SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
-------------------------------------------
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[ ] No fee required
[X] 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. (set forth the amount on which the filing
fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] 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:
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FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
ONE CENTER AVENUE
LITTLE FALLS, NEW JERSEY 07424
(973) 256-2100
November ____, 1998
Dear Fellow Stockholder:
On behalf of the Board of Directors, I want to extend to you a cordial
invitation to attend a Special Meeting of Stockholders ("Meeting") of First
Savings Bancorp of Little Falls, Inc. (the "Company"). The Meeting will be held
at the main office of the Company, located at One Center Avenue, Little Falls,
New Jersey on __________, December ____, 1998 at _____ ___.m., local time.
The purpose of the Meeting is to vote on a proposal to approve the
Agreement and Plan of Merger, dated September 4, 1998 (the "Merger Agreement"),
by and among Greater Community Bancorp ("Greater Community"), GCB Acquisition
Corp. ("Newco"), and the Company, pursuant to which the Company would merge with
Newco (the "Corporate Merger") with the Company surviving, and First Savings
Bank of Little Falls, F.S.B. (the "Savings Bank") would merge with Great Falls
Bank (the "Bank Merger" and together with the Corporate Merger, the "Mergers").
Newco is a newly-formed subsidiary of Greater Community.
Upon consummation of the Corporate Merger, each outstanding share of
the Company's common stock would be converted into the right, subject to
adjustment, to receive a cash payment of $52.26 from Greater Community. Each
share of the Company's common stock held as treasury stock by the Company will
be canceled and retired. Consummation of the Mergers is subject to certain
conditions, including approval of the Merger Agreement by the Company's
stockholders and approval of the Mergers by various regulatory agencies.
Approval of the Merger Agreement requires the affirmative vote by the holders of
a majority of the outstanding common stock of the Company.
The accompanying Notice of Special Meeting and Proxy Statement contain
information about the Mergers. We urge you to review carefully such information,
and the information in the Company's 1997 Annual Report to Stockholders, and
Quarterly Report on Form 10-QSB for the period ended September 30, 1998, copies
of which are attached to the Proxy Statement.
The Board of Directors of the Company has unanimously approved the
Merger Agreement and unanimously recommends that the stockholders of the Company
approve the Merger Agreement. A failure to vote, either by not returning the
enclosed proxy or by checking the "Abstain" box thereon, will have the same
effect as a vote against approval of the Merger Agreement. Even if you plan to
attend the Meeting in person, please complete the enclosed proxy, sign, date and
mail it promptly in the enclosed postage-paid, return addressed envelope. You
may revoke your proxy by attending the Meeting and voting in person.
Sincerely,
Dr. Haralambos S. Kostakopoulos
President and Chief Executive Officer
Please do not send your common stock certificates at this time. If the
Corporate Merger is consummated, you will be sent instructions regarding the
surrender of your stock certificates.
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
ONE CENTER AVENUE
LITTLE FALLS, NEW JERSEY 07424
(973) 256-2100
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER ____, 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of First
Savings Bancorp of Little Falls, Inc. (the "Company") will be held at _____
___.m., Eastern time, on __________, December ____, 1998, or any adjournment or
adjournments thereof, at the main office of the Company, located at One Center
Avenue, Little Falls, New Jersey on __________, December ____, 1998, at _____
___.m., for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement and Plan
of Merger, dated as of September 4, 1998 (the "Merger Agreement"), by
and among Greater Community Bancorp ("Greater Community"), GCB
Acquisition Corp. ("Newco"), and the Company, pursuant to which (i)
the Company would merge with Newco (the "Corporate Merger") with the
Company surviving, and First Savings Bank of Little Falls, F.S.B. (the
"Savings Bank") would merge with Great Falls Bank with Great Falls
Bank surviving (the "Bank Merger" and together with the Corporate
Merger, the "Mergers"), and (ii) each outstanding share of the Company
common stock would be converted into the right, subject to adjustment,
to receive a cash payment of $52.26 from Greater Community upon
completion of the Corporate Merger, subject to the terms and
conditions contained in the Merger Agreement; and
2. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
A copy of the Merger Agreement is set forth in ANNEX A to the
accompanying Proxy Statement. Stockholders are urged to read the Merger
Agreement in its entirety.
The Board of Directors of the Company has fixed _________ ____, 1998,
as the record date for the determination of stockholders entitled to notice of
and to vote at the Meeting, and accordingly, only holders of record of the
Company common stock at the close of business on that date will be entitled to
notice of and to vote at the Meeting or any adjournment or adjournments thereof.
Approval of the Merger Agreement requires the affirmative vote of a majority of
the holders of the outstanding common stock of the Company.
The Board of Directors of the Company unanimously recommends that
stockholders vote "For" approval of the Merger Agreement.
By Order of the Board of Directors of
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
Sarina Matos
Secretary
Stockholders are urged to complete, date, sign and return promptly the enclosed
proxy in the accompanying envelope, which requires no postage if mailed in the
United States. Your cooperation is appreciated. Your proxy will be voted with
respect to the matters identified thereon in accordance with any specifications
on the proxy. A failure to vote, either by not returning the enclosed proxy or
by checking the "Abstain" box thereon, will have the same effect as a vote
against approval of the Merger Agreement.
<PAGE>
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC.
ONE CENTER AVENUE
LITTLE FALLS, NEW JERSEY 07424
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON December ____, 1998
This Proxy Statement is being furnished by First Savings Bancorp of
Little Falls, Inc., a New Jersey corporation (the "Company"), to the holders of
the Company common stock, par value $__________ per share (the "Company Common
Stock"), in connection with the solicitation of proxies by the Company's Board
of Directors for use at a Special Meeting of Stockholders of the Company to be
held at _____ ___.m., Eastern time, on _________, December ____, 1998, at the
main office of the Company, located at One Center Avenue, Little Falls, New
Jersey (the "Meeting"), and at any adjournment or adjournments thereof.
This Proxy Statement, the accompanying Notice of Special Meeting and
form of proxy are first being mailed to the stockholders of record of the
Company on or about November ____, 1998.
The primary purpose of the Meeting is to consider and vote upon a
proposal to approve the Agreement and Plan of Merger, dated as of September 4,
1998 (the "Merger Agreement"), by and among Greater Community Bancorp ("Greater
Community"), GCB Acquisition Corp. ("Newco"), and the Company, pursuant to which
(i) the Company would merge with Newco (the "Corporate Merger") with the Company
surviving, and First Savings Bank of Little Falls, F.S.B. (the "Savings Bank")
would merge with Great Falls Bank with Great Falls Bank surviving (the "Bank
Merger" and together with the Corporate Merger, the "Mergers"), and (ii) each
outstanding share of the Company common stock would be converted into the right,
subject to adjustment, to receive a cash payment of $52.26 from Greater
Community upon completion of the Corporate Merger, subject to the terms and
conditions contained in the Merger Agreement. See "SUMMARY," "THE MERGERS", "THE
MERGER AGREEMENT" and a copy of the Merger Agreement attached as ANNEX A to this
Proxy Statement.
Upon consummation of the Corporate Merger each outstanding share of the
Company Common Stock would be converted into the right to receive a cash payment
of $52.26 from Greater Community, subject to adjustment as specified in the
Merger Agreement.
The Company Common Stock is not listed on any stock exchange or on the
National Association of Securities Dealers Automated Quotations System. The
market for the Company Common Stock is not liquid, with few purchases and sales
of stock. The last known sale of the Company Common Stock involved 500 shares at
$14.00 a share on May 6, 1994.
THE DATE OF THIS PROXY STATEMENT IS NOVEMBER ____, 1998
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Securities and
Exchange Commission (File No. 0-23194) under Section 13(a) or 15(d) of the
Exchange Act are hereby incorporated by reference in this Proxy Statement:
(i) the Company's Annual Report on Form 10-KSB for the year ended December
31, 1997;
(ii) the Company's Quarterly Reports on Form 10-QSB for the quarters ended
March 31, 1998, June 30, 1998, and September 30, 1998; and
(iii) the Company's Current Report on Form 8-K, dated September 8, 1998.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Proxy
Statement to the extent that a statement contained herein modifies or supersedes
that earlier statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this Proxy
Statement.
(ii)
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TABLE OF CONTENTS
<TABLE>
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PAGE
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...................................
SUMMARY...........................................................................
SELECTED CONSOLIDATED FINANCIAL DATA..............................................
PRICE RANGE OF COMPANY COMMON STOCK; DIVIDENDS....................................
THE MEETING.......................................................................
General........................................................................
Record Date: Vote Required.....................................................
PROPOSAL I - THE MERGER...........................................................
General........................................................................
Background and Reasons.........................................................
Opinion of Financial Advisor...................................................
Certain Federal Income Tax Consequences........................................
THE MERGER AGREEMENT..............................................................
The Mergers....................................................................
Effective Date.................................................................
Exchange of the Company Common Stock Certificates..............................
Interests of Certain Persons...................................................
Employee Benefits..............................................................
Appraisal Rights...............................................................
Business Pending Consummation..................................................
Regulatory Approvals...........................................................
Conditions to Consummation; Termination........................................
Waiver; Amendment..............................................................
Expenses; Termination Fees.....................................................
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING.....................................
LEGAL OPINIONS....................................................................
ACCOUNTANTS.......................................................................
OTHER MATTERS.....................................................................
ANNEXES
Annex A - Agreement and Plan of Merger ........................................ A-1
Annex B - Opinion and Letter of Ryan, Beck & Co., Inc.......................... B-1
EXHIBITS
Exhibit 1 - 1997 Annual Report to Stockholders
Exhibit 2 - Quarterly Report on Form 10-QSB for the quarter ended September 30, 1998
</TABLE>
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY PROVIDES CERTAIN INFORMATION RELATING TO THE
MERGERS. THIS SUMMARY IS NOT INTENDED TO BE A SUMMARY OF ALL MATERIAL
INFORMATION RELATING TO THE MERGERS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO MORE DETAILED INFORMATION CONTAINED ELSEWHERE IN THIS PROXY
STATEMENT, INCLUDING THE ANNEXES HERETO, AND IN THE DOCUMENTS INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT. A COPY OF THE MERGER AGREEMENT IS ATTACHED AS
ANNEX A TO THIS PROXY STATEMENT. STOCKHOLDERS ARE URGED TO READ CAREFULLY THE
ENTIRE PROXY STATEMENT, INCLUDING THE ANNEXES. AS USED IN THIS PROXY STATEMENT,
THE TERMS "GREATER COMMUNITY," "NEWCO," "GREAT FALLS BANK," "THE COMPANY" AND
"THE SAVINGS BANK" REFER TO SUCH ORGANIZATIONS, AND, UNLESS THE CONTEXT
OTHERWISE REQUIRES, SUCH ORGANIZATIONS AND THEIR RESPECTIVE SUBSIDIARIES.
Greater Community Bancorp ("Greater Community")
Greater Community is a New Jersey business corporation. It is
registered as a bank holding company with the Board of Govenors of the Federal
Reserve System under the Federal Bank Holding Company Act of 1956, as amended.
Greater Community was incorporated in 1984. Greater Community's only substantive
business activity is the ownership and operation of Great Falls Bank and Bergen
Commercial Bank, which Greater Community acquired in 1985 and 1995,
respectively. The principal executive office of Greater Community is located at
55 Union Boulevard, Totowa, New Jersey 07511 and the telephone number at that
address is (973) 942-1111.
At September 30, 1998, Greater Community had consolidated assets of
$__________, deposits of $__________, and shareholders' equity of $__________.
GCB Acquisition Corp. ("Newco")
Newco is a wholly-owned subsidiary of Greater Community. Newco is a New
Jersey-chartered corporation formed in ___________ 1998 to acquire the shares of
the Company. Newco owns no assets. The principal executive office of Newco is
located at 55 Union Boulevard, Totowa, New Jersey 07511 and the telephone number
at that address is (973) 942-1111.
The Company and the Savings Bank
The Company is a New Jersey corporation organized in March 1993 and
became a unitary savings and loan holding company upon the completion of the
reorganization of the Savings Bank into the holding company form of ownership.
At that time the Company acquired all of the outstanding common stock of the
Savings Bank. The Savings Bank's common stock was originally issued in
connection with the Savings Bank's conversion from mutual to stock form in
September 1992. The Company's principal asset is the stock of the Savings Bank
which is a community-oriented institution offering a variety of financial
services in Little Falls, New Jersey. As of September 30, 1998, the Company
reported assets of $____ million, net loans of $____ million, deposits of $____
million, and stockholders' equity of $____ million, and as of such date the
Company operated through three offices two of which are located in Passaic
County and one of which is located in Bergen County. For the fiscal year ended
December 31, 1997, and for the nine months ended September 30, 1998, the Company
reported net income of $_______ and $_______, respectively. The principal
executive offices of the
<PAGE>
Company and the Savings Bank are located at One Center Avenue, Little Falls, New
Jersey 07424, and their telephone number is (973) 256-2100.
The Meeting; Record Date
The Meeting will be held on December ____, 1998, at _____ ___.m.,
Eastern time, at the main office of the Company, located at One Center Avenue,
Little Falls, New Jersey, for the purpose of considering and voting upon a
proposal to approve the Merger Agreement.
The Board of Directors of the Company has fixed ___________ ___, 1998,
as the record date for determining stockholders entitled to notice of and to
vote at the Meeting (the "Record Date"). As of such date, there were 440,100
shares of the Company Common Stock outstanding and entitled to be voted at the
Meeting.
The Mergers
Under the terms of the Merger Agreement, the Company would merge with
Newco, with the Company surviving, and the Savings Bank would merge with Great
Falls Bank. Upon consummation of the Corporate Merger, each outstanding share of
the Company Common Stock would be converted into the right to receive a cash
payment of $52.26 (the "Cash Consideration") from Greater Community, subject to
adjustment. The merger of the Savings Bank with and into Great Falls Bank, with
Great Falls Bank surviving, is expected to occur immediately after the Corporate
Merger.
Vote Required
Approval of the Merger Agreement requires the affirmative vote of a
majority of the holders of the outstanding common stock of the Company. Each
owner of Company Common Stock on the Record Date will be entitled to one vote
for each share held of record upon each matter properly submitted at the Meeting
or any adjournment or adjournments thereof.
The directors and executive officers of the Company (including certain
of their related interests) beneficially owned, as of the Record Date, and are
entitled to vote at the Meeting, _______ shares of the Company Common Stock,
which represents 90.0% of the outstanding shares of the Company Common Stock
entitled to be voted at the Meeting. Accordingly, assuming that the directors
and executive officers of the Company vote their shares of the Company Common
Stock in favor of approval of the Merger Agreement, approval of the Merger
Agreement will not require the affirmative vote of the holders of any additional
outstanding shares of the Company Common Stock entitled to be voted at the
Meeting in order for the Merger Agreement to be approved at the Meeting.
A FAILURE TO VOTE, EITHER BY NOT RETURNING THE ENCLOSED PROXY OR BY
CHECKING THE "ABSTAIN" BOX THEREON, WILL HAVE THE SAME EFFECT AS A VOTE AGAINST
APPROVAL OF THE MERGER AGREEMENT.
Effective Date
Subject to the conditions to the obligations of the parties to effect
the Mergers, the Corporate Merger will become effective (the "Effective Date")
upon performance of all covenants and obligations of the parties and upon
fulfillment or waiver of all conditions to the obligations of the parties.
Subject
2
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to the foregoing, it is currently anticipated that the Mergers will be
consummated during the first calendar quarter of 1999. The closing will be held
following the satisfaction or waiver of the conditions to the Merger and in no
event later than the last to occur of January 1, 1999 or the 45th day following
receipt of all required regulatory approvals.
Recommendation of the Company's Board of Directors
The Board of Directors of the Company has approved the Merger Agreement
by unanimous vote, believes it is in the best interests of the Company and its
stockholders and unanimously recommends its approval by the Company's
stockholders.
Opinion of Financial Advisor
Ryan, Beck & Co., Inc. ("Ryan Beck") rendered its oral opinion to the
Company's Board of Directors on September 4, 1998, and subsequently rendered an
additional formal written updated opinion dated December ____, 1998 (the
"Opinion") that, as of the respective dates of such opinions and subject to the
assumptions set forth therein, the Cash Consideration is fair to the holders of
the Company's Common Stock from a financial point of view. For information
concerning the matters reviewed, assumptions made and factors considered by Ryan
Beck see "PROPOSAL I - THE MERGER - Opinion of Financial Advisor" and ANNEX B to
this Proxy Statement, which sets forth a copy of Ryan Beck's written fairness
opinion dated December ____, 1998. Holders of the Company's Common Stock are
urged to, and should, read the Opinion in its entirety.
Certain Federal Income Tax Consequences
Stockholders are urged to consult their own tax advisors as to the
specific consequences to them of the Corporate Merger under applicable tax laws.
The receipt of cash by a stockholder of the Company in exchange for
shares of the Company Common Stock pursuant to the Merger Agreement will be a
taxable transaction to such stockholder for federal income tax purposes. In
general, a stockholder will recognize gain or loss upon the surrender of the
stockholder's Company Common Stock equal to the difference, if any, between (i)
the sum of the cash payment of $52.26 per share received in exchange for the
shares of the Company Common Stock and (ii) the stockholder's tax basis in such
Company Common Stock.
Interests of Certain Persons
Certain directors or executive officers of the Company have interests
in the Mergers in addition to their interests as stockholders of the Company
generally. These interests include, among others, provisions in the Merger
Agreement relating to indemnification and maintenance of director and officer
liability insurance coverage. These interests also relate to certain benefits
available as a result of a "change in control" of the Company, such as the
Corporate Merger, including, among others, the payment of certain severance
benefits under an existing employment agreement to President Kostakopoulos. The
estimated aggregate amount of payments to executive officers expected to be made
in connection with the Corporate Merger due to acceleration of benefits from an
employment agreement is $712,136.
3
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No Appraisal Rights
No stockholders of the Company are entitled to appraisal rights in
connection with, or as a result of, the Merger. See "Proposal I - The Merger --
No Appraisal Rights."
Business Pending Consummation
The Company has agreed in the Merger Agreement to carry on its business
in substantially the same manner its business was conducted prior to the date of
the Merger Agreement, and has agreed not to take certain actions relating to the
operation of the Company pending consummation of the Mergers, without the prior
written consent of Greater Community, except as otherwise permitted by the
Merger Agreement.
Regulatory Approvals
The Mergers are subject to the prior approval of the Board of Governors
of the Federal Reserve System (the "Federal Reserve Board"), the Federal Deposit
Insurance Corporation (the "FDIC"), the Commissioner of the Department of
Banking and Insurance of New Jersey (the "New Jersey Commissioner"), the Office
of Thrift Supervision (the "OTS") and other regulatory authorities, if any.
Applications or waiver requests have been either filed with each of such
regulatory authorities for such approvals or will be filed in the near future.
There can be no assurance that the necessary regulatory approvals will be
obtained or as to the timing or conditions of such approvals. See "THE MERGER
AGREEMENT -- Regulatory Approvals."
Conditions to Consummation; Termination
Consummation of the Mergers is subject, among other things, to: (i)
approval of the transactions contemplated by the Merger Agreement by the
requisite vote of the stockholders of the Company; (ii) receipt of the
regulatory approvals referred to under "THE MERGER AGREEMENT -- Regulatory
Approvals" without any condition or requirement which would so materially
adversely impact the economic or business benefits to Greater Community of the
transactions contemplated by the Merger Agreement so as to render inadvisable
the consummation of the Mergers; and (iii) there being in effect no order,
decree or injunction of any court or agency of competent jurisdiction that
enjoins or prohibits the Mergers.
The Merger Agreement may be terminated by mutual agreement of the
Boards of Directors of Newco and the Company. The Merger Agreement may also be
terminated by the Board of Directors of the Company if the Corporate Merger does
not occur on or before July 29, 1999, or if certain conditions set forth in the
Merger Agreement are not met.
Expenses; Termination Fees
All expenses incurred by or on behalf of the parties in connection with
the Merger Agreement and the transactions contemplated thereby shall be borne by
the party incurring the same.
The Company will be entitled to receive $500,000 if the Merger
Agreement is terminated because of Greater Community's breach of a covenant or
agreement under the Merger Agreement. Generally, Greater Community will be
entitled to receive $500,000 if the Merger Agreement is terminated because
4
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(i) the Company receives a superior offer from another potential acquiror, (ii)
the Company fails to obtain stockholder approval by January 2, 1999, or (iii)
the Company breaches a covenant or agreement under the Merger Agreement.
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial and other data for the
last five fiscal years are derived in part from the audited consolidated
financial statements of the Company. The consolidated financial and other data
for the nine-month periods ended September 30, 1998 and 1997, are derived from
unaudited consolidated financial statements. The unaudited consolidated
financial statements include all adjustments, consisting of normal recurring
accruals, which the Company considers necessary for a fair presentation of the
financial position and the results of operations of these periods. Operating
results for the nine months ended September 30, 1997 and 1998, are not
necessarily indicative of the results that may be expected for the entire fiscal
year ending December 31, 1998. The data for the nine months ended September 30,
1997 and 1998, are annualized where applicable. The data should be read in
conjunction with the audited consolidated financial statements, related notes
and other financial information incorporated by reference herein.
UNAUDITED SELECTED FINANCIAL DATA
(dollars in thousands, except per share data)
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<CAPTION>
At or For
Nine Months Ended
September 30, At or for the year ended December 31,
------------------- -----------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
TOTAL AMOUNTS OF:
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Total Assets $ $ $178,144 $166,734 $154,635 $133,730 $130,574
Loans Receivable 105,467 94,733 85,836 74,277 76,918
Securities Available for Sale 31,226 37,507 35,964 --- 15,893
Mortgage-Backed Securities 10,415 12,805 2,545 18,289 4,035
Held to Maturity
Investment Securities, 19,644 2,000 19,000 28,120 10,443
Held to Maturity
Cash & Cash Equivalents 3,683 10,673 1,128 3,559 12,345
Deposits 166,759 156,596 131,636 123,656 115,494
Borrowed Money 551 -- 12,600 --- 5,000
Stockholders Equity 9,864 9,332 9,597 9,177 9,041
Net Interest Income 4,603 4,270 4,116 3,922 3,980
Net Income (Loss) 794 (120) 363 499 2,500
Diluted Earnings Per $1.80 ($0.27) $0.82 $1.13 $5.68
Common Shares
Common Stock Dividends $1.00 -- $0.50 $0.50 ---
Declared Per Share
Return on Average Assets 0.46% -0.08% 0.26% 0.38% 1.90%
Return on Average Equity 8.19% -1.24% 3.86% 5.43% 32.22%
Dividend Payout Ratio (1) 55.42% -- 25.95% 15.20% 0.00%
Average Equity to Average 5.60% 6.13% 6.65% 6.94% 5.88%
Assets Ratio
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(1) Common stock dividends declared as a percentage of net income applicable to
common shares.
5
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MARKET PRICE OF STOCK AND RELATED SECURITY HOLDER MATTERS
The Company's Common Stock is not listed on any stock exchange or on
the National Association of Securities Dealers Automated Quotations System
("NASDAQ"). Approximately 90% of the Common Stock is held by current officers
and directors of the Company including an investor group consisting of
Haralambos S. Kostakopoulos - President of the Savings Bank, Emanuel M.
Kontokosta Chairman of the Board, and Vice Chairman Nikos P. Mouyiaris and
Frederick J. Tedeschi. There is no active trading market for the Common Stock,
with few purchases and sales of stock. The last known sale of the Common Stock
involved 500 shares at $14.00 a share on May 6, 1994.
The ability of the Company to pay dividends on its Common Stock is
dependent upon the ability of the Savings Bank to pay dividends, since the
Company's main asset is the stock of the Savings Bank. The ability of the
Savings Bank to pay dividends is restricted by the regulations of the OTS and
tax considerations. The Savings Bank may not pay dividends that would reduce the
regulatory capital of the Savings Bank below the level required for institutions
insured by SAIF or the liquidation account created in connection with the mutual
to stock conversion of the Savings Bank. During 1997, a dividend of $1.00 per
share was declared to the owners of Common Stock, and during 1998, a $0.50
dividend was declared in March, June, and September.
There are ____ holders of the Common Stock of the Company as of
November ___, 1998.
THE MEETING
General
This Proxy Statement is being furnished by the Company to its
stockholders in connection with the solicitation of proxies by the Board of
Directors of the Company for use at the Meeting to be held on December ____,
1998, and any adjournment or adjournments thereof, to consider and vote upon a
proposal to approve the Merger Agreement and any other business as may properly
come before the Meeting.
After having been submitted, the enclosed proxy may be revoked by the
person giving it, at any time before it is exercised, by: (i) submitting written
notice of revocation of such proxy to the Secretary of the Company; (ii)
submitting a proxy having a later date; or (iii) such person appearing at the
Meeting and revoking the proxy. All shares represented by valid proxies will be
exercised in the manner specified thereon. If no specification is made, such
shares will be voted in favor of approval of the Merger Agreement.
Directors, officers, and employees of the Company may solicit Proxies
from Company stockholders, either personally or by telephone, telegraph or other
form of communication. Such persons will receive no additional compensation for
such services. The Company has retained no third party to assist in soliciting
proxies or to send proxy materials to brokerage houses and other custodians,
nominees and fiduciaries for transmittal to their principals. All expenses
associated with the solicitation of proxies will be paid by the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE
MERGER AGREEMENT, BELIEVES IT IS IN THE BEST INTERESTS OF THE COMPANY
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AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS ITS APPROVAL BY THE
COMPANY'S STOCKHOLDERS.
Record Date; Vote Required
The Board of Directors of the Company has fixed November ___, 1998, as
the Record Date for determining stockholders entitled to notice of and to vote
at the Meeting, and accordingly, only holders of the Company Common Stock of
record at the close of business on that day will be entitled to notice of and to
vote at the Meeting. The number of shares of the Company Common Stock
outstanding on the Record Date was 440,100, each of such shares being entitled
to one vote.
As to the approval of the Merger Agreement by checking the appropriate
box, a stockholder may: (i) vote "FOR" approval of the Merger Agreement (ii)
vote "AGAINST" the Merger Agreement, or (iii) "ABSTAIN." The Merger Agreement
must be approved by a vote of a majority of the shares of the Common Stock
entitled to vote, without regard to (a) Broker Non-votes, or (b) proxies marked
"ABSTAIN" as to that matter.
