As filed with the Securities and Exchange Commission on September __,
1996
Registration Statement No. 33-______
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------
UNITY BANCORP, INC.
(Exact Name of Small Business Issuer in Its Charter)
Delaware 6712 22-3282551
- -------- ---- ----------
(State or Other (Primary Standard (IRS Employer
Jurisdiction of Industrial Identification
Incorporation or Classification No.)
Organization) Code Number)
64 Old Highway 22, Clinton, New Jersey 08809
(908) 730-7630
- --------------------------------------------------------------------------------
(Address and Telephone Number of Principal Executive Offices)
64 Old Highway 22, Clinton, New Jersey 08809
- --------------------------------------------------------------------------------
(Address of Principal Place of Business or Intended Principal Place of Business)
Unity Bancorp, Inc.
64 Old Highway 22
Clinton, New Jersey 08809
Attn: James Hyman
President and
Chief Operating Officer
(908) 730-7630
- --------------------------------------------------------------------------------
(Name, Address, Telephone Number of Agent for Service)
----------
With copies of communication to:
McCarter & English
Four Gateway Center
Newark, New Jersey 07102
<PAGE>
Attn: Robert A. Schwartz, Esq.
(201) 639-2093
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes
effective.
If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the
Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed
pursuant to Rule 462(c) under the Securities Act, check the
following box and list the Securities Act registration
statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made
pursuant to Rule 434, please check the following box. [ ]
<PAGE>
<TABLE>
CALCULATION OF REGISTRATION FEE
================================================================================================================================
<CAPTION>
Title of Each Amount to Proposed Proposed Amount of
Class of be Maximum Maximum Registration
Securities to Registered Offering Aggregate Fee
be Registered Price(1) Offering
Price
------------- ---------- -------- --------- ------------
<S> <C> <C> <C> <C>
Units, each 335,500 $16.50 $5,535,750 $1,909
consisting of Per Unit
one share of
Common Stock,
no par value,
and one
Warrant to
purchase one
share of
Common Stock
Common Stock, 335,500(2) $17.00 $5,703,500 $1,967
no par Per
value(2) Share
Total ............................................................ $3,876
================================================================================================================================
</TABLE>
- ----------
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Issuable upon exercise of the Warrants.
----------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
<TABLE>
UNITY BANCORP, INC.
Cross Reference Sheet Form SB-2
<CAPTION>
Prospectus Caption or
Items of Form SB-2 Location
- ------------------ ---------------------
<S> <C>
1. Front of Registration
Statement and Outside Front
Cover of
Prospectus ............................................... Facing Page of
Registration Statement;
Front cover page of
Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus.................................. Inside Front Cover Page;
AVAILABLE INFORMATION;
TABLE OF CONTENTS
3. Summary Information and Risk
Factors ................................................... PROSPECTUS SUMMARY;
SPECIAL CONSIDERATIONS
AND RISK FACTORS
4. Use of Proceeds............................................ USE OF PROCEEDS
5. Determination of Offering Price............................ THE OFFERING -- PLAN OF
DISTRIBUTION
6. Dilution................................................... Not Applicable
7. Selling Security-Holders................................... Not Applicable
8. Plan of Distribution....................................... THE OFFERING; PLAN OF
DISTRIBUTION
9. Legal Proceedings.......................................... BUSINESS
10. Directors, Executive Officers,
Promoters and Control Persons.............................. MANAGEMENT -- Certain
Transactions with
Management
11. Security Ownership of Certain
Beneficial Owners and
Management................................................. SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
12. Description of Securities.................................. DESCRIPTION OF
SECURITIES
13. Interest of Named Experts and
Counsel.................................................... Not Applicable
-i-
<PAGE>
14. Disclosure of Commission
Position on Indemnification for
Securities Act Liabilities ................................ Not Applicable
15. Organization within last five
years...................................................... MANAGEMENT -- Certain
Transactions with
Management
16. Description of Business.................................... BUSINESS
17. Management's Discussion and
Analysis of Plan of Operation.............................. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF
FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
18. Description of Property.................................... BUSINESS -- Properties
19. Certain Relationships and
Related Transactions....................................... MANAGEMENT -- Certain
Transactions with
Management
20. Market for Common Equity and
Related Stockholder Matters................................ MARKET AND PRICE RANGE
OF COMMON STOCK;
DIVIDEND POLICY
21. Executive Compensation..................................... MANAGEMENT -- Executive
Compensation
22. Financial Statements....................................... CONSOLIDATED FINANCIAL
STATEMENTS
23. Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosure.................................. Not Applicable
</TABLE>
-ii-
<PAGE>
PROSPECTUS
Subject to completion, dated _________ __, 1996
UNITY BANCORP, INC.
305,000 UNITS
----------
Unity Bancorp, Inc. (the "Company"), a Delaware corporation and bank
holding company registered under the Bank Holding Company Act of 1956, as
amended (the "BHCA") is offering for sale (the "Offering") 305,000 Units (the
"Units") at a per Unit price of $16.50. Each Unit consists of one Share of
Common Stock, no par value (the "Common Stock"), and one warrant (a "Warrant")
to purchase one share of Common Stock at an exercise price of $17.00 for a
period of two years from the date of issuance. The Offering will commence on
________ ___, 1996 and will terminate on _________ ___, ________ (subject to
extension by the Board of Directors of the Company as provided for herein, the
"Offering Termination Date").
Prior to the date of the Offering, there has been only a limited trading
market in the Common Stock and no trading market in the Units or Warrants. On
August 31, 1996, the last reported sale price of the Common Stock on the NASDAQ
Bulletin Board was $16.75. The Company has received conditional approval to have
the Common Stock and the Warrants listed on the American Stock Exchange under
the symbols "________" and "________" respectively although no assurances can be
given that the Company will satisfy all of the conditions contained in the
conditional approval. If such conditions can not be met, the Common Stock and
the Warrants will be traded on the NASDAQ Bulletin Board.
PROSPECTIVE PURCHASERS SHOULD CAREFULLY CONSIDER THE INFORMATION CONTAINED
HEREIN UNDER THE HEADING "SPECIAL CONSIDERATIONS AND RISK FACTORS."
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Underwriting Proceeds to
Price to Public Discount(1) Company (2)
--------------- ------------ -----------
Per Unit................. $16.50 $ None $5,032,500
Total(3) ................ $16.50 None $5,032,500
- ----------
(1) The Company has not engaged any underwriter in connection with the Offering.
Offers and sales of the Units will be effected by certain officers of the
Company, who will not be separately paid for such activities. No discounts or
commissions will be paid to such officers. See "The Offering - PLAN OF
DISTRIBUTION."
(2) Before deducting offering expenses payable by the Company estimated to be
$150,000.
(3) The Company has retained an option to sell up to an additional 30,500 Units,
on the same terms and conditions set forth herein, solely to cover
over-subscriptions, if any. If such option is exercised in full, the Price to
the Public and Proceeds to the Company will be $16.50 and $5,535,750
respectively.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
----------
The Units are offered, subject to prior sale, and subject to the right of
the Company to withdraw, cancel or modify such offer and to reject any order in
whole or in part. The Offering covered by this Prospectus will expire on the
Offering Termination Date, unless the Company, in its sole discretion, shall
extend the offer. It is expected that delivery of the certificates representing
the Common Stock and the Warrants purchased as part of the Units during the
Offering will be made against payment therefor on or about _____ __, 1996 at the
offices of the Company, Clinton, New Jersey.
The date of this Prospectus is ______ __, 1996.
<PAGE>
THIS PRELIMINARY PROSPECTUS AND THE INFORMATION CONTAINED HEREIN ARE
SUBJECT TO CHANGE, COMPLETION OR AMENDMENT WITHOUT NOTICE. THESE SECURITIES MAY
NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED BEFORE THE PROSPECTUS IS DELIVERED
IN FINAL FORM. UNDER NO CIRCUMSTANCES SHALL THIS PROSPECTUS CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY NOR WILL THERE BE ANY SALE OF THESE
SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD
BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH JURISDICTION.
<PAGE>
THE SECURITIES OFFERED BY THIS PROSPECTUS ARE NOT SAVINGS ACCOUNTS OR
DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENTAL AGENCY.
AVAILABLE INFORMATION
Unity Bancorp, Inc. has filed with the Securities and Exchange Commission
(the "Commission") in Washington, D.C., a Registration Statement on Form SB-2
(herein, together with all amendments thereto, the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Units offered hereby. This Prospectus, which constitutes a part
of the Registration Statement, does not contain all the information set forth in
the Registration Statement and the exhibits thereto and reference is made to the
Registration Statement and exhibits thereto for further information with respect
to Unity Bancorp, Inc. and the Units offered hereby. Statements herein
concerning the contents of any contract or other document are not necessarily
complete, and in each instance reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. The Registration
Statement, together with exhibits, may be inspected without charge, and copied
at prescribed rates at the principal or regional offices of the Commission at
the addresses indicated above. Copies also may be obtained at prescribed rates
from the public reference facilities maintained by the Commission, at 450 Fifth
Street, N.W., Washington, D.C.
In connection with the Offering, the Company will become subject to the
informational requirements of Section 12(b) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") and in accordance therewith, will file
reports and other information with the Securities and Exchange Commission (the
"Commission" or the "SEC"). Such reports and other information can be inspected
without charge and copied at prescribed rates at the public reference facilities
maintained by the SEC at Room 1024 Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, DC 20549 and at its regional offices located at Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661 and 7 World Trade
Center, 15th Floor, New York, NY 10048. Copies of such material can also be
obtained at prescribed rates from the SEC's Public Reference Section, 450 Fifth
Street, N.W., Washington, DC 20549 and its public reference facilities in
Chicago, Illinois and New York, New York.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and consolidated financial
statements (including the notes thereto) appearing elsewhere in this Prospectus.
The term Company as used herein refers to Unity Bancorp, Inc. and its wholly
owned subsidiary, First Community Bank (the "Bank").
THE COMPANY
Unity Bancorp, Inc. is a one-bank holding company incorporated under the
laws of the State of Delaware to serve as a holding company for the Bank. The
Bank opened for business on September 16, 1991. The Bank is a full-service
commercial bank, providing a wide range of business and consumer financial
services through its main office and four branches located in Clinton, North
Plainfield, Flemington, Springfield, and Scotch Plains, New Jersey. The Bank's
primary trade area encompasses the Route 22/Route 78 corridor between the Bank's
Clinton, New Jersey main office and its Springfield, New Jersey branch. This
trade area includes communities in Hunterdon, Middlesex, Morris, Somerset and
Union Counties, New Jersey.
The Company is subject to the supervision and regulation of the Board of
Governors of the Federal Reserve System (the "FRB"). The Bank is a New Jersey
chartered commercial bank whose deposits are insured by the Savings Association
Insurance Fund ("SAIF") of the Federal Deposit Insurance Corporation ("FDIC").
See "SPECIAL CONSIDERATIONS AND RISK FACTORS - Disparity in Insurance Premiums
and Special Assessment." The operations of Unity Bancorp, Inc. and the Bank are
subject to the supervision and regulation of FRB, FDIC and the New Jersey
Department of Banking.
Subsequent to June 30, 1996, the Company redeemed $2.0 million in its
outstanding subordinated debt in exchange for 160,800 shares of its Common
Stock. This subordinated debt was held by affiliates of the Company, including
members of the Board of Directors of the Company and the Bank and their
affiliates. The shares issued in exchange for the subordinated debt may not be
transferred by these affiliates until September, 1998, two years after
consummation of the exchange offer.
