merger, the JSB Option Agreement and the Disclosure Letters, represents
the entire understanding of the parties hereto with reference to the
transactions contemplated hereby and supersedes any and all other oral or
written agreements
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heretofore made. All terms and provisions of this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns. Except for Section 4.13 (other than Section 4.13(c)) and
Section 4.14, which confer rights on the parties described therein, nothing in
this Agreement is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
Section 8.9. Assignment. This Agreement may not be assigned by either
party hereto without the written consent of the other party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
NORTH FORK BANCORPORATION, INC.
By: /s/ JOHN ADAM KANAS
------------------------------------
John Adam Kanas
Chairman of the Board, President and
Chief Executive Officer
JSB FINANCIAL, INC.
By: /s/ PARK T. ADIKES
------------------------------------
Park T. Adikes
Chairman of the Board and
Chief Executive Officer
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<PAGE> 164
APPENDIX B
JSB FINANCIAL, INC.
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of August 16, 1999 ("Agreement"), by and
between JSB Financial, Inc., a Delaware corporation ("Issuer"), and North Fork
Bancorporation, Inc., a Delaware corporation ("Grantee").
RECITALS
A. The Agreement and Plan of Merger. Grantee and Issuer have entered into
an Agreement and Plan of Merger, dated as of August 16, 1999 ("Merger
Agreement"), providing for, among other things, the merger of Issuer with and
into Grantee, with Grantee being the surviving corporation.
B. Condition to Agreement and Plan of Merger. As a condition and an
inducement to Grantee's execution and delivery of the Merger Agreement, Grantee
has required that Issuer agree, and Issuer has agreed, to grant Grantee the
Option (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Merger Agreement, and intending to be legally bound hereby, Issuer and
Grantee agree as follows:
1. Defined Terms. Capitalized terms which are used but not defined herein
shall have the meanings ascribed to such terms in the Merger Agreement.
2. Grant of Option. Subject to the terms and conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option ("Option") to purchase up
to 1,848,092 shares of common stock, par value $.01 per share ("Issuer Common
Stock"), of Issuer (as adjusted as set forth herein, the "Option Shares," which
shall include the Option Shares before and after any transfer of such Option
Shares, but in no event shall the number of Option Shares for which this Option
is exercisable exceed 19.9% of the issued and outstanding shares of Issuer
Common Stock), at a purchase price per Option Share (as adjusted as set forth
herein, the "Purchase Price") equal to $58.75.
3. Exercise of Option.
(a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of the agreements or covenants
contained in this Agreement or the Merger Agreement, and (ii) no preliminary or
permanent injunction or other order against the delivery of shares covered by
the Option issued by any court of competent jurisdiction in the United States
shall be in effect, the Holder may exercise the Option, in whole or in part, at
any time and from time to time, following the occurrence of a Purchase Event (as
hereinafter defined); provided, that, the Option shall terminate and be of no
further force or effect upon the earliest to occur of (A) the Effective Time,
(B) termination of the Merger Agreement in accordance with the terms thereof
prior to the occurrence of a Purchase Event or a Preliminary Purchase Event
other than a termination thereof by Grantee pursuant to Section 6.1(b)(ii) of
the Merger Agreement (a termination of the Merger Agreement by Grantee pursuant
to Section 6.1(b)(ii) of the Merger Agreement, being referred to herein as a
"Default Termination"), (C) 18 months after a Default Termination or (D) 18
months after termination of the Merger Agreement (other than a Default
Termination) following the occurrence of a Purchase Event or a Preliminary
Purchase Event; provided, however, that any purchase of shares upon exercise of
the Option shall be subject to compliance with applicable law; provided further,
however, that if the Option cannot be exercised on any day an injunction, order
or similar restraint issued by a court of competent jurisdiction, the period
during which the Option may be exercised shall be extended so that the Option
shall expire no earlier than the tenth business day after such injunction, order
or restraint shall have been dissolved or when such injunction, order or
restraint shall have become permanent and no longer subject to appeal, as
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the case may be. The term "Holder" shall mean the holder or holders of the
Option from time to time, and which initially is Grantee. The rights set forth
in Sections 8 and 9 of this Agreement shall terminate when the right to exercise
the Option and Substitute Option terminate (other than as a result of a complete
exercise of the Option) as set forth herein.
(b) As used herein, a "Purchase Event" means any of the following events:
(i) Without Grantee's prior written consent, Issuer shall have authorized,
recommended, publicly proposed or publicly announced an intention to authorize,
recommend or propose, or Issuer shall have entered into an agreement with any
person (other than Grantee or any subsidiary of Grantee) to effect (A) a merger,
consolidation or similar transaction involving Issuer or any of its significant
subsidiaries, (B) the disposition, by sale, lease, exchange or otherwise, of
assets or deposits of Issuer or any of its significant subsidiaries representing
in either case 10% or more of the consolidated assets or deposits of Issuer and
its subsidiaries, other than in the ordinary course of business, or (C) the
issuance, sale or other disposition by Issuer of (including by way of merger,
consolidation, share exchange or any similar transaction) securities
representing 10% or more of the voting power of Issuer or any of its significant
subsidiaries (each of (A), (B) or (C), an "Acquisition Transaction"); or
(ii) Any person (other than Grantee or any subsidiary of Grantee) shall
have acquired beneficial ownership (as such term is defined in Rule 13d-3 under
the Securities Exchange Act of 1934, as amended ("Exchange Act")) of, or the
right to acquire beneficial ownership of, or any "group" (as such term is
defined in Section 13(d)(3) of the Exchange Act), other than a group of which
Grantee or any subsidiary of Grantee is a member, shall have been formed which
beneficially owns, or has the right to acquire beneficial ownership of, 10% or
more of the voting power of Issuer or any of its significant subsidiaries.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) Any person (other than Grantee or any subsidiary of Grantee) shall have
commenced (as such term is defined in Rule 14d-2 under the Exchange Act) or
shall have filed a registration statement under the Securities Act of 1933, as
amended, ("Securities Act"), with respect to, a tender offer or exchange offer
to purchase any shares of Issuer Common Stock such that, upon consummation of
such offer, such person would own or control 10% or more of the then outstanding
shares of Issuer Common Stock (such an offer being referred to herein as a
"Tender Offer" or an "Exchange Offer," respectively); or
(ii) The stockholders of Issuer shall not have approved the Merger
Agreement by the requisite vote at the meeting of the stockholders of the Issuer
required to be called to approve the Merger Agreement ("Issuer Meeting"), the
Issuer Meeting shall not have been held or shall have been canceled prior to
termination of the Merger Agreement or Issuer's Board of Directors shall have
withdrawn or modified in a manner adverse to Grantee the recommendation of
Issuer's Board of Directors with respect to the Merger Agreement, in each case
after it shall have been publicly announced that any person (other than Grantee
or any subsidiary of Grantee) shall have (A) made, or disclosed an intention to
make, a bona fide proposal to engage in an Acquisition Transaction, (B)
commenced a Tender Offer or filed a registration statement under the Securities
Act with respect to an Exchange Offer or (C) filed an application (or given a
notice), whether in draft or final form, under the Bank Holding Company Act of
1956, as amended ("BHC Act"), the Home Owners' Loan Act of 1933, as amended
("HOLA"), the Bank Merger Act, as amended ("BMA") or the Change in Bank Control
Act of 1978, as amended ("CBCA"), for approval to engage in an Acquisition
Transaction; or
(iii) Any person (other than Grantee or any subsidiary of Grantee) shall
have made a bona fide proposal to Issuer or its stockholders by public
announcement, or written communication that is or becomes the subject of public
disclosure, to engage in an Acquisition Transaction; or
(iv) After a proposal is made by a third party to Issuer or its
stockholders to engage in an Acquisition Transaction, or such third party states
its intention to the Issuer to make such a proposal if the Merger Agreement
terminates, and thereafter Issuer shall have breached any representation,
warranty, covenant or agreement contained in the Merger Agreement and such
breach would entitle Grantee to terminate the Merger Agreement under Section
6.1(b) thereof (without regard to the cure period provided for therein
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unless such cure is promptly effected without jeopardizing consummation of the
Merger pursuant to the terms of the Merger Agreement).
As used in this Agreement, the term "person" shall have the meaning
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Preliminary Purchase Event or Purchase Event of which it has knowledge, it
being understood that the giving of such notice by Issuer shall not be a
condition to the right of Holder to exercise the Option.