The directors and executive officers of the Company (including certain
of their related interests) beneficially owned, as of the Record Date, and are
entitled to vote at the Meeting ________ shares of the Company Common Stock,
which represents 90% of the outstanding shares of Company Common Stock entitled
to be voted at the Meeting. Accordingly, assuming that the directors and
executive officers of the Company vote their shares of the Company Common Stock
in favor of approval of the Merger Agreement, approval of the Merger Agreement
will not require the affirmative vote of any additional outstanding shares of
the Company Common Stock entitled to be voted at the Meeting in order for the
Merger Agreement to be approved at the Meeting.
A FAILURE TO VOTE, EITHER BY NOT RETURNING THE ENCLOSED PROXY OR BY
CHECKING THE "ABSTAIN" BOX THEREON, WILL HAVE THE SAME EFFECT AS A VOTE AGAINST
APPROVAL OF THE MERGER AGREEMENT.
PROPOSAL I - THE MERGER
THE FOLLOWING INFORMATION RELATING TO THE MERGERS IS NOT INTENDED TO BE
A COMPLETE DESCRIPTION OF ALL INFORMATION RELATING TO THE MERGERS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO MORE DETAILED INFORMATION CONTAINED
ELSEWHERE IN THIS PROXY STATEMENT, INCLUDING THE ANNEXES HERETO, AND IN THE
DOCUMENTS INCORPORATED HEREIN BY REFERENCE. A COPY OF THE MERGER AGREEMENT IS
ATTACHED AS ANNEX A TO THIS PROXY STATEMENT AND REFERENCE IS MADE THERETO FOR A
COMPLETE DESCRIPTION OF THE TERMS OF THE MERGERS. STOCKHOLDERS OF THE COMPANY
ARE URGED TO READ THE MERGER AGREEMENT CAREFULLY.
General
Under the terms of the Merger Agreement, the Company and Newco would
merge and the Savings Bank would subsequently merge with and into Great Falls
Bank. Upon consummation of the Corporate Merger, each outstanding share of the
Company Common Stock would be converted
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automatically and without any action on the part of the holder thereof, into the
right to receive a cash payment of $52.26 from Greater Community subject to
adjustment.
Background of the Merger
In January and February of 1998 the Board of Directors of the Company
(the "Board") determined to address the strategic options available to the
Company. Options explored included the acquisition of another institution and an
initial public offering of the Company's Common Stock. At that time the Board
was not considering a sale of the Company. In early March, the Company received
an unsolicited verbal offer from a third party to acquire the Company for $20
million, or $45.44 per share, in cash. This offer was subsequently presented in
writing. The Board, with the assistance of Ryan Beck, reviewed this offer. The
Company elected to reject this offer because of concerns about regulatory
approvability, however, as a result of their analysis the Board decided that it
was in the best interests of the shareholders to consider the sale of the
Company. On March 11, 1998 the Company engaged Ryan Beck as its financial
advisor to conduct a due diligence review of the Company, identify potential
acquirors, assist in the preparation of a confidential offering memorandum and
assist in any discussions and negotiations with potential acquirors.
Beginning in May 1998 Ryan Beck contacted 43 financial institutions to
determine their level of interest in the Company. A confidential offering
memorandum containing March 31, 1998 data was sent to 29 of these companies
after execution of a confidentiality agreement and they were instructed to
provide their preliminary indications of interest to Ryan Beck in early June
1998. Nine companies, including the party which had previously contacted the
Company, provided preliminary indications of interest which were presented to
the Board of Directors of the Company. Four companies contemplated a stock for
stock exchange, three companies contemplated an exchange of a combination of
cash and securities, one company contemplated an all cash transaction and one
company presented the option of either a stock for stock exchange or a
combination of cash and stock. Ryan Beck reviewed with the Board the financial
aspects of the proposals, specifically reviewing the key financial components of
comparable transactions. The indications of interest by four of the companies
were not considered to be competitive based upon the indicated price, and the
Company elected not to continue discussions with these parties.
The remaining five prospective acquirors conducted a due diligence
review of the Company during June and July of 1998. Three of these companies
submitted revised proposals, which were reviewed by the Board on July 24, 1998.
The revised indication by Greater Community contemplated a combination of cash
and stock at a price in excess of the all cash proposal ultimately accepted by
the Company. Subsequent to the Board's review of these proposals, the Board
began negotiations on a stock for stock exchange with another party. Although
the value of this proposed offer was below the combination proposal from Greater
Community, the Board believed this offer was in the best interests of the
Company's shareholders due to liquidity and ownership concentration issues, as
well as the future appreciation potential of this party's stock. Following
discussions with the President of Greater Community, the Board received a
revised indication for an all cash transaction at a price level lower than the
combination proposal. During the first week of August, in light of the revised
proposal and a decline in the market value of the stock of the other potential
acquirer which had a negative impact on the value of their proposed offer, the
Board reviewed their options. At that time the Board authorized management and
the Company's representatives to negotiate the terms of a definitive agreement
with Greater Community, believing the all cash offer provided more secure value
to the Company's shareholders.
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Management reviewed and revised several drafts of the definitive
agreement with the assistance of the Company's legal counsel and investment
banker. On September 4, 1998, the Board met again to consider the proposed
definitive merger agreement that had been negotiated with Greater Community,
including the proposed final all cash purchase price. At that meeting Ryan Beck
orally gave the Board its opinion that the consideration to be received by the
stockholders of the Company from Greater Community was fair from a financial
point of view. After extensive discussion the Board determined that the proposed
merger is in the best interests of the Company and its stockholders and the
Board unanimously voted to approve the Merger Agreement.
Reasons for the Merger
The terms of the Merger Agreement, including the Cash Consideration to
be received by the Company's stockholders, were the result of arm's length
negotiations between the representatives of the Company and Greater Community
after a thorough auction process. Among the factors considered by the Board of
Directors of the Company in deciding to approve and recommend the terms of the
Merger were (i) the cash to be received by the Company's stockholders, (ii)
information concerning the financial condition, results of operations, capital
levels, asset quality and future prospects of the Company, (iii) industry and
economic conditions, (iv) the impact of the Merger on the depositors, employees,
customers and communities served by the Company through expanded commercial,
consumer and retail banking products and services, (v) the opinion of the
Company's financial advisor as to the fairness of the consideration to be
received by the holders of the Company's Common Stock from a financial point of
view, (vi) the general structure of the transaction and the compatibility of
management and business philosophy, (vii) the likelihood of receiving the
requisite regulatory approvals in a timely manner, and (viii) the ability of the
combined enterprise to compete in relevant banking and non-banking markets. In
making its determination, the Board did not ascribe relative weights to the
factors which it considered.
The Board of Directors of the Company believes that the Merger is in
the best interest of the Company and its shareholders. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE APPROVAL OF THE MERGER
AGREEMENT.
Opinion of Financial Advisor
- ----------------------------
On March 11, 1998, the Company formally retained Ryan Beck to act as
the Company's financial advisor with respect to the acquisition of the Company.
Ryan Beck is regularly engaged in the valuation of banks, bank holding
companies, savings and loan associations, savings banks and savings and loan
holding companies in connection with mergers, acquisitions and other
securities-related transactions. Ryan Beck has knowledge of, and experience
with, the Mid-Atlantic banking market and banking organizations operating within
this market, and was selected by the Company because of its knowledge of,
experience with, and reputation in the financial services industry.
In its capacity as the Company's financial advisor, Ryan Beck
participated in the negotiations with respect to the pricing and other terms and
conditions of the Merger, but the decision as to whether to accept the Greater
Community proposal and the final pricing of the Merger was ultimately made by
the Board of Directors of the Company. Ryan Beck rendered its oral opinion to
the the Company Board of Directors on September 4, 1998, and rendered an
additional formal written opinion dated as of December ____, 1998 that, based on
and subject to the assumptions, factors, and limitations as set forth in the
Opinion and as described below, the Cash Consideration of $52.26 per share of
the Company is "fair"
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to the Company's stockholders from a financial point of view. No limitations
were imposed by the Company's Board of Directors upon Ryan Beck with respect to
the investigations made or procedures followed by it in arriving at its opinion.
The full text of the Opinion of Ryan Beck dated as of December ____,
1998, which sets forth assumptions made and matters considered, is attached as
Annex B to this Proxy Statement. Stockholders of the Company are urged to read
this Opinion in its entirety. Ryan Beck's Opinion is directed only to the
financial fairness of the Cash Consideration and does not constitute a
recommendation to any Company stockholder as to how such stockholder should vote
at the Meeting. The summary of the Opinion set forth in this Proxy Statement is
qualified in its entirety by reference to the full text of such Opinion. Ryan
Beck's oral opinion as of September 4, 1998 was to the same effect as such
Opinion. Ryan Beck does not admit that it is an expert within the meaning of the
term "expert" as used within the Securities Act of 1933, as amended ("Securities
Act"), and the rules and regulations promulgated thereunder, or that its
opinions constitute a report or valuation within the meaning of Section 11 of
the Securities Act and the rules and regulations promulgated thereunder.
In connection with its analysis, Ryan Beck: (i) reviewed the Merger
Agreement and related documents; (ii) reviewed this Proxy Statement; (iii)
reviewed Greater Community's Annual Reports to Stockholders and Annual Reports
on Form 10-K for the years ended December 31, 1997, 1996, and 1995, and Greater
Community's Quarterly Reports on Form 10-Q for the periods ended March 31, 1998
and June 30, 1998; (iv) reviewed internal analyses prepared by Greater
Community's management; (v) reviewed the Company's Annual Reports to
Stockholders and Annual Reports on Form 10-KSB for the years ended December 31,
1997, 1996, and 1995, and the Company's Quarterly Reports on Form 10- QSB for
the periods ended March 31, 1998 and June 30, 1998; (vi) reviewed publicly
available financial data of commercial banking organizations which Ryan Beck
deemed generally comparable to Greater Community; (vii) reviewed publicly
available financial data of thrift organizations which Ryan Beck deemed
generally comparable to the Company; (viii) reviewed terms of recent
acquisitions of thrift organizations which Ryan Beck deemed generally comparable
in whole or in part to the Company; (ix) reviewed the potential pro-forma impact
of the Merger on Greater Community's financial condition, operating results and
capital ratios; and (x) conducted such other studies, analyses, inquiries and
examinations as Ryan Beck deemed appropriate. Ryan Beck also reviewed certain
projections provided by the Company and Greater Community for the year ending
December 31, 1998 and met with certain members of the Company and Greater
Community's senior management to discuss the Company and Greater Community's
past and current business operations, financial condition, strategic plan and
future prospects, including any potential operating efficiencies and synergies
which may arise from the Merger. Ryan Beck as part of its review of the Merger,
also analyzed Greater Community's financial ability to consummate the Merger and
considered the future prospects of the Company in the event it remained
independent.
In connection with its review, Ryan Beck relied upon and assumed,
without independent verification, the accuracy and completeness of the financial
and other information regarding the Company and Greater Community provided to
Ryan Beck by the Company and Greater Community and their representatives. Ryan
Beck is not an expert in the evaluation of allowances for loan losses.
Therefore, Ryan Beck has not assumed any responsibility for making an
independent evaluation of the adequacy of the allowances for loan losses set
forth in the balance sheets of the Company and Greater Community at June 30,
1998, and Ryan Beck assumed such allowances were adequate and complied fully
with applicable law, regulatory policy and sound banking practice as of the date
of such financial statements.
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Ryan Beck has reviewed certain historical financial data and financial
projections (and the assumptions and basis therefor) provided by the Company and
Greater Community. Ryan Beck assumed that such forecasts and projections
reflected the best currently available estimates and judgments of the respective
managements. In certain instances, for the purposes of its analyses, Ryan Beck
made adjustments to such financial and operating forecasts which in Ryan Beck's
judgment were appropriate under the circumstances. Ryan Beck was not retained to
nor did it make any independent evaluation or appraisal of the assets or
liabilities of the Company or Greater Community nor did Ryan Beck review any
loan files of the Company, Greater Community or their respective subsidiaries.
Ryan Beck also assumed that the Merger in all respects is, and will be,
undertaken and consummated in compliance with all laws and regulations that are
applicable to the Company and Greater Community.
The preparation of a fairness opinion on a transaction such as the
Merger involves various determinations as to the most appropriate and relevant
methods of financial analysis and the application of those methods to the
particular circumstances and, therefore, the Opinion is not readily susceptible
to summary description. In arriving at its opinion, Ryan Beck performed a
variety of financial analyses. Ryan Beck believes that its analyses must be
considered as a whole and the consideration of portions of such analyses and the
factors considered therein, without considering all factors and analyses, could
create an incomplete view of the analyses and the process underlying Ryan Beck's
Opinion. No one of the analyses was assigned a greater significance than any
other.
The projections furnished to Ryan Beck were prepared by the respective
managements of the Company and Greater Community, without input or guidance by
Ryan Beck. The Company and Greater Community do not publicly disclose internal
management projections of the type provided to Ryan Beck in connection with the
review of the Merger. Such projections were not prepared with a view towards
public disclosure. The public disclosure of such projections could be misleading
since the projections were based on numerous variables and assumptions which are
inherently uncertain, including, without limitation, factors related to general
economic and competitive conditions. Accordingly, actual results could vary
significantly from those set forth in such projections.
In its analyses, Ryan Beck made numerous assumptions with respect to
industry performance, business and economic conditions, and other matters, many
of which are beyond the control of the Company or Greater Community. Any
estimates contained in Ryan Beck's analyses are not necessarily indicative of
future results or values, which may be significantly more or less favorable than
such estimates. Estimates of values of companies do not purport to be appraisals
nor do they necessarily reflect the prices at which companies or their
securities may actually be sold. The following is a brief summary of the
analyses and procedures performed by Ryan Beck in the course of arriving at its
Opinion.
Analysis of Selected Companies: Ryan Beck compared the Company's
financial data as of June 30, 1998 to a peer group of thirty-three selected
thrifts located in the Mid Atlantic region with assets between $100 million and
$300 million. Ryan Beck deemed this group to be generally comparable to the
Company. At or for the twelve months ended June 30, 1998, the Company had equity
to assets of 5.52%, a return on average assets of 0.48%, a return on average
equity of 8.77%, a net interest margin of 2.73%, loans equal to 64.47% of
deposits, a ratio of non-performing loans to total loans of 2.60%, a ratio of
loan loss reserves to non-performing assets of 14.45%, a ratio of non-interest
income to average assets of 0.10%, a ratio of non-interest expenses to average
assets of 1.88%, and an efficiency ratio of 69.41%. These ratios were compared
to the median ratios of the thirty-three selected thrift organizations at or for
the twelve months ended March 31, 1998, which were, as calculated, an equity to
assets ratio of 9.98%, a return on average assets of 0.78%, a return on average
equity of 7.22%, a net interest
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margin of 3.53%, loans equal to 84.78% of deposits, a ratio of non-performing
loans to total loans of 1.18%, a ratio of loan loss reserves to non-performing
assets of 49.32%, a ratio of non-interest income to average assets of 0.35%, a
ratio of non-interest expense to average assets of 2.28%, and an efficiency
ratio of 66.76%. Ryan Beck noted that the Company's performance as measured by
return on average assets was weaker than that of the peer group, due to the
lower level of loans, a lower net interest margin and a lower level of
non-interest income at the Company as compared to the peer group. Ryan Beck also
noted that the Company's non-interest expenses as a percent of average assets
was lower than that of the peer group. However, the Company's efficiency ratio
was slightly higher than the peer group. Ryan Beck also compared Greater
Community's reported financial data as of June 30, 1998 with that of a group of
twenty-nine selected commercial banking organizations with assets between $300
million and $500 million and which are located in the Mid Atlantic region of the
United States for which public trading and pricing information was available.
Ryan Beck deemed this group to be generally comparable to Greater Community.
Greater Community data was presented as reported at June 30, 1998. Ryan
Beck noted that Greater Community reported total assets of $357 million at June
30, 1998. At or for the twelve months ended June 30, 1998, Greater Community had
a ratio of equity to assets of 8.37%, a return on average assets ratio of 0.90%,
a return on average equity ratio of 10.99%, a dividend yield of 2.18%, a net
interest margin of 4.22% (based on the twelve months ended March 31, 1998), a
ratio of non-performing assets to total assets of 0.59%, and a ratio of loan
loss reserves to non-performing loans of 167.13%. These ratios were compared to
the median ratios of the twenty-nine selected commercial banking organizations,
which were, as calculated, an equity to assets ratio of 9.61%, a return on
average assets ratio of 1.17%, a return on average equity ratio of 12.56%, a
dividend yield of 2.08%, a net interest margin of 4.45%, a ratio of
non-performing assets to total assets of 0.83% and a ratio of loan loss reserves
to non-performing loans of 159.60%.
Analysis of Selected Transactions: Ryan Beck compared the Company's
financial data as of June 30, 1998 with that of a group of ten selected thrift
organizations being acquired in transactions announced since October 1, 1997 and
for which pricing data pertaining to the transactions was publicly available.
The criteria for this group was thrifts throughout the United States with assets
between $100 million and $400 million, an equity to assets ratio less than 9.00%
and a positive return on average assets. Ryan Beck deemed this group to be
generally comparable to the Company. The median ratios of the ten selected
companies, as calculated, represented a 5.96% tangible equity to tangible assets
ratio, a non-performing assets to assets ratio of 1.42%, an annualized
year-to-date return on average assets of 0.55% and an annualized year-to-date
return on average equity of 8.85%.
Ryan Beck also calculated certain ratios based on the Cash
Consideration and the median ratios for the ten selected thrift acquisitions
("Comparable Transactions"). The Cash Consideration represented 229.68% of
stated book value at June 30, 1998, 230.75% of tangible book value at June 30,
1998, 26.84 times latest twelve months diluted earnings, and a core deposit
premium over tangible book value at June 30, 1998 of 8.53%. The median ratios
for the Comparable Transactions, as calculated, represented a price to diluted
book value of 180.75%, a price to diluted tangible book value of 180.75%, a
price to latest twelve months earnings of 22.46 times, and a core deposit
premium over tangible book value of 7.16%. The average ratios for the Comparable
Transactions, as calculated, represented a price to diluted book value of
219.60%, a price to diluted tangible book value of 224.44%, a price to latest
twelve months earnings of 26.43 times, and a core deposit premium over tangible
book value of 12.15%. The imputed value of the Company based on the median
ratios of the above mentioned acquisition peer group was $41.13 based on price
to stated book value, $40.94 based on price to tangible book value, $43.74
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based on latest twelve months diluted earnings, $47.49 based on the core deposit
premium over tangible book value. The Cash Consideration is $52.26 per share of
the Company.
No company or transaction used in the "Analysis of Selected Publicly
Traded Companies" and "Analysis of Selected Transactions" sections above is
identical to the Company, Greater Community or the Merger. Accordingly, an
analysis of the results of the foregoing is not mathematical; rather it involves
complex considerations and judgments concerning differences in financial and
operating characteristics of the companies involved and other factors that could
affect the trading values of the securities of the company or companies to which
they are being compared.
Discounted Dividend Analysis: Using a discounted dividend analysis,
Ryan Beck estimated the present value of the future dividend streams that the
Company could produce in perpetuity. Projection ranges for the Company's
five-year balance sheet and income statement were provided by the Company's
management. Management's projections were based upon various factors and
assumptions, many of which are beyond the control of the Company. These
projections are, by their nature, forward-looking and may differ materially from
the actual values or actual future results which may be significantly more or
less favorable than suggested by such projections. In producing a range of per
share values, Ryan Beck utilized the following assumptions: discount rates range
from 11.0% to 13.0%, terminal price/earnings multiples range from 14.0x to 16.0x
(which when applied to terminal year estimated earnings produces a value which
approximates the net present value of the dividends in perpetuity, given certain
assumptions regarding growth rates and discount rates) and earnings that include
estimated savings in the Company's non-interest expense equal to 35% in 1999 and
40% in 2000, with an assumed 5% growth in synergies in years thereafter. The
discounted dividend analysis produced a range of net present values per share of
the Company's Common Stock from $41.34 to $51.46. These analyses do not purport
to be indicative of actual values or expected values or an appraisal range of
the shares of the Company's Common Stock. Ryan Beck noted that the discounted
dividend analysis is a widely used valuation methodology, but noted that it
relies on numerous assumptions, including expense savings levels, dividend
payout rates, terminal values and discount rates, the future values of which may
be significantly more or less than such alternatives. Any variation from these
assumptions would most likely produce different results. In connection with its
written Opinion dated as of December ____, 1998, Ryan Beck confirmed the
appropriateness of its reliance on the analyses used to render its September 4,
1998 opinion by performing procedures to update certain of such analyses and by
reviewing the assumptions and conclusions contained in the Opinion.
Ryan Beck's written Opinion dated December ____, 1998 was based solely
upon the information available to it and the economic, market and other
circumstances as they existed as of the date of such Opinion. Events occurring
after such date could materially affect the assumptions and conclusions
contained in such Opinion. Ryan Beck has not undertaken to reaffirm or revise
its Opinion or otherwise comment upon any events occurring after the date
thereof.
The summary set forth above does not purport to be a complete
description, but is a brief summary of the material analyses and procedures
performed by Ryan Beck in the course of arriving at its Opinion. With regard to
Ryan Beck's services in connection with the financial advisory agreement and the
Merger Agreement, the Company has agreed to pay Ryan Beck an advisory fee equal
to 1.50% of the aggregate dollar value of the consideration received by the
Company's stockholders in the Merger. Based upon the estimated aggregate
purchase price to be paid in connection with the Merger, Ryan Beck's aggregate
fees will be approximately $345,000. Ryan Beck was paid approximately $115,000
of such advisory fee upon the signing of the Agreement and the remainder will be
paid upon the closing of this
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transaction. In addition, the Company has agreed to reimburse Ryan Beck for its
reasonable out-of-pocket expenses, which shall not exceed $10,000 without the
prior consent of the Company. The Company has also agreed to indemnify Ryan Beck
and certain related persons against certain liabilities, including liabilities
under federal securities law, incurred in connection with its services. The
amounts of Ryan Beck's fees were determined by negotiation between the Company
and Ryan Beck.
Ryan Beck has had an investment banking relationship with the Company
for a number of years. Additionally, Ryan Beck has also acted as financial
advisor to the Company with respect to various other matters from time to time.
Ryan Beck has had no prior relationship with Greater Community. Ryan Beck's
research department does not follow Greater Community. Ryan Beck is a market
maker in Greater Community's common stock and, in such capacity, may from time
to time own Greater Community securities.
Certain Federal Income Tax Consequences
The following is a discussion of certain federal income tax
consequences of the Corporate Merger. The discussion is included for general
information purposes only and may not apply to special situations, such as the
Company's stockholders, if any, who received their Company Common Stock upon the
exercise of employee stock options or otherwise as compensation, and the
Company's stockholders that are insurance companies, securities dealers,
financial institutions or foreign persons.
The receipt of cash by a stockholder of the Company in exchange for
shares of the Company Common Stock pursuant to the Merger Agreement will
constitute a taxable transaction to such stockholder for federal income tax
purposes. In general, a stockholder will recognize gain or loss upon the
surrender of the stockholder's Company Common Stock equal to the difference, if
any, between (i) the sum of the cash payment per share received in exchange for
the shares of the Company Common Stock, and (ii) the stockholder's tax basis in
such Company Common Stock. Any gain or loss will generally be treated as capital
gain or loss if the Company Common Stock exchanged was held as a capital asset
in the hands of the stockholder.
The cash payments due to the holders of the Company Common Stock upon
the exchange thereof pursuant to the Merger Agreement (other than certain exempt
entities and persons) will be subject to a 31% backup withholding tax by the
exchange agent under federal income tax law unless certain requirements are met.
Generally, the exchange agent will be required to deduct and withhold the tax if
(i) the stockholder fails to furnish a taxpayer identification number ("TIN") to
the exchange agent or fails to certify under penalty of perjury that such TIN is
correct, (ii) the Internal Revenue Service ("IRS") notifies the exchange agent
that the TIN furnished by the stockholder is incorrect, (iii) the IRS notifies
the exchange agent that the stockholder has failed to report interest, dividends
or original issue discount in the past, or (iv) there has been a failure by the
stockholder to certify under penalty of perjury that such stockholder is not
subject to the 31% backup withholding tax.
No ruling has been or will be requested from the IRS as to any of the
tax effects of any of the transactions discussed in this Proxy Statement to
stockholders of the Company, and no opinion of counsel has been or will be
rendered to the Company with respect to any of the tax effects of the Corporate
Merger to the Company's stockholders. There is no assurance that applicable tax
laws will not change, on a current or retroactive basis, prior to the Effective
Date.
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Because certain tax consequences of the Corporate Merger may vary
depending upon the particular circumstances of each stockholder and other
factors, each stockholder of the Company is urged to consult such holder's own
tax advisor to determine the particular tax consequences to such holder of the
Corporate Merger (including the application and effect of state and local income
and other tax laws).
THE MERGER AGREEMENT
THE FOLLOWING IS A BRIEF SUMMARY OF CERTAIN PROVISIONS OF THE MERGER
AGREEMENT. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL
TEXT OF THE MERGER AGREEMENT WHICH IS ATTACHED AS ANNEX A TO THIS PROXY
STATEMENT.
The Mergers
Under the terms of the Merger Agreement, Newco would merge with the
Company and the Savings Bank would merge with Great Falls Bank. Upon
consummation of the Corporate Merger, each outstanding share of the Company
Common Stock would be converted, by virtue of the Corporate Merger,
automatically and without any action on the part of the holder thereof, into the
right to receive a cash payment of $52.26 from Great Community.
Effective Date
Subject to the conditions of the obligations of the parties to effect
the Mergers, the Corporate Merger will become effective (the "Effective Date")
at the time specified in the Certificate of Merger for the Corporate Merger,
which shall be executed at the completion of the closing ("Closing") of the
Corporate Merger and in no event be later than the 45th day following receipt of
all required regulatory approvals. Subject to the foregoing, it is currently
anticipated that the Mergers will be consummated during the first quarter of
1999.