The principal executive offices of Unity Bancorp, Inc. are located at 64
Old Highway 22, Clinton, NJ 08809, and the telephone number is (908) 730-7630.
3
<PAGE>
THE OFFERING
Securities Offered............ 305,000 Units, each Unit
consisting of one share of
Common Stock and one Warrant.
Shares of Common Stock
outstanding prior
to the Offering(1) .......... 1,250,192 shares
Shares of Common Stock
outstanding after the
Offering(1) .................. 1,555,192 shares
Warrants...................... Each Warrant entitles the
holder thereof to purchase one
share of Common Stock at an
exercise price of $17.00,
subject to adjustment upon the
occurrence of certain events.
The Warrants, which are
immediately exercisable, will
expire two years from their
date of issuance.
The Offering and
Plan of Distribution.......... The Company is offering
305,000 Units, each Unit
consisting of one share of
Common Stock and one Warrant
to purchase one share of
Common Stock. Units will be
offered by certain officers of
the Company to the general
public. All subscriptions for
the Units may be made by
completing the Subscription
Agreement accompanying this
Prospectus and mailing the
Subscription Agreement and the
aggregate purchase price for
the Units to the Company.
See "THE OFFERING--PLAN OF
DISTRIBUTION."
Dividends..................... The Company has paid regular
quarterly cash dividends since
the first quarter of 1995.
- --------
(1) Does not include 305,000 shares of Common Stock reserved for issuance
upon exercise of the Warrants.
4
<PAGE>
The current quarterly dividend is $.06 per
share. The Company has also issued a 10%
stock dividend in 1993 and 1994 and a 5%
stock dividend in 1996. The future payment of
dividends, if any, by the Company will be
determined from time to time based upon,
among other things, the Company's performance
and capital needs.
Use of Proceeds............... The proceeds of the Offering will be used to
fund the Company's continued expansion. Among
the possibilities the Company is considering
is chartering a new commercial bank
subsidiary (the "Subsidiary") or establishing
additional branches. The Company will
strongly consider using the proceeds to
capitalize the Subsidiary if Congress does
not resolve the premium disparity between
members of the SAIF, like the Bank, and
members of the Bank Insurance Fund ("BIF") of
the FDIC. See "SPECIAL CONSIDERATIONS AND
RISK FACTORS - Disparity in Insurance
Premiums and Special Assessment." In
addition, the Company will use the proceeds
to expand its lending activities.
Market for Securities......... The Units, the Common Stock and the Warrants
are currently not listed on any securities
exchange or on the NASDAQ National or
SmallCap Markets. The Common Stock does trade
from time to time on the NASDAQ Bulletin
Board. There is no trading market for the
Units or the Warrants. In connection with the
Offering, the Company has received
conditional approval to have
5
<PAGE>
the Common Stock and the Warrants listed on
the American Stock Exchange under the symbols
"_______" and "______" respectively. Among
the conditions contained in the approval is a
requirement that the Common Stock and the
Warrants sold pursuant to the Offering be
distributed to at least _______ subscribers
who are not current stockholders of the
Company. Although the Company intends to use
its best efforts to satisfy this requirement,
no assurance can be given that the Company
will be able to satisfy this condition. In
the event the Company is unable to satisfy
this condition, the Common Stock and the
Warrants will not be listed on the American
Stock Exchange and will, instead, be traded
on the NASDAQ Bulletin Board.
Special Considerations and
Risk Factors.................. Prospective purchasers of the Units should
consider the information discussed under the
heading "SPECIAL CONSIDERATIONS AND RISK
FACTORS."
6
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth at and for each of the
two years presented below are derived from the consolidated financial statements
of the Company, which have been audited by Arthur Andersen LLP, independent
auditors, whose report thereon is included elsewhere herein. The selected
consolidated financial information for the six month periods ended June 30, 1996
and 1995 are derived from unaudited financial statements of the Company. The
results of operations for the six months ended June 30, 1996 are unaudited and
are not necessarily indicative of the results of operations to be expected for
the twelve months ending December 31, 1996. The selected consolidated financial
information should be read in conjunction with the consolidated financial
statements of the Company, including the related notes, thereto set forth
elsewhere in this Prospectus.
Six Months Ended Years Ended
June 30, December 31,
------------------ ------------------
1996 1995 1995 1994
------ ------ ------ ------
(Dollars in thousands, except per share data)
INCOME STATEMENT DATA:
Interest income ................ $4,949 $3,461 $7,770 $4,938
Interest expense ............... 2,136 1,350 3,334 1,830
------ ------ ------ ------
Net interest income ............ 2,813 2,111 4,436 3,108
Provision for loan losses ...... 257 145 229 161
Other income ................... 1,050 625 1,385 628
Other expense .................. 2,791 1,777 3,978 2,600
------ ------ ------ ------
Income before income taxes ..... 815 814 1,614 975
Income tax expense ............. 312 313 609 219
------ ------ ------ ------
Net income ..................... $ 503 $ 501 $1,005 $ 756
====== ====== ====== ======
7
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended Years Ended
June 30, December 31,
---------------------- -----------------
1996 1995 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net Income ................... $ 0.47 $ 0.52 $ 1.04 $ 0.84
Cash dividends ............... 0.11 0.15 0.24 -0-
Book value ................... 9.41 8.58 9.24 8.04
Weighted average shares
outstanding .................. 1,058,282 962,380 963,019 900,954
BALANCE SHEET DATA:
Total Assets ................. $138,448 $ 96,581 $121,804 $ 78,648
Total loans .................. 84,064 46,033 59,108 36,421
Investment
securities(1) ................ 34,208 31,912 36,161 30,476
Deposits ..................... 125,623 86,565 110,998 70,695
Total stockholders'
equity ....................... 10,256 7,874 8,476 7,360
PERFORMANCE RATIOS:
Return on average
assets ....................... .78% 1.17% 1.03% 1.07%
Return on average
stockholders' equity ......... 10.58% 13.27% 12.82% 11.53%
Net interest margin .......... 4.55% 5.12% 4.70% 4.52%
Dividend payout ratio ........ 23.96% 27.43% 22.81% 0%
Equity to assets ratio ....... 7.38% 8.84% 8.07% 9.26%
</TABLE>
- --------
(1) Includes securities held to maturity and securities available for sale.
8
<PAGE>
SPECIAL CONSIDERATIONS AND RISK FACTORS
A prospective purchaser should review and consider carefully the following
factors, together with the other information contained in this Prospectus, in
evaluating an investment in the Units.
DISPARITY IN INSURANCE PREMIUMS AND SPECIAL ASSESSMENT
Unlike deposits of most commercial banks, deposits of the Bank are insured
by the SAIF. Both the SAIF and the BIF, the deposit insurance fund that covers
most commercial bank deposits, are statutorily required to hold reserves equal
to 1.25% of insured deposits. Under federal law, the FDIC may not reduce
insurance premiums until a fund holds reserves equal to 1.25% of insured
deposits. The BIF reached this statutorily required ratio in mid-1995, and the
FDIC established a new assessment rate schedule for BIF members of 0 to 31 basis
points. Approximately 92% of BIF members pay only the statutorily mandated
minimum payment of $2,000 per year for deposit insurance, with no additional
premium. Since the SAIF has not reached its statutorily mandated reserve ratio,
the FDIC has maintained the assessment rate schedule for SAIF-member
institutions at 23 to 31 basis points. Due to the differential in FDIC insurance
premium assessments, SAIF members, such as the Bank, may be at a substantial
competitive disadvantage to BIF members with respect to pricing of loans and
deposits and the ability to achieve lower operating costs through reduced
premium rates.
Several alternatives to mitigate the effect of the BIF/SAIF premium
disparity have been proposed by Congress. In November, 1995, Congress passed
legislation designed to recapitalize the SAIF, thereby leading to equalized
premium assessments, by requiring all SAIF member institutions to pay a one time
fee of approximately 85 basis points on the amount of deposits held by a SAIF
member institution. Under the legislation, certain institutions, such as the
Bank, which were chartered as de novo commercial banks with deposits insured by
the SAIF, would be entitled to a 20% reduction in the amount of the special
assessment. This payment would have been required in January, 1996. President
Clinton vetoed this legislation in December, 1995. If this legislation had been
accepted by the President, it would have had the effect of immediately reducing
the capital of SAIF member institutions by the amount of their assessments.
Based on the Bank's deposits as of March 31, 1995, the measurement date
contained in the proposed legislation, the Bank's special assessment would have
been $493,113. Since this legislation was vetoed, various other proposals have
been discussed in Congress, most of which would require SAIF members to pay an
upfront special assessment in return for reduced premiums and an eventual merger
of the SAIF and the BIF.
9
<PAGE>
Management of the Company is unable to predict whether any proposal will be
enacted or whether ongoing SAIF premiums will be reduced to a level comparable
to that of BIF premiums. See "SUPERVISION AND REGULATION." Management of the
Company has reviewed several alternative strategies to compensate for the
BIF-SAIF premium disparity, including chartering a new commercial bank
subsidiary of the Company to be insured by the BIF fund. See "--Growth Strategy"
and "Use of Proceeds."
GROWTH STRATEGY
The Company has adopted an aggressive growth strategy pursuant to which the
Company has grown through the establishment of new branches. The Company has
opened three new branches in Flemington, Springfield and Scotch Plains, New
Jersey since June 1, 1995.
Growth through de novo branching involves certain risks and costs which
might not be incurred if the Company acquired an existing institution or branch
along with its associated deposits and loans. In establishing de novo branches,
the Company is required to enter into a market which may already be served by
existing institutions and compete without the benefit of existing customer
relationships. The Company must fund the majority of a branch's start up costs
prior to the time the branch opens for business and attracts deposits. It
typically takes up to twelve months for a branch to contribute to the Company's
profitability.
Among the strategies reviewed by Company management to ameliorate the
BIF-SAIF premium disparity is chartering a new commercial bank subsidiary of the
Company which will be insured by the BIF fund of the FDIC. This strategy entails
a variety of risks, including the ability of the Company to yield sufficient
deposit insurance premium savings to justify the expenses of establishing the
Subsidiary. In the event the Company elects to use the proceeds of the Offering
to capitalize the Subsidiary, no assurance can be given that Congressional
responses to the BIF-SAIF issue will not preclude the Company from recouping its
investment from deposit insurance premium savings. See "Use of Proceeds."
CONTROL BY OFFICERS AND DIRECTORS
Upon completion of the Offering, directors and executive officers of the
Company and their affiliates will control a substantial percentage of the Common
Stock. Executive Officers and directors of the Company will own approximately
54% of the outstanding shares of the Common Stock. Because the directors and
executive officers will own a majority of the Company's outstanding Common
Stock, as a practical matter, it will be difficult to undertake any corporate
actions requiring stockholder approval, or to elect a board of directors of the
10
<PAGE>
Company, without the support of the directors, executive officers and their
affiliates.
ABSENCE OF A PUBLIC MARKET
There is currently no established public market for the Units, the Common
Stock and the Warrants. The Common Stock trades from time to time on the NASDAQ
Bulletin Board. In connection with the Offering, the Company has applied to have
the Warrants and the Common Stock listed on the American Stock Exchange. The
Common Stock and the Warrants have been conditionally approved for listing on
the American Stock Exchange under the symbols "_____" and "_____" respectively.