(e) In the event Holder wishes to exercise the Option, it shall send to
Issuer a written notice (the "Option Notice," the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of Option
Shares it intends to purchase pursuant to such exercise and (ii) a place and
date not earlier than three business days nor later than 15 business days from
the Notice Date for the closing ("Closing") of such purchase ("Closing Date");
provided, that the first Option Notice shall be sent to Issuer within 180 days
after the first Purchase Event of which Grantee has been notified. If prior
notification to or approval of any Governmental Entity is required in connection
with any such purchase, Issuer shall cooperate with the Holder in the filing of
the required notice of application for approval and the obtaining of such
approval, and the Closing shall occur promptly following such regulatory
approvals and any mandatory waiting periods. Any exercise of the Option shall be
deemed to occur on the Notice Date relating thereto.
4. Payment and Delivery of Certificates.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in immediately
available funds by wire transfer to a bank account designated by Issuer, an
amount equal to the Purchase Price multiplied by the number of Option Shares to
be purchased on such Closing Date and (ii) present and surrender this Agreement
to the Issuer at the address of the Issuer specified in Section 13(f) of this
Agreement.
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a) of
this Agreement, (i) Issuer shall deliver to Holder (A) a certificate or
certificates representing the Option Shares to be purchased at such Closing,
which Option Shares shall be free and clear of all liens (as defined in the
Merger Agreement) and subject to no preemptive rights, and (B) if the Option is
exercised in part only, an executed new agreement with the same terms as this
Agreement evidencing the right to purchase the balance of the shares of Issuer
Common Stock purchasable hereunder, and (ii) Holder shall deliver to Issuer a
letter agreeing that Holder shall not offer to sell or otherwise dispose of such
Option Shares in violation of applicable federal and state law or of the
provisions of this Agreement.
(c) In addition to any other legend that is required by applicable law,
certificates for the Option Shares delivered at each Closing shall be endorsed
with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND PURSUANT TO THE TERMS OF A STOCK OPTION
AGREEMENT DATED AS OF AUGUST 16, 1999. A COPY OF SUCH AGREEMENT
WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON
RECEIPT BY THE ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the portion of the above legend relating to the
Securities Act shall be removed by delivery of substitute certificate(s) without
such legend if Holder shall have delivered to Issuer a copy of a letter from the
staff of the Securities and Exchange Commission ("SEC"), or an opinion of
counsel in form and substance reasonably satisfactory to Issuer and its counsel,
to the effect that such legend is not required for purposes of the Securities
Act.
(d) Upon the giving by Holder to Issuer of an Option Notice, the tender of
the applicable purchase price in immediately available funds and the tender of
this Agreement to Issuer, Holder shall be deemed to be the holder of record of
the shares of Issuer Common Stock issuable upon such exercise, notwithstanding
that the stock transfer books of Issuer shall then be closed or that
certificates representing such shares of Issuer
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Common Stock shall not then be actually delivered to Holder. Issuer shall pay
all expenses, and any and all United States federal, state and local taxes and
other charges that may be payable in connection with the preparation, issuance
and delivery of stock certificates under this Section 4 in the name of Holder or
its assignee, transferee or designee.
(e) Issuer agrees (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Issuer Common Stock so that the Option may be exercised without additional
authorization of Issuer Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Issuer Common
Stock, (ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer, (iii) promptly to take all action as may from time to time be required
(including (A) complying with all premerger notification, reporting and waiting
period requirements and (B) in the event prior approval of or notice to any
Governmental Entity is necessary before the Option may be exercised, cooperating
fully with Holder in preparing such applications or notices and providing such
information to such Governmental Entity as it may require) in order to permit
Holder to exercise the Option and Issuer duly and effectively to issue shares of
Issuer Common Stock pursuant hereto and (iv) promptly to take all action
provided herein to protect the rights of Holder against dilution.
5. Representations and Warranties of Issuer. Issuer hereby represents and
warrants to Grantee (and Holder, if different than Grantee) as follows:
(a) Corporate Authority. Issuer has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby; the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of Issuer, and
no other corporate proceedings on the part of Issuer are necessary to
authorize this Agreement or to consummate the transactions contemplated by
this Agreement. This Agreement has been duly and validly executed and
delivered by Issuer.
(b) Beneficial Ownership. To the best knowledge of Issuer, as of the
date of this Agreement, no person or group has beneficial ownership of more
than 10% of the issued and outstanding shares of Issuer Common Stock.
(c) Shares Reserved for Issuance; Capital Stock. Issuer has taken all
necessary corporate action to authorize and reserve and permit it to issue,
and at all times from the date hereof through the termination of this
Agreement in accordance with its terms, will have reserved for issuance
upon the exercise of the Option, that number of shares of Issuer Common
Stock equal to the maximum number of shares of Issuer Common Stock at any
time and from time to time purchasable upon exercise of the Option, and all
such shares, upon issuance pursuant to the Option, will be duly authorized,
validly issued, fully paid and nonassessable, and will be delivered free
and clear of all claims, liens, encumbrances and security interests (other
than those created by this Agreement) and not subject to any preemptive
rights.
(d) No Violations. The execution, delivery and performance of this
Agreement does not and will not, and the consummation by Issuer of any of
the transactions contemplated hereby will not, constitute or result in (i)
a breach or violation of, or a default under, its Certificate of
Incorporation or By-Laws, or the comparable governing instruments of any of
its subsidiaries, or (ii) a breach or violation of, or a default under, any
agreement, lease, contract, note, mortgage, indenture, arrangement or other
obligation of it or any of its subsidiaries (with or without the giving of
notice, the lapse of time or both) or under any law, rule, ordinance or
regulation or judgment, decree, order, award or governmental or
non-governmental permit or license to which it or any of its subsidiaries
is subject, that would, in any case, give any other person the ability to
prevent or enjoin Issuer's performance under this Agreement in any material
respect.
6. Representations and Warranties of Grantee. Grantee hereby represents
and warrants to Issuer that Grantee has full corporate power and authority to
enter into this Agreement and, subject to obtaining the approvals referred to in
this Agreement, to consummate the transactions contemplated by this Agreement;
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have
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been duly authorized by all necessary corporate action on the part of Grantee;
and this Agreement has been duly executed and delivered by Grantee.
7. Adjustment upon Changes in Issuer Capitalization, Etc.
(a) In the event of any change in Issuer Common Stock by reason of a stock
dividend, stock split, split-up, recapitalization, combination, exchange of
shares or similar transaction, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
any such transaction so that Holder shall receive, upon exercise of the Option,
the number and class of shares or other securities or property that Holder would
have received in respect of Issuer Common Stock if the Option had been exercised
immediately prior to such event, or the record date therefor, as applicable. If
any additional shares of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in the first sentence of
this Section 7(a), upon exercise of any option to purchase Issuer Common Stock
outstanding on the date hereof or upon conversion into Issuer Common Stock of
any convertible security of Issuer outstanding on the date hereof), the number
of shares of Issuer Common Stock subject to the Option shall be adjusted so
that, after such issuance, the Option, together with any shares of Issuer Common
Stock previously issued pursuant hereto, equals 19.9% of the number of shares of
Issuer Common Stock then issued and outstanding, without giving effect to any
shares subject to or issued pursuant to the Option. No provision of this Section
7 shall be deemed to affect or change, or constitute authorization for any
violation of, any of the covenants or representations in the Merger Agreement.
(b) In the event that Issuer shall enter into an agreement (i) to
consolidate with or merge into any person, other than Grantee or one of its
subsidiaries, and Issuer shall not be the continuing or surviving corporation of
such consolidation or merger, (ii) to permit any person, other than Grantee or
one of its subsidiaries, to merge into Issuer and Issuer shall be the continuing
or surviving corporation, but, in connection with such merger, the then
outstanding shares of Issuer Common Stock shall be changed into or exchanged for
stock or other securities of Issuer or any other person or cash or any other
property, or the outstanding shares of Issuer Common Stock immediately prior to
such merger shall, after such merger, represent less than 50% of the outstanding
shares and share equivalents of the merged company or (iii) to sell or otherwise
transfer all or substantially all of its assets or deposits to any person, other
than Grantee or one of its subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provisions so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
("Substitute Option"), at the election of Holder, to purchase shares of either
(A) the Acquiring Corporation (as hereinafter defined), (B) any person that
controls the Acquiring Corporation or (C) in the case of a merger described in
clause (ii), Issuer (such person being referred to as "Substitute Option
Issuer").
(c) The Substitute Option shall have the same terms as the Option,
provided, that, if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to Holder. The Substitute Option Issuer shall also enter
into an agreement with Holder in substantially the same form as this Agreement,
which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock (as hereinafter defined) as is equal to the Assigned
Value (as hereinafter defined) multiplied by the number of shares of Issuer
Common Stock for which the Option was theretofore exercisable, divided by the
Average Price (as hereinafter defined). The exercise price of the Substitute
Option per share of Substitute Common Stock ("Substitute Option Price") shall
then be equal to the Purchase Price multiplied by a fraction in which the
numerator is the number of shares of Issuer Common Stock for which the Option
was theretofore exercisable and the denominator is the number of shares of the
Substitute Common Stock for which the Substitute Option is exercisable.