Exchange of the Company Common Stock Certificates
Greater Community will designate a bank or other institution to act as
an exchange agent. Greater Community will, not less than twenty-four hours prior
to the Closing, deposit with the exchange agent an amount equal to 100% of the
Cash Consideration. The Company may submit to its shareholders instructions for
submitting their stock certificates to the Company prior to Closing. All stock
certificates submitted to the Company prior to Closing will be delivered by the
Company to Greater Community at the Closing. At Closing, the Company and Greater
Community will jointly execute a letter of direction to the exchange agent with
respect to the Company stockholders who have submitted their stock certificates
prior to Closing and the amount to be paid to each. The exchange agent shall, in
accordance with the aforementioned letter of direction, pay to the the Company
shareholders specified in such letter of direction an amount equal to 100% of
the Cash Consideration for their shares within twenty-four (24) hours following
the Effective Date by check or electronic funds transfer.
Within one (1) business day following the Closing, Greater Community
will send instructions for submitting their stock certificates to the exchange
agent to any the Company shareholders who did not submit their stock
certificates. The exchange agent will pay, by check or electronic funds
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transfer, to the the Company shareholders who submit their stock certificates
pursuant to these instructions subsequent to Closing an amount equal to 100% of
the Cash Consideration for their shares within one (1) business day following
receipt of the stock certificate.
Notwithstanding the tender or non-tender of the stock certificates,
effective as of the Effective Date all shares of the Company shall be and become
void and will cease to evidence any ownership interest in the Company and will
instead be converted into the right to receive a cash payment equal to the Cash
Consideration.
THE COMPANY'S STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL
THEY RECEIVE THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS.
The Cash Consideration into which such holder's shares are converted on
the Effective Date will be delivered by or on behalf of Greater Community, to
such holder only upon delivery to ______________________________ (the "Exchange
Agent") of the certificates formerly representing all of such shares owned by
such holder (or indemnity satisfactory to Greater Community and the Exchange
Agent, in their judgment, if any of such certificates are lost, stolen or
destroyed). No interest will be paid on such Cash Consideration to which such
holder shall be entitled to receive upon such delivery.
After the Closing, the stock transfer books of the Company will be
closed and there will be no further transfers on the transfer books of the
Company of the shares of the Company Common Stock that were outstanding
immediately prior to the Effective Date.
Interests of Certain Persons
Certain members of the Company's management and its Board may be deemed
to have interests in the Mergers in addition to their interests, if any, as
stockholders of the Company. These interests are described in more detail below.
Employment Agreement. President Kostakopoulos has an employment
agreement with the Savings Bank that provides for certain payments and benefits
in the event his employment with the Savings Bank is terminated following a
change of control as defined in the employment agreement. The execution of the
terms of the Merger Agreement would constitute a change of control for purposes
of this agreement and the employment of President Kostakopoulos will be
terminated upon the consummation of the Mergers. The amount of payments to
President Kostakopoulos upon termination of his employment as of the Effective
Date will be $712,136.
Insurance Coverage. The Company currently has an insurance policy for
its directors and officers that covers these individuals in the event they are
subject to a lawsuit in connection with their duties as officers and directors.
Pursuant to the Merger Agreement, Greater Community will cause the officers and
directors of the Company and the Savings Bank immediately prior to the Effective
Date to be covered for a period of six years from the Effective Date by the
directors' and officers' liability insurance policy maintained by the Company
and the Savings Bank (provided that Greater Community may substitute an
insurance policy of at least the same coverage and amounts containing terms and
conditions which are not less advantageous than the current insurance policy).
This insurance is intended to provide coverage following the Mergers for actions
of officers and directors
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taken prior to the Mergers. This insurance coverage reduces the potential
exposure of officers and directors for actions taken by them prior to the
Mergers.
Change in Control Agreement. Following the Effective Date, Greater
Community shall cause Great Falls Bank to honor in accordance with its terms the
Change In Control Severance Agreement between Brian McCourt and the Bank.
Employee Benefits
The Mergers are not expected to result in any payment to any person as
a result of any employment agreement, including without limitation any severance
or unemployment compensation, to any director, officer, employee or consultant,
other than Dr. Haralambos S. Kostakopoulos. In accordance with the Merger
Agreement, Greater Community will cause Great Falls Bank to allow the employees
of the Bank who are offered and who accept employment by Great Falls Bank (the
"Bank Employees") to participate in any of Great Falls Bank's employee benefit
plans in which similarly situated employees of Great Falls Bank participate, to
the same extent as comparable employees of Great Falls Bank. As of the Effective
Date, Great Falls Bank will permit the Bank Employees to participate in Great
Falls Bank's group hospitalization, medical, life and disability insurance plans
on the same terms and conditions as applicable to comparable employees of
Greater Community and its subsidiaries; provided, however, that all Bank
Employees and their dependents will be eligible to participate in the medical
insurance plan(s) covering employees of Great Falls Bank as of the Effective
Date without regard to pre-existing conditions or exclusions and with no
uninsured waiting periods. As of the next entry date following the Effective
Date, Great Falls Bank will permit the Bank Employees to participate in Great
Falls Bank's defined contribution plan; provided, that the Bank Employees must
wait one year to be entitled to participate in the profit sharing portion of
this plan. The Bank Employees will be given credit for their years of service
with the Savings Bank or the Company for eligibility and vesting purposes under
Great Falls Bank's defined contribution retirement plan. The Bank Employees will
generally retain all accrued vacation and sick leave benefits. All participants
of the Savings Bank's defined contribution plan will become 100% vested in their
participant accounts. Great Falls Bank will recognize, for purposes of
eligibility to participate, vesting and benefits accrual purposes, all prior
years of service that any Bank Employee had with the Savings Bank or the
Company, except that any Bank Employees who are involuntarily terminated within
six months following the Effective Date will not be entitled to receive
severance benefits under Greater Community's severance policies.
Greater Community will pay certain identified employees a retention
bonus if such Bank Employee shall either (a) remain in the employ of Greater
Community or a subsidiary of Greater Community for a period of three (3) months
following the Effective Date or (b) be terminated from such employment within
three (3) months following the Effective Date by Greater Community or a
subsidiary of Greater Community without cause. The aggregate pretax cost of the
retention bonuses will not exceed $90,748.
Greater Community and Great Falls Bank will pay the cost of
out-placement services for any Bank Employees that are terminated without cause
within the six month period following the Effective Date. Bank Employees who are
entitled to receive a retention bonus shall not be entitled to any severance
benefits until they have been employed by Greater Community for six months;
provided, that such Bank Employees shall be entitled to one month's advance
notice of termination during such six month period or to one month's pay in lieu
of such notice.
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Any employee of Company or the Savings Bank as of the Effective Date,
other than Dr. Kostakopoulos, Mr. McCourt or any employee who is entitled to
receive a retention bonus, who is involuntarily terminated for any reason, or
whose job or terms of employment is substantially changed (and who thereafter
terminates his or her employment), other than terminations or changes made for
just cause, within six months after the Effective Date will receive the
severance benefits set forth in the following sentence. Such severance benefits
will be paid in a lump-sum payment equal to one (1) week's salary for every year
or partial year of employment service with the Company or the Bank, with a
minimum severance benefit equal to two (2) weeks of salary and the maximum
severance benefit payable shall be twenty-six (26) weeks of salary.
No Appraisal Rights
Pursuant to Article 14A:11-1 of the New Jersey Business Corporations
Act, the stockholders of a corporation in a merger generally are not entitled to
appraisal rights if pursuant to a plan of merger such stockholders will receive
(i) cash, (ii) shares of stock which are either listed on a national securities
exchange or held of record by more than 1,000 stockholders, or (iii) cash and
such securities. The stockholders of the Company are not entitled to appraisal
rights in connection with the Mergers because cash will be paid to stockholders
pursuant to the Merger Agreement.
Business Pending Consummation
The Company and the Savings Bank have agreed in the Merger Agreement to
carry on their business in substantially the same manner their business was
conducted prior to the date of this Merger Agreement, and have agreed not to
take certain actions relating to the operation of the Company pending
consummation of the Mergers, without the prior written consent of Greater
Community, except as otherwise permitted by the Merger Agreement. These actions
include, without limitation:
(i) amending their Charter or By-Laws;
(ii) issuing, selling or delivering, or agreeing to issue, sell or
deliver, any shares of any class of capital stock of the Company or the Savings
Bank or any securities convertible into any such shares, or any options,
warrants, or other rights calling for the issuance, sale or delivery of any such
shares or convertible securities;
(iii) borrowing, or agreeing to borrow, any funds or voluntarily incur,
assume or become subject to, whether directly or by way of guarantee or
otherwise, any obligation or liability (absolute or contingent), except in the
ordinary course of business;
(iv) canceling or agreeing to cancel any debts or claims, except in the
ordinary course of business;
(v) distributing, leasing, selling or transferring, agreeing to lease,
sell or transfer, or grant or agreeing to grant any preferential rights to lease
or acquire, any of its assets, property or rights, except in the ordinary course
of business;
(vi) making or permitting any amendment to or termination of any
material contract or agreement, license or other right to which it is a party,
except in the ordinary course of business;
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(vii) mortgaging or pledging any of its assets, tangible or intangible,
except in the ordinary course of business;
(viii) granting any bonus or increase in compensation, other than
increases given in conformity with past practice; provided, that in no event
shall (I) any increase be given to Haralambos S. Kostakopoulos or any other
employee who has received an increase after October 15, 1997 or (II) any other
employee be given an increase in excess of 4% of his or her base pay;
(ix) entering into or making any change in any employee benefit
program, except as required by law;
(x) acquiring voting securities or any other ownership interest in any
corporation, association, joint venture, mutual savings association,
partnership, business trust or other business entity, or acquire control or
ownership of all or a substantial portion of the assets of any of the foregoing,
or merge, consolidate or otherwise combine with any other entity, or acquire any
branch of any entity engaged in the business of banking, or directly or
indirectly solicit or authorize the solicitation of or enter into any agreement
providing for any of the foregoing;
(xi) soliciting or authorizing the solicitation of or entering into any
agreement or understanding or, subject to the fiduciary duties of the directors
of the Company, engage in any discussions with, or furnish any non-public
information concerning the Company to, any third party with respect to any offer
or possible offer from a third party (I) to purchase shares of any class of
capital stock of the Company or any subsidiary or any securities convertible
into any such shares, or to acquire any option, warrant or other right to
purchase or otherwise acquire any such shares or convertible securities, (II) to
make a tender or exchange offer for any shares of any class of capital stock of
the Company or any subsidiary, (III) to purchase, lease or otherwise acquire all
or a substantial portion of the assets of the Company or any subsidiary, or (IV)
to merge, consolidate or otherwise combine with the Company or any subsidiary;
(xii) making any capital expenditure in excess of $10,000;
(xiii) making, extending or rolling over any loan or loan commitment
which, together with all other outstanding loans and loan commitments to the
same borrower and affiliates of such borrower, exceeds (x) $300,000, in the case
of loans secured by first mortgages on one to four family residential dwellings
or (y) $150,000 (exclusive of guarantees by agencies of the United States or the
State of New Jersey) for loans which are not secured by first mortgages on one
to four family residential dwellings;
(xiv) purchasing any securities (whether for sale or to be held to
maturity) having a maturity in excess of five years from the date hereof; or
purchasing more than $2,000,000 of any issue of securities issued by the United
States Treasury or any other agency of the United States Government ("Government
Securities"); or purchase any securities which are not Government Securities if
the cost of such securities, together with the cost of all other securities then
owned by the Company or any subsidiary, and issued by the same issuer or any
affiliate thereof, exceeds $2,000,000;
(xv) offering to pay interest on accounts at the Savings Bank at rates
which exceed the historical relationship of the Savings Bank's rates for such
accounts to the prevailing rates for such accounts in the Savings Bank's primary
market area;
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(xvi) entering into or agreeing to enter into any other agreement or
transaction not in the ordinary course of business; or
(xvii) taking action which would or is likely to (I) adversely affect
the ability of either Greater Community or the Company to obtain any necessary
approvals of governmental authorities required for the transactions contemplated
hereby; (II) adversely affect First Saving's ability to perform its covenants
and agreements under this Agreement; (III) result in any of the conditions to
the Mergers not being satisfied; or (IV) agree in writing or otherwise to do any
of the foregoing.
Accounting Treatment
Greater Community is expected to use the purchase method of accounting
with respect to its acquisition of the Company in the Merger.
Regulatory Approvals
The Mergers are subject to the prior approval of the OTS, FDIC, New
Jersey Commissioner and the Federal Reserve Board.
The Bank Merger is, and therefore the Mergers are, subject to the prior
approval by the Federal Reserve Board, the FDIC, the OTS and the New Jersey
Commissioner. The Bank Holding Company Act of 1956, as amended (the "BHC Act"),
governs the Federal Reserve Board's approval process. The BHC Act provides that
the Federal Reserve Board may not approve any transaction (i) which would result
in a monopoly or which would be in furtherance of any combination or conspiracy
to monopolize or to attempt to monopolize the business of banking in any part of
the United States, or (ii) the effect of which in any section of the country may
be to substantially lessen competition, or tend to create a monopoly, or which
in any other manner might restrain trade, unless the Federal Reserve Board finds
that the anti-competitive effects of the proposed transaction are clearly
outweighed in the public interest by the probable effect of the transaction in
meeting the convenience and needs of the communities to be served.
In conducting its review of any application for approval under the BHC
Act, the Federal Reserve Board must consider the financial and managerial
resources and future prospects of the institutions involved, and the convenience
and needs of the communities that the institutions will serve. The Federal
Reserve Board may deny an application if it determines that the financial or
managerial resources of the acquiring bank holding company are inadequate. The
BHC Act also provides that a transaction approved by the Federal Reserve Board
may not be consummated for 30 days after approval to allow for review by the
Department of Justice under the federal antitrust laws. If, however, the
Department of Justice does not commence a legal action during this 30-day
period, it may not thereafter challenge the transaction except in an action
commenced under Section 2 of the Sherman Antitrust Act.
Consummation of the Mergers are also subject to approval by the New
Jersey Commissioner under the New Jersey banking statutes regulating interstate
combinations. The New Jersey Commissioner must consider whether (i) the Merger
would result in a monopoly, or would be in furtherance of any combination or
conspiracy to monopolize or to attempt to monopolize the business of banking in
any section of New Jersey, (ii) the Merger would have the effect in any section
of New Jersey of substantially lessening competition, or would tend to create a
monopoly or in any other
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manner would be in restraint of trade, unless the anti-competitive effects of
the proposed merger are clearly outweighed in the public interest by the
probable effect of the Merger in meeting the convenience and needs of the
communities to be served or (iii) the merger would be contrary to the best
interests of the shareholders or customers of the Company and the Savings Bank.
The BHC Act and New Jersey law provide for the publication of notice
of, and the opportunity of administrative hearings relating to, the respective
applications for approval noted and described above. Interested parties may
intervene in the approval proceedings. If an interested party intervenes, such
intervention could substantially delay the regulatory approvals required for
consummation of the Merger.
Applications seeking approval of the Mergers were filed with the
Federal Reserve Board, FDIC, OTS and the New Jersey Commissioner by letters
dated __________ ___, 1998. The OTS approved an application on __________ ___,
1998. Regulatory approval had not been received from the Federal Reserve Board,
FDIC or the New Jersey Commissioner as of the date of mailing of this Proxy
Statement but the Company and the Savings Bank have no reason to believe that
such approvals will not be received.
The Mergers cannot proceed in the absence of the requisite regulatory
approvals. There can be no assurance that such regulatory approvals will be
obtained, and, if the Mergers are approved, there can be no assurance as to the
date of any such approvals. There can also be no assurance that any such
approvals will not contain a condition or requirement which causes such
approvals to fail to satisfy the conditions set forth in the Merger Agreement
and described below under "-- Conditions to Consummation; Termination." There
can likewise be no assurance that the U.S. Department of Justice or a state
Attorney General will not challenge the Mergers or, if such a challenge is made,
as to the result thereof.
Conditions To Consummation; Termination
Consummation of the Mergers is subject, among other things, to: (i)
approval of the transactions contemplated by the Merger Agreement by the
requisite vote of the stockholders of the Company; (ii) receipt of the
regulatory approvals referred to under "-- Regulatory Approvals"; (iii) there
being in effect no order, decree or injunction of any court or agency of
competent jurisdiction that enjoins or prohibits the Mergers; or (iv) all
outstanding stock options to purchase shares of Company Common Stock shall have
been canceled on or prior to the Effective Date.
Consummation of the Mergers is also subject to the satisfaction or
waiver of various other conditions specified in the Merger Agreement, including,
among others, the delivery by the Company and Greater Community, each to the
other, of (a) opinions of their respective counsel reasonably satisfactory to
the addressees of such opinions, and (b) certificates executed by certain of
their respective executive officers as to due performance and compliance in all
material respects with the agreements and covenants in the Merger Agreement and
the truth and correctness of the representations and warranties. The Company's
adjusted net worth must not be below $9,045,707 as of the end of the month
preceding the month in which the Closing occurs. The Merger Agreement provides
that prior to the Effective Date, either before or after receipt of the required
stockholder approval, the Merger Agreement may be terminated: (i) by mutual
consent of Greater Community and the Company; or (ii) by either Greater
Community or the Company in the event of a breach by the other party of any
representation, warranty, or covenant contained in the Merger Agreement,
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which breach cannot or is not cured within 30 days after written notice thereof
is given to the party committing such breach.
Secton 9.1 of the Merger Agreement provides that the Company may
terminate the Merger Agreement if (i) the Company receives an unsolicited offer
to purchase or otherwise acquire the Company and, pursuant to the Board's
fiduciary duties to the Company and its stockholders, the Board decides to
terminate the Merger Agreement to pursue such other offer; or (ii) the approval
of the stockholders of the Company is not be obtained. The Company may also
terminate the Merger Agreement if (i) any Greater Community representation or
warranty is not true and correct in all material respects; (ii) Greater
Community or Newco breaches any covenant or agreement and such breaching party
fails to cure within 30 days of written demand to cure; or (iii) any condition
required by the Merger Agreement is not satisfied by July 29, 1999. The Merger
Agreement allows Greater Community to terminate the Merger Agreement if (i) the
approval of the stockholders of the Company is not be obtained by January 2,
1999; (ii) any representation or warranty of the Company is not true and correct
in all material respects; (iii) the Company breaches any covenant or agreement
and such breaching party fails to cure within 30 days of written demand to cure;
or (iii) any condition required by the Merger Agreement is not satisfied by July
29, 1999.
Waiver; Amendment
Prior to the Effective Date, any provision of the Merger 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)
only by an agreement in writing among the parties thereto approved by their
respective Boards of Directors and executed in the same manner as the Merger
Agreement.
Expenses; Termination Fees
All expenses incurred by or on behalf of the parties in connection with
the Merger Agreement and the transactions contemplated thereby shall be borne by
the party incurring the same. The Company shall be entitled to receive $500,000
if Greater Community terminates the Merger Agreement as the result of a breach
by Greater Community. Greater Community shall be entitled to a fee of $500,000
if the Merger Agreement is terminated by Greater Community because (1) the
Company decides, in accordance with its fiduciary duties, to pursue merger
negotiations with a third party; (2) the stockholders of the Company fail to
approve the Merger Agreement by January 2, 1999; and (3) the Company breaches
the Merger Agreement and the Company fails to cure such breach within the period
provided under the Merger Agreement.
LEGAL OPINIONS
Certain legal matters associated with the Mergers will be passed upon
by Malizia, Spidi, Sloane & Fisch, P.C., Washington, D.C., as counsel for the
Company and the Savings Bank, and by Williams, Caliri, Miller & Otley as counsel
for Greater Community, Newco, and Great Falls Bank.
ACCOUNTANTS
The consolidated balance sheets of the Company as of December 31, 1997
and 1996, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the years in the two-year period ended
December 31, 1997, included in the Company's 1997 Annual
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Report to Stockholders which is incorporated by reference in the Company's
Annual Report on Form 10-KSB for the fiscal year ended December 31, 1997, have
been incorporated herein in reliance on the report of Radics & Co., L.L.C.
independent certified public accountants, and upon the authority of said firm as
experts in accounting and auditing. The Company's independent certified public
accountants are not expected to attend the Meeting and therefore will not be
available to make a statement or respond to stockholders' questions.
OTHER MATTERS
As of the date of this Proxy Statement, the Board knows of no matters
which will be presented for consideration at the Meeting other than as set forth
in the Notice of Meeting accompanying this Proxy Statement. However, if any
other matters shall come before the meeting or any adjournments thereof and be
voted upon, the enclosed Proxy shall be deemed to confer discretionary authority
to the individuals named as proxies therein to vote the shares represented by
such Proxy as to any such matters.
FINANCIAL INFORMATION
The following documents are included as Exhibit 1 and Exhibit 2,
respectively, to this Proxy Statement: (1) the Company's 1997 Annual Report to
Stockholders, and (2) the Company's Quarterly Report on Form 10-QSB for the
quarter ended September 30, 1998.
By Order of the Board of Directors
Sarina Matos
Secretary
Little Falls, New Jersey
November ____, 1998
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ANNEX A -- AGREEMENT AND PLAN OF MERGER
(WITHOUT SCHEDULES)
<PAGE>
ANNEX 1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement"), made this 4th day of
September, 1998, by and between GREATER COMMUNITY BANCORP, a corporation duly
organized and validly existing under the laws of the State of New Jersey
(hereinafter referred to as "GCB"), having an address for purposes of this
Agreement located at 55 Union Boulevard, Totowa, New Jersey 07512; GCB
ACQUISITION CORP., a corporation duly organized and validly existing under the
laws of the State of New Jersey (hereinafter referred to as "Newco"), and a
wholly owned subsidiary of GCB, having an address for purposes of this Agreement
located at 55 Union Boulevard, Totowa, New Jersey 07512; and FIRST SAVINGS
BANCORP OF LITTLE FALLS, INC., a corporation duly organized and validly existing
under the laws of the State of New Jersey (hereinafter referred to as "First
Savings"), having an address for purposes of this Agreement located at 115 Main
Street, Little Falls, New Jersey 07424. This Agreement contemplates a
transaction in which GCB will acquire all of the outstanding capital stock of
First Savings for cash by means of a reverse subsidiary merger of Newco with and
into First Savings.
W I T N E S S E T H :
WHEREAS, the Boards of Directors of GCB, Newco and First Savings,
deeming it advisable for the mutual benefit of GCB, First Savings and Newco and
their respective stockholders, that First Savings merge with Newco upon the
terms and conditions hereinafter set forth (hereinafter sometimes referred to as
the "Merger" and sometimes referred to as the "Holding Company Merger"), have
each by duly adopted resolutions approved this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1. The Corporations Proposing to Merge. The names of the
corporations proposing to merge are GCB ACQUISITION CORP.
("Newco") and FIRST SAVINGS BANCORP OF LITTLE FALLS, INC. ("First
Savings"). Newco and First Savings are both business
corporations organized and existing under the New Jersey Business
Corporation Act (the "Act").
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1.2. Merger; Effect of Merger; Surviving Corporation.
(a) Upon performance in all material respects of all covenants and
obligations of the parties contained herein and upon fulfillment in all material
respects or waiver of all conditions to the obligations of the parties contained
herein, at the effective date of the Merger (the "Effective Date"), Newco shall
be merged with and into First Savings, which shall be the surviving corporation
and which shall continue to exist as the surviving corporation under its present
name pursuant to the provisions of the Act. First Savings is hereinafter
sometimes referred to as the "Surviving Corporation". The separate corporate
existence of Newco shall cease upon the Effective Date in accordance with the
provisions of the Act.
(b) The Certificate of Incorporation of First Savings upon the
Effective Date shall be the Certificate of Incorporation of the Surviving
Corporation and said Certificate of Incorporation shall continue in full force
and effect until amended in the manner prescribed by the provisions of the Act.
(c) The Bylaws of Newco upon the Effective Date shall become the Bylaws
of the Surviving Corporation and said Bylaws shall continue in full force and
effect until changed, altered or amended in the manner prescribed by such Bylaws
and the provisions of the Act.
(d) The directors and officers of Newco upon the Effective Date shall
be the directors and officers of the Surviving Corporation and shall continue to
hold their respective offices until the election and qualification of their
respective successors or until their tenure is otherwise terminated in
accordance with the Bylaws of the Surviving Corporation.
1.3. Conversion of Newco Shares Into Shares of Surviving Corporation.
Each share of Common Stock of Newco outstanding on the Effective Date shall
remain outstanding immediately after the merger as an identical share of Common
Stock of the Surviving Corporation.
1.4. Conversion of First Savings Shares Into Right to Receive Cash.
Each share of Common Stock of First Savings outstanding immediately prior to the
Effective Date shall, upon the Effective Date by virtue of the Merger and
without any action on the part of any holder thereof, be converted into a right
to receive $52.26, subject to adjustment as provided in Section 1.5 and subject
to the provisions of Section 1.6. The amount of $52.26, as adjusted pursuant to
Section 1.5, is hereinafter referred to as the "Conversion Amount"; the amount
obtained by multiplying (a) the Conversion Amount by (b) the number of shares of
First Savings Common Stock outstanding on the Effective Date (which number of
shares shall be 440,100) is hereinafter referred
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to as the "Total Conversion Amount." In no event shall the Total Conversion
Amount exceed $23,000,000.00.
Each share of Common Stock of First Savings which, immediately prior to
the Effective Date, was issued and held as treasury stock by First Savings will
be canceled and retired.
1.5. Adjustment to Conversion Amount. The Conversion Amount shall be
subject to the following adjustments: (a) If the stockholders' equity of First
Savings as of the end of the month preceding the closing contemplated by Article
VIII hereof (the "Closing"), adjusted as provided in the following paragraph of
this Section 1.5 (the "Adjusted Net Worth") shall be less than $10,050,785 (the
stockholders' equity of First Savings, less Unrealized Gain on Securities
Available for Sale, as of June 30, 1998), the Total Conversion Amount shall be
reduced by the amount of the shortfall and the Conversion Amount shall be
reduced by the reduction in the Total Conversion Amount divided by the number of
shares of First Savings Common Stock outstanding on the Effective Date (which
number of shares shall be 440,100); and (b) if total expenses ("Transaction
Expenses") incurred by First Savings and the FS Subsidiaries in connection with
the transactions contemplated by this Agreement exceed $557,500, then the Total
Conversion Amount shall be reduced by the amount by which such expenses exceed
$557,500 and the Conversion Amount shall be reduced by the reduction in the
Total Conversion Amount divided by the number of shares of First Savings Common
Stock outstanding on the Effective Date (which number of shares shall be
440,100). For purposes of this Agreement, "Transaction Expenses" shall include,
but shall not be limited to, the following, regardless of whether such expenses
shall have been paid or accrued as of the date of Closing: Investment banking
expenses, legal expenses, accounting expenses, costs of preparing and printing
the proxy, proxy solicitation costs, costs of the meeting of stockholders of
First Savings contemplated in Section 1.8 hereof and costs of SEC filings; but
shall not include amounts payable to Dr. Kostakopoulos pursuant to Section 5.7
or 5.12 hereof, amounts which may become payable to Brian McCourt under the
Change In Control Severance Agreement between Mr. McCourt and the Bank,
obligations to pay Retention Bonuses (as that term is defined in Section 5.9
hereof) and costs of converting the Bank incurred pursuant to Section 5.2
hereof.