Among the conditions contained in the American Stock Exchange's approval is a
requirement that the shares of Common Stock and the Warrants sold in the
Offering be distributed to at least ___________ subscribers who are not existing
shareholders of the Company. Although the Company intends to use its best
efforts to satisfy this requirement, no assurance can be given that the Company
will be successful in satisfying the conditions included in the American Stock
Exchange's conditional approval of having the Common Stock and the Warrants
listed on the American Stock Exchange. In the event the Common Stock and the
Warrants are not listed on the American Stock Exchange, the Common Stock and the
Warrants will be traded on the NASDAQ Bulletin Board. However, the NASDAQ
Bulletin Board provides a far less liquid market for trading of the Common Stock
and the Warrants, and it may be more difficult for shareholders to sell large
blocks of the Common Stock or the Warrants if the Company's Common Stock and
Warrants are traded on the NASDAQ Bulletin Board instead of the American Stock
Exchange. Even if the Common Stock and the Warrants are listed on the American
Stock Exchange, no assurances can be given that an active public trading market
for the Common Stock or the Warrants will develop or if such a market develops,
that it will be sustained.
SOURCES OF DIVIDENDS ON COMMON STOCK
The Company is a legal entity separate and distinct from the Bank. The
Company has no material assets other than its ownership of the Bank. Earnings of
the Company are wholly dependent on the earnings of the Bank, as the Company has
engaged in no significant operations of its own. Accordingly, the earnings of
the Company, and its ability to pay dividends with respect to the Common Stock,
are largely dependent on the receipt by the Company of the earnings of the Bank
in the form of dividends. Any restriction on the ability of the Bank to pay
dividends to the Company could significantly and adversely affect the ability of
the Company to pay dividends with respect to the Common Stock.
The Bank's ability to pay dividends or make other capital distributions to
the Company is governed by regulations imposed
11
<PAGE>
by the FDIC and the New Jersey Department of Banking (the "Department"), the
Bank's primary regulators. See "Supervision and Regulation."
COMPETITION
The banking and financial services field in which the Company is engaged is
highly competitive and most competitors have substantially greater financial
resources than the Company does. The Company's principal market area is served
by branch offices of large commercial banks and thrift institutions. Such
institutions have substantially greater resources than the Company to expend
upon advertising and marketing, and their substantially greater capitalization
enables those competitors to make much larger loans. The Company's success
depends a great deal upon its judgment that large and mid-size financial
institutions do not adequately serve small businesses and consumers in its
principal market area and the Company's ability to compete favorably for such
customers.
In addition to existing competition, on September 29, 1994, the Riegel-Neal
Interstate Banking and Branching Efficiency Act (the "Interstate Act") was
signed into law. The Interstate Act reduces restrictions on the acquisition of
New Jersey financial institutions by out of state bank holding companies and
financial institutions, and permits the operations of acquired New Jersey
institutions to be conducted under existing charters, thereby making
acquisitions of New Jersey institutions more efficient and cost effective for
out of state bank holding companies and financial service institutions. Adoption
of the Interstate Act may make the New Jersey banking market even more
competitive than it currently is. See "Supervision and Regulation."
LENDING RISKS
The risk of non-payment (or deferred or delayed payment) of loans is
inherent in commercial banking. Such non-payment, or delayed or deferred payment
of loans to the Company, if they occur, may have a material adverse effect on
the Company's earnings and overall financial condition. Additionally, in
compliance with applicable banking laws and regulations and in light of sound
judgment, the Company maintains an allowance for loan losses created through
charges against earnings. As of June 30, 1996, the Company's allowance for loan
losses was $774,417. The Company's marketing focus on small to medium-size
businesses may result in the assumption by the Company of certain lending risks
that are different from or greater than those which would apply to loans made to
larger companies. Company management seeks to minimize the Company's credit risk
exposure through credit controls which include evaluation of potential
borrowers, collateral available, liquidity and cash flow.
12
<PAGE>
However, there can be no assurance that such procedures will actually reduce
loan losses.
FUTURE ISSUANCE OF SECURITIES; EXERCISE OF WARRANTS
In order to have sufficient capital to facilitate its growth strategy, the
Company may be required to raise additional capital. In the event the Company is
unable to raise such capital, it may not be able to undertake its current
expansion strategy and management will be required to reorient its long term
strategy for the Company. There can be no assurance that the Company will be
able to generate or attract additional capital in the future on favorable terms.
In addition, the issuance of additional securities to raise additional capital
may result in dilution to the then current stockholders of the Company.
The Warrants issued as part of the Units may not be exercised unless the
Company maintains an effective registration statement covering the shares of
Common Stock issuable upon exercise of the Warrants with the SEC and with
various securities administrators for the states in which the warrant holders
reside, or unless the issuance of such shares of Common Stock is exempt from
registration. Although the Company will make every reasonable effort to maintain
such registration, no assurances can be given that the Company will be
successful.
POTENTIAL IMPACT OF CHANGES IN MONETARY POLICY AND INTEREST RATES
The operating results of the Company may be significantly affected
(favorably or unfavorably) by market rates of interest which, in turn, are
affected by prevailing economic conditions, by the fiscal and monetary policies
of the United States Government and by the policies of various regulatory
agencies. The earnings of the Company will depend primarily upon its interest
rate spread (i.e., the difference between income earned on its loans and
investments and the interest paid on its deposits). Like many financial
institutions, the Company may be subject to the risk of fluctuations in interest
rates, which, if significant, may have a material adverse effect on its
operations. See "SUPERVISION AND REGULATION".
SUPERVISION AND REGULATION
The Federal and state laws and regulations applicable to the Company and
the Bank give regulatory authorities extensive discretion in connection with
their supervisory and enforcement responsibilities, and generally have been
promulgated to protect depositors and the deposit insurance funds and not for
the purpose of protecting stockholders. These laws and regulations can
materially affect the future business of the Company and the Bank. Laws and
regulations now affecting the Company and the
13
<PAGE>
Bank may be changed at any time, and the interpretation of such laws and
regulations by bank regulatory authorities is also subject to change. The
Company can give no assurance that future changes in laws and regulations or
changes in their interpretation will not adversely affect the business of the
Company and the Bank. See "SUPERVISION AND REGULATION."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Units offered hereby
is estimated to be approximately $4,882,500 ($5,385,750 if the over-subscription
option is exercised in full by the Company), after deducting offering expenses.
The Company intends to use the proceeds of the Offering to fund the
Company's ongoing expansion. The proceeds may be used to fund additional
branches of the Bank, or may be used by the Company to fund the initial
capitalization of the Subsidiary. If congressional action is not taken to
ameliorate the BIF/SAIF premium disparity, the Company will strongly consider
using the proceeds to capitalize the Subsidiary. Under the regulations of the
New Jersey Department of Banking, a de novo institution must have minimum
capital of $5 million. The Company may use the net offering proceeds, together
with certain internally generated funds, to fund the initial capitalization of
the Subsidiary. The Company may also use a portion of the proceeds to fund
expansion of its leading activities.
MARKET AND PRICE RANGE OF COMMON STOCK
Commencing in November, 1995, the Common Stock of the Company became listed
for trading on the NASDAQ Bulletin Board. Prior to that time, the Common Stock
was not traded on any recognized securities exchange. As of August 31, 1996,
there were 296 stockholders of record of the Common Stock. In connection with
the Offering, the Company has received conditional approval to have the Common
Stock and Warrants listed for trading on the American Stock Exchange under the
symbols "_____" and "_____" respectively. Among the conditions contained in the
American Stock Exchange's approval is a requirement that the Common Stock and
Warrants sold pursuant to the Offering be distributed to at least _______
subscribers who are not currently shareholders of the Company. Although the
Company intends to use its best efforts to satisfy this condition, no assurances
can be given that this condition will be satisfied. In the event this condition
is not satisfied, the Common Stock and the Warrants will be traded on the NASDAQ
Bulletin Board, a less liquid market than the American Stock Exchange. Even if
the conditions contained in the American Stock Exchange's conditional approval
are satisfied and the stock is listed for trading on the American
14
<PAGE>
Stock Exchange, there can be no assurance that an active or liquid trading
market for the Common Stock or the Warrants will develop or, if developed, be
maintained.
The following table sets forth the high and low bid prices of the Common
Stock, as reported on the NASDAQ Bulletin Board since November, 1995, the date
the Company first became listed on the Bulletin Board. The high and low bid
prices reflect interdealer quotations, without retail mark-up, mark-down or
commissions and do not necessarily represent actual transactions.
Bid
---------------------------------
Cash
High Low Dividend
------ ----- --------
1995
4th Quarter $15.00 $14.00 $.05
1996
1st Quarter.............................. 16.25 14.00 .06
2nd Quarter.............................. 17.75 15.00 .06
3rd Quarter (through August 31,
1996).................................... 17.50 16.75 .06
As of August 31, 1996, options to purchase 39,750 shares of Common Stock
were outstanding, all of which were immediately exercisable. In addition, the
Company has issued 286,621 shares of stock without registration and which are
subject to two year holding periods. The holding period on 125,821 of these
shares lapses in March, 1998 and the holding period on the remaining 160,800
shares lapses in September, 1998.
15
<PAGE>
DIVIDEND POLICY
The Company began paying a cash dividend in the first quarter of 1995 and
has paid a quarterly dividend each quarter since. The Company's current dividend
is $.06 per share. Additionally, the Company issued 10% stock dividends during
1992 and 1993 and a 5% stock dividend in 1996.
The future payment of cash dividends, if any, by the Company will be
determined from time to time by the Board of Directors which will consider,
among other factors, the Company's financial condition and results of
operations, investment opportunities, capital requirements and regulatory
limitations. Funds for the payment of cash dividends by the Company are derived
from dividends paid by the Bank to the Company. Accordingly, restrictions on the
Bank's ability to pay cash dividends directly affect the payment of cash
dividends by the Company. The Bank is subject to certain limitations on the
amount of cash dividends that it may pay under the Banking Act, which provides
that a bank may pay dividends only if, after payment of the dividend, the
capital stock of the bank will be unimpaired and either the bank will have a
surplus of not less than 50 percent of its capital stock or the payment of the
dividend will not reduce the bank's surplus. As of June 30, 1996, the Bank had
3,778,102 available for the payment of dividends to the Company pursuant to
these restrictions.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1996 and as adjusted to give effect, after deducting offering expenses, to
the sale by the Company of 305,000 Units offered hereby. As adjusted numbers are
based upon an offering price of $16.50 per Unit.
June 30, 1996
------------------------
Actual As Adjusted
------ -----------
(Dollars in Thousands)
Subordinated Debt ................................. $ 2,010 $ 2,010
-------
Stockholders' equity:(1)
Common Stock, no par value 2,500,000
shares authorized, 1,089,392 shares
issued and 1,394,392 shares
issued, as adjusted.............................. 9,462 $14,345
-------
Retained earnings.................................. 880 $ 880
-------
-16-
<PAGE>
Net unrealized holding (losses) on
available for sale securities.................... (86) (86)
------- -------
Total stockholders' equity................ $12,266 $17,149
======= =======
- ----------
(1) Does not include 305,000 shares of Common Stock reserved for issuance
upon exercise of Warrants and an aggregate of 120,000 shares of Common Stock
reserved for issuance under the Company's 1994 Stock Option Plan for Employees,
the Company's 1994 Stock Option Plan for Non-Employee Directors and the
Company's Stock Bonus Plan.