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(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (A) the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than
Issuer), (B) Issuer in a merger in which Issuer is the continuing or
surviving person, or (C) the transferee of all or substantially all of
Issuer's assets (or a substantial part of the assets of its subsidiaries
taken as a whole).
(ii) "Substitute Common Stock" shall mean the shares of capital stock
(or similar equity interest) with the greatest voting power in respect of
the election of directors (or persons similarly responsible for the
direction of the business and affairs) of the Substitute Option Issuer.
(iii) "Assigned Value" shall mean the highest of (A) the price per
share of Issuer Common Stock at which a Tender Offer or an Exchange Offer
therefor has been made, (B) the price per share of Issuer Common Stock to
be paid by any third party pursuant to an agreement with Issuer, (C) the
highest closing price for shares of Issuer Common Stock within the 60-day
period immediately preceding the consolidation, merger or sale in question
and (D) in the event of a sale of all or substantially all of Issuer's
assets or deposits, an amount equal to (x) the sum of the price paid in
such sale for such assets (and/or deposits) and the current market value of
the remaining assets of Issuer, as determined by a nationally recognized
investment banking firm selected by Holder, divided by (y) the number of
shares of Issuer Common Stock outstanding at such time. In the event that a
Tender Offer or an Exchange Offer is made for Issuer Common Stock or an
agreement is entered into for a merger or consolidation involving
consideration other than cash, the value of the securities or other
property issuable or deliverable in exchange for Issuer Common Stock shall
be determined by a nationally recognized investment banking firm selected
by Holder.
(iv) "Average Price" shall mean the average closing price of a share
of Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided, that, if Issuer is the issuer
of the Substitute Option, the Average Price shall be computed with respect
to a share of common stock issued by Issuer, the person merging into Issuer
or by any company which controls such person, as Holder may elect.
(f) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.9% of the aggregate of the shares of Substitute Common Stock
outstanding but for the limitation in the first sentence of this Section 7(f),
Substitute Option Issuer shall make a cash payment to Holder equal to the excess
of (i) the value of the Substitute Option without giving effect to the
limitation in the first sentence of this Section 7(f) over (ii) the value of the
Substitute Option after giving effect to the limitation in the first sentence of
this Section 7(f). This difference in value shall be determined by a nationally
recognized investment banking firm selected by Holder.
(g) Issuer shall not enter into any transaction described in Section 7(b)
of this Agreement unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assume in writing all the obligations of Issuer
hereunder and take all other actions that may be necessary so that the
provisions of this Section 7 are given full force and effect (including, without
limitation, any action that may be necessary so that the holders of the other
shares of common stock issued by Substitute Option Issuer are not entitled to
exercise any rights by reason of the issuance or exercise of the Substitute
Option and the shares of Substitute Common Stock are otherwise in no way
distinguishable from or have lesser economic value (other than any diminution in
value resulting from the fact that the shares Substitute Common Stock are
restricted securities, as defined in Rule 144, promulgated under the Securities
Act ("Rule 144"), or any successor provision) than other shares of common stock
issued by Substitute Option Issuer).
8. Repurchase at the Option of Holder.
(a) Subject to the last sentence of Section 3(a) of this Agreement, at the
request of Holder at any time commencing upon the first occurrence of a
Repurchase Event (as defined in Section 8(d) hereof) and ending
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12 months immediately thereafter, Issuer shall repurchase from Holder (i) the
Option and (ii) all shares of Issuer Common Stock purchased by Holder pursuant
hereto with respect to which Holder then has beneficial ownership. The date on
which Holder exercises its rights under this Section 8 is referred to as the
"Request Date." Such repurchase shall be at an aggregate price ("Section 8
Repurchase Consideration") equal to the sum of:
(i) The aggregate Purchase Price paid by Holder for any shares of
Issuer Common Stock acquired pursuant to the Option with respect to which
Holder then has beneficial ownership;
(ii) The excess, if any, of (A) the Applicable Price (as defined
below) for each share of Issuer Common Stock over (B) the Purchase Price
(subject to adjustment pursuant to Section 7 of this Agreement), multiplied
by the number of shares of Issuer Common Stock with respect to which the
Option has not been exercised; and
(iii) The excess, if any, of the Applicable Price over the Purchase
Price (subject to adjustment pursuant to Section 7 of this Agreement) paid
(or, in the case of Option Shares with respect to which the Option has been
exercised but the Closing Date has not occurred, payable) by Holder for
each share of Issuer Common Stock with respect to which the Option has been
exercised and with respect to which Holder then has beneficial ownership,
multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer shall,
within 10 business days after the Request Date, pay the Section 8 Repurchase
Consideration to Holder in immediately available funds, and contemporaneously
with such payment, Holder shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common Stock purchased thereunder
with respect to which Holder then has beneficial ownership, and Holder shall
warrant that it has sole record and beneficial ownership of such shares and that
the same are then free and clear of all Liens. Notwithstanding the foregoing, to
the extent that prior notification to or approval of any Governmental Entity is
required in connection with the payment of all or any portion of the Section 8
Repurchase Consideration, Holder shall have the ongoing option to revoke its
request for repurchase pursuant to this Section 8, in whole or in part, or to
require that Issuer deliver from time to time that portion of the Section 8
Repurchase Consideration that it is not then so prohibited from paying and
promptly file the required notice or application for approval and expeditiously
process the same (and each party shall cooperate with the other in the filing of
any such notice or application and the obtaining of any such approval). If any
Governmental Entity disapproves of any part of Issuer's proposed repurchase
pursuant to this Section 8, Issuer shall promptly give notice of such fact to
Holder and Holder shall have the right (i) to revoke the repurchase request or
(ii) to the extent permitted by such Governmental Entity, determine whether the
repurchase should apply to the Option and/or Option Shares and to what extent to
each, and Holder shall thereupon have the right to exercise the Option as to the
number of Option Shares for which the Option was exercisable at the Request Date
less the number of shares covered by the Option in respect of which payment has
been made pursuant to Section 8(a)(ii) of this Agreement. Holder shall notify
Issuer of its determination under the preceding sentence within five business
days of receipt of notice of disapproval of the repurchase. Notwithstanding
anything herein to the contrary, in the event that Issuer delivers to the Holder
written notice accompanied by a certification of Issuer's independent auditor
each stating that a requested repurchase of Issuer Common Stock would result in
the recapture of Issuer's bad debt reserves under the Internal Revenue Code of
1986, as amended ("Code"), Holder's repurchase request shall be deemed to be
automatically revoked. Notwithstanding anything herein to the contrary, all of
Holder's rights under this Section 8 shall terminate on the date of termination
of this Option pursuant to Section 3(a) of this Agreement.
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Issuer Common Stock paid for any
such share by the person or groups described in Section 8(d)(i) hereof, (ii) the
price per share of Issuer Common Stock received by holders of Issuer Common
Stock in connection with any merger, sale or other business combination
transaction described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) of this
Agreement, or (iii) the highest closing sales price per share of Issuer Common
Stock as quoted on the New York Stock Exchange ("NYSE"), the American Stock
Exchange ("AMEX") or the National Market System of The Nasdaq Stock Market
("Nasdaq") (or if
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Issuer Common Stock is not quoted on the NYSE, AMEX or Nasdaq, the highest bid
price per share as quoted on the principal trading market or securities exchange
on which such shares are traded as reported by a recognized source chosen by
Holder) during the 40 business days preceding the Request Date; provided,
however, that in the event of a sale of less than all of Issuer's assets, the
Applicable Price shall be the sum of the price paid in such sale for such assets
and the current market value of the remaining assets of Issuer as determined by
a nationally recognized investment banking firm selected by Holder, divided by
the number of shares of Issuer Common Stock outstanding at the time of such
sale. If the consideration to be offered, paid or received pursuant to either of
the foregoing clauses (i) or (ii) shall be other than in cash, the value of such
consideration shall be determined in good faith by an independent nationally
recognized investment banking firm selected by Holder and reasonably acceptable
to Issuer, which determination shall be conclusive for all purposes of this
Agreement.
(d) As used herein, "Repurchase Event" shall occur if (i) any person (other
than Grantee or any subsidiary of Grantee) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3, promulgated under the
Exchange Act), or the right to acquire beneficial ownership of, or any "group"
(as such term is defined under the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of, more than
25% of the then outstanding shares of Issuer Common Stock, or (ii) any of the
transactions described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) of this
Agreement shall be consummated.