For purposes hereof, "Adjusted Net Worth" as of a given date shall mean
the net worth of First Savings, excluding Unrealized Gain (or Loss) on
Securities Available for Sale, on such date as shown on a consolidated statement
of financial condition of First Savings and the FS Subsidiaries as of such date,
subject to the following adjustments: (w) up to $557,500 of Transaction Expenses
incurred (and recorded as expenses) prior to such date by First Savings in
connection with the transactions contemplated hereby shall be added to the
consolidated book net worth of First
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Savings; (x) all gains, on an after tax basis, on sales of securities made
subsequent to June 30, 1998 shall be subtracted from the consolidated book net
worth of First Savings; (y) the effect, on an after tax basis, of all changes
made by First Savings at the request of GCB pursuant to Section 5.10 hereof
shall be excluded from the consolidated book net worth of First Savings; and (z)
all costs of converting the Bank incurred pursuant to Section 5.2 hereof shall
be added to the consolidated book net worth of First Savings. The aforementioned
consolidated statement of financial condition of First Savings and the FS
Subsidiaries shall (i) be prepared in accordance with the books of First Savings
and the FS Subsidiaries, (ii) be prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied between June 30, 1998 and
such date and (iii) fairly presents the consolidated financial position of First
Savings and the FS Subsidiaries at such date.
1.6. Payment of Conversion Amount.
(a) GCB shall designate a bank or other institution with fiduciary
powers to act as Exchange Agent hereunder. Such designation shall be subject to
approval by First Savings, which approval shall not be unreasonably withheld or
delayed. The fees of the Exchange Agent shall be paid by GCB.
(b) GCB shall, not less than twenty-four hours prior to the Closing
Date, deposit with the Exchange Agent an amount equal to 100% of the Total
Conversion Amount. The Exchange Agent shall distribute such funds in accordance
with the following subsections of this Section 1.6.
(c) First Savings may submit to its shareholders instructions for
submitting their stock certificates to First Savings prior to Closing. All stock
certificates submitted to First Savings prior to Closing shall be delivered by
First Savings to GCB at the Closing. All stock certificates submitted to First
Savings prior to Closing shall be delivered by First Savings to GCB at Closing.
At Closing, First Savings and GCB shall jointly execute a letter of direction to
the Exchange Agent with respect to the First Savings shareholders who have
submitted their stock certificates prior to Closing and the amount to be paid to
each. The Exchange Agent shall, in accordance with the aforementioned letter of
direction, pay to the First Savings shareholders specified in such letter of
direction an amount equal to 100% of the Conversion Amount for their shares
within twenty-four (24) hours following the Effective Date by check or
electronic funds transfer.
(d) Within one (1) business day following the Closing, GCB shall send
instructions for submitting their stock certificates to the Exchange Agent to
any First Savings shareholders who did not submit their stock certificates
pursuant to subsection (a)
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above. The Exchange Agent shall pay, by check or electronic funds transfer, to
the First Savings shareholders who submit their stock certificates pursuant to
these instructions subsequent to Closing an amount equal to 100% of the
Conversion Amount for their shares within one (1) business day following receipt
of the stock certificate.
(e) All payments to First Savings shareholders pursuant to clauses (c)
and (d) of this Section 1.6 shall be sent to the shareholder's address as shown
on the stock records of First Savings, or to such other address as a shareholder
may specify in a written instruction submitted with the shareholder's stock
certificates.
(f) Notwithstanding the tender or non-tender of the stock certificates,
effective as of the Effective Date all shares of First Savings shall be and
become void and shall cease to evidence any ownership interest in First Savings,
Newco or GCB and shall instead be converted into the right to receive a cash
payment equal to the Conversion Amount as detailed in Section 1.4 hereof, as
adjusted pursuant to Section 1.5 hereof. Notwithstanding anything herein to the
contrary, this Section 1.6(f) shall be construed as an agreement as to which the
shareholders of First Savings are intended to be third party beneficiaries and
shall be enforceable by such persons and their heirs and representatives.
(g) Notwithstanding anything to the contrary in this Section 1.6, if
any holder of First Savings stock shall be unable to surrender his or her
certificate for shares of First Savings Stock because such certificate has been
lost or destroyed, such holder may deliver in lieu thereof a lost stock
certificate affidavit and indemnity bond in form and substance and with surety
satisfactory to GCB.
1.7. Certificate of Merger; Effective Date. At the Closing, the proper
officers of First Savings and Newco, respectively, shall execute and file a
Certificate of Merger as prescribed by the Act. Such Certificate of Merger shall
provide that the Effective Date of the merger shall be 11:59 p.m. on the day the
Certificate of Merger is filed with the State of New Jersey. If practicable,
such Certificate of Merger will be filed on the date of Closing; if that is not
practicable, then the Certificate of Merger shall be filed on the first business
day following the date of Closing.
1.8. Meeting of Stockholders of First Savings. Promptly following
execution of this Agreement and Plan of Merger, the Board of Directors of First
Savings shall direct and cause this Agreement to be submitted to the
stockholders of First Savings, at a meeting of the stockholders of First
Savings, for the purpose of adopting and approving the same. Such meeting shall
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take place not later than the 120th day following the date of this Agreement.
The Board of Directors of First Savings shall, subject to the exercise of their
fiduciary duties, recommend that the stockholders of First Savings vote to adopt
and approve this Agreement and Plan of Merger. First Savings shall comply with
all applicable laws and regulations, including the proxy rules promulgated by
the Securities and Exchange Commission, applicable to the calling and conduct of
such meeting.
1.9. Voting Agreement by Shareholders. First Savings shall, upon
execution of this Agreement, deliver a certificate in the form of Exhibit D
hereto signed by each shareholder who also serves as a director of First Savings
as of the date of such certificate, indicating the intention of each such person
to vote in favor of the transaction at the stockholder meeting of First Savings
at which meeting a vote on the Agreement will be taken.
1.10. Approval by Sole Stockholder of Newco. Upon execution of this
Agreement, GCB, as sole stockholder of Newco, shall adopt a resolution adopting
and approving this Agreement and Plan of Merger.
1.11. Stock Transfer Books. At the Effective Date, the stock transfer
books of First Savings shall be closed and no transfer of First Savings Stock
shall thereafter be made.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF FIRST SAVINGS
First Savings hereby represents and warrants to GCB as follows:
2.1. Organization; Good Standing; Power; and Qualification. First
Savings is a corporation duly organized, validly existing and in good standing
under the laws of the State of New Jersey, has all requisite corporate power and
authority to own, lease and operate its properties, and to conduct its business
as it is now being conducted. Item 2.1(a) of the First Savings Disclosure
Schedule contains a list of all of First Saving's direct and indirect
subsidiaries (the "FS Subsidiaries"). Each FS Subsidiary other than First
Savings Bank of Little Falls, F.S.B. (the "Bank") is duly organized, validly
existing and in good standing under the laws of the State of New Jersey. The
Bank is a federal savings bank duly organized, validly existing and in good
standing under the laws of the United States of America. Each FS Subsidiary
(unless otherwise indicated, all references to the FS Subsidiaries include the
Bank) has all requisite corporate power and authority to own, lease and operate
its properties, and to conduct its business as it is now being conducted. First
Savings has heretofore delivered to GCB true and complete copies
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of the Certificates of Incorporation and By-Laws, as amended to the date hereof,
of First Savings and each FS Subsidiary. Each of First Savings and the FS
Subsidiaries is duly qualified or licensed to do business and is in good
standing as a foreign corporation in each state or other jurisdiction in which
the nature of its business or operations requires such qualification or
licensing. Item 2.1(b) of the First Savings Disclosure Schedule contains a list
of all foreign jurisdictions in which First Savings and each FS Subsidiary is
qualified or licensed to do business.
2.2. Capitalization. The authorized capital stock of First Savings
consists of 5,000,000 shares of Common Stock, of which 440,100 shares are issued
and outstanding and 0 shares are held by First Savings as treasury stock.
2.3. Options, Etc.. First Savings has no outstanding convertible
securities, warrants, options, rights, calls or other commitments of any nature
to issue or sell its capital stock.
2.4. Authority; No Violation, etc. First Savings has all requisite
corporate power to execute, deliver and perform its obligations under this
Agreement. The execution and delivery of this Agreement and performance by First
Savings of its obligations hereunder have been duly approved and authorized by
all requisite corporate action of First Savings, subject to the stockholder
approval contemplated by Section 1.8 hereof. This Agreement has been duly
executed and delivered by First Savings and, subject as aforesaid, constitutes
the legal, valid and binding agreement of First Savings, subject to (i)
applicable bankruptcy, insolvency, moratorium, fraudulent conveyance,
reorganization, receivership and other laws relating to or affecting the rights
and remedies of creditors generally, and (ii) principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law). Except for matters disclosed in Item 2.4 of the First Savings Disclosure
Schedule, neither the execution and delivery of this Agreement by First Savings
nor compliance by First Savings with any of the provisions hereof will (a)
conflict with or result in a breach of any provision of First Savings's
Certificate of Incorporation, (b) violate, or result with the passage of time in
a violation of, or cause a default or acceleration under, or give rise to any
right to termination, cancellation or acceleration (whether immediately, or
after the giving of notice, or after the passage of time, or a combination
thereof) under, or result in the creation of any lien, charge or encumbrance on
any assets of First Savings or any FS Subsidiary pursuant to, any of the terms,
conditions or provisions of any agreement, instrument or obligation to which
First Savings or any FS Subsidiary is a party, or by which it or any of its
properties or assets may be bound, or (c) violate any Federal or state statute,
rule or regulation or judgment, order, writ, injunction
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or decree of any Federal or state court, administrative agency or governmental
body, in each case applicable to First Savings or any FS Subsidiary, or any of
their properties or assets, or otherwise require any filing with, or obtaining
any permit, authorization, consent or approval of, any Federal, State or local
public body, commission or authority, including without limitation the New
Jersey Industrial Site Responsibility Act (N.J.S.A. 13:1K-6 et. seq.), except
those approvals and authorizations specified in Section 2.5 hereof.
2.5. Governmental Approvals and Filings. No approval, authorization,
consent, license, clearance or order of, declaration or notification to, or
filing, registration or compliance with, any governmental or regulatory
authority is required in order to (a) authorize the Merger contemplated by this
Agreement, (b) authorize the merger of the Bank with and into Great Falls Bank
(the "Bank Merger") on the Effective Date or (c) prevent the termination of any
material right, privilege, license or agreement of First Savings or any FS
Subsidiary, or to prevent any material loss to First Savings or any FS
Subsidiary, or to the business of First Savings or any FS Subsidiary, by reason
of the Holding Company Merger or the Bank Merger, except (i) approvals by the
Office of Thrift Supervision, (ii) approvals of the Federal Reserve Board (or
the Federal Reserve Bank of New York under power delegated by the Federal
Reserve Board), (iii) in the case of the Bank Merger, compliance with N.J.S.A.
17:9A- 132 through 17:9A-148, inclusive, including approval by the Commissioner
of the Department of Banking and Insurance of New Jersey and filing of the
agreement and plan of the Bank Merger, certified as having been approved by the
stockholders of the Bank and Great Falls Bank, (iv) approvals by the Federal
Deposit Insurance Corporation for the acquisition and assumption of the deposits
of the Bank by Great Falls Bank and the insurance of the Bank's deposits
following the Effective Date, and (v) compliance with the proxy requirements of
the Securities Exchange Act of 1934 and the regulations promulgated thereunder.
2.6. Equity Investments. Except as set forth in Item 2.6 of the First
Savings Disclosure Schedule, First Savings does not own, directly or indirectly,
any voting shares of any company other than the FS Subsidiaries.
2.7. Financial Information. First Savings has delivered to GCB (a) its
audited consolidated statements of financial condition as of December 31, 1997
and 1996 and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the years in the two-year period
ended December 31, 1997 and (b) its Quarterly Report on Form 10-QSB for the
quarterly period ended June 30, 1998. The aforementioned financial statements
and report do not contain any untrue statements of material fact or omit to
state any material fact necessary in order to make the statements and
information
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contained therein not misleading. Each of the financial statements contained in
the aforementioned financial statements and report, with the related notes
thereto, (i) is in accordance with the books of First Savings and the FS
Subsidiaries, (ii) has been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved,
except if and as otherwise indicated therein and (iii) fairly present the
consolidated financial position of First Savings and the FS Subsidiaries at such
dates and the results of its operations and the cash flows for the respective
periods indicated therein, except, in the case of the unaudited statements, for
normal year-end adjustments. The copies of the consolidated corporate income tax
returns of First Savings and the FS Subsidiaries for the 12 month periods ended
December 31, 1997 and December 31, 1996 which have been delivered to GCB are
each true, correct and complete.
2.8. Regulatory Filings. First Savings has delivered to GCB true and
complete copies of all reports filed by First Savings and the Bank with the
Office of Thrift Supervision and the Federal Deposit Insurance Corporation since
December 31, 1994.
2.9. Absence of Changes. Except for matters described in Item 2.9 of
the First Savings Disclosure Schedule, there has been no material adverse change
since June 30, 1998 in the assets, properties, business or condition, financial
or otherwise, of First Savings and the FS Subsidiaries, taken as a whole.
2.10. Agreements, etc. Item 2.10(a) of the First Savings Disclosure
Schedule contains a true and complete list of every agreement, to which First
Savings or an FS Subsidiary is a party or by which First Savings or an FS
Subsidiary is bound, which is performable in the future and which, together with
all other contracts of the same or similar nature, provides for the future
obligation to pay or receive more than $10,000.00 or is otherwise material to
the business of First Savings or any FS Subsidiary, including but not limited to
(a) leases of real or personal property, (b) any agreements for the sale of
assets other than in the ordinary course of business, (c) any agreements
pursuant to which First Savings or an FS Subsidiary has borrowed money or may in
the future borrow money and (d) software licenses; provided, however, that such
Item need not list outstanding loans to unaffiliated persons made by the Bank or
loan commitments and credit facilities pursuant to which the Bank may be
obligated to lend money to unaffiliated persons. Except for matters listed in
Item 2.10(b) of the First Savings Disclosure Schedule, First Savings and the FS
Subsidiaries have performed all obligations to be performed by them to date
under all contracts and other agreements listed in Item 2.10(a) of the First
Savings Disclosure Schedule and is not in default thereunder; and, to the best
knowledge of First Savings, there exists no default, or any event
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which upon the giving of notice or the passage of time would give rise to any
default, in the performance of any obligation to be performed by any other party
to any such contract or other agreement.
2.11. Absence of Undisclosed Liabilities. Neither First Savings nor any
FS Subsidiary has any material liabilities (whether matured or unmatured,
accrued, absolute or contingent or otherwise) which were not reflected, reserved
against, accrued for or otherwise disclosed on First Savings's consolidated
statement of financial condition dated as at June 30, 1998, except for
obligations to perform the contracts and the agreements listed on Item 2.10(a)
of the First Savings Disclosure Schedule in accordance with their respective
terms.
2.12. Condition of Tangible Assets. Those assets of First Savings and
the FS Subsidiaries that are tangible property necessary to their business
operations are in generally good operating condition and repair.
2.13. Litigation, etc. Except for matters listed on Item 2.13 of the
First Savings Disclosure Schedule: (a) there are no actions, suits, claims,
investigations or proceedings (legal, administrative or arbitrative) pending or,
to the best knowledge of First Savings, threatened, against First Savings or any
FS Subsidiary, whether at law or in equity, whether civil or criminal in nature
or whether before or by any Federal, state, municipal or other governmental
court, department, commission, board, bureau, agency or instrumentality,
domestic or foreign; and (b) there are no existing unsatisfied judgments,
decrees, injunctions or orders of any court, governmental department,
commission, agency, instrumentality or arbitrator outstanding against First
Savings or any FS Subsidiary. No petition for bankruptcy, voluntary or
involuntary, has been filed by or against First Savings or any FS Subsidiary,
neither First Savings nor any FS Subsidiary has made any assignment for the
benefit of its creditors and no receiver has been appointed for First Savings or
any FS Subsidiary or any of their assets.
2.14. Permits, Licenses, etc. Item 2.14 of the First Savings Disclosure
Schedule contains a list of all licenses, permits, orders and approvals issued
by any department, commission, agency or other instrumentality of any federal,
state, county or local government which pertains to the business conducted by
First Savings and each FS Subsidiary. First Savings Corporation is not licensed
as an insurance producer by the New Jersey Department of Banking and Insurance
and is not required to have such a license in order to conduct its business.
2.15. Compliance with Laws. Except as disclosed in Item
2.15 of the First Savings Disclosure Schedule, neither First
Savings nor any FS Subsidiary is in violation, in any respect
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material to its business or assets, of any federal, state, county or local law,
ordinance, regulation or order applicable to the business conducted by it. First
Savings and each FS Subsidiary has all licenses, permits, orders and approvals
of any governmental or regulatory body which are required for the conduct of the
business conducted by it and which, if not held by it, could reasonably be
expected to have a material adverse effect upon its business or assets
(collectively, "Required Permits"). All such Required Permits are in full force
and effect, no violations are or have been reported in respect of any Required
Permit and no proceeding is pending, or to the best knowledge of First Savings,
threatened, to revoke or limit any such Required Permit.
2.16. Brokers' or Finders' Fees, etc. No agent, broker, investment
banker, person or firm acting on behalf of First Savings or under the authority
of First Savings is or will be entitled to any broker's or finder's fee or any
other commission or similar fee directly or indirectly from GCB, Newco, First
Savings or any FS Subsidiary in connection with any of the transactions
contemplated hereby, except for fees payable to Ryan, Beck & Co., which fees
shall be the sole responsibility of First Savings and shall be paid at or prior
to the Closing. It is expressly understood that Ryan, Beck & Co. has been
retained solely by and is working solely for the benefit of First Savings in
connection with this matter.
2.17. Employees. First Savings has heretofore delivered to GCB a true
and complete list of the names, positions and rates of compensation of all
employees of First Savings and each FS Subsidiary.
2.18. Names. During the last 3 years First Savings and the FS
Subsidiaries have used no business names other than their current corporate
names.
2.19. Year 2000 Readiness. First Savings and each of the FS
Subsidiaries have taken all reasonable steps necessary to address the computer
software, accounting and record keeping issues raised in order for the data
processing systems used in the business conducted by First Savings and the FS
Subsidiaries to be substantially Year 2000 compliant on or before the end of
1999 and, except as set forth in Item 2.19 of the First Savings Disclosure
Schedule, First Savings does not expect the future cost of addressing such
issues to be material. Neither First Savings nor any FS Subsidiary has received
a rating of less than satisfactory from any bank regulatory agency with respect
to Year 2000 compliance.
2.20. Benefit Plans; Employee Relations.
(a) Except as set forth in Item 2.20(a) of the First
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Savings Disclosure Schedule, (i) First Savings and each FS Subsidiary is in
substantial compliance with all applicable Federal, state and local laws and
regulations respecting employment and employment practices, and terms and
conditions of employment and wages and hours, (ii) no collective bargaining
agreement presently covers (nor has any, in the past, covered) any employees of
First Savings or any FS Subsidiary, nor is any currently being negotiated by
First Savings or any FS Subsidiary, nor is First Savings or any FS Subsidiary a
party to any other written contract with or material enforceable oral commitment
to any labor union, (iii) there is no unfair labor practice complaint against
First Savings or any FS Subsidiary pending before the National Labor Relations
Board or any comparable state or local agency, and (iv) there is no labor
strike, dispute, slowdown, stoppage or organizational effort actually pending
or, to the best knowledge of First Savings, threatened against or involving
First Savings or any FS Subsidiary.
(b) Item 2.20(b) of the First Savings Disclosure Schedule contains a
true and complete list of all written contracts with, or oral commitments for
the employment, retention or payment of any severance or other benefit to, any
employee, consultant or other person.
(c) Item 2.20(c) of the First Savings Disclosure Schedule contains a
true and complete list of all Employee Pension Benefit Plans (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974 ("ERISA")),
all Employee Welfare Benefit Plans (as defined in Section 3(1) of ERISA), all
incentive compensation plans and all other employee benefit programs maintained
by First Savings or any FS Subsidiary in respect of its employees (other than
normal policies concerning vacations, holidays and salary continuation during
short absences for illness or other reasons) (all of the foregoing appearing on
such list being herein sometimes collectively referred to as "Employee Benefit
Programs"). First Savings has heretofore delivered to GCB true and complete
copies of all plan texts and other agreements adopted in connection with the
Employee Benefit Programs (including separation policies). With respect to such
plans, Item 2.20(c) of the First Savings Disclosure Schedule contains a true and
complete list of (and First Savings has heretofore delivered to GCB true and
complete copies of):
(i) the most recent Internal Revenue Service ("IRS")
determination letter received by First Savings or any FS Subsidiary relating to
each of the Employee Pension Benefit Plans listed in such Item 2.20(c) (the
"First Savings Retirement Plans") and all applications for determination letters
relating to First Savings Retirement Plans which are pending on the date hereof;
(ii) the most recent Annual Report (Form 5500 Series)
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and accompanying schedules of each of the Employee Welfare Benefit Plans listed
in such Item (the "First Savings Welfare Plans") and each First Savings
Retirement Plan, as filed pursuant to applicable law;
(iii) the Summary Plan Description (as currently in effect)
distributed to employees for all of First Savings Retirement Plans and First
Savings Welfare Plans; and
(iv) the most recent actuarial report received with respect to
each First Savings Retirement Plans that is a defined benefit plan, if any.
(d) Except as disclosed in Item 2.20(c) of the First Savings Disclosure
Schedule, (i) the First Savings Retirement Plans are in substantial compliance
with ERISA and will constitute qualified plans under the Internal Revenue Code
of 1986 immediately prior to the Effective Date, (ii) no material violation of
ERISA has occurred in connection with the administration of any First Savings
Retirement Plan or any First Savings Welfare Plan, (iii) there are no actions,
suits or claims pending or, to the best knowledge of First Savings, threatened
against any First Savings Retirement Plan or First Savings Welfare Plan, or any
administrator or fiduciary thereof, (iv) with respect to each First Savings
Retirement Plan and each First Savings Welfare Plan as to which an Annual Report
is required to be filed, no liabilities as of the date of the most recent Annual
Report relating to such Plan exist unless specifically referred to in such
Annual Report, and no materially adverse change has occurred with respect to the
financial materials covered by such Annual Report since the date thereof, (v) no
accumulated funding deficiency (within the meaning of Section 412 of the
Internal Revenue Code of 1986) exists with respect to any First Savings
Retirement Plan and (vi) no "reportable event" (as defined in Section 4043 of
ERISA) has occurred with respect to any First Savings Retirement Plan that is
subject to Title IV of ERISA. All First Savings Welfare Plans are either
self-funded, or are funded through a contract with an insurance company.
2.21. Tax Matters. First Savings and each FS Subsidiary has filed all
Federal, state and local income and other tax returns (including, but not
limited to, returns for state and federal income taxes, sales taxes, use taxes
and payroll taxes, and information reports), required to be filed by it, and
each such return is complete and accurate in all material respects and was filed
on a timely basis. First Savings and each FS Subsidiary has paid all taxes of
any nature whatsoever with any related penalties, interest and liabilities (any
of the foregoing being referred to herein as a "Tax") that are shown on such tax
returns as due and payable on or before the date hereof, other than such Taxes
as are being contested in good faith and which are listed in Item 2.21 of the
First Savings Disclosure Schedule.
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The accruals for current and deferred Taxes reflected on the consolidated
Statement of Financial Condition of First Savings and the FS Subsidiaries as at
June 30, 1998 are sufficient in all material respects. Except as set forth in
Item 2.21 of the First Savings Disclosure Schedule, there are no claims or
assessments pending against First Savings or any FS Subsidiary for any alleged
deficiency in Tax, and First Savings does not know of any threatened Tax claims
or assessments against it or any FS Subsidiary, which, in either case, involve
amounts either singly or in the aggregate in excess of $10,000.00. Neither First
Savings nor any FS Subsidiary has ever been subject to a sales and use tax
examination. Neither First Savings nor any FS Subsidiary has ever been subject
to a payroll tax examination. First Savings and the FS Subsidiaries do not treat
any workers as independent contractors. All information reports on Forms 1098
and 1099 were filed on magnetic media. A true and complete copy of the policy
and procedures of First Savings and the FS Subsidiaries related to information
reporting compliance has been furnished to GCB. Neither First Savings nor any FS
Subsidiary has ever received any notices or penalties regarding failure to
comply with 1099 reporting requirements.
2.22. Insurance. Item 2.22 of First Savings Disclosure Schedule
contains a true and complete list of all policies of liability, theft, fidelity,
property damage and other forms of insurance held by First Savings or any FS
Subsidiary (specifying the insurer, amount of coverage, annual premium, type of
insurance, policy number and any pending material claims thereunder). The
policies listed in such Item 2.22 are outstanding and duly in force and all
premiums with respect to such policies are currently paid. Except as set forth
in such Item 2.22, neither First Savings nor any FS Subsidiary has, during the
past three fiscal years, been denied or had revoked or rescinded any policy of
insurance.