The table above does not give effect to an exchange of $2 million in
the Company's subordinated notes for 160,800 shares of the Company's Common
Stock which was effectuated in September, 1996. The effect of this exchange
is to decrease on both an actual and an as-adjusted basis, the Company's
subordinated debt to zero and to increase in the Company's stockholders
equity by $2,010,000.
The following tables set forth the capital ratios of the Company and
the Bank as of June 30, 1996 and as adjusted to give effect, after
deducting offering expenses, to the sale by the Company of the 305,000
Units offered hereby at a price of $16.50 per Unit, as well as the minimum
required regulatory capital for the Company and the Bank.
-17-
<PAGE>
<TABLE>
THE COMPANY
<CAPTION>
June 30, 1996
---------------------------------- Required Regulatory
Actual As Adjusted Minimum
--------- ------------ -------------------
<S> <C> <C> <C>
Risk based capital:
Tier I capital................................ 10.40% 14.94% 4.00%
Total capital................................. 11.19% 15.71% 8.00%
Leverage ratio.................................... 7.72% 11.32% 3.00-5.00%
</TABLE>
THE BANK
<TABLE>
<CAPTION>
June 30, 1996
---------------------------------- Required Regulatory
Actual As Adjusted Minimum
--------- ------------ -------------------
<S> <C> <C> <C>
Risk based capital()
Tier I capital................................ 10.40% 10.40% 4.00%
Total capital................................. 11.19% 11.19% 8.00%
Leverage ratio.................................... 7.72% 7.72% 3.00-5.00%
</TABLE>
- ---------------
Both the Company and the Bank are subject to minimum capital requirements
promulgated by the FRB, the FDIC and the New Jersey Department of Banking, their
respective primary regulators. See "Supervision and Regulation - Bank Holding
Company Regulation - Capital Adequacy Guidelines for Bank Holding Companies."
-18-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and
results of operations should be read in conjunction with the Company's financial
statements and the notes relating thereto including herein. When necessary,
reclassifications have been made to prior years' data throughout the following
discussion and analysis for purposes of comparability with 1995 data.
OVERVIEW AND STRATEGY
Since the Company commenced operations in September, 1991, the Company
has increased its asset base at a rapid pace. The Company was created through
the purchase of two existing branches from the RTC. Upon commencement of its
operations, the Company had total assets of $61.9 million, consisting primarily
of cash and cash equivalents and investment securities. At June 30, 1996, the
Company had total assets of $138.4 million, including loans of $84.1 million.
Upon commencing operations, the Company had two branches located in Annandale
and North Plainfield, New Jersey. The Company has subsequently expanded along
the Route 22/78 corridor into Flemington and eastward into Scotch Plains and
Springfield, New Jersey. In addition, the Company has relocated its main office
from Annandale to Clinton, New Jersey. Although the Company's emphasis has been
on growth, the Company became profitable in its second year of operation, and
its net income has increased to $1.0 million for the year ended December 31,
1995 and $503 thousand for the six months ended June 30, 1996. As a result of
the Company's success in continuing growth while retaining profitability, and in
order to provide stockholders of a return on their investment, the Company began
paying cash dividends in the first quarter of 1995.
RESULTS OF OPERATIONS
The Company's results of operations depend primarily on its net
interest income, which is the difference between the interest earned on its
interest-earning assets and the interest paid on funds borrowed to support those
assets, such as deposits. Net interest margin is a function of the difference
between the weighted average rate received on interest-earning assets and the
weighted average rate paid on interest-bearing liabilities, as well as the
average level of interest-earning assets as compared with that of
interest-bearing liabilities. Net income is also affected by the amount of
non-interest income and operating expenses.
-19-
<PAGE>
NET INCOME
For the six months ended June 30, 1996, net income totaled $503
thousand, remaining relatively unchanged from the $501 thousand earned in the
comparable period of 1995. Although the Company's net interest income increased
by $703 thousand, or 33.3% over the comparable period of 1995, the increase was
offset by an increase of $1.0 million, or 57.1%, in total other expenses. The
increase in the Company's net interest income resulted from an increase of $1.5
million, or 43.0%, in total interest income partially offset by a $786 thousand
increase in total interest expense. The increase in total interest income was
attributable to a $38.0 million, or 82.6%, increase in the Company's loan
portfolio. Despite the increase in the Company's loan portfolio, the Company's
average yield on its interest earning assets declined to 8.00% for the six
months ended June 30, 1996 from 8.39% for the comparable period of 1995. The
decline in the Company's average yield reflects the repricing of the Company's
adjustable rate loans to lower market rates of interest during 1996. In
addition, new loans originated by the Company during 1996 were at lower rates of
interest than those loans originated during 1995, reflecting reduced market
rates.
The Company's net income increased from 1994 to 1995 by $249 thousand,
or 32.9%, to $1.0 million for the year ended December 31, 1995 from $756
thousand for the year ended December 31, 1994. This increase was primarily
attributable to an increase in net interest income of $1.3 million, or 42.7%,
during 1995. The increase in net interest income was attributable to an increase
in interest income of $2.8 million, or 57.4%, to $7.8 million for the year ended
December 31, 1995 from $4.9 million for the year ended December 31, 1994,
primarily as a result of an increase in the Company's loan portfolio. The volume
increases in the Company's loan portfolio were primarily funded through the
maturation of lower yielding securities, thereby increasing the Company's
average yield and net margin. The Company's average yield on interest earning
assets increased to 8.24% for the year ended December 31, 1995 from 7.18% for
the year ended December 31, 1994.
Interest expense rose $786 thousand, or 58.2%, to $2.1 million for the
six months ended June 30, 1996 compared to $1.4 million for the comparable
period of 1995, and $1.5 million, or 82.2%, to $3.3 million for the year ended
December 31, 1995 from $1.8 million for the year ended December 31, 1994. The
increases in interest expense over all periods is primarily attributable to a
77.7% increase in the Company's deposits from December 31, 1994 to June 30,
1996.
The increase in net interest income during 1995 compared to 1994 was
partially offset by higher other expenses and a higher provision for loan
losses.
-20-
<PAGE>
On a per share basis, earnings were $.47 for the six months ended June
30, 1996, $1.04 for the year ended December 31, 1995, and $.84 for the year
ended December 31, 1994.
COMPARATIVE AVERAGE BALANCE SHEETS
The following table reflects the components of the Company's net
interest income, setting forth for the periods presented herein, (1) average
assets, liabilities and stockholders' equity, (2) interest income earned on
interest-earning assets and interest expense paid on interest-bearing
liabilities, (3) average yields earned on interest-earning assets and average
rates paid on interest-bearing liabilities, (4) the Company's net interest
spread (i.e., the average yield on interest-earnings assets less the average
rate on interest-bearing liabilities) and (5) the Company's net yield on
interest-earning assets. Rates are computed on a taxable equivalent basis.
-21-
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED JUNE 30, -----------------------------------------------------------------
1996 1995 1994
---------------------------- ---------------------------- ----------------------------------
Average Average Average
Interest Rates Interest Rates Interest Rates
Average Income/ Earned/ Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid Balance Expense Paid
------- -------- ------- ------- -------- ------- ------- -------- --------
(Dollars In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets:
Taxable loans (net of unearned
income)........................... $69,719 $3,487 10.00% $44,743 $4,782 10.69% $31,295 $2,962 9.47%
Tax exempt securities............. 572 16 5.59% 93 5 5.33% 0 0 0.00%
Taxable investment securities..... 33,761 1,015 6.01% 31,778 2,074 6.53% 27,424 1,716 6.26%
Interest bearing deposits......... 13,169 258 3.92% 12,670 617 4.87% 7,848 166 2.12%
Federal funds sold................ 6,483 174 5.36% 5,012 292 5.82% 2,191 93 4.26%
Total interest earning assets..... 123,704 4,950 8.00% 94,295 7,770 8.24% 68,757 4,938 7.18%
Non-interest earning assets....... 5,686 3,328 2,415
Allowance for possible loan
losses............................ (654) (447) (349)
Total Assets............. $128,736 $97,176 $70,823
LIABILITIES AND SHAREHOLDERS'
EQUITY
Interest bearing liabilities:
NOW deposits............. $12,704 $146 2.30% $10,665 $275 2.58% $6,288 $153 2.43%
Savings deposits......... 23,147 316 2.73% 20,677 626 3.03% 23,467 647 2.76%
Money market deposits.... 6,182 97 3.13% 5,277 197 3.74% 3,595 100 2.78%
</TABLE>
-22-
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED JUNE 30, -----------------------------------------------------------------
1996 1995 1994
---------------------------- ---------------------------- ----------------------------------
Average Average Average
Interest Rates Interest Rates Interest Rates
Average Income/ Earned/ Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid Balance Expense Paid
------- -------- ------- ------- -------- ------- ------- -------- --------
(Dollars In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Time deposits .............. 55,418 1,518 5.48% 38,781 2,113 5.45% 23,555 930 3.95%
Subordinated debt .......... 1,265 59 9.36% 1,378 123 8.94% 0 0 0%
Total interest bearing
liabilities .............. 98,716 2,136 4.33% 76,777 3,334 4.34% 56,904 1,830 3.22%
Non-interest bearing liabilities:
Demand deposits ............ 19,991 3.60% 11,887 3.76% 7,134 2.86%
Other liabilities .......... 524 671 227
Total non-interest
bearing liabilities ...... 20,515 12,558 7,361
Shareholders' equity ....... 9,504 7,841 6,558
Total liabilities and
shareholders' equity ..... $128,736 $97,176 $70,823
Net interest differential .. $ 2,813 $4,436 $3,108
Net yield on interest-
earning assets ........... 4.55% 4.70% 4.52%
</TABLE>
-23-
<PAGE>
The following table presents by category the major factors that contributed
to the changes in net interest income for each of the years ended December 31,
1995 and 1994 and for the six months ended June 30, 1996, as compared to each
respective previous period. Amounts have been computed on a fully tax-equivalent
basis, assuming a Federal income tax rate of 34%.
<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended December 31,
1996 versus 1995 1995 versus 1994
------------------------------ ---------------------------
Increase (Decrease)
Due to Change in:
Average Average Average Average
Volume Rate Net Volume Rate Net
------- ------- --- ------- ------- ---
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Taxable loans (net of
unearned income) ...... $1,640 ($ 136) ($ 107) $1,273 $ 382 $ 164
Tax exempt
securities ............ 0 0 16 0 0 5
Taxable investment
securities ............ 60 (107) (6) 272 75 12
Interest bearing
deposits .............. 124 (47) (28) 102 216 133
Federal funds sold ...... 96 (8) (8) 120 34 44
Total interest
income ....... 1,920 (299) (133) 1,768 707 358
</TABLE>
-24-
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended December 31,
1996 versus 1995 1995 versus 1994
----------------------------- ---------------------------
Increase (Decrease)
Due to Change in:
Average Average Average Average
Volume Rate Net Volume Rate Net
------- ------- --- ------- ------- ---
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest expense:
NOW deposits ............. 44 (11) (4) 107 9 6
Savings deposits ......... 33 (28) (3) (77) 63 ($ 8)
Money market
deposits ............... 18 (17) (3) 47 34 16
Time deposits ............ 609 80 64 601 354 229
Subordinated debt ........ 1 3 0 0 0 123
Total interest
expense ....... 705 27 54 677 460 367
Net interest
income ........ $1,216 ($326) ($187) $1,090 $246 ($ 9)
</TABLE>
-25-
<PAGE>
PROVISION FOR LOAN LOSSES
For the six months ended June 30, 1996, the Company's provision for
loan losses was $257 thousand, an increase of $112 thousand over the provision
of $145 thousand for the six month period ended June 30, 1995. For the year
ended December 31, 1995, the Company's provision for loan losses was $229
thousand, an increase of $68 thousand over the provision of $161 thousand for
the year ended December 31, 1994. The increased provisions reflect the continued
growth in the Company's loan portfolio.