9. Repurchase of Substitute Option.
(a) Subject to the last sentence of Section 3(a) of this Agreement, at the
request of Holder at any time commencing upon the first occurrence of a
Repurchase Event (as defined in Section 8(d) hereof) and ending 12 months
immediately thereafter, Substitute Option Issuer (or any successor entity
thereof) shall repurchase from Holder (i) the Substitute Option and (ii) all
shares of Substitute Common Stock purchased by Holder pursuant hereto with
respect to which Holder then has beneficial ownership. The date on which Holder
exercises its rights under this Section 9 is referred to as the "Section 9
Request Date." Such repurchase shall be at an aggregate price ("Section 9
Repurchase Consideration") equal to the sum of:
(i) The aggregate Purchase Price paid by Holder for any shares of
Substitute Common Stock acquired pursuant to the Substitute Option with
respect to which Holder then has beneficial ownership;
(ii) The excess, if any, of (A) the Highest Closing Price (as defined
below) for each share of Substitute Common Stock over (B) the Purchase
Price (subject to adjustment pursuant to Section 7 of this Agreement),
multiplied by the number of shares of Substitute Common Stock with respect
to which the Substitute Option has not been exercised; and
(iii) The excess, if any, of the Highest Closing Price over the
Purchase Price (subject to adjustment pursuant to Section 7 of this
Agreement) paid (or, in the case of Substitute Option Shares with respect
to which the Substitute Option has been exercised but the Closing Date has
not occurred, payable) by Holder for each share of Substitute Common Stock
with respect to which the Substitute Option has been exercised and with
respect to which Holder then has beneficial ownership, multiplied by the
number of such shares.
(b) If Holder exercises its rights under this Section 9, Substitute Option
Issuer shall, within 10 business days after the Section 9 Request Date, pay the
Section 9 Repurchase Consideration to Holder in immediately available funds, and
contemporaneously with such payment, Holder shall surrender to Substitute Option
Issuer the Substitute Option and the certificates evidencing the shares of
Substitute Common Stock purchased thereunder with respect to which Holder then
has beneficial ownership, and Holder shall warrant that it has sole record and
beneficial ownership of such shares and that the same are then free and clear of
all Liens. Notwithstanding the foregoing, to the extent that prior notification
to or approval of any Governmental Entity is required in connection with the
payment of all or any portion of the Section 9 Repurchase Consideration, Holder
shall have the ongoing option to revoke its request for repurchase pursuant to
this Section 9, in whole or in part, or to require that Substitute Option Issuer
deliver from time to time that portion of the Section 9 Repurchase Consideration
that it is not then so prohibited from paying and promptly file the
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required notice or application for approval and expeditiously process the same
(and each party shall cooperate with the other in the filing of any such notice
or application and the obtaining of any such approval). If any Governmental
Entity disapproves of any part of Substitute Option Issuer's proposed repurchase
pursuant to this Section 9, Substitute Option Issuer shall promptly give notice
of such fact to Holder and Holder shall have the right (i) to revoke the
repurchase request or (ii) to the extent permitted by such Governmental Entity,
determine whether the repurchase should apply to the Substitute Option and/or
Substitute Option Shares and to what extent to each, and Holder shall thereupon
have the right to exercise the Substitute Option as to the number of Substitute
Option Shares for which the Substitute Option was exercisable at the Section 9
Request Date less the number of shares covered by the Substitute Option in
respect of which payment has been made pursuant to Section 9(a)(ii) of this
Agreement. Holder shall notify Substitute Option Issuer of its determination
under the preceding sentence within five business days of receipt of notice of
disapproval of the repurchase. Notwithstanding anything herein to the contrary,
in the event that Substitute Option Issuer delivers to the Holder written notice
accompanied by a certification of Substitute Option Issuer's independent auditor
each stating that a requested repurchase of Substitute Common Stock would result
in the recapture of Substitute Option Issuer's bad debt reserves under the Code,
Holder's repurchase request shall be deemed to be automatically revoked.
Notwithstanding anything herein to the contrary, all of Holder's rights under
this Section 9 shall terminate on the date of termination of this Substitute
Option pursuant to Section 3(a) of this Agreement.
(c) For purposes of this Agreement, the "Highest Closing Price" means the
highest of the closing sales price per share of Substitute Common Stock, as
quoted on the NYSE, AMEX or Nasdaq (or if the Substitute Common Stock is not
quoted on the NYSE, AMEX or Nasdaq, the highest bid price per share as quoted on
the principal trading market or securities exchange on which such shares are
traded as reported by a recognized source) during the six-month period preceding
the Section 9 Request Date.
10. Registration Rights.
(a) Demand Registration Rights. Issuer shall, subject to the conditions of
Section 10(c) of this Agreement, if requested by any Holder, including Grantee
and any permitted transferee ("Selling Shareholder"), as expeditiously as
possible, prepare and file and keep current a registration statement under the
Securities Act if such registration is necessary in order to permit the sale or
other disposition of any or all shares of Issuer Common Stock or other
securities that have been acquired by or are issuable to the Selling Shareholder
upon exercise of the Option in accordance with the intended method of sale or
other disposition stated by the Selling Shareholder in such request, including
without limitation a "shelf" registration statement under Rule 415, promulgated
under the Securities Act, or any successor provision, and Issuer shall use its
best efforts to qualify such shares or other securities for sale under any
applicable state securities laws.
(b) Additional Registration Rights. If Issuer at any time after the
exercise of the Option proposes to register any shares of Issuer Common Stock
under the Securities Act in connection with an underwritten public offering of
such Issuer Common Stock, Issuer will promptly give written notice to the
Selling Shareholders of its intention to do so and, upon the written request of
any Selling Shareholder given within 30 days after receipt of any such notice
(which request shall specify the number of shares of Issuer Common Stock
intended to be included in such underwritten public offering by the Selling
Shareholder), Issuer will cause all such shares for which a Selling Shareholder
requests participation in such registration, to be so registered and included in
such underwritten public offering; provided, however, that Issuer may elect to
not cause some or all of such shares to be so registered (i) if the underwriters
in the Public Offering in good faith object for valid business reasons, or (ii)
in the case of a registration solely to implement an employee benefit agreement
or a registration filed on Form S-4 of the Securities Act or any equivalent or
successor Form. If some, but not all the shares of Issuer Common Stock, with
respect to which Issuer shall have received requests for registration pursuant
to this Section 10(b), shall be excluded from such registration, Issuer shall
make appropriate allocation of shares to be registered among the Selling
Shareholders desiring to register their shares pro rata in the proportion that
the number of shares requested to be registered by each such Selling Shareholder
bears to the total number of shares requested to be registered by all such
Selling Shareholders then desiring to have Issuer Common Stock registered for
sale.
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(c) Conditions to Required Registration. Issuer shall use all reasonable
efforts to cause each registration statement referred to in Section 10(a) of
this Agreement to become effective and to obtain all consents or waivers of
other parties which are required therefor and to keep such registration
statement effective, provided, however, that Issuer may delay any registration
of Option Shares required pursuant to Section 10(a) of this Agreement for a
period not exceeding 90 days provided Issuer shall in good faith determine that
any such registration would adversely affect an offering or contemplated
offering of other securities by Issuer, and Issuer shall not be required to
register Option Shares under the Securities Act pursuant to Section 10(a)
hereof:
(i) Prior to the earliest of (A) termination of the Merger Agreement
pursuant to Article VI thereof, (B) failure to obtain the requisite
stockholder approval pursuant to Section 6.1(b) of the Merger Agreement,
and (C) a Purchase Event or a Preliminary Purchase Event;
(ii) On more than one occasion during any calendar year;
(iii) Within 90 days after the effective date of a registration
referred to in Section 10(b) of this Agreement pursuant to which the
Selling Shareholder or Selling Shareholders concerned were afforded the
opportunity to register such shares under the Securities Act and such
shares were registered as requested; and
(iv) Unless a request therefor is made to Issuer by Selling
Shareholders that hold at least 25% or more of the aggregate number of
Option Shares (including shares of Issuer Common Stock issuable upon
exercise of the Option) then outstanding.
In addition to the foregoing, Issuer shall not be required to maintain the
effectiveness of any registration statement after the expiration of nine months
from the effective date of such registration statement. Issuer shall use all
reasonable efforts to make any filings, and take all steps, under all applicable
state or local securities laws to the extent necessary to permit the sale or
other disposition of the Option Shares so registered in accordance with the
intended method of distribution for such shares; provided, however,that Issuer
shall not be required to consent to general jurisdiction or qualify to do
business in any state or locality where it is not otherwise required to so
consent to such jurisdiction or to so qualify to do business.