2.23. Dealings with Officers and Directors. Except as set forth in Item
2.23 of the First Savings Disclosure Schedule, there is no present transaction,
business relationship or indebtedness involving First Savings or any FS
Subsidiary which is of a type described in Item 404 of Regulation S-K
(promulgated by the Securities and Exchange Commission) or which is a "covered
transaction" as that term is defined in Section 23A of the Federal Reserve Act
(12 U.S. Code 371c), as amended, nor is First Savings or any FS Subsidiary a
party to any agreement or understanding which provides for or contemplates such
a transaction, business relationship or indebtedness in the future. Except for
the Employee Benefit Programs referred to in Section 2.20, neither First Savings
nor any FS Subsidiary is a party to any agreement involving payments to any
person or entity based on the profits or gross revenues of First Savings.
2.24. Securities Exchange Act of 1934. First Savings has
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filed all reports required to be filed by it pursuant to the Securities Exchange
Act of 1934, as amended, during the 36 months preceding the date of this
Agreement, and such reports do not contain any untrue statement of a material
fact or omit to state any material fact which is necessary to make the
statements contained therein not misleading.
2.25. Environmental, Health and Safety. Except as set forth
in Item 2.25 of the First Savings Disclosure Schedule:
(a) Each of First Savings, the FS Subsidiaries, the
Participation Facilities and the Loan Properties (each as hereinafter defined)
are, and have been, in compliance with all applicable federal, state and local
laws including common law, regulations and ordinances and with all applicable
decrees, orders and contractual obligations relating to pollution, the discharge
of, or exposure to materials in the environment or workplace ("Environmental
Laws"), except for violations which, either individually or in the aggregate,
have not had and cannot reasonably be expected to have a material adverse effect
on First Savings or any FS Subsidiary.
(b) There is no suit, claim, action or proceeding, pending or,
to the best of First Saving's knowledge threatened, before any court, regulatory
agency or other forum in which First Savings, any FS Subsidiary, any
Participation Facility or any Loan Property, has been or, with respect to
threatened proceedings, may be, named as a defendant (x) for alleged
noncompliance (including by any predecessor) with any Environmental Laws, or (y)
relating to the release, threatened release or exposure to any material whether
or not occurring at or on a site owned, leased or operated by First Savings or
any FS Subsidiary, any Participation Facility or any Loan Property.
(c) During the period of (x) First Savings' or any FS
Subsidiary's ownership or operation of any of their respective current or former
properties, (y) First Savings' or any FS Subsidiary's participation in the
management of any Participation Facility, or (z) First Savings' or any FS
Subsidiary's holding of a security interest in a Loan Property, there has been
no release of materials in, on, under or affecting any such property, except
where such release has not had and cannot reasonably be expected to result in,
either individually or in the aggregate, a material adverse effect on First
Savings or any FS Subsidiary. Prior to the period of (x) First Savings' or any
FS Subsidiary's ownership or operation of any of their respective current
properties, (y) First Savings' or any FS Subsidiary's participation in the
management of any Participation Facility, or (z) First Savings' or any FS
Subsidiary's holding of a security interest in a Loan Property, there was no
release or threatened release of materials in, on, under or affecting any such
property, Participation Facility or Loan Property, except where such a release
has not
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had and cannot be reasonably expected to have, either individually or in the
aggregate, a material adverse effect of First Savings or any FS Subsidiary.
(d) The following definitions apply for purposes of this
Section 2.25: (x) "Loan Property" means any property in which First Savings or
any FS Subsidiary holds a security interest, and, where required by the context,
said term means the owner or operator of such property; and (y) "Participation
Facility" means any facility in which First Savings or any FS Subsidiary
participates in the management and, where required by the context, said term
means the owner or operator of such property.
2.26. Restricted Activities and Transactions. Except as set forth in
Item 2.26 of the First Savings Disclosure Schedule, during the period commencing
June 30, 1998, neither First Savings nor any FS Subsidiary has taken any action
described in Section 4.2 (excluding subsection 4.2(g)) of this Agreement.
2.27. First Savings Disclosure Schedule and Other Materials Furnished
by First Savings. The First Savings Disclosure Schedule delivered simultaneously
with this Agreement by First Savings to GCB and identified and initialed as such
by an officer of First Savings (the "First Savings Disclosure Schedule"),
together with any materials furnished to GCB by First Savings and referred to in
this Article II, are true and complete in all material respects and do not
contain any untrue statement of a material fact or omit to state any material
fact which is necessary to make the statements contained therein not misleading.
2.28. Title to Property. Except as set forth in Item 2.28 of the First
Savings Disclosure Schedule, First Savings and the FS Subsidiaries have good and
marketable title to all of their real and personal property, including but not
limited to the real property on which the main office and each branch office of
the Bank is located, free and clear of all Encumbrances and imperfections of
title, if any. As used in this Agreement, the term "Encumbrances" shall mean and
include security interests, mortgages, leases, liens, pledges, options, rights
of first refusal and other encumbrances, whether or not relating to the
extension of credit or the borrowing of money.
2.29. Liquidation Account. The Bank has maintained sufficient records
to make the necessary computations of the balance of the liquidation account and
the subaccounts thereunder.
2.30. Survival. The representations and warranties of
First Savings contained in this Article II shall not survive the
Closing.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF GCB
GCB hereby represents and warrants to First Savings as follows:
3.1. Organization; Good Standing; Power; and Qualification. Each of GCB
and Newco is a corporation duly organized, validly existing and in good standing
under the laws of the State of New Jersey, has all requisite corporate power and
authority to own, lease and operate its properties, and to conduct its business
as it is now being conducted. Great Falls Bank is a banking corporation duly
organized, validly existing and in good standing under the laws of the State of
New Jersey. All of the outstanding capital stock of Great Falls Bank is owned by
GCB.
3.2. Authority; No Violation, etc. Each of GCB and Newco has all
requisite corporate power to execute, deliver and perform its obligations under
this Agreement. The execution and delivery of this Agreement and performance by
each of GCB and Newco of its obligations hereunder have been duly approved and
authorized by all requisite corporate action of GCB and Newco, respectively,
subject in the case of Newco to the stockholder consent contemplated by Section
1.10 hereof. This Agreement has been duly executed and delivered by GCB and
Newco and, subject as aforesaid, constitutes the legal, valid and binding
agreement of each of GCB and Newco, subject to (i) applicable bankruptcy,
insolvency, moratorium, fraudulent conveyance, reorganization, receivership and
other laws relating to or affecting the rights and remedies of creditors
generally, and (ii) principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). Neither the
execution and delivery of this Agreement by GCB and Newco nor compliance by GCB
and Newco with any of the provisions hereof will (a) conflict with or result in
a breach of any provision of the Certificate of Incorporation of GCB or Newco,
(b) violate, or result with the passage of time in a violation of, or cause a
default or acceleration under, or give rise to any right to termination,
cancellation or acceleration (whether immediately, or after the giving of
notice, or after the passage of time, or a combination thereof) under, or result
in the creation of any lien, charge or encumbrance on any assets of GCB or Newco
pursuant to, any of the terms, conditions or provisions of any agreement,
instrument or obligation to which GCB or Newco is a party, or by which it or any
of its properties or assets may be bound, or (c) violate any Federal or state
statute, rule or regulation or judgment, order, writ, injunction or decree of
any Federal or state court, administrative agency or governmental body, in each
case applicable to GCB or Newco, or any of their properties or assets, or
otherwise require any filing with, or obtaining any permit, authorization,
consent or approval of, any Federal, State or local public body, commission or
authority, including without
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limitation the New Jersey Industrial Site Responsibility Act
(N.J.S.A. 13:1K-6 et. seq.), except those approvals and
authorizations specified in Section 3.3 hereof.
3.3. Governmental Approvals and Filings. No approval, authorization,
consent, license, clearance or order of, declaration or notification to, or
filing, registration or compliance with, any governmental or regulatory
authority is required in order to authorize (a) the Holding Company Merger and
(b) the Bank Merger, except (i) approvals by the Office of Thrift Supervision,
(ii) approvals of the Federal Reserve Board (or the Federal Reserve Bank of New
York under power delegated by the Federal Reserve Board), (iii) in the case of
the Bank Merger, compliance with N.J.S.A. 17:9A-132 through 17:9A-148,
inclusive, including approval by the Commissioner of the Department of Banking
and Insurance of New Jersey and filing of the agreement and plan of the Bank
Merger, certified as having been approved by the stockholders of the Bank and
Great Falls Bank, (iv) approvals by the Federal Deposit Insurance Corporation
for the acquisition and assumption of the deposits of the Bank by Great Falls
Bank and the insurance of the Bank's deposits following the Effective Date, and
(v) compliance with the proxy requirements of the Securities Exchange Act of
1934 and the regulations promulgated thereunder.
3.4. Brokers' or Finders' Fees, etc. No agent, broker, investment
banker, person or firm acting on behalf of GCB or Newco or under the authority
of GCB or Newco is or will be entitled to any broker's or finder's fee or any
other commission or similar fee directly or indirectly from First Savings in
connection with any of the transactions contemplated hereby, except for fees
payable to Advest, Inc., which fees shall be the sole responsibility of GCB. It
is expressly understood that Advest, Inc. has been retained solely by and is
working solely for the benefit of GCB and Newco in connection with this matter.
3.5. Financial Information. GCB has delivered to First Savings (a) its
audited consolidated statements of financial condition as of December 31, 1997
and 1996 and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the years in the two-year period
ended December 31, 1997 and (b) its Quarterly Report on Form 10-QSB for the
quarterly period ended June 30, 1998. The aforementioned financial statements
and report do not contain any untrue statements of material fact or omit to
state any material fact necessary in order to make the statements and
information contained therein not misleading. Each of the financial statements
contained in the aforementioned financial statements and report, with the
related notes thereto, (i) is in accordance with the books of GCB and its
subsidiaries, (ii) has been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved,
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except if and as otherwise indicated therein and (iii) fairly present the
consolidated financial position of GCB and its subsidiaries at such dates and
the results of its operations and the cash flows for the respective periods
indicated therein, except, in the case of the unaudited statements, for normal
year-end adjustments.
3.6. Regulatory Filings. GCB and its bank subsidiaries have made all
required filings with the Federal Reserve Board, the New Jersey Department of
Banking and Insurance and the Federal Deposit Insurance Corporation since
December 31, 1994.
3.7. Absence of Changes. There has been no material adverse change
since June 30, 1998 in the assets, properties, business or condition, financial
or otherwise, of GCB and its subsidiaries, taken as a whole.
3.8. Litigation, etc. Except for matters listed on Item 3.8 of the GCB
Disclosure Schedule: (a) there are no actions, suits, claims, investigations or
proceedings (legal, administrative or arbitrative) pending or, to the best
knowledge of GCB, threatened, against GCB or any subsidiary of GCB, whether at
law or in equity, whether civil or criminal in nature or whether before or by
any Federal, state, municipal or other governmental court, department,
commission, board, bureau, agency or instrumentality, domestic or foreign; and
(b) there are no existing unsatisfied judgments, decrees, injunctions or orders
of any court, governmental department, commission, agency, instrumentality or
arbitrator outstanding against GCB or any subsidiary of GCB. No petition for
bankruptcy, voluntary or involuntary, has been filed by or against GCB or any
subsidiary of GCB, neither GCB nor any subsidiary of GCB has made any assignment
for the benefit of its creditors and no receiver has been appointed for GCB or
any subsidiary of GCB or any of their assets.
3.9. Great Falls Bank. Great Falls Bank is in good standing under the
laws of the State of New Jersey and its deposits are insured by the Federal
Deposit Insurance Corporation.
3.10. Compliance with Laws. Except as disclosed in Item 3.10 of the GCB
Disclosure Schedule, neither GCB nor any subsidiary of GCB is in violation, in
any respect material to its business or assets, of any federal, state, county or
local law, ordinance, regulation or order applicable to the business conducted
by it. GCB and each subsidiary of GCB has all licenses, permits, orders and
approvals of any governmental or regulatory body which are required for the
conduct of the business conducted by it and which, if not held by it, could
reasonably be expected to have a material adverse effect upon its business or
assets (collectively, "Required Permits"). All such
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Required Permits are in full force and effect, no violations are or have been
reported in respect of any Required Permit and no proceeding is pending, or to
the best knowledge of GCB, threatened, to revoke or limit any such Required
Permit.
3.11. Securities Exchange Act of 1934. GCB has filed all reports
required to be filed by it pursuant to the Securities Exchange Act of 1934, as
amended, during the 36 months preceding the date of this Agreement, and such
reports do not contain any untrue statement of a material fact or omit to state
any material fact which is necessary to make the statements contained therein
not misleading.
3.12. Year 2000 Readiness. GCB and each of its bank subsidiaries have
taken all reasonable steps necessary to address the computer software,
accounting and record keeping issues raised in order for the data processing
systems used in the business conducted by them to be substantially Year 2000
compliant on or before the end of 1999 and, except as set forth in the GCB
Disclosure Schedule, GCB does not expect the future cost of addressing such
issues to be material. Neither GCB nor either of its bank subsidiaries has
received a rating of less than satisfactory from any bank regulatory agency with
respect to Year 2000 compliance.
3.13. Defined Benefit Plan. Neither GCB nor Great Falls
Bank maintains a defined benefit retirement plan.
3.14. Undisclosed Liabilities. To the best knowledge of GCB, neither
GCB nor Great Falls Bank has any material liabilities (whether matured or
unmatured, accrued, absolute or contingent or otherwise) which were not
reflected, reserved against, accrued for or otherwise disclosed on GCB's
consolidated statement of financial condition dated as at June 30, 1998 and
which can reasonably be expected to prevent or delay the Closing.
3.15. Survival. The representations and warranties of GCB
contained in this Article III shall not survive the Closing.
ARTICLE IV
COVENANTS
A. Covenants of First Savings:
4.1. Regular Course of Business. Except as otherwise consented to in
writing by GCB, prior to the Effective Date, First Savings will, and will cause
the FS Subsidiaries to, carry on their business diligently and in the ordinary
course only, and, without limiting the generality of the foregoing, First
Savings will use its best efforts to preserve its present business organization
(including that of the FS Subsidiaries)
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intact and preserve the present relationships of First Savings and the FS
Subsidiaries with persons having business dealings with them. During such
period, First Savings will, and will cause the FS Subsidiaries to, maintain
their books of account, records and files in the ordinary course in accordance
with existing practices and all applicable regulatory requirements.
4.2. Restricted Activities and Transactions. Except as otherwise
consented to in writing by GCB, from the date of this Agreement through the
Effective Date, First Savings will not, and First Savings will not permit any of
the FS Subsidiaries, to:
(a) amend its Charter or By-Laws;
(b) issue, sell or deliver, or agree to issue, sell or
deliver, any shares of any class of capital stock of First Savings or any FS
Subsidiary or any securities convertible into any such shares, or any options,
warrants, or other rights calling for the issuance, sale or delivery of any such
shares or convertible securities;
(c) except in the ordinary course of business (and consistent
with past practice) (i) borrow, or agree to borrow, any funds or voluntarily
incur, assume or become subject to, whether directly or by way of guarantee or
otherwise, any obligation or liability (absolute or contingent), (ii) cancel or
agree to cancel any debts or claims, (iii) distribute, lease, sell or transfer,
agree to lease, sell or transfer, or grant or agree to grant any preferential
rights to lease or acquire, any of its assets, property or rights, (iv) make or
permit any amendment to or termination of any material contract or agreement,
license or other right to which it is a party or (v) mortgage or pledge any of
its assets, tangible or intangible; for purposes of this Agreement, any contract
or agreement which satisfies the criteria in Section 2.10 shall be deemed a
material contract or agreement.
(d) grant any bonus or increase in compensation, other than
increases given in conformity with past practice; provided, that in no event
shall (i) any increase be given to Haralambos S. Kostakopoulos or any other
employee who has received an increase after October 15, 1997 or (ii) any other
employee be given an increase in excess of 4% of his or her base pay. The
employees who have been given retention bonus agreements are listed in Item
4.2(d) to the First Savings Disclosure Schedule.
(e) enter into or make any change in any Employee Benefit
Program, except as required by law;
(f) acquire voting securities or any other ownership interest
in any corporation, association, joint venture, mutual savings association,
partnership, business trust or other
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business entity, or acquire control or ownership of all or a substantial portion
of the assets of any of the foregoing, or merge, consolidate or otherwise
combine with any other entity, or acquire any branch of any entity engaged in
the business of banking, or directly or indirectly solicit or authorize the
solicitation of or enter into any agreement providing for any of the foregoing;
(g) directly or indirectly solicit or authorize the
solicitation of or enter into any agreement or understanding or, except to the
extent as may be required by law or in order to satisfy the fiduciary duties of
the directors of First Savings, engage in any discussions with, or furnish any
non-public information concerning First Savings or any FS Subsidiary to, any
person or entity other than GCB or a representative thereof with respect to any
offer or possible offer from a third party (i) to purchase shares of any class
of capital stock of First Savings or any FS Subsidiary or any securities
convertible into any such shares, or to acquire any option, warrant or other
right to purchase or otherwise acquire any such shares or convertible
securities, (ii) to make a tender or exchange offer for any shares of any class
of capital stock of First Savings or any FS Subsidiary, (iii) to purchase, lease
or otherwise acquire all or a substantial portion of the assets of First Savings
or any FS Subsidiary, or (iv) to merge, consolidate or otherwise combine with
First Savings or any FS Subsidiary;
(h) except as disclosed in item 4.2(h) of the First Savings
Disclosure Schedule, make any capital expenditure in excess of $10,000;
(i) make, extend or roll over any loan or loan commitment
which, together with all other outstanding loans and loan commitments to the
same borrower and affiliates of such borrower, exceeds (x) $300,000, in the case
of loans secured by first mortgages on one to four family residential dwellings
or (y) $150,000 (exclusive of guarantees by agencies of the United States or the
State of New Jersey) for loans which are not secured by first mortgages on one
to four family residential dwellings;
(j) purchase any securities (whether for sale or to be held to
maturity) having a maturity in excess of five years from the date hereof; or
purchase more than $2,000,000 of any issue of securities issued by the United
States Treasury or any other agency of the United States Government ("Government
Securities"); or purchase any securities which are not Government Securities if
the cost of such securities, together with the cost of all other securities then
owned by First Savings or any FS Subsidiary, and issued by the same issuer or
any affiliate thereof, exceeds $2,000,000;
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(k) offer to pay interest on accounts at the Bank at rates
which exceed the historical relationship of the Bank's rates for such accounts
to the prevailing rates for such accounts in the Bank's primary market area;
said historical relationships are disclosed in Item 4.2(k) of the First Savings
Disclosure Schedule;
(l) enter into or agree to enter into any other agreement or
transaction not in the ordinary course of business; or
(m) Willfully take action which would or is likely to (i)
adversely affect the ability of either GCB or First Savings to obtain any
necessary approvals of governmental authorities required for the transactions
contemplated hereby; (ii) adversely affect First Saving's ability to perform its
covenants and agreements under this Agreement; or (iii) result in any of the
conditions to the Merger not being satisfied; or (iv) agree in writing or
otherwise to do any of the foregoing.
4.3. Dividends and Distributions; Repurchases. Except as otherwise
consented to in writing by GCB, prior to the Effective Date, First Savings will
not declare or pay any dividend on its capital stock in cash, stock or property,
and will not redeem, repurchase or otherwise acquire any shares of its capital
stock, except that First Savings may (a) declare and pay a fifty cent per share
dividend in September, 1998; (b) may declare and pay a dividend, effective May
1, 1999, in the event that the Closing does not occur on or before April 30,
1999, which dividend shall not exceed fifty cents per share; provided, that such
a dividend may not be declared in the event that the Closing shall not have
occurred by April 30, 1999 because of a breach by First Savings of any
representation, warranty, covenant or agreement made by it herein; or (c) may
declare and pay a dividend pursuant to Section 5.12.
4.4. Advice of Changes. First Savings will promptly advise GCB in
writing of (i) any event occurring subsequent to the date of this Agreement
which would render any representation or warranty of First Savings contained in
this Agreement, if made on or as of the date of such event or on or as of the
Closing, untrue or inaccurate in any material respect and (ii) any material
adverse change in the business of First Savings or any FS Subsidiary.
4.5. Acquisition Proposals. First Savings will use its best efforts to
provide GCB with same-day notice of any offer First Savings receives from or on
behalf of any third party of the type referred to in Section 4.2(g) hereof,
including in such notice the identity of the offeror and the complete terms of
any such offer, and will use its best efforts to provide GCB with same-day
notice of the receipt of any information that such an
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offer is likely to be made and any available details with respect to such
potential offer. First Savings shall in any event provide GCB with the notices
contemplated above no later than the second business day following receipt of
any such offer or receipt of information that any such offer is likely to be
made.
4.6. Filings, Notices and Financial Statements. During the period
commencing on the date hereof and ending on the date on which the Closing
occurs:
(a) First Savings shall provide GCB with copies of all filings
made by First Savings, the Bank or any other FS Subsidiary on or after the date
hereof to the Office of Thrift Supervision, the Federal Deposit Insurance
Corporation and any other regulatory agency which has authority to regulate
First Savings, the Bank or any other FS Subsidiary by the first to occur of (i)
two business days following such filing or (ii) the Closing.
(b) To the extent that it is legally permitted to do so, First
Savings shall provide GCB with copies of all communications received by First
Savings, the Bank or any other FS Subsidiary from the Office of Thrift
Supervision, the Federal Deposit Insurance Corporation and any other regulatory
agency which has authority to regulate First Savings, the Bank or any other FS
Subsidiary within five business days of receipt of such communication or, if
sooner, by the Closing. If First Savings, the Bank or any other FS Subsidiary
shall receive any such communication which it is legally prohibited from
providing to GCB, First Savings shall notify GCB that such a communication has
been received within five business days of receipt thereof or, if sooner, by the
Closing, and First Savings and the FS Subsidiaries shall cooperate with GCB to
obtain the consent of the regulatory agency which issued such communication to
provide a copy thereof to GCB and, upon receipt of such consent, shall promptly
provide a copy of such communication to GCB.
(c) First Savings shall prepare unaudited financial statements
on a monthly basis and shall furnish copies of such statements to GCB by the
20th day following the end of each month; it is understood that the financial
statements to be furnished pursuant to this subparagraph shall be the financial
statements regularly prepared by the management of First Savings for its board
of directors.
(d) First Savings shall deliver to GCB its quarterly reports
on Form 10-QSB, all other SEC filings made by First Savings and all press
releases issued by First Savings or any FS Subsidiary on the date such filing is
made or such press release is issued.
4.7. Proxy Statement.
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(a) The proxy statement for the meeting of First Savings
shareholders contemplated by Section 1.8 hereof will not, at the time of its
issuance and at the time of the meeting, contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made, in the light of the circumstances under which they are made,
not misleading.
(b) First Savings shall cause a notice of meeting and proxy
statement regarding the meeting of First Savings shareholders contemplated by
Section 1.8 hereof to be mailed to its shareholders as soon as practicable in
accordance with applicable Federal and state law. Provided, however, that First
Savings shall furnish the proposed notice of meeting and proxy statement to GCB
for review and comments prior to sending them to its shareholders. First Savings
shall make the final determination as to the contents of such notice of meeting
and proxy statement.
4.8. Breaches and Adverse Developments. First Savings shall, in the
event it becomes aware of the impending or threatened occurrence of any event or
condition which would cause or constitute a breach (or would have caused or
constituted a breach had such event occurred or have been known prior to the
date hereof) of any of its representations, warranties, covenants or agreements
contained or referred to herein, or any other material adverse development
affecting First Savings or any of the FS Subsidiaries, give prompt written
notice thereof to GCB and use its best efforts to prevent or promptly remedy any
such breach.
4.9 Liquidation Account Computations. First Savings shall (a) furnish
to GCB a computation of the Liquidation Account within forty-five (45) days
following the date hereof and (b) recompute the Liquidation Account as of
January 1, 1999 and shall furnish such recomputation to GCB by January 31, 1999.
B. Covenants of GCB:
4.10. Funding and Capital Adequacy. After giving pro forma effect to
the Merger and any other acquisitions which GCB or its subsidiaries have agreed
to consummate, GCB will be deemed "well capitalized" under prompt corrective
action regulatory capital requirements from December 31, 1998 until receipt of
all approvals and authorizations required in connection with the transactions
contemplated by this Agreement from the following banking regulatory agencies:
The Office of Thrift Supervision, the Federal Reserve Board (or the Federal
Reserve Bank of New York under power delegated by the Federal Reserve Board),
the Commissioner of the Department of Banking and Insurance of New Jersey and
the Federal Deposit Insurance Corporation.
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4.11. Filings, Notices and Financial Statements. During the period
commencing on the date hereof and ending on the date on which the Closing
occurs:
(a) GCB shall provide First Savings with copies of all filings
made by GCB or either of its bank subsidiaries on or after the date hereof to
the Federal Reserve Board, the New Jersey Department of Banking and Insurance or
the Federal Deposit Insurance Corporation and any other regulatory agency which
has authority to regulate GCB or its bank subsidiaries by the first to occur of
(i) two business days following such filing or (ii) the Closing.
(b) GCB shall deliver to First Savings its quarterly reports
on Form 10-QSB or 10-Q, all other SEC filings made by GCB and all press releases
issued by GCB or any subsidiary of GCB on the date such filing is made or such
press release is issued.
4.12. Negative Covenants. Except as specifically contemplated by this
Agreement, GCB shall not do, or agree to commit to do, or permit any of GCB's
subsidiaries to do, without the prior written consent of First Savings (which
shall not be unreasonably withheld), any of the following:
(a) Willfully take action which would or is likely to (i)
adversely affect the ability of either GCB or First Savings to obtain any
necessary approvals of governmental authorities required for the transactions
contemplated hereby; (ii) adversely affect GCB's ability to perform its
covenants and agreements under this Agreement; or (iii) result in any of the
conditions to the Merger not being satisfied; or
(b) agree in writing or otherwise to do any of the
foregoing.
4.13. Breaches and Adverse Developments. GCB shall, in the event it
becomes aware of the impending or threatened occurrence of any event or
condition which would cause or constitute a breach (or would have caused or
constituted a breach had such event occurred or have been known prior to the
date hereof) of any of its representations, warranties, covenants or agreements
contained or referred to herein, or any other material adverse development
affecting GCB, Newco or Great Falls Bank, give prompt written notice thereof to
First Savings and use its best efforts to prevent or promptly remedy any such
breach.