OTHER INCOME
Other income, primarily consisting of gains on sales of loans and
service fees received from deposit accounts, amounted to $1.1 million for the
six months ended June 30, 1996, an increase of $426 thousand, or 68.1%, from the
comparable period of 1995. Other income for the year ended December 31, 1995
increased by $757 thousand, or 120%, to $1.4 million compared to $628 thousand
in 1994. These increases were primarily related to increased gains on sale of
loans by the Company in both the six month period ended June 30, 1996 and the
year ended December 31, 1995, as well as the Company's increasing level of
deposits. The Company is an active participant in the United States Small
Business Administration's guaranteed loan program. Pursuant to this program, the
United States Small Business Administration guarantees between 75% and 80% of
the principal balance of any approved loan. After closing a loan, the Company
sells the guaranteed portion of the loan. For the six month period ended June
30, 1996, the Company recognized $618 thousand in income from the gain on sale
of loans, an increase of $248 thousand over the $370 thousand recognized from
the six months ended June 30, 1995. For the year ended December 31, 1995, the
Company recognized income of $871 thousand from the gain on sale of loans, an
increase of $624 thousand over the $247 thousand recognized for the year ended
December 31, 1994. The increases in gains on sale of loans are attributable to
the Company's increasing penetration of the small business loan market in the
Company's trade areas.
OTHER EXPENSES
Other expenses for the six months ended June 30, 1996 amounted to $2.8
million, an increase of $1.0 million, or 57.1%, from the comparable period of
1995 when other expenses totaled $1.8 million. For the year ended December 31,
1995, other expenses increased by $1.4 million, or 53.0%, to $4.0 million
compared to $2.6 million for the year ended December 31, 1994. These increases
were primarily attributable to increased salary, occupancy and other operating
expenses. The increases in salary and occupancy expenses during the year ended
December 31, 1995 and during the six months ended June 30, 1996 reflect the
-26-
<PAGE>
Company's expansion through the establishment of new branches. Since the
beginning of 1995, the Company has opened new branches in Flemington,
Springfield and Scotch Plains, New Jersey and has relocated its main branch and
corporate headquarters from Annandale to new leased space in Clinton, New
Jersey. Increases in other operating expenses reflect increased FDIC deposit
insurance premiums on the Company's expanding deposit base, as well as increased
item processing and servicing charges.
INCOME TAX EXPENSE
The income tax provision, which includes both federal and state taxes,
for the six months ended June 30, 1996 and for the years ended December 31, 1995
and 1994 was $312 thousand, $609 thousand and $219 thousand, respectively.
Increases in income taxes were primarily attributable to increases in income
before taxes in all periods reported, as well as full utilization of the
Company's net operating loss carryforwards during the year ended December 31,
1994.
FINANCIAL CONDITION
At June 30, 1996, the Company's total assets were $138.4 million,
compared to $121.8 million at December 31, 1995 and $78.6 million at December
31, 1994. Total loans increased to $84.1 million at June 30, 1996 from $59.1
million at December 31, 1995 and $36.4 million at December 31, 1994. Total
deposits increased to $125.6 million at June 30, 1996 from $111.0 million at
December 31, 1995 and $70.7 million at December 31, 1994.
LOAN PORTFOLIO
At June 30, 1996, the Company's total loans were $84.1 million, an
increase of $25.0 million, or 42.2%, over total loans at December 31, 1995. The
Company's loan portfolio at December 31, 1995 totaled $59.1 million, an increase
of $22.7 million, or 62.3%, over total loans at December 31, 1994. These
increases in the Company's loan portfolio reflect the Company's expansion
through its new branches as well as its continued penetration of its existing
marketplace.
The Company's loan portfolio consists of commercial and industrial
loans, real estate loans and consumer loans. Commercial and industrial loans are
made for the purpose of providing working capital, financing the purchase of
equipment or inventory and for other business purposes. Real estate loans
consist of loans secured by commercial or residential property and loans for the
construction of commercial or residential property. Consumer loans are made for
the purpose of financing the purchase of consumer goods, home improvements, and
other personal needs, and are generally secured by the personal property being
purchased.
-27-
<PAGE>
The Company's loans are primarily to businesses and individuals located
in the Company's trade area. The Company has not made loans to borrowers outside
of the United States. Commercial lending activities are focused primarily on
lending to small business borrowers. The Company believes that its strategy of
customer service, competitive rate structures and selective marketing, have
enabled the Company to gain market entry to local loans. Company mergers and
lending curtailments at larger banks competing with the Company have also
contributed to the Company's efforts to attract borrowers.
The following table sets forth the classification of the Company's
loans by major category at June 30, 1996 and as of December 31, 1995 and 1994,
respectively.
-28-
<PAGE>
<TABLE>
<CAPTION>
December 31,
June 30, -------------------------------------------
1996 1995 1994
-------------------- ------------------ -------------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial and
industrial............... $12,682 15.09% $ 9,125 15.44% $ 6,952 19.09%
Real estate -
non-residential
properties............... 34,116 40.58% 23,612 39.95% 15,018 41.23%
Residential
properties............... 23,053 27.42% 16,034 27.13% 9,514 26.12%
Construction.............. 8,066 9.60% 5,705 9.65% 1,293 3.55%
Lease financing........... 57 0.07% 83 0.14% 335 0.92%
Consumer.................. 6,090 7.24% 4,549 7.70% 3,309 9.09%
------- ------- ------- ------- ------- -------
Total loans........... $84,064 100.00% $59,108 100.00% $36,421 100.00%
======= ======= ======= ======= ======= =======
</TABLE>
The following table sets forth fixed and adjustable rate commercial and
construction loans as of June 30, 1996 in terms of interest rate sensitivity.
<TABLE>
<CAPTION>
Within 1 Year 1 to 5 Years After 5 years Total
------------- ------------ ------------- -----
(In Thousands)
<S> <C> <C> <C> <C>
Loans with fixed rates:
Commercial........... $ 5,216 $3,647 $ -- $ 8,863
Real estate.......... 5,720 -- -- 5,720
Loans with adjustable
rates:
Commercial............ -- 3,371 448 3,819
Real estate........... -- 2,346 -- 2,346
------ ----- ---- -------
$10,936 $9,364 $448 $20,748
======= ====== ==== =======
</TABLE>
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<PAGE>
ASSET QUALITY
The Company's principal earning assets are its loans. Inherent in the
lending function is the risk of the borrower's inability to repay their loan
under its existing terms. Risk elements include non accrual loans, past due and
restructured loans, potential problem loans, loan concentrations and other real
estate.
Non-performing assets include loans that are not accruing interest
(non-accruing loans) as a result of principal or interest being in default for a
period of 90 days or more. When a loan is classified as non-accrual, interest
accruals discontinue and all past due interest is reversed and charged against
current income. Until the loan becomes current, any payments received from the
borrower are applied to outstanding principal until such time as management
determines that the financial condition of the borrower and other factors merit
recognition of such payments as interest.
The Company attempts to minimize overall credit risk through loan
diversification and its loan approval procedures. The Company's due diligence
begins at the time a borrower and the Company begin to discuss the origination
of a loan. Documentation, including a borrower's credit history, materials
establishing the value and liquidity of potential collateral, the purpose of the
loan, the source and timing of the repayment of the loan, and other factors are
analyzed before a loan is submitted for approval. Loans made are also subject to
periodic review.
The following table sets forth information concerning the Company's
non-performing assets as of the dates indicated:
Non-Performing Loans
--------------------
December 31,
------------
June 30, 1996 1995 1994
------------- ---- ----
(In Thousands)
Non-accrual loans........................ $ 166 $ 78 $ 47
Non-accrual loans to total loans......... .20% .13% .13%
Non-performing assets to total assets.... .12% .06% .06%
Allowance for possible loan losses
as a percentage of non-performing loans.. 466.52% 720.42% 808.92%
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<PAGE>
The interest income that would have been recorded had these loans
performed under the original contract terms was not material for the years ended
December 31, 1995 and 1994 and was $9,516 for the six months ended June 30,
1996.
At the dates indicated in the above table, there were no concentration
of loans exceeding 10% of the Company's total loans and the Company had no
foreign loans.
ALLOWANCE FOR LOAN LOSSES
The Company attempts to maintain an allowance for loan losses at a
sufficient level to provide for potential losses in the loan portfolio. Loan
losses are charged directly to the allowance when they occur and any recovery is
credited to the allowance. Risks within the loan portfolio are analyzed on a
continuous basis by the Company's officers, by outside, independent loan review
auditors and by the Company's Audit Committee. A risk system, consisting of
multiple grading categories, is utilized as an analytical tool to assess risk
and appropriate reserves. Along with the risk system, management further
evaluates risk characteristics of the loan portfolio under current and
anticipated economic conditions and considers such factors as the financial
condition of the borrower, past and expected loss experience, and other factors
management feels deserve recognition in establishing an appropriate reserve.
These estimates are reviewed at least quarterly, and, as adjustments become
necessary, they are realized in the periods in which they become known.
Additions to the allowance are made by provisions charged to expense and the
allowance is reduced by net charge-offs (i.e. - loans judged to be uncollectible
and charged against the reserve, less any recoveries on such loans). Although
management attempts to maintain the allowance at a level deemed adequate, future
additions to the allowance may be necessary based upon changes in market
conditions. In addition, various regulatory agencies periodically review the
Company's allowance for loan losses. These agencies may require the Company to
take additional provisions based on their judgments about information available
to them at the time of their examination.
The Company's allowance for possible loan losses totaled $774 thousand,
$562 thousand and $380 thousand at June 30, 1996 and December 31, 1995 and 1994,
respectively. The increases in the allowance are due to the continued increase
in the Company's total loan portfolio.
The following is a summary of the reconciliation of the allowance for
loan losses for the six month periods ended June 30, 1996 and 1995 and for the
years ended December 31, 1995 and 1994.