(d) Expenses. Except where applicable state law prohibits such payments,
Issuer will pay all expenses (including without limitation registration fees,
qualification fees, blue sky fees and expenses (including the fees and expenses
of counsel), legal expenses, including the reasonable fees and expenses of one
counsel to the holders whose Option Shares are being registered, printing
expenses and the costs of special audits or "cold comfort" letters, expenses of
underwriters, excluding discounts and commissions but including liability
insurance if Issuer so desires or the underwriters so require, and the
reasonable fees and expenses of any necessary special experts) in connection
with each registration pursuant to Section 10(a) or 10(b) of this Agreement
(including the related offerings and sales by holders of Option Shares) and all
other qualifications, notifications or exemptions pursuant to Section 10(a) or
10(b) of this Agreement.
(e) Indemnification. (i) In connection with any registration under Section
10(a) or 10(b) of this Agreement, Issuer hereby indemnifies the Selling
Shareholders, and each underwriter thereof, including each person, if any, who
controls such holder or underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, losses, claims, damages and liabilities
caused by any untrue, or alleged untrue, statement of a material fact contained
in any registration statement or prospectus or notification or offering circular
(including any amendments or supplements thereto) or any preliminary prospectus,
or caused by any omission, or alleged omission, to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such expenses, losses, claims, damages or
liabilities of such indemnified party are caused by any untrue statement or
alleged untrue statement that was included by Issuer in any such registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) in reliance upon and in conformity with,
information furnished in writing to Issuer by such indemnified party expressly
for use therein, and Issuer and each officer, director and controlling person of
Issuer shall be indemnified by such Selling Shareholders, or by such
underwriter, as the case may be, for all such expenses, losses, claims, damages
and liabilities caused by any untrue, or alleged untrue, statement, that was
included by Issuer in any such registration statement or
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prospectus or notification or offering circular (including any amendments or
supplements thereto) in reliance upon, and in conformity with, information
furnished in writing to Issuer by such holder or such underwriter, as the case
may be, expressly for such use.
(ii) Promptly upon receipt by a party indemnified under this Section 10(e)
of notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 10(e), such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
Section 10(e). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and satisfactory to such
indemnified party. The indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel (other than reasonable costs of investigation)
shall be paid by the indemnified party unless (x) the indemnifying party either
agrees to pay the same, (y) the indemnifying party fails to assume the defense
of such action with counsel satisfactory to the indemnified party, or (z) the
indemnified party has been advised by counsel that one or more legal defenses
may be available to the indemnifying party that may be contrary to the interest
of the indemnified party, in which case the indemnifying party shall be entitled
to assume the defense of such action notwithstanding its obligation to bear fees
and expenses of such counsel. No indemnifying party shall be liable for any
settlement entered into without its consent, which consent may not be
unreasonably withheld.
(iii) If the indemnification provided for in this Section 10(e) is
unavailable to a party otherwise entitled to be indemnified in respect of any
expenses, losses, claims, damages or liabilities referred to herein, then the
indemnifying party, in lieu of indemnifying such party otherwise entitled to be
indemnified, shall contribute to the amount paid or payable by such party to be
indemnified as a result of such expenses, losses, claims, damages or liabilities
in such proportion as is appropriate to reflect the relative benefits received
by Issuer, the Selling Shareholders and the underwriters from the offering of
the securities and also the relative fault of Issuer, the Selling Shareholders
and the underwriters in connection with the statements or omissions which
resulted in such expenses, losses, claims, damages or liabilities, as well as
any other relevant equitable considerations. The amount paid or payable by a
party as a result of the expenses, losses, claims, damages and liabilities
referred to above shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or defending
any action or claim; provided, however, that in no case shall any Selling
Shareholder be responsible, in the aggregate, for any amount in excess of the
net offering proceeds attributable to its Option Shares included in the
offering. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. Any
obligation by any holder to indemnify shall be several and not joint with other
holders.
(iv) In connection with any registration pursuant to Section 10(a) or 10(b)
of this Agreement, Issuer and each Selling Shareholder (other than Grantee)
shall enter into an agreement containing the indemnification provisions of
Section 10(e) of this Agreement.
(f) Miscellaneous Reporting. Issuer shall comply with all reporting
requirements and will do all such other things as may be necessary to permit the
expeditious sale at any time of any Option Shares by the Selling Shareholders
thereof in accordance with and to the extent permitted by any rule or regulation
promulgated by the SEC from time to time, including, without limitation, Rule
144. Issuer shall at its expense provide the Selling Shareholders with any
information necessary in connection with the completion and filing of any
reports or forms required to be filed by them under the Securities Act or the
Exchange Act, or required pursuant to any state securities laws or the rules of
any stock exchange.
(g) Issue Taxes. Issuer will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will save the Selling Shareholders harmless, without
limitation as to time, against any and all liabilities, with respect to all such
taxes.
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11. Quotation; Listing. If Issuer Common Stock or any other securities to
be acquired in connection with the exercise of the Option are then authorized
for quotation or trading or listing on the NYSE, AMEX, Nasdaq or any other
securities exchange, Issuer, upon the request of Holder, will promptly file an
application, if required, to authorize for quotation or trading or listing the
shares of Issuer Common Stock or other securities to be acquired upon exercise
of the Option on the NYSE, AMEX, Nasdaq or such other securities exchange and
will use its best efforts to obtain approval, if required, of such quotation or
listing as soon as practicable.
12. Division of Option. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Holder, upon presentation and
surrender of this Agreement at the principal office of Issuer for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any other Agreements and related Options for which this Agreement (and
the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
13. Profit Limitation.
(a) Notwithstanding any other provision of this agreement, in no event
shall Grantee's Total Profit (as hereinafter defined) exceed $30 million, plus
Grantee's documented, reasonable out-of-pocket expenses (including fees and
expenses of legal, financial and accounting advisors) incurred in connection
with the transactions contemplated by the Merger Agreement, and, if it otherwise
would exceed such amount, Grantee, at its sole election, shall either (i)
deliver to Issuer for cancellation Shares previously purchased by Grantee, (ii)
pay cash or other consideration to Issuer or (iii) undertake any combination
thereof, so that Grantee's Total Profit shall not exceed $30 million, plus
Grantee's documented, reasonable out-of-pocket expenses (including fees and
expenses of legal, financial and accounting advisors) incurred in connection
with the transactions contemplated by the Merger Agreement, after taking into
account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, this Option may
not be exercised for a number of Shares as would, as of the Notice Date, result
in a Notional Total Profit (as defined below) of more than $30 million, plus
Grantee's documented, reasonable out-of-pocket expenses (including fees and
expenses of legal, financial and accounting advisors) incurred in connection
with the transactions contemplated by the Merger Agreement, and, if exercise of
the Option otherwise would exceed such amount, Grantee, at its discretion, may
increase the Purchase Price for that number of Shares set forth in the Option
Notice so that the Notional Total Profit shall not exceed $30 million, plus
Grantee's documented, reasonable out-of-pocket expenses (including fees and
expenses of legal, financial and accounting advisors) incurred in connection
with the transactions contemplated by the Merger Agreement; provided, that
nothing in this sentence shall restrict any exercise of the Option permitted
hereby on any subsequent date at the Purchase Price set forth in Section 2
hereof.
(c) As used herein, the term "Total Profit" shall mean the aggregate amount
(before taxes) of the following: (i) the amount of cash received by Grantee
pursuant to Section 6.3 of the Merger Agreement and Section 8(a)(ii) hereof,
(ii) (x) the amount received by Grantee pursuant to the repurchase of Option
Shares pursuant to Section 8 or Section 9 hereof, less Grantee's purchase price
for such Option Shares, and (iii) the net cash amounts received by Grantee
pursuant to the sale of Option Shares (or any other securities into which such
Option Shares are converted or exchanged) to any unaffiliated party, less
Grantee's purchase price for such Option Shares.
(d) As used herein, the term "Notional Total Profit" with respect to any
number of Option Shares as to which Grantee may propose to exercise this Option
shall be the Total Profit determined as of the date of the Option Notice
assuming that this Option were exercised on such date for such number of Shares
and
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assuming that such Option Shares, together with all other Option Shares held by
Grantee and its affiliates as of such date, were sold for cash at the closing
market price for the Common Stock as of the close of business on the preceding
trading day (less customary brokerage commissions).
14. Miscellaneous.
(a) Expenses. Except to the extent expressly provided for herein, each of
the parties hereto shall bear and pay all costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be waived at
any time by the party that is entitled to the benefits of such provision. This
Agreement may not be modified, amended, altered or supplemented except upon the
execution and delivery of a written agreement executed by the parties hereto.