4.14. Liquidation Account. GCB agrees to maintain or otherwise cause
Great Falls Bank to maintain the liquidation account established by the Bank
pursuant to the plan of conversion adopted in connection with its conversion
from mutual to stock form upon the Effective Date for the benefit of those
persons and entities who were eligible savings account holders of
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the Bank on October 31, 1991 and who continue from time to time to have rights
therein.
4.15. GCB Shareholder Approval. Approval of the transactions
contemplated by this Agreement by the shareholders of GCB is not required and
will not be sought.
ARTICLE V
MUTUAL COVENANTS AND AGREEMENTS
5.1. Governmental Approvals.
(a) First Savings will, and will cause the FS Subsidiaries to, use
their best efforts to comply as promptly as practicable with the governmental
requirements specified in Sections 2.5 and 3.3 and obtain as soon as practicable
all necessary approvals, authorizations, consents, licenses, clearances or
orders referred to in those sections; provided, however, that the following
shall be the responsibility of GCB and its subsidiaries: (i) obtaining approval
(or waiver) of the Federal Reserve Board (or the Federal Reserve Bank of New
York under power delegated by the Federal Reserve Board), (ii) obtaining
approval by the Federal Deposit Insurance Corporation for the acquisition and
assumption of the deposits of the Bank by Great Falls Bank and the insurance of
the Bank's deposits following the Effective Date and (iii) obtaining approval of
the Commissioner of the Department of Banking and Insurance Of New Jersey to the
Bank Merger. First Savings shall, within thirty (30) days following the date
hereof, apply for non- applicability determinations from the New Jersey
Department of Environmental Protection with respect to the New Jersey Industrial
Site Responsibility Act for all real property owned by First Savings or any FS
Subsidiary.
(b) GCB will, and will cause Newco and Great Falls Bank to, use their
best efforts to comply as promptly as practicable with the governmental
requirements specified in Sections 2.5 and 3.3 and obtain as soon as practicable
all necessary approvals, authorizations, consents, licenses, clearances or
orders referred to in those sections; provided, however, that the following
shall be the responsibility of First Savings and the FS Subsidiaries: (i)
obtaining approvals by the Office of Thrift Supervision and (ii) compliance with
the proxy requirements of the Securities Exchange Act of 1934 and the
regulations promulgated thereunder.
(c) Each of First Savings and GCB agrees that it shall, and shall cause
its subsidiaries to, cooperate fully with the other in order to assist the other
to comply with those governmental responsibilities, and to obtain all approvals,
authorizations, consents, licenses, clearances or orders, which are the
responsibility of the other pursuant to clauses (a) and (b), above; in
furtherance of, and without limiting the generality of,
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the foregoing, each of First Savings and GCB agrees that it shall, and shall
cause its subsidiaries to, provide promptly to the other such information
concerning its business and financial statements and affairs as, in the
reasonable judgment of the other party or its counsel, may be required or
appropriate for inclusion in any application or other submission to a regulatory
authority and to cause its counsel and auditors to cooperate with the other's
counsel and auditors in the preparation of any such application or submission.
(d) GCB shall, if required by any regulatory authority as a condition
of granting any necessary approval, authorization, consent, license, clearance
or order, cause this Agreement to be submitted to the stockholders of GCB at a
special meeting of such stockholders for the purpose of adopting and approving
the same.
(e) Each party shall furnish to the other all applications for
regulatory approvals which it or any of its subsidiaries is required to make
pursuant to clauses (a) or (b) above for review and comments prior to sending
them to the regulators.
5.2. The Bank Merger. Promptly following execution of this Agreement,
GCB shall cause the Board of Directors of Great Falls Bank, and First Savings
shall cause the Board of Directors of Bank, to authorize the execution of a
merger agreement in the form attached hereto as Exhibit A (the "Bank Merger
Agreement") and to cause Great Falls Bank and Bank to execute the Bank Merger
Agreement and to submit the Bank Merger Agreement for approval by the
Commissioner of the Department of Banking and Insurance of New Jersey.
Thereafter, the parties shall each use their best efforts to obtain the approval
of the Commissioner.
It is the understanding of GCB that the Bank Merger may be accomplished
in the manner contemplated by this Section 5.2 hereof by reason of New Jersey
laws which give New Jersey banks "parity" with national banking associations.
However, in the event that it is necessary for Bank to convert to a national
banking association (or, if mergers between New Jersey commercial banks and New
Jersey savings banks are permissible, a New Jersey savings bank) in order to
complete the transaction, First Savings shall use its best efforts to bring
about such conversion as quickly as possible.
5.3. Expenses. In the event the Merger is not consummated, GCB and
First Savings will each separately bear its own expenses (and those of its
subsidiaries) incurred in connection with this Agreement or any transaction
contemplated hereby, subject to the provisions of Article IX hereof.
5.4. Public Announcements. Recognizing that they each have
independent obligations with respect to the dissemination of
material information to the public and to their respective
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shareholders, GCB and First Savings will to the maximum extent feasible advise
and confer with each other prior to the issuance of any reports, statements or
releases (including reports, statements or releases to their respective
employees) pertaining to this Agreement. Without limiting the generality of the
foregoing, First Savings shall furnish any such proposed report, statement or
release to GCB for review and comments prior to issuance.
5.5. Further Assurances. GCB and First Savings agree to execute and
deliver, and to cause their respective subsidiaries to execute and deliver, such
instruments and take such other actions as may be necessary or required in order
to consummate the transactions contemplated hereby.
5.6. Conversion Amount. First Savings shall, as soon as practicable
following the end of the month preceding the month in which the Closing is to
take place, furnish to GCB (i) a consolidated statement of the financial
condition of First Savings and the FS Subsidiaries at the end of said month,
prepared in accordance with Section 1.5 and (ii) a statement of its Adjusted Net
Worth at the end of said month, calculated in accordance with Section 1.5, which
statement shall include a reasonably detailed explanation of all adjustments.
5.7. Termination of Employment of Dr. Haralambos S. Kostakopoulos. The
employment of Dr. Haralambos S. Kostakopoulos, the President of First Savings,
will terminate upon the Effective Date. First Savings shall be responsible for
satisfying the obligation of First Savings to Dr. Kostakopoulos to make the
payment(s) provided for in Dr. Kostakopoulos' Employment Agreement, as detailed
in Item 5.7 of the First Savings Disclosure Schedule, subject to the following
provisions of this Section 5.7. This obligation shall not exceed $712,136 if Dr.
Kostakopoulos is alive on the Effective Date, which amount shall be paid to Dr.
Kostakopoulos by First Savings on the Effective Date; and this obligation shall
not exceed $0 if Dr. Kostakopoulos is not alive on the Effective Date. Except as
provided in this Section 5.7, Dr. Kostakopoulos agrees that he shall not be
entitled to any severance pay or other compensation from First Savings, any FS
Subsidiary, GCB, Newco, Great Falls Bank or any other subsidiary of GCB arising
out of, in connection with, or as a result of, his Employment Agreement, his
employment by First Savings and/or any FS Subsidiary, or the termination of his
employment.
If and to the extent that any payment made to Dr. Kostakopoulos
pursuant to the preceding paragraph of this Section 5.7 constitutes an "excess
parachute payment" which cannot be taken as a deduction pursuant to Section 280G
of the Internal Revenue Code of 1986, as amended, then the amount payable to Dr.
Kostakopoulos shall be reduced by the portion of such payment
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which constitutes an excess parachute payment.
Notwithstanding anything herein to the contrary, Dr. Kostakopoulos does
not waive his rights to purchase continuation of benefits under the Consolidated
Omnibus Budget Reconciliation Act or similar New Jersey law.
5.8. Access to Records and Properties; Confidentiality.
(a) First Savings shall permit reasonable access to GCB and
its agents and representatives, including, without limitation, officers,
directors, employees, attorneys, accountants and financial advisors
(collectively, "Representatives"), and shall disclose and make available to GCB
and its Representatives, its books, papers and records relating to their
respective assets, stock ownership, properties, operations, obligations and
liabilities, including, but not limited to, books of account (including the
general ledger), tax records, minute books of director's and stockholder's
meetings, organizational documents, bylaws, material contracts and agreements,
filings with any regulatory authority, independent auditors work papers (subject
to receipt by such auditors of a standard access representation letter),
litigation files, plans affecting employees, and any other business activities
or prospects of First Savings or any FS Subsidiary, in which GCB and its
Representatives may have a reasonable interest. First Savings shall not be
required to provide access to or disclose information where such access or
disclosure would violate or prejudice the rights of any customer or would
contravene any law, rule, regulation, order or judgment, or in the case of the
document which is subject to an attorney-client privilege, would compromise the
right of the disclosing party to claim that privilege. The parties will use all
reasonable efforts to obtain waivers of any such restriction (other than the
attorney client privilege) and in any event make appropriate substitute
disclosure arrangements under circumstances in which the restrictions of the
preceding sentence apply.
(b) GCB shall deliver to First Savings, within five (5)
business days following receipt thereof, copies of the public sections of all
regulatory examination reports rendered during the period commencing on the date
hereof and ending upon the Closing with respect to GCB or Great Falls Bank.
(c) All information furnished by the parties hereto previously
in connection with transactions contemplated by this Agreement or pursuant
hereto shall be used solely for the purpose of evaluating the transactions
contemplated hereby, shall be kept confidential and shall be treated as the sole
property of the party delivering the information until consummation of the
Merger contemplated hereby and, if such Merger shall not occur, each party and
each party's Representatives shall return to the other
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party all documents or other materials containing, reflecting or referring to
such information, will not retain any copies of such information, shall keep
confidential all such information, and shall not directly or indirectly use such
information for any competitive or commercial purposes or any other purpose not
expressing permitted hereby. Each party hereto shall inform its Representatives
of the terms of this Section 5.8. Any breach of this Section 5.8 by a
Representative of a party hereto shall conclusively be deemed to be a breach
thereof by such party. In the event that the Merger contemplated hereby does not
occur or this Agreement is terminated, all documents, notes and other writings
prepared by a party hereto or its Representatives based on information furnished
by the other party, and all other documents and records obtained from another
party hereto in connection herewith, shall be promptly destroyed. The obligation
to keep such information confidential shall continue for 30 months from the date
the proposed Merger is abandoned but shall not apply to (i) any information
which (A) the party receiving the information can establish by convincing
evidence was already in its possession prior to the disclosure thereof to it by
the other party; (B) was then generally known to the public other than as a
result of a disclosure by any party hereto or its Representatives; (C) became
known to the public through no fault of the party receiving such information; or
(D) was disclosed to the party receiving such information by a third party not
bound by an obligation of confidentiality; or (ii) disclosures pursuant to a
legal, regulatory or examination requirement or in accordance with an order of a
court of competent jurisdiction, provided that in the event of any disclosure
required by this clause (ii), the disclosing party will give reasonable prior
written notice of such disclosure to the other parties and shall not disclose
any such information without an opinion of counsel supporting its position that
such information must be disclosed.
(d) In addition to all other remedies that may be available to any
party hereto in connection with a breach by any other party hereto of its or its
Representative's obligations under this Section 5.8, each party hereto shall be
entitled to specific performance and injunctive and other equitable relief with
respect to this Section 5.8. Each party hereto waives, and agrees to use all
reasonable efforts to cause its Representatives to waive, any requirement to
secure or post a bond in connection with any such relief.
5.9. Employees of the Bank.
Subject to the provisions of this Section 5.9, GCB agrees that it shall
cause Great Falls Bank to allow the employees of the Bank who are offered and
who accept employment by Great Falls Bank (the "Bank Employees") to participate
in any of Great Falls Bank's employee benefit plans in which similarly situated
employees of Great Falls Bank participate, to the same extent as
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comparable employees of Great Falls Bank. As of the Effective Date, GCB shall
cause Great Falls Bank to permit the Bank Employees to participate in Great
Falls Bank's group hospitalization, medical, life and disability insurance plans
on the same terms and conditions as applicable to comparable employees of GCB
and its subsidiaries; provided, however, that all Bank Employees and their
dependents will be eligible to participate in the medical insurance plan(s)
covering employees of Great Falls Bank as of the Effective Date without regard
to pre-existing conditions or exclusions and with no uninsured waiting periods.
As of the next entry date immediately following the Effective Date, GCB shall
cause Great Falls Bank to permit the Bank Employees to participate in Great
Falls Bank's defined contribution plan; provided, that the Bank Employees shall
not be entitled to participate in the profit sharing portion of said plan until
the first anniversary of the Effective Date. The Bank Employees shall be given
credit for their years of service with the Bank or First Savings for eligibility
and vesting purposes under Great Falls Bank's defined contribution retirement
plan, except that the Bank Employees shall not be entitled to participate in the
profit sharing portion of said plan until the first anniversary of the Effective
Date.
As of the Effective Date, the Bank Employees shall retain all accrued
vacation and sick leave benefits, provided such amounts have been fully accrued
for by First Savings or the Bank as of the Effective Date and are in accordance
with such amounts provided in past practice by First Savings and the Bank. As of
the Effective Date, all participants under the Bank's defined contribution plan
shall become 100% vested in all participant accounts. With respect to Great
Falls Bank's vacation, sick leave and severance policies, GCB shall cause Great
Falls Bank to recognize, for purposes of eligibility to participate, vesting and
benefits accrual purposes, all prior years of service that any Bank Employee had
with the Bank or First Savings, except that any Bank Employees who are
involuntarily terminated within six months following the Effective Date shall
not be entitled to receive severance benefits under GCB's severance policies;
such employees shall instead be paid severance benefits in accordance with, and
subject to, the provisions of this Section 5.9.
GCB shall pay each of the four (4) Bank Employees disclosed on Item 4.2
of the First Savings Disclosure Schedule a retention bonus ("Retention Bonus")
if and only if such Bank Employee shall either (a) remain in the employ of GCB
or a subsidiary of GCB for a period of three (3) months following the Effective
Date or (b) be terminated from such employment within three (3) months following
the Effective Date by GCB or a subsidiary of GCB without cause. The amount of
the Retention Bonus to be paid to each listed individual shall be as specified
in Item 4.2 of the First Savings Disclosure Schedule; the aggregate pretax cost
of the Retention Bonuses shall not exceed $90,748.
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Following the Effective Date, GCB shall cause Great Falls Bank to honor
in accordance with its terms the Change In Control Severance Agreement between
Brian McCourt and the Bank.
GCB and Great Falls Bank agree to pay the cost of out- placement
services for any Bank Employees that are terminated without cause within the six
month period following the Effective Date. Bank Employees who are entitled to
receive a Retention Bonus shall not be entitled to any severance benefits until
they have been employed by GCB for six months; provided, that such Bank
Employees shall be entitled to one month's advance notice of termination during
such six month period or to one month's pay in lieu of such notice.
Any employee of First Savings or the Bank as of the Effective Date,
other than Dr. Kostakopoulos, Mr. McCourt or any employee who is entitled to
receive a Retention Bonus, who is involuntarily terminated for any reason, or
whose job or terms of employment is substantially changed (and who thereafter
terminates his or her employment), other than terminations or changes made for
just cause, within six months after the Effective Date will receive the
severance benefits set forth in the following sentence. Such severance benefits
will be paid in a lump-sum payment equal to one (1) week's salary for every year
or partial year of employment service with First Savings or the Bank, with a
minimum severance benefit equal to two (2) weeks of salary and the maximum
severance benefit payable shall be twenty-six (26) weeks.
5.10. Accounting and Financial Matters.
Notwithstanding that First Savings believes that it has established all reserves
and taken all provisions for possible loan losses required by GAAP and
applicable laws, rules and regulations, First Savings recognizes that GCB may
have adopted different loan, accrual and reserve policies (including loan
classifications and levels of reserves for possible loan losses). From and after
the date of this Agreement to the Effective Time, First Savings and GCB shall
consult and cooperate with each other with respect to (i) conforming, based upon
such consultation, the loan, accrual and reserve policies of First Savings and
the FS Subsidiaries to those policies of GCB and its subsidiaries to the extent
appropriate (provided, that any required change in the practices of First
Savings and the FS Subsidiaries in connection with the matters in this clause
(i) need not be effected until the parties receive all necessary stockholder
approvals and all approvals and authorizations of the public authorities
referred to in Sections 2.5 and 3.3 hereof), and (ii) conforming, based upon
such consultation, the composition of the securities portfolios and overall
asset/liability management position of First Savings and the FS Subsidiaries,
and GCB and its subsidiaries, to the extent appropriate.
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5.11. 1999 Closing. Notwithstanding any other provision of this
Agreement, the Closing will not occur prior to January 1, 1999.
5.12. Key Man Insurance. Notwithstanding anything herein to the
contrary, in the event that Dr. Kostakopoulos shall die after the date of the
Agreement, but prior to the Effective Time, First Savings, the Bank, GCB or
Great Falls Bank, as the case may be, shall pay to the estate of Dr.
Kostakopoulos, out of the aggregate proceeds received by First Savings, the
Bank, GCB or Great Falls Bank from the key man life insurance currently held by
First Savings or the Bank on the life of Dr. Kostakopoulos, the sum that would
have been payable under his Employment Agreement upon the Effective Date (as
disclosed in Item 5.7 of the First Savings Disclosure Schedule) but for his
prior death, without regard to the stated limitation in Section 5.7 of $712,136,
and no sums shall be payable by First Savings, Bank, any other FS Subsidiary,
GCB or Newco pursuant to Section 5.7 of this Agreement. Further, in the event
that Dr. Kostakopoulos shall die after the date of the Agreement, but prior to
the Effective Time, First Savings shall pay a special cash dividend on the
shares of common stock of First Savings in the aggregate amount equal to the
amount, if any, by which the aggregate proceeds received by First Savings or the
Bank from the key man life insurance held by First Savings or the Bank on the
life of Dr. Kostakopoulos exceeds the sum of (a) the payments made to the estate
of Dr. Kostakopoulos pursuant to the first sentence of this Section 5.11 and (b)
the aggregate amount of all premiums paid by First Savings, the Bank or any
other FS Subsidiary in respect of such key man life insurance; provided,
however, that the aggregate special cash dividend payable on the Common Stock of
First Savings shall be reduced by the amount of any shortfall referenced at
Section 1.5 herein. Notwithstanding anything herein to the contrary, this
Section 5.12 shall be construed as an agreement as to which Dr. Kostakopoulos
and the shareholders of First Savings are intended to be third party
beneficiaries and shall be enforceable by such persons and their heirs and
representatives.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF GCB AND NEWCO
The obligations of GCB and Newco to consummate the transactions
contemplated hereby are subject to the satisfaction of the following conditions
unless waived by GCB and Newco:
6.1. Representations and Warranties. The representations and warranties
of First Savings set forth in Article II hereof shall be true and correct in all
material respects as of the date of this Agreement and as of the date of the
Closing contemplated
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by Article VIII hereof (the "Closing Date") as though made on and as of the
Closing Date.
6.2. Covenants. First Savings shall have performed and complied in all
material respects with each and every covenant, agreement and condition required
by this Agreement to be performed or complied with by it prior to the Closing
Date.
6.3. Certificate. First Savings shall have furnished to GCB a
certificate of its President in form and substance reasonably satisfactory to
GCB to the effect that (i) the representations and warranties contained in
Article II of this Agreement are true and correct in all material respects at
and as of the Closing Date as though such representations and warranties were
made on the date thereof, (ii) First Savings has complied with all terms,
covenants and provisions of this Agreement required to be performed or complied
with by First Savings prior to the Closing Date, (iii) the statement of
stockholders equity furnished pursuant to Section 5.6 is in accordance with the
books of First Savings and fairly presents the stockholders equity of First
Savings as of the end of the month preceding the month in which the Closing
occurs, and (iv) to the knowledge of First Savings, the conditions set forth in
Sections 6.5, 6.6 and 6.7 hereof are each satisfied as of the Closing Date.
6.4. Opinion of Counsel. GCB shall have received an opinion of Malizia,
Spidi, Sloane & Fisch, P.C., counsel to First Savings, dated the date of the
Closing and addressed to GCB, in form and substance satisfactory to counsel to
GCB, as to the matters set forth in Exhibit B attached hereto. In rendering such
opinion, such counsel may rely upon certificates of officers of First Savings
and of public officials as to matters of fact.
6.5. No Governmental or Other Proceeding or Litigation. No
-------------------------------------------------
order of any court or administrative agency (including, without
limitations any banking regulatory authority) shall be in effect
on the Closing Date or on the Effective Date which restrains or
prohibits any transaction contemplated hereby or which would
limit or otherwise affect in a material respect the operation of
Bank and Great Falls Bank as a single entity following
consummation of the Bank Merger or of First Savings and Newco as
a single entity following consummation of the Holding Company
Merger; no suit, action, or proceeding by any governmental body
or other person or entity, or investigation or inquiry by any
governmental body, shall be pending or, in the case of a
governmental body, threatened against GCB, Newco, Great Falls
Bank, First Savings or any FS Subsidiary, which challenges the
validity or legality, or seeks to restrain the consummation, of
any transaction contemplated hereby or which seeks to limit or
otherwise affect the operation of Bank and Great Falls Bank as a
single entity following the consummation of the Bank Merger or of
First Savings and Newco as a single entity following consummation
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of the Holding Company Merger; and no written advice shall have been received by
GCB or First Savings or their respective counsel from any governmental body, and
remain in effect, stating that an action or proceeding will, if the Holding
Company Merger and/or the Bank Merger is consummated or sought to be
consummated, be filed seeking to invalidate or restrain said transaction or
limit or otherwise affect the operation of Bank and Great Falls Bank as a single
entity following the consummation of the Bank Merger or of First Savings and
Newco as a single entity following consummation of the Holding Company Merger.
6.6. Approvals and Consents. The approval of the stockholders of First
Savings referred to in Section 1.8 hereof, and all approvals and authorizations
of the public authorities referred to in Sections 2.5 and 3.3 hereof, shall have
been obtained, and all waiting periods specified by law shall have passed. Also,
First Savings shall have obtained non- applicability determinations from the New
Jersey Department of Environmental Protection with respect to the New Jersey
Industrial Site Responsibility Act for all real property owned by First Savings
or any FS Subsidiary on the date hereof.
6.7. First Savings's Stockholders Equity. First Savings's Adjusted Net
Worth (as defined in Section 1.5) as of the end of the month preceding the month
in which the Closing is to take place shall be not less than $9,045,707.
6.8. Transaction Expenses. First Savings shall have furnished to GCB
(a) an accounting of all Transaction Expenses (as that term is defined in
Section 1.5 hereof) and (b) final bills from all providers of significant
services in connection with the transactions contemplated by this Agreement,
including its investment bankers, attorneys and accountants.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF FIRST SAVINGS
The obligations of First Savings to consummate the transactions
contemplated hereby are subject to the satisfaction of the following conditions
unless waived by First Savings:
7.1. Representations and Warranties. The representations and warranties
of GCB set forth in Article III hereof shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date as though
made on and as of the Closing Date.
7.2. Covenants. GCB and Newco shall have performed and complied in all
material respects with each and every covenant, agreement and condition required
by this Agreement to be performed or complied with by it prior to the Closing
Date.
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7.3. Certificate. Each of GCB and Newco shall have furnished to First
Savings a certificate of its President or Vice President in form and substance
reasonably satisfactory to First Savings to the effect that (i) the
representations and warranties contained in Article III of this Agreement are
true and correct in all material respects at and as of the Closing Date as
though such representations and warranties were made on the date thereof, (ii)
it has complied with all terms, covenants and provisions of this Agreement
required to be performed or complied with by it prior to the Closing Date and
(iii) to the knowledge of GCB or Newco, as the case may be, the conditions set
forth in Sections 7.5 and 7.6 hereof are each satisfied as of the Closing Date.
7.4. Opinion of Counsel. First Savings shall have received an opinion
of Williams, Caliri, Miller & Otley, counsel to GCB and Newco, dated the date of
the Closing and addressed to First Savings, in form and substance satisfactory
to counsel to First Savings, as to the matters set forth in Exhibit C attached
hereto. In rendering such opinion, such counsel may rely upon certificates of
officers of GCB and Newco and of public officials as to matters of fact.
7.5. No Governmental or Other Proceeding or Litigation. No
-------------------------------------------------
order of any court or administrative agency (including, without
limitations any banking regulatory authority) shall be in effect
on the Closing Date or on the Effective Date which restrains or
prohibits any transaction contemplated hereby or which would
limit or otherwise affect in a material respect the operation of
Bank and Great Falls Bank as a single entity following
consummation of the Bank Merger or of First Savings and Newco as
a single entity following consummation of the Holding Company
Merger; no suit, action, or proceeding by any governmental body
or other person or entity, or investigation or inquiry by any
governmental body, shall be pending or, in the case of a
governmental body, threatened against GCB, Newco, Great Falls
Bank, First Savings or any FS Subsidiary, which challenges the
validity or legality, or seeks to restrain the consummation, of
any transaction contemplated hereby or which seeks to limit or
otherwise affect the operation of Bank and Great Falls Bank as a
single entity following the consummation of the Bank Merger or of
First Savings and Newco as a single entity following consummation
of the Holding Company Merger; and no written advice shall have
been received by GCB or First Savings or their respective counsel
from any governmental body, and remain in effect, stating that an
action or proceeding will, if the Holding Company Merger and/or
the Bank Merger is consummated or sought to be consummated, be
filed seeking to invalidate or restrain said transaction or limit
or otherwise the operation of Bank and Great Falls Bank as a
single entity following the consummation of the Bank Merger or of
First Savings and Newco as a single entity following consummation
of the Holding Company Merger.
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7.6. Approvals and Consents. All approvals and authorizations of the
public authorities referred to in Sections 2.5 and 3.3 hereof, shall have been
obtained, and all waiting periods specified by law shall have passed.
7.7. Fairness Opinion. First Savings shall have received the opinion of
Ryan, Beck & Co., in form and substance reasonably satisfactory to said Board of
Directors, that the consideration to be paid to the stockholders of First
Savings pursuant to this Agreement is fair from a financial point of view to
such stockholders as of the date of Board adoption of the Agreement and as of
the date of mailing of the proxy statement to the stockholders of First Savings
related to the Meeting of Stockholders contemplated by Section 1.8 hereof. The
foregoing opinion shall be included in the proxy statement. Provided, that the
condition specified in this Section 7.7 hereof shall be conclusively deemed to
have been waived if First Savings shall not have exercised its right to
terminate this Agreement by reason of the failure of such condition on or before
the first to occur of (i) the date of the proxy statement distributed in
connection with the meeting of shareholders of First Savings contemplated in
Section 1.8 hereof or (ii) the 120th day following the date of this Agreement.