-31-
<PAGE>
Six Months Ended Year Ended
June 30, December 31,
-------------- --------------
1996 1995 1995 1994
---- ---- ---- ----
(In Thousands)
Balance at Beginning of Year ........... $562 $380 $380 $302
Charge-offs:
Real estate ........................ -- 46 49 45
Installment ........................ -- 1 1 10
Commercial ......................... -- -- -- 27
Lease financing .................... 45 -- -- --
---- ---- ---- ----
Total charge offs: ..................... 45 47 50 82
Provision charged to expense ........... 257 145 229 161
Recoveries--real estate ................ -- -- 3 --
---- ---- ---- ----
Balance of allowance at end
of year .............................. $774 $478 $562 $380
==== ==== ==== ====
Ratio of net charge-offs to
average loans outstanding ............ .06% .12% .11% .26%
Balance of allowance at year -
end as a % of loans at year end ...... .92% 1.04% .95% 1.04%
The following table sets forth, for each of the Company's major lending
areas, the amount and percentage of the Company's allowance for loan losses
attributable to such category, and the percentage of total loans represented by
such category, as of the periods indicated:
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<PAGE>
Allocation of the Allowance for Loan Losses by Category
December 31,
June 30, ------------------------------------
1996 1995 1994
------------------ ----------------- -----------------
% of % of % of
Amount All Loans Amount All Loans Amount All Loans
------ --------- ------ --------- ------ ---------
Balance
Applicable to:
Commercial and
industrial ....... $158,493 15.1% $ 95,919 15.4% $ 61,601 19.1%
Real Estate:
Nonresidential
properties ... 267,194 40.6% 187,856 39.9% 166,736 41.2%
Residential
properties ... 186,855 27.4% 91,659 27.1% 122,728 26.1%
Construction ....... 86,337 9.6% 121,041 9.7% 11,083 3.5%
Lease financing .... 11,947 0.1% 662 0.1% 2,870 0.9%
Consumer ........... 63,591 7.2% 64,795 7.7% 15,173 9.1%
-------- ----- -------- ----- -------- -----
Total .......... $774,417 100.0% $561,931 100.0% $380,191 100.0%
======== ===== ======== ===== ======== =====
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<PAGE>
INVESTMENT SECURITIES
The Company maintains an investment portfolio to fund increased loans or
decreased deposits and other liquidity needs and to provide an additional source
of interest income. The portfolio is composed of U.S. Treasury Securities,
obligations of U.S. Government and government sponsored agencies, selected
municipal and state obligations, and corporate fixed income securities.
The Company adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," (SFAS 115),
effective January 1, 1994. Under SFAS 115, securities are classified as
securities held to maturity based on management's intent and the Company's
ability to hold them to maturity. Such securities are stated at cost, adjusted
for unamortized purchase premiums and discounts. Securities that are bought and
held principally for the purpose of selling them in the near term are classified
as trading securities, which are carried at market value. Realized gains and
losses and gains and losses from marking the portfolio to market value are
included in trading revenue. Securities not classified as securities held to
maturity or trading securities are classified as securities available for sale,
and are stated at fair value. Unrealized gains and losses on securities
available for sale are excluded from results of operations, and are reported as
a separate component of stockholders' equity, net of taxes. Securities
classified as available for sale include securities that may be sold in response
to changes in interest rates, changes in prepayment risks, the need to increase
regulatory capital or other similar requirement.
Management determines the appropriate classification of securities at the
time of purchase. At June 30, 1996, $20.4 million of the Company's investment
securities were classified as held to maturity and $13.9 million were classified
as available for sale. At June 30, 1996, no investment securities were
classified as trading securities.
At June 30, 1996, total investment securities were $34.2 million, a decrease
from total investment securities of $36.2 million at December 31, 1995, which
was an increase from total securities of $30.5 million at December 31, 1994. The
decrease in the Company's investment securities for the six months ended June
30, 1996 is attributable to the Company using the proceeds of maturing
investment securities to fund new loan demand.
The following table sets forth the carrying value of the Company's security
portfolio as of the dates indicated.
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<PAGE>
A comparative summary of securities available for sale at June 30, 1996,
December 31, 1995 and 1994 is as follows:
Unrealized
Available for Sale Amortized Cost Market Value Net Gain/(loss)
- ------------------ -------------- ------------ ---------------
US Treasury ................... $ 1,954,318 $ 1,957,828 $ 3,510
US government sponsored
agencies .................... 8,682,411 8,623,895 (58,516)
State and municipal ........... 757,000 755,737 (1,263)
Other ......................... 2,519,142 2,517,337 (1,805)
----------- ----------- -----------
Total June 30, 1996 ........... $13,912,870 $13,854,797 ($ 58,073)
US Treasury ................... $ 1,963,616 $ 1,977,094 $ 13,478
US government sponsored
agencies .................... 7,504,828 7,564,063 59,234
US government agencies
and corporations ............ 706,143 719,665 13,523
State and municipal ........... 1,360,000 1,365,337 5,337
Other ......................... 4,623,887 4,678,123 54,236
----------- ----------- -----------
Total December 31, 1995 ....... $16,158,475 $16,304,283 $ 145,808
US government agencies
and corporations ............ $ 1,793,650 $ 1,757,647 ($ 36,003)
US government sponsored
agencies .................... 250,000 192,500 (57,500)
Other ......................... 5,633,171 5,249,144 (384,027)
----------- ----------- -----------
Total December 31, 1994 ....... $ 7,676,821 $ 7,199,291 ($ 477,529)
-35-
<PAGE>
A comparative summary of investment securities held to maturity at June 30,
1996, December 31, 1995 and 1994 is as follows:
Unrealized
Held to Maturity Amortized Cost Market Value Net Gain/(Loss)
- ---------------- -------------- ------------ ---------------
US government agencies and
corporations ................ $ 7,430,382 $ 7,406,719 ($ 23,663)
US government sponsored
agencies .................... 3,988,634 3,379,375 (609,259)
Other ......................... 8,934,557 8,728,993 (205,564)
----------- ----------- -----------
Total June 30, 1996 ........... $20,353,573 $19,515,087 ($ 838,486)
US government agencies and
corporations ................ 6,773,258 6,764,329 (8,930)
US government sponsored
agencies .................... 3,987,500 3,500,499 (487,000)
Other ......................... 9,095,985 8,999,487 (96,498)
----------- ----------- -----------
Total December 31, 1995 ....... $19,856,743 $19,264,315 ($ 592,428)
US Treasury ................... $ 6,379,890 $ 6,290,405 ($ 89,485)
US government sponsored
agencies .................... 9,467,892 8,359,134 (1,108,758)
Other ......................... 7,429,062 6,691,619 (737,443)
----------- ----------- -----------
Total December 31, 1994 ....... $23,276,844 $21,341,158 ($1,935,687)
-36-
<PAGE>
The following table sets forth as of June 30, 1996 and December 31,
1995 the maturity distribution of the Company's investment portfolio.
Maturity Schedule of Investment Securities
<TABLE>
<CAPTION>
June 30,1996
------------
Held to Maturity Securities Securities Available
for Sale
--------------------------- --------------------
(In Thousands)
AMORTIZED MARKET AVERAGE AMORTIZED MARKET AVERAGE
COST VALUE RATE COST VALUE RATE
------ ------ ---- ------ ------ ----
<S> <C> <C> <C> <C> <C>
US TREASURIES
UNDER 1 YEAR ...... $ -- $ -- -- $ 1,954 $ 1,958 5.94%
US TREASURIES
1-5 YEARS ......... -- -- -- -- -- --
US GOVERNMENT
AGENCIES 1-5
YEARS ............. -- -- -- -- -- --
US GOVERNMENT
AGENCIES 10+
YEARS ............. 7,430 7,407 6.17% -- -- --
US GOVERNMENT
SPONSORED
AGENCIES UNDER
1 YEAR ............ -- -- -- 5,202 5,224 6.98%
US GOVERNMENT
SPONSORED
AGENCIES 1-5
YEARS ............. 1,239 1,236 5.05% 3,480 3,400 5.49%
US GOVERNMENT
SPONSORED
AGENCIES 5-10
YEARS ............. 1,500 1,313 3.86% -- -- --
US GOVERNMENT
SPONSORED
AGENCIES OVER
10 YEARS .......... 1,250 831 3.41% -- -- --
STATE/MUNICIPAL
UNDER 1 YEAR ...... -- -- -- 757 756 5.79%
OTHER UNDER 1
YEAR .............. -- -- -- -- -- --
OTHER 1-5
YEARS ............... 669 679 6.20% 2,038 2,036 5.92%
OTHER 10+
YEARS ............... 8,266 8,050 6.20% 481 481 6.42%
TOTAL ............... $20,354 $19,515 5.79% $13,913 $13,855 6.22%
</TABLE>
-37-
<PAGE>
<TABLE>
<CAPTION>
December 31, 1995
Held to Maturity Securities Securities Available
for Sale
--------------------------- --------------------
(In Thousands)
AMORTIZED MARKET AVERAGE AMORTIZED MARKET AVERAGE
COST VALUE RATE COST VALUE RATE
------ ------ ---- ------ ------ ----
<S> <C> <C> <C> <C> <C> <C>
US TREASURIES
UNDER 1 YEAR ...... $ -- $ -- -- $ 1,612 $ 1,621 5.93%
US TREASURIES
1-5 YEARS ......... -- -- -- 352 356 5.93%
US GOVERNMENT
AGENCIES 1-5
YEARS ............. -- -- -- 706 720 6.80%
US GOVERNMENT
AGENCIES 10+
YEARS ............. 6,773 6,764 6.70% -- --
US GOVERNMENT
SPONSORED
AGENCIES UNDER
1 YEAR ............ -- -- -- 7,712 7,772 6.70%
US GOVERNMENT
SPONSORED
AGENCIES 1-5
YEARS ............. 1,238 1,216 5.05% 499 511 7.90%
US GOVERNMENT
SPONSORED
AGENCIES 5-10
YEARS ............. 1,500 1,382 4.43% -- -- --
US GOVERNMENT
SPONSORED
AGENCIES OVER
10 YEARS .......... 1,250 903 2.74% -- -- --
STATE/MUNICIPAL
UNDER 1 YEAR ...... -- -- -- 1,360 1,365 7.21%
OTHER UNDER 1
YEAR .............. -- -- -- 1,000 1,000 5.74%
OTHER 1-5
YEARS ............... 667 667 5.86% 2,547 2,588 6.38%
OTHER 10+
YEARS ............... 8,428 8,332 6.17% 371 371 6.92%
TOTAL ............... $19,857 $19,264 5.93% $16,159 $16,304 6.61%
</TABLE>
-38-
<PAGE>
DEPOSITS
Deposits are the Company's primary source of funds. The Company
experienced a growth in deposit balances of $14.6 million, or 13.2% to $125.6
million at June 30, 1996, from $111.0 million at December 31, 1995. Deposits
increased by $40.3 million, or 57.0%, to $111.0 million at December 31, 1995
from $70.7 million at December 31, 1994. This growth was accomplished through
the Company's expansion through its new branches, its emphasis on customer
service, competitive rate structures and selective marketing. The Company
attempts to establish a comprehensive relationship with its business borrowers,
seeking deposits as well as lending relationships. This approach has helped the
Company increase its non-interest bearing deposits. From December 31, 1994, the
Company's non-interest bearing demand deposits increased from $9.2 million, or
12.9%, of total deposits to $23.3 million, or 18.5%, of total deposits, an
increase of $14.2 million, or 154%. In addition, the Company's time deposits
increased from $28.1 million to $59.1 million at June 30, 1996, an increase of
$31.0 million, or 110%. The Company has no foreign deposits, nor are there any
material concentrations of deposits.
The following table sets forth the average amounts of various types of
deposits for each of the periods indicated:
<TABLE>
<CAPTION>
(IN THOUSANDS) 6/96 12/95 12/94
-------------- ---- ----- -----
Average Balance Amount % Amount % Amount %
------ - ------ - ------ -
Deposits:
<S> <C> <C> <C> <C> <C> <C>
NOW deposits................... $12,704 10.8% $10,665 12.2% $6,288 9.8%
Savings deposits............... 23,147 19.7% 20,677 23.7% 23,467 36.6%
Money market
deposits..................... 6,182 5.3% 5,277 6.0% 3,595 5.6%
Time deposits.................. 55,418 47.2% 38,781 44.4% 23,555 36.8%
Demand deposits................ 19,991 17.0% 11,887 13.6% 7,134 11.1%
-------- ------ ------- ------ ------- ------
Total interest-bearing
liabilities.................. $117,443 100.0% $87,286 100.0% $64,039 100.0%
======== ====== ======= ====== ======= ======
</TABLE>
The Company does not actively solicit short-term deposits of $100,000
or more because of the liquidity risks posed by such deposits. The following
table summarizes the maturity distribution of certificates of deposits of
denominations of $100,000 or more as of June 30, 1996.