(c) Entire Agreement; No Third-Party Beneficiaries; Severability. This
Agreement, together with the Merger Agreement and the other documents and
instruments referred to herein and therein, between Grantee and Issuer (i)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and (ii) is not intended to confer upon any person other
than the parties hereto (other than the indemnified parties under Section 10(e)
of this Agreement and any transferees of the Option Shares or any permitted
transferee of this Agreement pursuant to Section 14(h) of this Agreement) any
rights or remedies hereunder. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or Governmental
Entity to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated. If
for any reason such court or Governmental Entity determines that the Option does
not permit Holder to acquire, or does not require Issuer to repurchase, the full
number of shares of Issuer Common Stock as provided in Section 3 of this
Agreement (as may be adjusted herein), it is the express intention of Issuer to
allow Holder to acquire or to require Issuer to repurchase such lesser number of
shares as may be permissible without any amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York without regard to any
applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained herein are
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the addresses set forth in the Merger Agreement (or
at such other address for a party as shall be specified by like notice).
(g) Counterparts. This Agreement and any amendments hereto may be executed
in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.
(h) Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder or under the Option shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party, except that Holder may assign this Agreement
to a wholly-owned subsidiary of Holder and Holder may assign its rights
hereunder in whole or in part after the occurrence of a Purchase Event. Subject
to the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
(i) Further Assurances. In the event of any exercise of the Option by the
Holder, Issuer, and the Holder shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
B-13
<PAGE> 177
(j) Specific Performance. The parties hereto agree that this Agreement may
be enforced by either party through specific performance, injunctive relief and
other equitable relief. Both parties further agree to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any such
equitable relief and that this provision is without prejudice to any other
rights that the parties hereto may have for any failure to perform this
Agreement.
(k) Limitation on Resale of Issuer Common Stock. Grantee agrees that no
shares of Issuer Common Stock acquired by it upon exercise of the Option, if
any, shall be sold, transferred or otherwise disposed by it prior to the
termination of the Merger Agreement in accordance with the terms thereof, except
as follows. If the Grantee shall determine to accept a bona fide offer to
purchase the Issuer Common Stock then held by it or to sell any such Stock on
the open market, the Grantee shall give notice thereof to the Issuer specifying
(i) the Issuer Common Stock to be sold and (ii) the purchase price to be offered
therefor (or in the case of open market sales, that the sales are to be at
prices prevailing on the market) and any other significant terms of the proposed
transaction. Upon receipt of such notice, the Issuer shall, for a period of
three business days immediately following such receipt, have the right of first
refusal to purchase the Issuer Common Stock then held by Grantee that is
proposed to be sold at the purchase price set forth in such notice or, if such
shares are to be sold in open market transaction, at a purchase price equal to
the average of the closing prices therefor (and if there is no such closing
price on any of such days, then the mean of the closing bid and the closing
asked prices on that day) on the principal market on which Issuer Common Stock
is traded for the five trading days immediately prior to the Issuer's receipt of
such notice. Payment for such shares shall be made to the Grantee in immediately
available funds within three business days immediately following receipt of the
notice of the proposed sale.
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
JSB FINANCIAL, INC.
By: /s/ PARK T. ADIKES
------------------------------------
Park T. Adikes
Chairman of the Board and Chief
Executive Officer
NORTH FORK BANCORPORATION, INC.
By: /s/ JOHN ADAM KANAS
------------------------------------
John Adam Kanas
Chairman of the Board,
President and Chief Executive
Officer
B-14
<PAGE> 178
[Donaldson, Lufkin & Jenrette logo]
APPENDIX C
January 11, 2000
Board of Directors
North Fork Bancorporation, Inc.
275 Broad Hollow Road
Melville, NY 11747
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the common stockholders of North Fork Bancorporation, Inc. ("North Fork"
or the "Company") of the Exchange Ratio (defined below) pursuant to the terms of
the Amended and Restated Agreement and Plan of Merger, dated as of August 16,
1999 (the "Agreement"), by and between JSB Financial, Inc. ("JSB") and the
Company, pursuant to which JSB will be merged (the "Merger") with and into the
Company.
Pursuant to the Agreement, each share of common stock, par value $.01 per
share ("JSB Common Stock"), of JSB will be converted into the right to receive
3.00 shares (the "Exchange Ratio") of common stock, par value $2.50 per share
("Company Common Stock"), of the Company.
In arriving at our opinion, we have reviewed the Agreement. We also have
reviewed financial and other information that was publicly available or
furnished to us by the Company and JSB including information provided during
discussions with their respective managements. Included in the information
provided during discussions with the respective managements were certain
financial projections of the Company and JSB provided by management of the
Company, including certain cost savings and operating synergies anticipated by
the management of the Company to result from the Merger. In addition, we have
compared certain financial and securities data of the Company and JSB with
various other companies whose securities are traded in public markets, reviewed
the historical stock prices and trading volumes of the common stock of the
Company and JSB, reviewed prices and premiums paid in certain other business
combinations and conducted such other financial studies, analyses and
investigations as we deemed appropriate for purposes of this opinion.
In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
us from public sources, that was provided to us by the Company and JSB or their
respective representatives, or that was otherwise reviewed by us in connection
with this opinion and have assumed that the Company is not aware of any
information prepared by it or its other representatives that might be material
to our opinion that has not been made available to us. In particular, we have
relied upon the estimates of the management of the Company of the cost savings
and operating synergies achievable as a result of the Merger. With respect to
the financial projections (including cost savings and operating synergies)
reviewed by us, we have assumed that they have been reasonably prepared
reflecting the best currently available estimates and judgments of the
management of the Company as to the future operating and financial performance
of North Fork, JSB and the combined company. We are not experts in the
evaluation of loan and lease portfolios for purposes of assessing the adequacy
of the allowances for losses with respect thereto and have assumed, with your
consent, that such allowances for each of the Company and JSB are in the
aggregate adequate to cover all such losses. In addition, we have not reviewed
individual credit files nor have we made an independent evaluation or appraisal
of the assets and liabilities (including any hedge or derivative positions) of
the Company or JSB or any of their subsidiaries and we have not been furnished
with any such evaluation or appraisal. We have not assumed any responsibility
for making any independent evaluation of any assets or liabilities or for making
any independent verification of any of the information reviewed by us. We have
also assumed that the transaction will qualify as a tax-free reorganization for
United States federal income tax purposes and that all material governmental,
regulatory or other consents and approvals necessary for the consummation of the
Merger will be obtained without any material adverse effect on the anticipated
benefits of the Merger. We have relied as to certain legal matters on advice of
counsel to the Company.
C-1
<PAGE> 179
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. We are expressing no opinion herein as to the
prices at which the Company Common Stock or JSB Common Stock will actually trade
at any time. Our opinion does not address the relative merits of the Merger and
the other business strategies being considered by the Company's Board of
Directors, nor does it address the Board's decision to proceed with the Merger.
Our opinion does not constitute a recommendation to any stockholder as to how
such stockholder should vote on the proposed transaction.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. In the ordinary course of our
business, we and our affiliates actively trade the securities of the Company and
JSB for our own account and for accounts of our customers, and, accordingly, may
at any time hold a long or short position in such securities. DLJ has performed
investment banking and other services for the Company in the past and has been
compensated for such services.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the Exchange Ratio is fair from a financial point of view to
the common stockholders of the Company.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ TOD D. PERKINS
------------------------------------
Tod D. Perkins
Managing Director
C-2
<PAGE> 180
[NORTHEAST CAPITAL & ADVISORY, INC. LETTERHEAD]
APPENDIX D
January 11, 2000
The Board of Directors
JSB Financial, Inc.
303 Merrick Road
Lynbrook, NY 11563
Members of the Board:
JSB Financial, Inc. ("JSB") and North Fork Bancorporation, Inc. ("North
Fork") entered into an Amended and Restated Agreement and Plan of Merger, dated
as of August 16, 1999 (the "Agreement"), pursuant to which JSB is to be merged
with and into North Fork with North Fork being the surviving entity (the
"Merger"). Pursuant to the Merger, and as set forth more fully in the Agreement,
upon the merger of JSB and North Fork, each outstanding share of JSB common
stock, par value $0.01 per share (the "JSB Shares"), will be converted into the
right to receive 3.00 shares (the "Exchange Ratio") of the common stock, par
value $2.50 per share, of North Fork (the "North Fork Shares").
You have requested our opinion as to whether the Exchange Ratio is fair
from a financial point of view to the holders of JSB Shares. Under certain
circumstances, as more fully described in the Agreement, holders of JSB Shares
may receive a greater Exchange Ratio.