ARTICLE VIII
CLOSING
Unless this Agreement shall have been terminated pursuant to a
provision of Article IX hereof, a closing (the "Closing") will be held, as soon
as practicable after the satisfaction or waiver of the conditions set forth in
Articles VI and VII hereof (but in no event prior to January 1, 1999; and in no
event later than the last to occur of January 1, 1999 or the 45th day following
receipt of all required regulatory approvals), at the offices of Williams,
Caliri, Miller & Otley, 1428 Route 23, Wayne, New Jersey. The parties agree that
the target date for such Closing shall be January 28, 1999. At the Closing, the
documents referred to in Articles VI and VII hereof will be exchanged by the
parties. Immediately thereafter, (i) the Certificate of Merger contemplated by
Section 1.7 hereof shall be filed in accordance with the Act and (ii) the Bank
Merger Agreement will be approved by the GCB as the sole shareholder of Great
Falls Bank and by First Savings as the sole shareholder of the Bank and shall be
filed with the Department of Banking and Insurance of the State of New Jersey.
ARTICLE IX
TERMINATION
9.1. Termination. This Agreement may be terminated at any
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time prior to Closing:
(a) by First Savings, by written notice to GCB, if (i) First
Savings, without violating any of its covenants hereunder, shall have received
an unsolicited offer to enter into a transaction of the type described in
Section 4.2(g) and the Board of Directors of First Savings, after consulting
with counsel, shall have determined in the exercise of its fiduciary duties that
it should terminate this Agreement and pursue such offer or (ii) the approval of
the stockholders of First Savings referred to in Section 1.8 hereof shall not be
obtained;
(b) by GCB, by written notice to First Savings, if the
approval of the stockholders of First Savings referred to in Section 1.8 hereof
shall not be obtained within 120 days following the date of this Agreement;
(c) by GCB, by written notice to First Savings, if (i) any
representation or warranty of First Savings set forth in Article II hereof shall
not be true and correct in all material respects, (ii) First Savings shall
breach any covenant or agreement made by it herein or (iii) any condition set
forth in Article VI hereof shall not have been satisfied by July 29, 1999.
Provided, that (x) GCB may not terminate this Agreement by reason of the failure
of a condition set forth in Article VI if the failure of such condition shall be
caused by a breach by GCB and/or Newco of any covenant or agreement made by it
herein; (y) GCB may not terminate this Agreement by reason of a breach of any
covenant or agreement made by First Savings hereunder unless First Savings shall
fail to cure such breach within thirty (30) days following a written demand to
cure by GCB; and (z) GCB may not terminate this Agreement by reason of a breach
of any representation or warranty made by First Savings in this Agreement unless
First Savings shall fail to eliminate the matter or condition which makes such
representation or warranty untrue, within thirty (30) days following a written
demand to cure by GCB.
(d) by First Savings, by written notice to GCB, if (i) any
representation or warranty of GCB set forth in Article III hereof shall not be
true and correct in all material respects, (ii) GCB or Newco shall breach any
covenant or agreement made by it herein or (iii) any condition set forth in
Article VII hereof shall not have been satisfied by July 29, 1999. Provided,
that (x) First Savings may not terminate this Agreement by reason of the failure
of a condition set forth in Article VII if the failure of such condition shall
be caused by a breach by First Savings of any covenant or agreement made by it
herein; (y) First Savings may not terminate this Agreement by reason of a breach
of any covenant or agreement made by GCB hereunder unless GCB shall fail to cure
such breach within thirty (30) days following a written demand to cure by First
Savings; and (z) First Savings
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may not terminate this Agreement by reason of a breach of any representation or
warranty made by GCB in this Agreement unless GCB shall fail to eliminate the
matter or condition which makes such representation or warranty untrue, within
thirty (30) days following a written demand to cure by First Savings.
9.2. Liability Upon Termination.
(a) If this Agreement is terminated in accordance with Section 9.1, the
transactions contemplated hereby shall be abandoned without further action by
either party hereto, and the parties shall have no further liabilities or
obligations hereunder except as provided in the following subsections of this
Section 9.2.
(b) In the event First Savings shall exercise its right of termination
under Section 9.1(a), First Savings shall pay to GCB a termination fee of
$500,000.
(c) In the event GCB shall exercise its right of termination under
Section 9.1(b), First Savings shall pay to GCB a termination fee of $500,000.
(d) First Savings shall pay to GCB, as liquidated damages, a
termination fee of $500,000 in the event that (i) this Agreement is terminated
by GCB pursuant to Section 9.1(c) hereof by reason of the breach by First
Savings of any covenant or agreement (but not any representation or warranty)
made by it herein, or (ii) this Agreement is terminated by First Savings unless
such termination is expressly permitted pursuant to Section 9.1(a) or 9.1(d)
hereof.
(e) GCB shall pay to First Savings, as liquidated damages, a
termination fee of $500,000 in the event that (i) this Agreement is terminated
by First Savings pursuant to Section 9.1(d) hereof by reason of the breach by
GCB or Newco of any covenant or agreement (but not any representation or
warranty) made by it herein, or (ii) this Agreement is terminated by GCB unless
such termination is expressly permitted pursuant to Section 9.1(b) or 9.1(c)
hereof.
(f) In the event that GCB shall terminate this Agreement pursuant to
Section 9.1(c) hereof by reason of the breach by First Savings of any
representation or warranty made by it herein other than those contained in
Section 2.5, First Savings shall reimburse GCB for all costs incurred by it in
connection with the negotiation and performance and enforcement of this
Agreement, as well as all costs of enforcing this Section 9.1(f).
(g) The maximum amount to which a party shall be entitled from the
other upon termination of this Agreement shall be $500,000, regardless of the
number of grounds which such party
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may have for claiming a termination fee or other payment
hereunder.
ARTICLE X
INDEMNIFICATION
10.1. Indemnification. In the event of any threatened or actual claim,
action, suit, proceeding or investigation, whether civil or administrative,
including, without limitation, any such claim, action, suit, proceeding or
investigation in which any person who is now, or has been at any time prior to
the date of this Agreement, or who becomes prior to the Effective Date, a
director or officer or employee of First Savings or any of its Subsidiaries (the
"Indemnified Parties") is, or is threatened to be, made a party based in whole
or in part on, or arising in whole or in part out of, or pertaining to (i) the
fact that he is or was a director, officer or employee of First Savings, any of
the Subsidiaries of First Savings or any of their respective predecessors or
(ii) this Agreement or any of the transactions contemplated hereby, whether in
any case asserted or arising before or after the Effective Date, the parties
hereto agree to cooperate and use their best efforts to defend against and
respond thereto. It is understood and agreed that after the Effective Date, GCB
shall indemnify and hold harmless, as and to the extent permitted by New Jersey
law, each such Indemnified Party against any losses, claims, damages,
liabilities, costs, expenses (including reasonable attorney's fees and expenses
in advance of the final disposition of any claim, suit, proceeding or
investigation to each Indemnified Party to the fullest extent permitted by law
upon receipt of any undertaking required by applicable law), judgments, fines
and amounts paid in settlement in connection with any such threatened or actual
claim, action, suit, proceeding or investigation, and in the event of any such
threatened or actual claim, action, suit, proceeding or investigation (whether
asserted or arising before or after the Effective Date), the Indemnified Parties
may retain counsel reasonably satisfactory to them after consultation with GCB;
provided, however, that (1) GCB shall have the right to assume the defense
thereof and upon such assumption GCB shall not be liable to any Indemnified
Party for any legal expenses of other counsel or any other expenses subsequently
incurred by any Indemnified Party in connection with the defense thereof, except
that if GCB elects not to assume such defense or counsel for the Indemnified
Parties reasonably advises that there are issues which raise conflicts of
interest between GCB and the Indemnified Parties, the Indemnified Parties may
retain counsel reasonably satisfactory to them after consultation with GCB, and
GCB shall pay the reasonable fees and expenses of such counsel for the
Indemnified Parties, (2) GCB shall in all cases be obligated pursuant to this
paragraph to pay for only one firm of counsel
41
<PAGE>
for all Indemnified Parties, (3) GCB shall not be liable for any settlement
effected without its prior written consent (which consent shall not be
unreasonably withheld) and (4) GCB shall have no obligation hereunder to any
Indemnified Party when and if a court of competent jurisdiction shall ultimately
determine, and such determination shall have become final and nonappealable,
that indemnification of such Indemnified Party in the manner contemplated hereby
is prohibited by applicable law. Any Indemnified Party wishing to claim
Indemnification under this Article X, upon learning of any such claim, action,
suit, proceeding or investigation, shall notify promptly GCB thereof, provided
that the failure to so notify shall not effect the obligations of GCB under this
Article X except to the extent such failure to notify prejudices GCB. GCB's
obligations under this Article X continue in full force and effect for a period
of six (6) years from the Effective Date; provided, however, that all rights to
indemnification in respect of any claim ( a "Claim") asserted or made within
such period shall continue until the final disposition of such Claim.
Notwithstanding anything to the contrary contained in this Section 10.1, in no
event shall GCB's obligations under this Section 10.1 with respect to
indemnification or the advancement of expenses be greater than the obligations
of First Savings and the FS Subsidiaries with respect thereto set forth as of
the date of this Agreement in the Certificate of Incorporation, By-laws or
similar governing documents of First Savings and the FS Subsidiaries.
10.2. Directors and Officers Liability Insurance. GCB shall cause the
persons serving as officers and directors of First Savings and the Bank
immediately prior to the Effective Date to be covered for a period of six years
from the Effective Date by the directors' and officers' liability insurance
policy maintained by First Savings and the Bank (provided that GCB may
substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are not less advantageous than such
policy) with respect to acts or omissions occurring prior to the Effective Date
which were committed by such officers and directors in their capacity as such.
10.3 Successors. In the event GCB or the Surviving Corporation or any
of its successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger, or (ii) transfers or conveys all or substantially
all of its properties and assets to any person, then, and in each such case, to
the extent necessary, proper provision shall be made so that the successors and
assigns of GCB or the Surviving Corporation, as the case may be, assume the
obligation set forth in this Article X.
10.4 Beneficiaries; Survival. The provisions of this
Article X are intended to be for the benefit of, and shall be
42
<PAGE>
enforceable by, each Indemnified Party and his or her heirs and representatives;
and the provisions of this Article X will survive the Effective Date.
ARTICLE XI
MISCELLANEOUS
11.1. Parties in Interest. Nothing expressed or implied in this
Agreement is intended or shall be construed to confer upon or give to any
person, firm or corporation other than the parties hereto any rights or remedies
under or by reason of this Agreement or any transaction contemplated hereby,
except as specifically provided in this Agreement.
11.2. Entire Agreement; Amendments. This Agreement contains the entire
understanding of the parties with respect to its subject matter. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to its subject matter, except as specifically provided to the contrary
herein. This Agreement may be amended or modified only by writing signed by the
parties hereto.
11.3. Headings. The article and section and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
11.4. Notices. All notices, claims, certificates, requests, demands and
other communications hereunder shall be in writing and shall be deemed to have
been duly given if delivered personally, sent by facsimile transmission and
confirmed by first class mail, or mailed by certified mail, return receipt
requested and postage prepaid, as follows:
If to GCB or Newco:
Greater Community Bancorp
55 Union Boulevard
Totowa, New Jersey 07512
Attention: Mr. George E. Irwin, President
Telecopier Number: 973-942-9816
with copy to:
Stuart M. Geschwind, Esq.
Williams, Caliri, Miller & Otley
1428 Route 23
Wayne, New Jersey 07474
Telecopier Number: 973-694-0302
43
<PAGE>
If to First Savings:
First Savings Bancorp of Little Falls, Inc.
115 Main Street
Little Falls, New Jersey 07424
Attention: Dr. Haralambos S. Kostakopoulos,
President
Telecopier Number: (973) 785-1832
with copy to:
Richard Fisch, Esq.
Malizia, Spidi, Sloane & Fisch, P.C.
One Franklin Square
1301 K Street, N.W.
Suite 700 East
Washington, D.C. 20005
Telecopier Number: (202) 434-4661
or to such other address as the party to whom notice is to be given may have
furnished to the other parties in writing in accordance herewith. If mailed as
aforesaid, any such communication shall be deemed to have been given on the
third business day following that on which the piece of mail containing such
communication is posted; provided that any communication sent by telecopy or
telex and confirmed by mail (postage prepaid) shall be deemed to have been given
at the time of transmission.
11.5. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
11.6. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New
Jersey.
11.7. Gender and Number; Person. Any reference expressed in any gender
shall be deemed to include each of the other genders, and the singular shall be
deemed to include the plural and vice versa, unless the context otherwise
requires. The term "person" as used in this Agreement, unless the context
otherwise requires, shall include any individual and any corporation,
partnership, association, or other entity or group.
11.8. Waivers. Any party to this Agreement may, by written notice to
the other parties hereto, waive any provision of this Agreement. The waiver by
any party hereto of a breach of any provision of this Agreement shall not
operate or be construed as
44
<PAGE>
a waiver of any subsequent breach of any other provision of this Agreement.
11.9. Parties Bound; Assignment. This Agreement and all of the
provisions hereof shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by either party hereto without the prior written consent of
the other party.
11.10. Release of restrictions on restricted stock. First Savings and
Dr. Kostakopoulos acknowledge that the release of the restrictions on restricted
stock held by Dr. Kostakopoulos as of February 17, 1998 will give rise to
taxable income to Dr. Kostakopoulos and an expense deduction for tax purposes to
First Savings.
45
<PAGE>
1997 ANNUAL REPORT
1910 SERVING THE COMMUNITY FOR 87 YEARS 1997
FIRST SAVINGS BANCORP OF LITTLE FALLS, INC
<PAGE>
Dear Fellow Stockholder,
In 1997, the Savings Bank recorded a pre-tax income of $1.23 million compared to
pre-tax loss of $179,110 in 1996. The income in 1997 compared to a loss in 1996
is attributable to a decrease in federal insurance premium of $1.0 million which
included a one time payment into the deposit insurance fund(SAIF) of $845,000
during the 1996 period and a $333,000 increase in net interest income. The
corresponding after-tax earnings are $794,100 in 1997, and a $120,100 loss in
1996.
Net interest income increased by $333,000 or 7.8% to $4.6 million in 1997
compared to $4.3 million in 1996; provisions for loan losses decreased by
$41,300 in 1997, compared to $142,500 in 1996, resulting in an increase in net
interest income after provisions for loan losses of $374,000 to $4.5 million in
1997 compared to $4.1 million in 1996. Non-interest income decreased to $167,000
in 1997 compared to $180,000 in 1996, reflecting decreased collection of
mortgage late fees and DDA fees. Non-interest expense decreased $1.0 million to
$3.4 million in 1997 compared to $4.5 million in 1996, primarily because of a
decrease of $1.0 million in federal insurance premium which included the
$845,000 non-recurring special SAIF assessment paid in 1996.
Your bank was the unsuccessful bidder in an auction for 75% of the stock of a
small commercial bank based in Brooklyn, New York. The Board of Directors is
continuing to explore an initial public offering.
In closing, the loyalty and support of our stockholders and customers is deeply
appreciated by the Board of Directors, officers and staff. We pledge to you our
diligent efforts for the continued improvement of First Savings Bank in the
forthcoming year.
Emanuel M. Kontokosta Dr. H.S. Kostakopoulos
Chairman of the Board President and Chief Executive Officer
Nikos P. Mouyiaris Frederick J. Tedeschi
Vice Chairman Vice Chairman
<PAGE>
BUSINESS OF THE COMPANY
First Savings Bancorp of Little Falls, Inc. (the "Company" or "Bancorp") is a
savings and loan holding company incorporated under the laws of the State of New
Jersey in March 1993, for the sole purpose of acquiring all of the issued and
outstanding Common Stock of First Savings Bank of Little Falls, S.L.A. ("First
Savings" or the "Bank") in connection with the reorganization of the Bank into
the holding company form of organization (the "Reorganization"). On January 7,
1994, after receipt of all required approvals, the Reorganization was
consummated and common and preferred stock of the Savings Bank was exchanged on
a one-for-one basis for shares of the Corporation's Common and Preferred Stock.
On December 31, 1996, Preferred Stock shares were converted to Common Stock
shares on a one-for-ten basis. As of December 31, 1997, the unconsolidated
assets of the Company consisted of all of the issued and outstanding shares of
the Savings Bank's Common Stock, organizational costs of $15,509 and $17,882 in
cash. Therefore, the discussion regarding operating results refers to the
Savings Bank.
BUSINESS OF THE BANK
First Savings Bank of Little Falls, F.S.B. is a federally chartered stock
savings bank located in Little Falls, New Jersey. The Bank was founded in 1928
as the Singac Building & Loan Association. In 1940, the Bank changed its name to
The First Savings and Loan Association of Little Falls and effective November
17, 1992, the Bank's name became the First Savings Bank of Little Falls, S.L.A.
On April 29, 1994, the Bank became a federal savings bank. On May 6, 1994, the
Bank purchased from the RTC the deposits and other assets of a branch in Little
Ferry, Bergen County. The Savings Bank's deposits have been federally insured
since 1933 by the Savings Association Insurance Fund ("SAIF") and its
predecessor, the Federal Savings and Loan Insurance Corporation ("FSLIC"). The
Savings Bank has been a member of the Federal Home Loan Bank System since 1934.
On September 28, 1992, the Bank completed its conversion from a New Jersey
chartered mutual savings and loan association to a New Jersey chartered stock
savings association pursuant to the provisions under federal and state law for a
"modified" conversion from mutual to stock form (the "Conversion"). As part of
the Conversion, an Investor Group, consisting of Dr. Haralambos S.
Kostakopoulos, President, Emanuel M. Kontokosta - Chairman of the Board, and
Vice Chairmen Nikos P. Mouyiaris and Frederick J. Tedeschi, along with other
existing officers and directors of the Bank, purchased 56% of the Common Stock
issued in the Conversion. The Investor Group also purchased 100% of the $3.4
million of convertible Preferred Stock issued in the Conversion. As of December
31, 1996 the Preferred Stock was converted to Common Stock at a rate of one
share of Preferred Stock to 10 shares of Common Stock.
Page 1
<PAGE>
The Bank is primarily engaged in the business of attracting deposits from the
general public and using those deposits, together with other funds, to purchase
securities and to originate mortgage loans for the purchase or construction of
residential properties. To a lesser extent, the Bank also originates home
improvement loans and home equity lines of credit.
At December 31, 1997, the Bank had two active subsidiaries, The First Service
Corporation of Little Falls, a wholly-owned subsidiary acting as a general agent
selling annuities, and Redeem Inc., a wholly-owned subsidiary serving as a REO
subsidiary in connection with taking title to REO properties.. As of March 31,
1998, Redeem Inc. does not hold title to any property, and has no loans
outstanding from First Savings. Redeem has no significant assets or liabilities.
MARKET PRICE OF STOCK AND RELATED SECURITY HOLDER MATTERS
The Bancorp's Common Stock is not listed on any stock exchange or on the
National Association of Securities Dealers Automated Quotations System
("NASDAQ"). Approximately 90% of the Common Stock is held by current officers
and directors of the Bank and by an Investor Group consisting of Haralambos S.
Kostakopoulos President of the Savings Bank, Emanuel M. Kontokosta - Chairman of
the Board, and Vice Chairmen Nikos P. Mouyiaris and Frederick J. Tedeschi. The
market for the Common Stock is illiquid, with few purchases and sales of stock.
The last known sale of the Common Stock involved 500 shares at $14.00 a share on
May 6, 1994.
The ability of the Bancorp to pay dividends on its Common Stock is dependent
upon the ability of the Bank to pay dividends, since the Bancorp's main asset is
the stock of the Savings Bank. The ability of the Bank to pay dividends is
restricted by the regulations of the OTS and tax considerations. The Bank may
not pay dividends that would reduce the regulatory capital of First Savings
below the level required for institutions insured by SAIF or the liquidation
account created in connection with the Conversion. During 1997, a dividend of
$1.00 per share was declared to the owners of Common Stock.
There are 42 holders of the Common Stock of the Bancorp as of March 31, 1998.
Page 2
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
Management's discussion and analysis of financial condition and results
of operations is intended to assist you in understanding our financial condition
and results of operations. The information in this section should also be read
with our Consolidated Financial Statements and Notes to the Consolidated
Financial Statements elsewhere in this document.
Certain forward-looking statements contained herein are subject to risks and
uncertainties. The Company's actual results may differ materially from those set
forth in such forward-looking statements. Reference is made to the Company's
reports filed with the Securities and Exchange Commission for a discussion of
factors that may cause such differences to occur.
Our results of operations depend primarily on net interest income,
which is determined by (i) the difference between rates of interest we earn on
our interest-earning assets and the rates we pay on interest-bearing liabilities
(interest rate spread), and (ii) the relative amounts of interest-earning assets
and interest-bearing liabilities. Our results of operations are also affected by
non-interest income, including, primarily, income from customer deposit account
service charges, and non-interest expense, including, primarily, salaries and
employee benefits, federal deposit insurance premiums, office occupancy costs,
equipment, and loss on foreclosed real estate. Our results of operations also
are affected significantly by general and economic and competitive conditions,
particularly changes in market interest rates, government policies and actions
of regulatory authorities, which events are beyond our control.
Asset/Liability Management
- --------------------------
We seek to reduce our exposure to changes in interest rates by
maintaining a balance between assets and liabilities maturing within a one to
three-year time span. Our assets and liabilities may be analyzed by examining
the extent to which our assets and liabilities are interest rate sensitive and
by monitoring the expected effects of interest rate changes on our net portfolio
value.
An asset or liability is interest rate sensitive within a specific time
period, if it will mature or reprice within that time period. If our assets
mature or reprice more quickly or to a greater extent than our liabilities, our
net portfolio value and net interest income would tend to increase during
periods of rising interest rates but decrease during periods of falling interest
rates. Conversely, if our assets mature or reprice more slowly or to a lesser
extent than our liabilities, our net portfolio value and net interest income
would tend to decrease during periods of rising interest rates but increase
during periods of falling interest rates. Our policy has been to mitigate the
interest rate risk inherent in the historical savings institution business of
originating long-term loans funded by short-term deposits by pursuing certain
strategies designed to decrease the vulnerability of our earnings to material
and prolonged changes in interest rates.
Page 3
<PAGE>
Net Portfolio Value
- -------------------
In recent years, we have measured our interest rate sensitivity by
computing the "gap" between the assets and liabilities which were expected to
mature or reprice within certain time periods, based on assumptions regarding
loan prepayment and deposit decay rates formerly provided by the OTS. However,
the OTS now requires the computation of amounts by which the net present value
of an institution's cash flow from assets, liabilities and off balance sheet
items (the institution's net portfolio value or "NPV") would change in the event
of a range of assumed changes in market interest rates. These computations
estimate the effect on an institution's NPV from instantaneous and permanent 1%
to 4% increases and decreases in market interest rates. Our Board of Directors
has adopted an interest rate risk policy which establishes maximum decreases in
our estimated NPV of 11%, 23%, 28% and 37% in the event of 1%, 2%, 3% and 4%
increases and decreases in market interest rates, respectively. At December 31,
1997, based on information provided by the OTS, it was estimated that our NPV
would decrease 17%, 36%, 57% and 77% and increase 15%, 30%, 46% and 68% in the
event of 1%, 2%, 3%, and 4% increases and decreases in market rates,
respectively. These calculations indicate that our net portfolio value could be
adversely affected by increases in interest rates but could be favorably
affected by decreases in interest rates. Changes in interest rates also may
affect our net interest income, while increases in rates expected to decrease
income and decreases in rates expected to increase income, our interest-bearing
liabilities would be expected to mature or reprice more quickly than our
interest-earning assets. In addition, we would be deemed to have more than a
normal level of interest rate risk under applicable regulatory capital
requirements.
While we cannot predict future interest rates or their effects on our
NPV or net interest income, we do not expect current interest rates to have a
material adverse effect on our NPV or net interest income in the future.
Computations of prospective effects of hypothetical interest rate changes are
based on numerous assumptions, including relative levels of market interest
rates, prepayments and deposit run-offs and should not be relied upon as
indicative of actual results. Certain shortcomings are inherent in such
computations. Although certain assets and liabilities may have similar maturity
or periods of repricing they may react at different times and in different
degrees to changes in the market interest rates. The interest rates on certain
types of assets and liabilities may fluctuate in advance of changes in market
interest rates, while rates on other types of assets and liabilities may lag
behind changes in market interest rates. Certain assets, such as adjustable rate
mortgages, generally have features which restrict changes in interest rates on a
short term basis and over the life of the asset. In the event of a change in
interest rates, prepayments and early withdrawal levels could deviate
significantly from those assumed in making calculations set forth above.
Additionally, an increased credit risk may result as the ability of many
borrowers to service their debt may decrease in the event of an interest rate
increase.
The board of directors is responsible for reviewing our asset and
liability policies. The Board of Directors meets quarterly to review interest
rate risk and trends, as well as liquidity and capital ratios and requirements.
Management is responsible for administering the policies and determinations of
the Board of Directors with respect to our asset and liability goals and
strategies. Management expects that our asset and liability policies and
strategies will continue as described above so long as competitive and
regulatory conditions in the financial institution industry and market interest
rates continue as they have in recent years.
Page 4
<PAGE>
Financial Condition
- -------------------
Our total consolidated assets increased by $11.4 million or 6.8% from
$166.7 million at December 31, 1996 to $178.1 million at December 31, 1997. Our
total liabilities increased $10.9 million or 6.9% from $157.4 million at
December 31, 1996 as compared to $168.3 million at December 31, 1997. The
increase in assets primarily reflects the Company deployment of proceeds from a
reduction in interest bearing deposits, sales of and repayments received on
securities available for sale, and deposit growth into our loan portfolio, and
investment securities held to maturity. Comparing balances from December 31,
1997 to 1996, we increased our loan receivable by $10.7 million, our investment
securities held to maturity increased by $17.6 million, interest bearing
deposits decreased by $7.8 million, and investment securities available for sale
decreased by $6.3 million. Deposits increased $10.2 million and our borrowed
funds increased $551,000.