-39-
<PAGE>
Time Deposits ($100,000 and over)
(In Thousands)
Three months or less............................................... $4,136
Over three months through six months............................... 2,001
Over six months through twelve months.............................. 1,699
Over twelve months................................................. 711
------
Total..................................................... $8,546
LIQUIDITY
The Company's liquidity is a measure of its ability to fund loans,
withdrawals or maturities of deposits and other cash outflows in a
cost-effective manner. The Company's principal sources of funds are deposits,
scheduled amortization and prepayments of loan principal, sales and maturities
of investment securities and funds provided by operations. While scheduled loan
payments and maturing investments are relatively predictable sources of funds,
deposit flows and loan prepayments are greatly influenced by general interest
rates, economic conditions and competition.
The Company's total deposits equaled $125.6 million, $111.0 million and
$70.7 million as of June 30, 1996, December 31, 1995, and December 31, 1994,
respectively. The increase in funds provided by deposit inflows during these
years has been more than sufficient to provide for the Company's lending demand.
Through the Company's investment portfolio the Company has generally
sought to obtain a safe yet slightly higher yield than would have been available
to the Company as a net seller of overnight Federal Funds while still
maintaining liquidity. Through its investment portfolio, the Company also
attempts to manage its maturity gap by seeking maturities of investments which
coincide as closely as possible with maturities of deposits. The Company's
investment portfolio also includes securities available for sale to provide
liquidity for anticipated loan demand and other liquidity needs.
Although the Company has traditionally been a net "seller" of Federal
Funds (or overnight loans to large banks), the Company does maintain lines of
credit with the Federal Home Loan Bank of New York, Summit Bank and Midlantic
Bank, NA for "purchase" of Federal Funds in the event that temporary liquidity
needs arise.
Management believes that the Company's current sources of funds provide
adequate liquidity for the current cash flow needs of the Company.
CAPITAL
A significant measure of the strength of a financial institution is its
capital base. The Company's federal regulators have classified and defined bank
capital into the
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<PAGE>
following components: (1) Tier I capital, which includes tangible shareholders'
equity for common stock and qualifying perpetual preferred stock, and (2) Tier
II capital, which includes a portion of the allowance for possible loan losses,
certain qualifying long-term debt and preferred stock which does not qualify for
Tier I capital. Minimum capital levels for banks are regulated by risk-based
capital adequacy guidelines which require a bank to maintain certain capital as
a percent of the bank's assets and certain off-balance sheet items adjusted for
predefined credit risk factors (risk-adjusted assets.) A bank is required to
maintain, at a minimum, Tier I capital as a percentage of risk-adjusted assets
of 4.0% and combined Tier I and Tier II capital as a percentage of risk-adjusted
assets of 8.0%.
In addition to the risk-based guidelines, the Company's regulators
require that a bank which meets the regulator's highest performance and
operation standards maintain a minimum leverage ratio (Tier I capital as a
percentage of tangible assets) of 3%. For those banks with higher levels of risk
or that are experiencing or anticipating significant growth, the minimum
leverage ratio will be proportionately increased. Minimum leverage ratios for
each bank are evaluated through the ongoing regulatory examination process.
The following table summarizes the risk-based and leverage capital
ratios for the Company at June 30, 1996, as well as the required minimum
regulatory capital ratios:
CAPITAL ADEQUACY
Minimum
June 30, 1996 Regulatory Requirements
------------- -----------------------
Risk-based Capital:
Tier I capital ratio.......... 10.4% 4.00%
Total capital ratio........... 11.19% 8.00%
Leverage ratio................... 7.72% 3.00-5.00%
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements of the Company and notes thereto, presented
elsewhere herein, 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
-41-
<PAGE>
cost of the Company's operations. Unlike most industrial companies, nearly all
the assets and liabilities of the Company are monetary. As a result, interest
rates have a greater impact on the Company's 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.
RECENTLY ISSUED ACCOUNTING STANDARDS
In October 1995 the Financial Accounts Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 123. "Accounting for Stock-Based
Compensation" (SFAS 123). This statement establishes financial accounting and
reporting standards for stock-based employee compensation plans. SFAS 123
encourages all entities to adopt the "fair value based method" of accounting for
employee stock compensation plans. However, SFAS 123 also allows an entity to
continue to measure compensation cost under such plans using the "intrinsic
value based method." The accounting requirements of this statement are effective
for transactions entered into in fiscal years that begin after December 15,
1995. The Company does not intend to apply the fair value based method, but the
Company's financial statements in 1996 and thereafter will include the
disclosure required by SFAS 123. Such disclosures include net income and
earnings per share as if the fair value based method had been applied.
On June 28, 1996, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities".
This Statement provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities based on
consistent application of a financial-components approach that focuses on
control. It distinguishes transfers of financial assets that are sales from
transfers that are secured borrowings.
Under the financial-components approach, after a transfer of financial
assets, an entity recognizes all financial and servicing assets it controls and
liabilities it has incurred and derecognizes financial assets it no longer
controls and liabilities that have been extinguished. The financial-components
approach focuses on the assets and liabilities that exist after the transfer.
Many of these assets and liabilities are components of financial assets that
existed prior to the transfer. If a transfer does not meet the criteria for a
sale, the transfer is accounted for as a secured borrowing with pledge of
collateral.
It is important to note that this Statement extends the
"available-for-sale" or "trading" approach in SFAS 115, Accounting for Certain
Investments in Debt and Equity Securities, to non-security financial assets that
can contractually be prepaid or otherwise settled in such a way that the holder
of the asset would not recover substantially all of its recorded
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<PAGE>
investment. Thus, non-security financial assets (no matter how acquired) such as
loans, other receivables, interest-only strips or residual interests in
securitization trusts (for example, tranches subordinate to other tranches, cash
reserve accounts or rights to future interest from serviced assets that exceed
contractually specified servicing fees) that are subject to prepayment risk that
could prevent recovery of substantially all of the recorded amount are to be
reported at fair value with the change in fair value accounted for depending on
the asset's classification as "available-for-sale" or "trading." The Statement
also amends SFAS 115 to prevent a security from being classified as
held-to-maturity if the security can be prepaid or otherwise settled in such a
way that the holder of the security would not recover substantially all of its
recorded investment.
This Statement requires that a liability be derecognized if and only if
either (a) the debtor pays the creditor and is relieved of its obligation for
the liability or (b) the debtor is legally released from being the primary
obligor under the liability either judicially or by the creditor. Therefore, a
liability is not considered extinguished by an in-substance defeasance.
This Statement provides implementation guidance for accounting for (1)
securitizations, (2) transfers of partial interests, (3) servicing of financial
assets, (4) securities lending transactions, (5) repurchase agreements including
"dollar rolls", (5) "wash sales," (6) loan syndications and participations, (7)
risk participations in banker's acceptances, (8) factoring arrangements, (9)
transfers of receivables with recourse, (10) transfers of sales-type and direct
financing lease receivables and (11) extinguishments of liabilities.
A number of existing FASB Statements are superseded or amended by SFAS
125. SFAS 125 is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996, and is to be
applied prospectively. Earlier or retroactive application is not permitted.
Also, the extension of the SFAS 115 approach to certain non-security financial
assets and the amendment to SFAS 115 is effective for financial assets held on
or acquired after January 1, 1997. Reclassifications that are necessary because
of the amendment do not call into question an entity's intent to hold other debt
securities to maturity in the future. The Company, at this time, does not
believe that SFAS 125 will have a significant impact on the consolidated
financial position or results of operations in 1997.
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<PAGE>
BUSINESS
GENERAL
The Company is a Delaware business corporation and bank holding company
registered under the BHCA. The Company was incorporated on February 14, 1994 for
the purpose of acquiring the Bank and thereby enabling the Bank to operate
within a holding company structure. Management of the Bank believed that a
holding company would facilitate potential acquisitions of other financial
institutions and provide financial flexibility for the growth of the Bank. On
December 1, 1994, the Company acquired 100% of the outstanding shares of the
Bank. At June 30, 1996, the Company had total assets of $138.4 million, deposits
of $125.6 million, total loans of $84.1 million, and stockholder's equity of
$10.3 million.
The principal activities of the Company are owning and supervising the
Bank. The Bank is a community-oriented, full service commercial bank providing
commercial and consumer financial services to businesses and individuals in the
Company's Trade Area, described below. The Company believes that it will
continue to gain market share in its Trade Area and will continue to meet a
similar or greater portion of the demand for credit. The Company meets the
competition from the many existing and larger financial institutions in its
Trade Area by emphasizing personalized service, responsive decision making and
an overall commitment to excellence.
Management believes that the economic conditions in the Company's Trade
Area are conducive to the Company's continued growth. The Company's Trade Areas
are bounded by several of New Jersey's primary highways, including the Route
22/78 corridor, Route 287 and Route 202.
The economy of the greater New York-New Jersey market has historically
benefitted from having a large number of corporate headquarters and a
concentration of financial services-related industries. It also has a well
educated employment base and a large number of industrial, service and
high-technology businesses. Over the past two years, New Jersey's economy has
slowly begun to recover from the effects of a prolonged decline in the national
and regional economy, layoffs in the financial services industry and corporate
relocations. Employment levels and real estate markets in the Bank's market area
have stabilized and in some instances begun to improve. Whether such improvement
will continue is dependent, in large part, upon the general economic health of
the United States and other factors beyond the Bank's control and, therefore,
cannot be estimated.
DEPOSITS
The Company offers a full range of deposit accounts including business
and personal checking accounts, interest-bearing NOW accounts, money market
accounts and certificates of
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<PAGE>
deposit and is competitive in structuring the terms (e.g., interest rates,
minimum balances, etc.) of the deposit accounts as part of its strategy to gain
deposits as a new entrant into its Trade Area. In spite of this effort, the
Company believes that its cost of funds is comparable to the average costs
experienced by its competitors.
LOANS
The Company lends funds to individuals and businesses for personal and
commercial purposes. The Company emphasizes the origination of loans with
adjustable rates of interest tied to the Company's Prime Rate, with 72% of the
Company's portfolio consisting of adjustable rate loans and 28% consisting of
fixed rate loans. The interest rates on these adjustable rate loans are repriced
from time to time to reflect changes, up or down, in the cost of funds to the
Company. In order to be competitive with other established banking institutions
in its trade area, the Company charges rates which are generally comparable to
those charged by other lenders.
In addition, the Company has been very active in providing loans to
small businesses through the United States Small Business Administration ("SBA")
guaranteed loan program. Under the SBA program, loans are available to small
businesses which meet certain criteria. Up to 90% of the principal of a loan to
a qualified business is guaranteed by the United States Government. The Company
sells the guaranteed portion of its SBA loans into the secondary market and
thereby derives premium income. The Company's ability to offer SBA loans on an
ongoing basis is dependent upon, among other factors, appropriation of funds by
the federal government to the SBA program. The Company has been designated a
"preferred lender" for the states of New Jersey, Delaware, New York and
Pennsylvania by the SBA. This means that the Company may originate SBA
guaranteed loans without prior SBA approval, although the guaranteed portion of
this loan will be 80% for loans up to $100,000 and 75% for loans over $100,000
and up to $1,000,000.