Northeast Capital & Advisory, Inc., as part of its investment banking
business, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. We are familiar with JSB, having provided certain investment
banking services to JSB from time to time, including having acted as its
financial advisor in connection with, and having participated in certain areas
of the negotiations leading to, the Agreement. In the ordinary course of our
business, and the business of certain affiliates, including our wholly owned
broker/ dealer Northeast Capital Markets Corp. and Financial Institutions Fund,
LLC, we may hold securities of both JSB and North Fork for our own account.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Joint Proxy Statement-Prospectus; the Annual Reports to
Shareholders and the Annual Reports on Form 10-K of JSB and North Fork for the
three years ended December 31, 1998; certain Quarterly Reports to Shareholders
and Quarterly Reports on Form 10-Q of North Fork and JSB; certain unaudited
interim reports and certain press releases to the respective stockholders of JSB
and North Fork; and certain financial information concerning the business and
operations of JSB and North Fork furnished to us by their respective
managements. We also have conducted discussions with members of the senior
managements of JSB and North Fork regarding the past and current business
operations, regulatory relationships, financial condition and future prospects
of their respective companies. As a part of this process, we reviewed certain
cost savings, operating synergies and the impact of certain operating strategies
which are expected to result from the Merger. In addition, we have reviewed the
reported price and trading activity of North Fork's and JSB's common stock;
compared certain financial information for JSB and North Fork with certain
financial and stock market information for certain other companies, the
securities of which are publicly traded; reviewed the financial terms of certain
recent business combinations in the commercial banking environment in
particular; and performed such other studies and analyses as we considered
appropriate.
In conducting our review and arriving at our opinion, we relied upon and
assumed the accuracy and completeness of all of the financial and other
information provided to us or publicly available for purposes of rendering this
opinion. We have generally relied upon the managements of JSB and North Fork as
to the reasonableness and achievability of the financial and operating forecasts
and projections (and the assumptions and bases therefor) provided to us, and we
have generally assumed that such forecasts and projections reflect the best
currently available estimates and judgments of such managements and that such
forecasts and projections will generally be realized in the amounts and in the
time periods currently estimated by such
D-1
<PAGE> 181
JSB Financial, Inc.
Fairness Opinion Letter -- Page 2
managements. We have also assumed that the aggregate allowance for loan losses
for JSB and North Fork combined is adequate to cover such losses. We have not
made nor obtained any evaluations or appraisals of the properties of JSB and
North Fork. We have, however, independently examined certain individual loan
credit files of North Fork and independently produced projections and operating
forecasts to assure ourselves that the assumptions generated by the managements
of JSB and North Fork in their projections and forecasts do not materially and
adversely alter the adequacy of the Exchange Ratio being received by JSB
shareholders, from a financial point of view. Finally, you have informed us that
the Merger is expected to be accounted for as a pooling of interests transaction
under generally accepted accounting principles.
In conducting our analysis and arriving at our opinion as expressed herein,
we have considered such financial and other factors as we have deemed
appropriate in the circumstances. We have also taken into account our assessment
of general economic, market and financial conditions, our experience in other
transactions, and our knowledge of the banking industry in general. In rendering
our opinion, we have assumed that in the course of obtaining the necessary
consents and regulatory approvals for the Merger, no conditions will be imposed
that will have a material adverse effect on the contemplated benefits of the
Merger to JSB. Our opinion is based upon information, conditions and projections
as they exist and can be evaluated on the date hereof.
Our advisory services and the opinion expressed herein are provided for the
information and assistance of the Board of Directors of JSB in connection with
its consideration of the transaction contemplated by the Agreement and such
opinion does not constitute a recommendation as to how any holder of JSB Shares
should vote with respect to such transaction.
Based upon and subject to the foregoing, it is our opinion that as of the
date hereof, the Exchange Ratio of the Merger as provided and described in the
Agreement is fair, from a financial point of view, to JSB's stockholders.
Very truly yours,
/s/ NORTHEAST CAPITAL & ADVISORY, INC.
--------------------------------------
NORTHEAST CAPITAL & ADVISORY, INC.
D-2
<PAGE> 182
APPENDIX E
CERTIFICATE OF AMENDMENT TO THE
RESTATED CERTIFICATE OF INCORPORATION OF
NORTH FORK BANCORPORATION, INC.
North Fork Bancorporation, Inc., a Delaware corporation (hereinafter called
the "Corporation"), does hereby certify as follows:
FIRST: Paragraph (a) of Article Fourth of the Corporation's Restated
Certificate of Incorporation is hereby amended to read in its entirety as
set forth below:
FOURTH: Capital Stock. (a) The authorized shares which the
Corporation has authority to issue shall be five hundred ten million
(510,000,000), divided into five hundred million (500,000,000) shares
of common stock, par value of one cent ($.01) each, and ten million
(10,000,000) shares of Preferred Stock, par value of one dollar
($1.00) each which Preferred Stock may be divided into and issued in
series as described herein.
SECOND: The foregoing amendment was duly adopted in accordance with
Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, North Fork Bancorporation, Inc. has caused this
Certificate to be duly executed in its corporate name this [ ] day of
[ ], 2000.
NORTH FORK BANCORPORATION, INC.
By:
------------------------------------
Name:
Title:
E-1
<PAGE> 183
REVOCABLE PROXY
JSB FINANCIAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF JSB FINANCIAL, INC. FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, FEBRUARY 10, 2000 AT 10:00 A.M.
The undersigned stockholder of JSB Financial, Inc. (the "Company") hereby
appoints each member of the official proxy committee of the Board of Directors
of the Company, consisting of Alfred F. Kelly, Richard W. Meyer and Arnold B.
Pritcher, or any of them, each of them with full power of substitution, to
attend and act as attorney and proxy for the undersigned, and to vote all shares
of common stock of the Company which the undersigned may be entitled to vote at
the Special Meeting of Stockholders to be held at the Long Island Marriott Hotel
and Conference Center, 101 James Doolittle Boulevard, Uniondale, New York 11553
on Thursday, February 10, 2000, at 10:00 a.m. New York time, and at any
adjournment or postponement thereof (the "Special Meeting").
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
- --------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
YOUR VOTE IS IMPORTANT
You can vote in one of two ways:
1. Call TOLL FREE 1-800-840-1208 from a Touch Tone telephone and follow the
instructions on the reverse side. There is NO CHARGE to you for this call.
OR
2. Complete, sign and date this proxy card on the reverse side and return it
promptly in the enclosed postage-paid envelope.
<PAGE> 184
PLEASE MARK
YOUR VOTE AS
INDICATED IN
THIS EXAMPLE [X]
PLEASE VOTE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1.
Proposal 1. Approval and adoption of the Amended and Restated Agreement and Plan
of Merger, dated as of August 16, 1999, by and between North Fork
Bancorporation, Inc. and JSB Financial, Inc., pursuant to which, among other
things, JSB Financial, Inc. will merge with and into North Fork Bancorporation,
Inc.
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
</TABLE>
I WILL ATTEND SPECIAL MEETING
[ ]
(PLEASE MARK BOX IF YOU PLAN TO
ATTEND THE SPECIAL MEETING.)
(IMPORTANT: IF YOUR SHARES ARE NOT
REGISTERED IN YOUR NAME, YOU WILL
NEED ADDITIONAL DOCUMENTATION TO
ATTEND THE SPECIAL MEETING.)
THIS PROXY, WHEN PROPERLY
EXECUTED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. IF NO
DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR PROPOSAL 1. IF
ANY OTHER MATTERS TO BE VOTED ON
ARE PRESENTED AT THE SPECIAL
MEETING, THIS PROXY WILL BE VOTED
BY THOSE NAMED IN THIS PROXY IN
THEIR BEST JUDGMENT. AS OF THE
DATE OF THE JOINT PROXY
STATEMENT-PROSPECTUS, THE BOARD OF
DIRECTORS KNOWS OF NO OTHER
MATTERS TO BE VOTED ON AT THE
SPECIAL MEETING.
The undersigned hereby
acknowledges receipt of the Notice
of Special Meeting of Stockholders
and the Joint Proxy
Statement-Prospectus, dated
January 11, 2000, for the Special
Meeting to be held on February 10,
2000.
PLEASE COMPLETE, SIGN, DATE AND
MAIL THIS PROXY CARD PROMPTLY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE
OR CAST YOUR VOTE BY TELEPHONE AS
INSTRUCTED BELOW.
SIGNATURE(S): ---------------------------------- DATED: -----------------------
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THIS PROXY CARD. IF SHARES ARE HELD
JOINTLY, EACH HOLDER MAY SIGN, BUT ONLY ONE SIGNATURE IS REQUIRED. IF SIGNING AS
ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE INCLUDE YOUR FULL
TITLE. CORPORATE PROXIES SHOULD BE SIGNED BY AN AUTHORIZED OFFICER.
- --------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
<PAGE> 185
PLEASE MARK
YOUR VOTE AS
INDICATED IN
THIS EXAMPLE [X]
PLEASE VOTE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1.
Proposal 1. Approval and adoption of the Amended and Restated Agreement and Plan
of Merger, dated as of August 16, 1999, by and between North Fork
Bancorporation, Inc. and JSB Financial, Inc., pursuant to which, among other
things, JSB Financial, Inc. will merge with and into North Fork Bancorporation,
Inc.