Results Of Operations for the Years Ending December 31, 1997 and 1996
- ---------------------------------------------------------------------
Net Income(Loss). Net income(loss) increased $914,000 from a loss of
$120,000 for 1996 to an income of $794,000 for 1997. The increase was primarily
the result of a decrease in federal deposit insurance premium of $1.0 million
and increased net interest income.
Net income(loss) decreased $483,000 or 133% from income of $363,000 for 1995 to
a loss of $120,000 for 1996. The decrease was primarily the result of the
recognition of the one-time SAIF special insurance assessment in the amount of
$541,000(after taxes). Excluding the SAIF special assessment, net income would
have increased $58,000 or 16% from 1995.
Net Interest Income. Net interest income is the most significant
component of our income from operations. Net interest income is the difference
between interest we receive on our interest-earning assets (primarily loans,
investment and mortgage-backed securities) and interest we pay on our
interest-bearing liabilities (primarily deposits and borrowed funds). Net
interest income depends on the volume of and rates earned on interest-earning
assets and the volume of and rates paid on interest-bearing liabilities.
The following table sets forth a summary of average balances of assets
and liabilities with corresponding interest income and interest expense as well
as average yield and cost information. Average balances are derived from monthly
balances, however, we do not believe the use of month-end balances has caused
any material difference in the information presented. There have been no tax
equivalent adjustments made to the yields.
Page 5
<PAGE>
<TABLE>
<CAPTION>
AVERAGE BALANCE SHEET
Year Ended December 31,
-----------------------------------------------------------------------------------------
------------------------ -------------------------- --------------------------------
1997 1996 1995
------------------------ -------------------------- --------------------------------
Average Average Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost Balance Interest Yield/Cost
------- -------- ---------- ------- -------- ---------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable (1) $101,389 $8,639 8.52 % $88,162 $7,686 8.72 % $75,220 $6,788 9.02 %
Mortgage-backed secruities 28,318 1,811 6.40 30,498 1,936 6.35 18,445 1,160 6.29
Other interest earnings assets 34,230 2,257 6.59 30,024 1,833 6.11 37,230 2,394 6.43
------- ------ ------- ------ ------- ------
Total interest-earning 163,937 12,707 7.75 148,684 11,455 7.70 130,895 10,342 7.90
------ ----- ------ ---- ------ ----
assets
Non-interest-earning assets 9,158 9,801 10,419
------ ------- ------
Total assets $173,095 $158,485 $141,314
======== ======== ========
Interest-bearing
liabilities:
Savings accounts $23,574 796 3.38 $22,435 754 3.36 $22,591 756 3.35
NOW and Money Market 14,760 365 2.47 14,515 364 2.51 15,368 410 2.67
Time Deposits 123,927 6,923 5.59 100,479 5,475 5.45 91,505 4,929 5.39
Borrowed money 305 20 6.56 10,768 592 5.50 2,225 131 5.89
------- ------ ------- ---- ------ ----
Total Interest-bearing
liabilities 162,566 8,104 4.99 148,197 7,185 4.85 131,689 6,226 4.73
------ ----- ------ ----- ------ ----
Non-interest-bearing 830 574 228
------- ---- ---
liabilities
Total liabilities 163,396 148,771 131,917
Retained Earnings 9,699 9,714 9,397
------- ------ -----
Total liabilities and retained
earnings $173,095 $158,485 $141,314
======== ======== =========
Net interest income $4,603 $4,270 $4,116
====== ====== ======
Interest rate spread 2.76 % 2.85 % 3.17 %
==== ===== ====
Net yield on
Interest-earnings
assets 2.81 % 2.87 % 3.14 %
==== ==== ====
Ratio of average interest-earning
assets to average
interest-bearing
liabilities................. 1.0084 x 1.0033 x 0.9940 x
====== ====== ======
</TABLE>
(1) Includes non-accrual loans.
(1) Average balances include non-accrual loans.
(2) Interest rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(3) Net yield on interest-earning assets represents net interest income as a
percentage of average interest-earning assets.
Page 6
<PAGE>
The table below sets forth information regarding changes in our
interest income and interest expense for the periods indicated. For each
category of our interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (i) changes in volume
(changes in volume multiplied by old rate); (ii) changes in rate (changes in
rate multiplied by old volume); (iii) changes in rate-volume (changes in rate
multiplied by the change in volume). Increases and decreases due to both rate
and volume, which cannot be segregated, have been allocated proportionately to
the change due to volume and change due to rate.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------
1997 vs. 1996 1996 vs. 1995
------------------------------- ---------------------------------
Increase Increase
(Decrease) (Decrease)
Due to Due to
------------------------------- ---------------------------------
Volume Rate Net Volume Rate Net
------ ---- --- ------ ---- ---
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Loans receivable $ 1,153 ($ 200) $ 953 $ 1,168 ($ 270) $ 898
Mortgage-backed securities (138) 13 (125) 758 18 776
Other interest earning assets 257 167 424 (463) (98) (561)
------- ------- ------- ------- ------- -------
Total interest-earning assets $ 1,272 ($ 20) $ 1,252 $ 1,463 ($ 350) $ 1,113
============================= =============================
Interest expense:
Savings accounts $ 38 $ 4 $ 42 ($ 5) $ 3 ($ 2)
NOW and money market 6 (5) 1 (22) (24) (46)
Time deposits 1,278 170 1,448 482 64 546
Borrowed money (575) 3 (572) 503 (42) 461
------- ------- ------- ------- ------- -------
Total interest-bearing 747 172 919 958 1 959
liabilities ============================= =============================
Net change $ 525 ($ 192) $ 333 $ 504 ($ 350) $ 154
============================= =============================
</TABLE>
Our net interest income increased $333,000 or 7.8% to $4.6 million in
1997 compared to $4.3 million in 1996. The increase was due primarily to an
increase of $884,000 in average net interest-earning assets, partially offset by
a decline in our interest rate spread from 2.85% in 1996 to 2.76% in 1997. The
decline in our interest rate spread had a corresponding impact on our net
interest margin which declined 6 basis points to 2.81% in 1997.
The increase in our average interest-earning assets of $15.3 million
reflects an increase of $13.2 million in average loans, an decrease of $2.2
million in average mortgage-backed securities and a increase of $4.2 million in
other average interest-earning assets which is made up of small business loan
securities, investment securities, and interest bearing deposits held at banks.
Offsetting the foregoing was an increase of $14.4 million in average
interest-bearing liabilities, reflecting a $24.8 million increase in average
interest-bearing deposits, primarily time deposits, offset by a $10.5 million
decrease in borrowed money.
Page 7
<PAGE>
Our interest rate spread and net interest margin decreased in 1997
compared to 1996. This was due to a increase in the yield on average
interest-earning assets from 7.70% in 1996 to 7.75% in 1997 and an increase in
the interest cost of average interest-bearing liabilities from 4.85% in 1996 to
4.99% in 1997.
The yield on our average interest-earning assets increased in 1997 due
the deployment of interest bearing deposits into loans and other interest
bearing assets, offset by a slight decrease in yield on loans. As general market
rates of interest were relatively stable during 1996 and 1997, the decline in
the yield on our loans in 1997 reflected the impact of competition for new loan
originations.
The increase in the cost of our average interest-bearing liabilities
was due primarily to a growth in deposits toward certificates of deposits, which
have a higher cost then demand and savings deposits. While the cost of time
deposits rose from 5.45% in 1996 to 5.59% in 1997, the cost of non-certificates
accounts remained steady at 3.03%. The increase in the cost of time deposits
reflects desire for growth and increased competition. The increase in deposits
allowed the Bank to reduce its reliance on borrowed money.
Our net interest income increased $154,000 or 3.7% to $4.3 million in
1996 compared to $4.1 million in 1995. The increase was due primarily to the
growth of average interest-earning assets from $130.9 million in 1995 to $148.7
million in 1996, partially offset by a $16.5 million increase in average
interest-bearing liabilities and a decline in our interest rate spread from
3.17% in 1995 to 2.85% in 1996. The decline in our interest rate spread had a
corresponding impact on our net interest margin which declined 27 basis points
to 2.87% in 1996.
The increase in our average interest-earning assets of $17.8 million
reflects an increase of $12.9 million in average loans, an increase of $12.0
million in average mortgage-backed securities and a decrease of $7.2 million in
other average interest-earning assets which is made up of small business loan
securities, investment securities, and interest bearing deposits held at banks.
Our interest rate spread and net interest margin decreased in 1996
compared to 1995. This was due to a decline in the yield on average
interest-earning assets from 7.90% in 1995 to 7.70% in 1996 and an increase in
the interest cost of average interest-bearing liabilities from 4.73% in 1995 to
4.85% in 1996.
The yield on our average interest-earning assets decreased in 1996 due
to a decline in the yield on loans and, other interest earning assets, offset by
a slight increase in yield on mortgage-backed securities. As general market
rates of interest were relatively stable during 1995 and 1996, the decline in
the yield on our loans in 1996 reflected the impact of competition for new loan
origination's.
Page 8
<PAGE>
The increase in the cost of our average interest-bearing liabilities
was due primarily to a shift in deposits toward certificates of deposits, which
have a higher cost the demand deposits. The cost of NOW and Money Market
accounts fell from 2.67% in 1995 to 2.51% in 1996, and borrowed money fell from
5.89% in 1995 to 5.50% in 1996, while the cost of time deposits rose from 5.39%
in 1995 to 5.45% in 1996. The lower costs of NOW and Money Market accounts
reflects our reduction of deposit rates to match the decrease in interest rates
during 1996 and the decrease in the cost of borrowings reflects the reduction in
average advances from the Federal Home Loan Bank and the decrease in interest
rates. The increase in the cost of time deposits reflects increased competition.
Provision for Loan Losses. We recorded a provision for loan losses of
$101,000 in 1997 compared with $143,000 in 1996 and a loan loss provision of
$80,000 in 1995. The increase in our provision for loan losses in 1997, 1996,
and 1995 reflects the increase in the size of our loan portfolio due to internal
loan growth, purchase of residential loans and the increase in our
non-performing loan portfolio.
Historically, we have emphasized our loss experience over other factors
in establishing the provision for loan losses. We review the allowance for loan
losses in relation to: (i) the composition of our loan portfolio, (ii)
observations of the general economic climate and (iii) loan loss expectations
(identification of impaired loans and the establishment of specific loan loss
allowances on such loans).
We will continue to monitor our allowance for loan losses and make
future adjustments to the allowance through the provision for loan losses as
economic conditions dictate. We maintain an allowance for loan losses at a level
that we consider to be adequate to provide for the inherent risk of loss in our
loan portfolio, however, there can be no assurance that future losses will not
exceed estimated amounts or that additional provisions for loan losses will not
be required in future periods. In addition, our determination as to the amount
of our allowance for loan losses is subject to review by the OTS, as part of the
examination process, which may result in the establishment of an additional
allowance based upon the judgment of the OTS after review of the information
available at the time of the OTS examination.
Non-Interest Income. Our non-interest income decreased $13,000 in 1997
or 7.3% from $180,000 for the year ended December 31, 1996 to $167,000 for the
year ended December 31, 1997. The decrease was primarily a result of an decrease
in miscellaneous non-interest income from $86,000 in 1996 to $68,000 in 1997.
This decrease was due to an decrease in collection of mortgage late charges
during 1996. The decrease was partially offset by a increase in gain on sales of
securities of $4,000.
Our non-interest income increased $20,000 in 1996 or 12.5% from
$160,000 for the year ended December 31, 1995 to $180,000 for the year ended
December 31, 1996. The increase was primarily a result of an increase in
miscellaneous non-interest income from $72,000 in 1995 to $86,000 in 1996. This
increase was due to an increase in collection of mortgage late charges during
1996.
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<PAGE>
Non-Interest Expense. Our non-interest expense decreased by $1.049
million or 23% from $4.49 million for 1996 to $3.44 million for 1997. The
increase was primarily attributable to a decrease of federal deposit insurance
premium of $1.03 million which included the one-time special SAIF assessment of
$845,000 paid in 1996. Pursuant to the Economic Growth and Paperwork Reduction
Act of 1996 (the "Act"), the FDIC imposed a special assessment on SAIF members
to capitalize the SAIF at the designated reserve level of 1.25% as of October 1,
1996. Based on our deposits as of March 31, 1995, the date for measuring the
amount of the special assessment pursuant to the Act, our special assessment was
$845,000. Due to the recapitalization of the SAIF, we experienced lower premiums
for deposits in 1997 and expect continued lower premiums for deposit insurance
in future periods. See Form 10-K, "Regulation - Regulation of the Bank -
Insurance of Deposit Accounts."
Pursuant to the Act, we pay, in addition to our normal deposit
insurance premium as a member of the SAIF, an annual amount equal to
approximately 6.4 basis points of outstanding SAIF deposits toward the
retirement of the Financing Corporation Bonds ("Fico Bonds") issued in the
1980's to assist in the recovery of the savings and loan industry. Members of
the Bank Insurance Fund ("BIF"), by contrast, pay, in addition to their normal
deposit insurance premium, approximately 1.3 basis points. Beginning no later
than January 1, 2000, the rate paid to retire the Fico Bonds will be equal for
members of the BIF and the SAIF. The Act also provides for the merging of the
BIF and the SAIF by January 1, 1999 provided there are no financial institutions
still chartered as savings associations at that time. Should the insurance funds
be merged before January 1, 2000, the rate paid by all members of this new fund
to retire the Fico Bonds would be equal.
In addition, our salaries and employee benefits increased by $89,000 or
6.5% in 1997 compared to 1996. The increase was a result of some staff increases
in our loan area to accommodate our loan growth. Loss on foreclosed real estate
decreased $235,000 in 1997 as compared to 1996. The decrease was due to $37,000
of loss provisions in 1997 compared to $257,000 of loss provisions in 1996. Our
legal fees increased $128,000 in 1997 as compared to 1996. This increase was the
result of legal fees in connection with a unsuccessful bid to purchase 75% of
the stock of a small commercial Bank based in Brooklyn, New York. The Bank is no
longer pursuing the purchase and should not incur any legal fees regarding this
matter in 1998. Exclusive of the items specifically discussed above, other
elements of non-interest expense totalled $1.44 million in 1997, an increase of
1.4% over the $1.42 million in 1996.
Our non-interest expense increased by $1.03 million or 30% from $3.46
million for 1995 to $4.49 million for 1996. The increase was primarily
attributable to the one-time special SAIF assessment of $845,000. Pursuant to
the Economic Growth and Paperwork Reduction Act of 1996 (the "Act"), the FDIC
imposed a special assessment on SAIF members to capitalize the SAIF at the
designated reserve level of 1.25% as of October 1, 1996. Based on our deposits
as of March 31, 1995, the date for measuring the amount of the special
assessment pursuant to the Act, our special assessment was $845,000.
Page 10
<PAGE>
In addition, our salaries and employee benefits decreased by $61,000 in
1996 compared to 1995. The decrease was a result of some staff reduction through
normal attrition and reduced medical benefits expense. Equipment expense
decreased by $21,000 in 1996 as compared to 1995. Equipment costs increased in
1995 due to the acquisition of Little Ferry Branch in fiscal 1994. There were no
branch acquisitions in 1996. Our legal fees increased $48,000 in 1996 as
compared to 1995. This increase was the result of increased legal fees in
connection with a lawsuit involving one of our real estate owned properties. The
suit was settled in 1996 and did not have a material affect on our consolidated
financial statements. See Form 10-K, "Real Estate Owned".
Income Tax Expense. We recognized an income tax expense of $436,000 for
1997 compared to a tax benefit of $59,000 in 1996. The $495,000 increase was the
result of pre-tax loss of $179,000 in 1996 versus pre-tax income of $794,000 in
1997.
Liquidity and Capital Resources
We are required to maintain minimum levels of liquid assets as defined
by OTS regulations. This requirement, which varies from time to time depending
upon economic conditions and deposit flows, is based upon a percentage of our
deposits and short term borrowings. The required ratio currently is 4.0% and our
liquidity ratio average was 14.5% and 37.7% at December 31, 1996 and 1997,
respectively.
Our primary sources of funds are deposits, repayment of loans and
mortgage-backed securities, maturities of investments and interest-bearing
deposits, funds provided from operations and advances from the FHLB of New York.
While scheduled repayments of loans and mortgage-backed securities and
maturities of investment securities are predicable sources of funds, deposit
flows and loan prepayments are greatly influenced by the general level of
interest rates, economic conditions and competition. We use our liquidity
resources principally to fund existing and future loan commitments, to fund
maturing certificates of deposit and demand deposit withdrawals, to invest in
other interest-earning assets, to maintain liquidity, and to meet operating
expenses.
Net cash provided by our operating activities for the year ended
December 31, 1997 totalled $1.4 million as compared to $1.3 million for the year
ended December 31, 1996 and $784,000 for the year ended December 31, 1995.
Net cash used in our investing activities for the year ended December
31, 1997 totalled $18.8 million an increase of $14.8 million from December 31,
1996. The increase was primarily attributable to a $10.1 million excess of loan
originations over repayments in 1997 compared to $2.9 million in 1996 and a
decrease of $8.0 million in net proceeds from calls of investment securities.
Net cash used in our investing activities for the year ended December 31, 1996
totalled $4.0 million a decrease of $19.4 million from December 31, 1995. The
decrease was primarily attributable to an increase of $17.3 million of net
proceeds from calls and sales of investment securities and mortgage-backed
securities.
Net cash provided by our financing activities for 1997 totalled $10.4
million. This was primarily the result of a net increase in deposits of $10.2
million. Net cash provided by our financing activities for 1996 totalled $12.2
million. This was the result of a net increase in deposits of $25.0 million
offset by a repayment of FHLB advances of $12.6 million.
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<PAGE>
Liquidity may be adversely affected by unexpected deposit outflows,
excessive interest rates paid by competitors, adverse publicity relating to the
savings and loan industry, and similar matters. Further, the disparity in Fico
Bond interest payments as described herein could result in us losing deposits to
BIF members that have lower costs of funds and therefore are able to pay higher
rates of interest on deposits. Management monitors projected liquidity needs and
determines the level desirable, based in part on our commitments to make loans
and management's assessment of our ability to generate funds. We are also
subject to federal regulations that impose certain minimum capital requirements.
Impact of Inflation and Changing Prices
Our consolidated financial statements and the accompanying notes
presented elsewhere in this document, have been prepared in accordance with
generally accepted accounting principles, which require the measurement of
financial position and operating results in terms of historical dollars without
considering the change in the relative purchasing power of money over time and
due to inflation. The impact of inflation is reflected in the increased cost of
our operations. Unlike most industrial companies, nearly all our assets and
liabilities are monetary. As a result, interest rates have a greater impact on
our performance than do the effects of general levels of inflation. Interest
rates do not necessarily move in the same direction or to the same extent as the
prices of goods and services.
Recent Accounting Pronouncements
FASB Statement on Accounting for Transfers and Servicing of Financial
Assets and Extinguishment of Liabilities. In June 1996, FASB issued SFAS No.
125, which will be effective, on a prospective basis, for fiscal years beginning
after December 31, 1996. SFAS No. 125 provides accounting and reporting
standards for transfers and servicing of financial assets and extinguishment of
liabilities based on consistent application of a financial-components approach
that focuses on control. SFAS No. 125 extends the "available for sale" and
"trading" approach of SFAS No. 115 to non-security financial assets that can be
contractually prepaid or otherwise settled in such a way that the holder of the
asset would not recover substantially all of its recorded investment. In
addition, SFAS No. 125 amends SFAS No. 115 to prevent a security from being
classified as held to maturity if the security can be prepaid or settled in such
a manner that the holder of the security would not recover substantially all of
its recorded investment. The extension of the SFAS No. 115 approach to certain
non-security financial assets and the amendment to SFAS No. 115 are effective
for financial assets held on or acquired after January 1, 1997. The FASB has
deferred the effective date of SFAS No. 125 until January 1, 1998 for certain
transactions including repurchase agreements, dollar-roll, securities lending
and similar transactions. FASB 125 will not have a material effect on our
financial statements.
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<PAGE>
In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income". Statement No. 130 requires that all items that are components of
"comprehensive income" be reported in a financial statement that is displayed
with the same prominence as other financial statements. Comprehensive income is
defined as the "change in equity [net assets] of a business enterprise during a
period from transactions and other events and circumstances from nonowner
sources. It includes all changes in equity during period except those resulting
from investments by owners and distributions to owners. Companies will be
required to (a) classify items of other comprehensive income by their nature in
the financial statements and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of a statement of financial position. Statement
No. 130 is effective for fiscal years beginning after December 15, 1997 and
requires reclassification of prior periods presented and requires
reclassification of prior periods presented. As the requirements of Statement
No. 130 is effective for fiscal years beginning after December 15, 1997 and
requires reclassification of prior periods presented. As the requirements of
Statement No. 130 are disclosure-related, its implementation will have no impact
on the Corporation's consolidated financial condition or results of operations.
Year 2000
The Year 2000 issue concerns the potential impact of historic computer
software code that only utilitizes two digits to represent the calendar
year(e.g. "98" for "1998"). Software so developed could produce inaccurate or
unpredictable results upon the change to January 1, 2000, when current and
future dates represent a lower two digit year number than date in the prior
century. The Bank, similar to most financial institutions, is significantly
subject to the potential impact of the "Year 2000 issue" due to the nature of
financial informatio9n. Potential impact to the Bank may arise from software,
hardware, and equipment both within the Bank's direct control and outside of the
Bank's ownership. Yet with which the Bank electronically or operationally
interfaces (e.g. vendors providing credit bureau information). The Bank has a
year 2000 compliance program in place to ensure that all software applications
will be year 2000 certified compliant. Management expects that it will be able
to satisfy year 2000 compliance issues by the end of 1998. Management intends to
perform testing on all systems throughout 1998 and 1999. The Bank does not
expect that the cost of its year 2000 compliance program will be material to its
financial condition or results of operations. Non-compliance with the year 2000
issue could have an adverse affect of the operations of the business.
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<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
- -----------------------
At or for the year ended DECEMBER 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In thousands except for per share amounts)
<S> <C> <C> <C> <C> <C>
TOTAL AMOUNT OF :
TOTAL ASSETS $178,144 $166,734 $154,635 $133,730 $130,574
LOANS RECEIVABLE, 105,467 94,733 85,836 74,277 76,918
SECURITIES AVAILABLE FOR SALE 31,226 37,507 35,964 ----- 15,893
MORTGAGE-BACKED SECURITIES 10,415 12,805 2,545 18,289 4,035
HELD TO MATURITY
INVESTMENT SECURITIES 19,644 2,000 19,000 28,120 10,443
HELD TO MATURITY
CASH & CASH EQUIVALENTS 3,683 10,673 1,128 3,559 12,345
DEPOSITS 166,759 156,596 131,636 123,656 115,494
BORROWED MONEY 551 ----- 12,600 ----- 5,000
STOCKHOLDERS EQUITY 9,864 9,332 9,597 9,177 9,041
NET INTEREST INCOME 4,603 4,270 4,116 3,922 3,980
NET INCOME(LOSS) 794 (120) 363 499 2,500
DILUTED EARNINGS PER COMMON SHARE $1.80 ($0.27) $0.82 $1.13 $5.68
COMMON STOCK DIVIDENDS DECLARED $1.00 ----- $0.50 $0.50 -----
RETURN ON AVERAGE ASSETS 0.46% -0.08% 0.26% 0.38% 1.90%
RETURN ON AVERAGE EQUITY 8.19% -1.24% 3.86% 5.43% 32.22%
DIVIDEND PAYOUT RATIO (1) 55.42% ------ 25.95% 15.20% 0.00%
AVERAGE EQUITY TO AVERAGE ASSETS 5.60% 6.13% 6.65% 6.94% 5.88%
RATIO
</TABLE>
(1) Common stock dividends declared as a percentage of net income applicable to
common shares.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Officers
CORPORATE DATA
Dr. H. S. Kostakopoulos
Directors President & Chief Executive Officer
Emanuel M. Kontokosta Brian McCourt
Chairman of the Board Vice President/Controller, Treasurer
Principal Owner of Kontokosta
Associates, New York, New York; Carlo Pascetta
an architectural and engineering firm Senior Loan Officer
Dr. H. S. Kostakopoulos John Christensen
President and CEO of First Savings Assistant Vice President
Bank of Little Falls, F.S.B. Manager/Branch Administration
Nikos P. Mouyiaris Pamela E. Skurat
Vice Chairman Assistant Vice President
Chairman - Executive Committee Manager/Loan Administration
Owner and President of Mana Products, Long
Island City, New York; Veronica Kingsley
a cosmetics firm Assistant Vice President
Quality Control
Frederick J. Tedeschi, Esq.
Vice Chairman Jo-Ann Palmere
Chairman - Investment Committee Assistant Secretary
Self-employed attorney and Town Manager - Main Branch
Justice, Southold, New York
Elizabeth A. Gallagher
Assistant Secretary
Manager - Singac Branch
Lois D'Ambrosia
Manager - Little Ferry Branch
- -------
Sarina Matos
Transfer Agent Assistant Vice President
First Savings Bank of Little Falls, F.S.B. Corporate Secretary
Compliance Officer
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Auditors
Radics & Co., LLC.
P.O. Box 676 Annual Meeting
U.S. Highway 46 East
Pine Brook, New Jersey 07058 The Annual Meeting of Stockholders will be
held on April 21, 1998 at Corporate
General Counsel Headquarters, 1 Center Avenue, Little Falls,
New Jersey.
McCarter & English
Four Gateway Center 10-KSB Information
100 Mulberry Street
Newark, New Jersey 07102 A copy of Form 10-KSB including financial
statement schedules as filed with the Securities
Special Securities Counsel and Exchange Commission will be furnished
without charge to stockholders as of the record
Malizia, Spidi, Sloane & Fisch, P.C. date upon written request to the Secretary,
1301 K Street, NW First Savings Bank of Little Falls, F.S.B., 1
Suite 700 East Center Avenue, Little Falls, New Jersey
Washington, D.C. 20005 07424.
Corporate Office
1 Center Avenue
Little Falls, New Jersey 07424
973-256-2100
Branches
115 Main Street
Little Falls, New Jersey 07424
973-256-2100
123 Route 23
Singac, New Jersey 07424
973-256-2100
Little Ferry
100 Washington Avenue
Little Ferry, NJ 07643
201-641-6755
Loan Center
1 Center Avenue
Little Falls, New Jersey 07424
973-256-2100
</TABLE>