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
</TABLE>
I WILL ATTEND SPECIAL MEETING
[ ]
(PLEASE MARK BOX IF YOU PLAN TO
ATTEND THE SPECIAL MEETING.)
(IMPORTANT: IF YOUR SHARES ARE NOT
REGISTERED IN YOUR NAME, YOU WILL
NEED ADDITIONAL DOCUMENTATION TO
ATTEND THE SPECIAL MEETING.)
THIS PROXY, WHEN PROPERLY
EXECUTED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. IF NO
DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR PROPOSAL 1. IF
ANY OTHER MATTERS TO BE VOTED ON
ARE PRESENTED AT THE SPECIAL
MEETING, THIS PROXY WILL BE VOTED
BY THOSE NAMED IN THIS PROXY IN
THEIR BEST JUDGMENT. AS OF THE
DATE OF THE JOINT PROXY
STATEMENT-PROSPECTUS, THE BOARD OF
DIRECTORS KNOWS OF NO OTHER
MATTERS TO BE VOTED ON AT THE
SPECIAL MEETING.
The undersigned hereby
acknowledges receipt of the Notice
of Special Meeting of Stockholders
and the Joint Proxy
Statement-Prospectus, dated
January 11, 2000, for the Special
Meeting to be held on February 10,
2000.
PLEASE COMPLETE, SIGN, DATE AND
MAIL THIS PROXY CARD PROMPTLY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE
OR CAST YOUR VOTE BY TELEPHONE AS
INSTRUCTED BELOW.
SIGNATURE(S): ---------------------------------- DATED: -----------------------
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THIS PROXY CARD. IF SHARES ARE HELD
JOINTLY, EACH HOLDER MAY SIGN, BUT ONLY ONE SIGNATURE IS REQUIRED. IF SIGNING AS
ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE INCLUDE YOUR FULL
TITLE. CORPORATE PROXIES SHOULD BE SIGNED BY AN AUTHORIZED OFFICER.
- --------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
IF YOU WISH TO VOTE BY TELEPHONE, PLEASE READ THE INSTRUCTIONS BELOW
[Telephone Icon] VOTE BY TELEPHONE [Telephone Icon]
QUICK [3 Star Icons] ( ( EASY [3 Star Icons] ( ( TOLL FREE [3 Star
Icons] ( ( IMMEDIATE
Call toll free 1-800-840-1208 anytime from a Touch Tone telephone and follow the
instructions below.
Your telephone vote authorizes the named proxies to vote your shares in the same
manner as if you completed, signed and returned your proxy card.
You will be asked to enter a Control Number which is located in the box in the
lower right hand corner of this form.
Proposal 1 -- To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
PLEASE DO NOT RETURN THE ABOVE PROXY CARD IF YOU VOTE BY PHONE
Call TOLL FREE ANYTIME From a Touch Tone telephone
1-800-840-1208
There is NO CHARGE to you for this call.
<PAGE> 186
TO: Participants in the Jamaica Savings Bank FSB Employee
Stock Ownership Plan (the "ESOP")
FROM: John J. Conroy, for the ESOP Plan Administrator
RE: Vote Authorization Form
DATE: January 13, 2000
- --------------------------------------------------------------------------------
Jamaica Savings Bank FSB (the "Bank") instituted an Employee Stock Ownership
Plan in connection with its conversion from the mutual to the stock form of
organization and the formation of its holding company, JSB Financial, Inc. (the
"Company").
As you know, shares of Company stock have been allocated to your ESOP account on
an annual basis. You have the right to vote these shares in your account
concerning the matters that come before the Special Meeting of Stockholders on
February 10, 2000.
Attached you will find a Vote Authorization Form and a Proxy
Statement/Prospectus in connection with the Special Meeting of Stockholders. The
management of the Bank requests that you read this material and complete and
sign the Vote Authorization Form. We urge you to forward your response to the
Trustee of the ESOP who will be voting the shares held by the ESOP. All replies
should be mailed directly to the Trustee, HSBC Bank USA, Trust & Investment
Management Group, 140 Broadway, 11th Floor, New York, N.Y. 10269-0080 by January
21, 2000 using the postage paid envelope provided. Your Vote Authorization Form
will be held confidential.
<PAGE> 187
JAMAICA SAVINGS BANK FSB
EMPLOYEE STOCK OWNERSHIP PLAN
VOTE AUTHORIZATION FORM
I, the undersigned, acknowledged that HSBC Bank USA is the Trustee and the
holder of record and custodian of the shares of JSB Financial, Inc. (the
"Company") common stock under the Jamaica Savings Bank FSB Employee Stock
Ownership Plan and Trust (the "ESOP"). I understand that the above number of
shares of Company stock have been allocated to me as of 12/27/99. Further, I
understand that my voting instructions are solicited on behalf of the Company's
Board of Directors for the Special Meeting of Stockholders on February 10, 2000.
Accordingly, I direct the Trustee to vote my shares as follows:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL
1. Approval and adoption of the Amended and Restated Agreement and
Plan of Merger, dated as of August 16, 1999, by and between North
Fork Bancorporation and JSB Financial, Inc., pursuant to which,
among other things, JSB Financial, Inc. will merge with and into
North Fork Bancorporation, Inc.
FOR AGAINST ABSTAIN
| | | | | |
In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the Special Meeting and
any adjournment or postponement thereof. As of the date of the Joint
Proxy Statement/Prospectus for the Special Meeting, management of the
Company is not aware of any such other business.
The ESOP Trustee is hereby authorized to vote my shares as indicated above. I
understand that if I sign this form without indicating specific instructions, my
shares will be voted as unallocated shares. I understand that my voting
instructions will be confidential.
-------------------------------------------
Signature
- ----------------------------- -------------------------------------------
Date Print your name
Please date, sign and submit this form to HSBC Bank USA in the enclosed postage
paid envelope by January 21, 2000.
<PAGE> 188
TO: Participants in Fund D (the "JSB Stock Fund") of the Jamaica Savings
Bank Incentive Savings Plan
FROM: John J. Conroy, Administrator of the Plan
RE: Vote Authorization Form
DATE: January 13, 2000
- --------------------------------------------------------------------------------
As you know, Jamaica Savings Bank FSB (the "Bank") amended the Incentive Savings
Plan (the "Plan") to provide for a means by which participants in the Plan could
invest funds in the common stock of JSB Financial, Inc., the parent holding
company of the Bank. As a participant in the JSB Stock Fund you have the right
to vote your proportionate interest.
As the Administrator of the Plan, it is my responsibility to provide you with a
Vote Authorization Form for use in directing Bankers Trust Co., the Trustee, in
voting your proportionate interest in the JSB Stock Fund in regard to the
Special Meeting of Stockholders which will be held on February 10, 2000.
The management of Jamaica Savings Bank FSB requests that you read the attached
Proxy Statement/Prospectus with regard to this meeting and sign the enclosed
Vote Authorization Form. This form should be sent to the Trustee, Bankers Trust
Company, Post Office Box 2626, Jersey City, N.J. 07303-2626, Attention: Gina
Gehan, 4th Floor, M.S. 3048 JSB in the attached postage paid envelope by January
21, 2000. Your Vote Authorization Form will be kept confidential.
<PAGE> 189
JAMAICA SAVINGS BANK FSB
INCENTIVE SAVINGS PLAN
VOTE AUTHORIZATION FORM
I understand that my proportionate interest in the JSB Stock Fund ("Fund D") of
the Jamaica Savings Bank FSB Incentive Savings Plan (the "Plan") is as stated
above. I further understand that I have the right to direct Bankers Trust
Company, the Trustee of the Plan, to vote my proportionate interest in Fund D.
I have been advised that my voting instructions are solicited on behalf of the
Board of Directors of JSB Financial, Inc. (the "Company") for the Special
Meeting of Stockholders on February 10, 2000.
Accordingly, I direct the Trustee, to vote my proportionate interest in Fund D
as follows:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
1. Approval and adoption of the Amended and Restated Agreement and
Plan of Merger, dated as of August 16, 1999, by and between North
Fork Bancorporation, Inc. and JSB Financial, Inc., pursuant to
which, among other things, JSB Financial, Inc. will merge with
and into North Fork Bancorporation, Inc.
FOR AGAINST ABSTAIN
| | | | | |
In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the Special Meeting and
any adjournment or postponement thereof. As of the date of the Joint
Proxy Statement/Prospectus for the Special Meeting, management of
the Company is not aware of any such other business.
Bankers Trust Company, the Trustee of the Jamaica Savings Bank FSB Incentive
Savings Plan and Trust, is hereby authorized to vote my proportionate interest
in Fund D as indicated above. I understand that my voting instructions will be
confidential.
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Signature
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Date Print your name
Please date, sign and submit this form to Bankers Trust Co. in the enclosed
postage paid envelope by January 21, 2000.