The Company's commercial loans are generally secured by business
assets, personal guarantees of the principals of closely-held businesses and
often by the personal assets of such principals. The loans are made to small and
mid-sized businesses in the Company's Trade Area. Federal and State law and
regulations restrict how much any bank may lend to a single customer with the
restrictions stated as a percentage of the primary capital of the Company. See
"SUPERVISION AND REGULATION". The Company believes that it can attract
commercial borrowers by providing competitive rates, superior service, local
decision-making and flexibility in loan structure. The Board of Directors
believes that small and mid-sized businesses are not always of primary
importance to larger banking institutions for commercial lending purposes,
whereas such businesses represent the main portion of the commercial loan
business for the Company.
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The Company grants both secured and unsecured personal loans to finance
the purchase of automobiles, durable goods or other consumer goods. The Board of
Directors believes that the Company's competitive interest rates and superior
service (which includes, among other things, convenience, personal attention and
prompt local decision-making) are important competitive factors in attracting
personal loans from credit-worthy consumers.
The Company also makes residential and commercial real estate loans
and, on a limited basis, construction loans.
OTHER ACTIVITIES
The Company also derives income from investments in securities,
typically obligations of the United States Government and Government Agencies.
The Company also provides a variety of financial services to its customers
including wire transfers, coin and currency collections, issuing money orders,
travelers checks and U.S. Series EE bonds, accepting direct deposit of payroll
and of federal recurring payments and issuing both standby and commercial
letters of credit.
The Company, through FCB Services Co., Inc., a subsidiary of the Bank,
sells tax deferred annuities. FCB Service Co., Inc. holds a New Jersey insurance
license. FCB Service Co., Inc. earns commissions on annuities it sells.
TRADE AREA
The Primary Trade Area is defined as the neighborhoods served by the
Bank's offices. The Bank's main office, located in Clinton, in combination with
its Flemington office, serve the greater area of Hunterdon County. The Clinton
office also services the southernmost communities of Warren and Morris Counties.
The Bank's North Plainfield office serves those communities located in the
northern, eastern and central parts of Somerset County, the northernmost
communities of Middlesex County and the southernmost communities of Union
County. The Bank's Springfield and Scotch Plains offices serve the northern,
eastern and central communities of Union County, and the southwestern
communities of Essex County.
The Company has a secondary Trade Area along the Route 78/Route 22
corridor between its two Hunterdon County offices and its offices located in
Union County. In addition to the previously mentioned Interstate highways, the
Bank's Primary and Secondary Trade Areas also have access to a major network of
other roads which includes Route 287 and Route 202.
COMPETITION
The Company is located in an extremely competitive environment. The
Company's Trade Area is already serviced by major regional banks, large thrift
institutions and by a variety of credit unions. Most of the Company's
competitors have
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substantially more capital and therefore greater lending limits than the
Company. The Company's competitors generally have established positions in the
Trade Area and have greater resources than the Company with which to pay for
advertising, physical facilities, personnel and interest on deposited funds. The
Company relies upon the competitive pricing of its loans, deposits and other
services as well as its ability to provide local decision making and personal
service in order to compete with these larger institutions.
EMPLOYEES
The Company employs 59 full-time and 7 part-time employees. None of the
Company's employees are represented by any collective bargaining agreements. The
Company believes that its relations with its employees are good.
PROPERTIES
The Company's main office is located in leased space in Clinton, New
Jersey. The Company leases approximately 18,000 square feet, including space
both for the Company's administrative headquarters and for the Bank's main
branch. The Bank maintains two ATM machines, and, under its lease, has the right
to use outside parking for its customers.
The North Plainfield branch is owned by the Company. The building is
situated at the southeast corner of Somerset Street and Mountain Avenue and
consists of a two-story, 8,000 sq. ft. office building, 5,334 ft. of which is
occupied by the Company. The building contains a full-service teller line and
lobby, three drive-up teller lanes, a 24-hour ATM machine, and on-site parking
of approximately 21 spaces.
The Company's Flemington office is located in the heart of the town's
small business and retail shopping district at 110 Main Street. The full-service
office is leased from an unrelated third-party and consists of 2,670 square feet
of bank lobby including separate teller and platform areas, a 24-hour ATM
machine and a night depository. In addition to curbside parking, the Company is
entitled to the use of leased parking spaces located in downtown lots
immediately adjacent to its office.
The Company maintains its Springfield office located at 733 Mountain
Avenue. The lobby and platform areas consist of approximately 1,200 square feet
of first floor bank space. The full-service office consists of a teller line,
platform area, drive-up teller window, safe deposit boxes and night depository.
The Company leases its office located at 2222 South Avenue
in Scotch Plains, New Jersey. The Company leases approximately
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3,900 square feet and maintains a 24-hour ATM machine. In
addition, the Company has the use of onsite parking at the site.
The leases for both the Company's main office and the Scotch
Plains branch are with certain members of the Company's Board of
Directors. See "Compensation of Directors; CERTAIN TRANSACTIONS
WITH MANAGEMENT."
The Company is a member of the MAC and PLUS ATM network.
LEGAL PROCEEDINGS
The Company and the Bank are periodically parties to or otherwise involved
in legal proceedings arising in the normal course of business, such as claims to
enforce liens, claims involving the making and servicing of real property loans,
and other issues incident to the Bank's business. Management does not believe
that there is any pending or threatened proceeding against the Company or the
Bank which, if determined adversely, would have a material effect on the
business or financial position of the Company or the Bank.
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SUPERVISION AND REGULATION
GENERAL
Bank holding companies and banks are extensively regulated under both
federal and state law. These laws and regulations are intended to protect
depositors, not stockholders. To the extent that the following information
describes statutory and regulatory provisions, it is qualified in its entirety
by reference to the particular statutory and regulatory provisions. Any change
in the applicable law or regulation may have a material effect on the business
and prospects of the Company and the Bank. See "Special Considerations and Risk
Factors--Supervision and Regulation."
BANK HOLDING COMPANY REGULATION
General. As a bank holding company registered under the BHCA, the Company
is subject to the regulation and supervision of the FRB. The Company is required
to file with the FRB annual reports and other information regarding its business
operations and those of its subsidiaries. Under the BHCA, the Company's
activities and those of its subsidiaries are limited to banking, managing or
controlling banks, furnishing services to or performing services for its
subsidiaries or engaging in any other activity which the FRB determines to be so
closely related to banking or managing or controlling banks as to be properly
incident thereto.
The BHCA requires, among other things, the prior approval of the FRB in any
case where a bank holding company proposes to (i) acquire all or substantially
all of the assets of any other bank, (ii) acquire direct or indirect ownership
or control of more than 5% of the outstanding voting stock of any bank (unless
it owns a majority of such bank's voting shares) or (iii) merge or consolidate
with any other bank holding company. The FRB will not approve any acquisition,
merger, or consolidation that would have a substantially anti-competitive
effect, unless the anti-competitive impact of the proposed transaction is
clearly outweighed by a greater public interest in meeting the convenience and
needs of the community to be served. The FRB also considers capital adequacy and
other financial and managerial resources and future prospects of the companies
and the banks concerned, together with the convenience and needs of the
community to be served, when reviewing acquisitions or mergers.
Additionally, the BHCA prohibits a bank holding company, with certain
limited exceptions, from (i) acquiring or retaining direct or indirect ownership
or control of more than 5% of the outstanding voting stock of any company which
is not a bank or bank holding company, or (ii) engaging directly or indirectly
in activities other than those of banking, managing or controlling
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banks, or performing services for its subsidiaries; unless such non-banking
business is determined by the FRB to be so closely related to banking or
managing or controlling banks as to be properly incident thereto. In making such
determinations, the FRB is required to weigh the expected benefits to the
public, such as greater convenience, increased competition or gains in
efficiency, against the possible adverse effects, such as undue concentration of
resources, decreased or unfair competition, conflicts of interest, or unsound
banking practices.
There are a number of obligations and restrictions imposed on bank holding
companies and their depository institution subsidiaries by law and regulatory
policy that are designed to minimize potential loss to the depositors of such
depository institutions and the FDIC insurance funds in the event the depository
institution becomes in danger of default. Under a policy of the FRB with respect
to bank holding company operations, a bank holding company is required to serve
as a source of financial strength to its subsidiary depository institutions and
to commit resources to support such institutions in circumstances where it might
not do so absent such policy. The FRB also has the authority under the BHCA to
require a bank holding company to terminate any activity or to relinquish
control of a non-bank subsidiary upon the FRB's determination that such activity
or control constitutes a serious risk to the financial soundness and stability
of any bank subsidiary of the bank holding company.
Capital Adequacy Guidelines for Bank Holding Companies. In January 1989,
the FRB adopted risk-based capital guidelines for bank holding companies. The
risk-based capital guidelines are designed to make regulatory capital
requirements more sensitive to differences in risk profile among banks and bank
holding companies, to account for off-balance sheet exposure, and to minimize
disincentives for holding liquid assets. Under these guidelines, assets and
off-balance sheet items are assigned to broad risk categories each with
appropriate weights. The resulting capital ratios represent capital as a
percentage of total risk-weighted assets and off-balance sheet items.
The risk-based guidelines apply on a consolidated basis to bank holding
companies with consolidated assets of $150 million or more. For bank holding
companies with less than $150 million in consolidated assets, the guidelines
will be applied on a bank-only basis unless: (a) the parent bank holding company
is engaged in nonbank activity involving significant leverage; or (b) the parent
company has a significant amount of outstanding debt that is held by the general
public.
The minimum ratio of total capital to risk-weighted assets (including
certain off-balance sheet activities, such as standby letters of credit) is 8%.
At least 4% of the total capital is
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required to be "Tier I Capital," consisting of common stockholders' equity,
noncumulative perpetual preferred stock, and a limited amount of cumulative
perpetual preferred stock, less certain goodwill items and other intangible
assets. The remainder ("Tier II Capital") may consist of (a) the allowance for
loan losses of up to 1.25% of risk-weighted assets, (b) excess of qualifying
perpetual preferred stock, (c) hybrid capital instruments, (d) perpetual debt,
(e) mandatory convertible securities, and (f) qualifying subordinated debt and
intermediate-term preferred stock up to 50% of Tier I capital. Total capital is
the sum of Tier I and Tier II capital less reciprocal holdings of other banking
organizations' capital instruments, investments in unconsolidated subsidiaries
and any other deductions as determined by the FRB (determined on a case by case
basis or as a matter of policy after formal rule-making).
Bank holding company assets are given risk-weights of 0%, 20%, 50% and
100%. In addition, certain off-balance sheet items are given similar credit
conversion factors to convert them to asset equivalent amounts to which an
appropriate risk-weight will apply. These computations result in the total
risk-weighted assets. Most loans are assigned to the 100% risk category, except
for performing first mortgage loans fully secured by residential property which
carry a 50% risk-weighing. Most investment securities (including, primarily,
general obligation claims of states or other political subdivisions of the
United States) are assigned to the 20% category, except for municipal or state
revenue bonds, which have a 50% risk-weight, and direct obligations of the U.S.
Treasury or obligations backed by the full faith and credit of the U.S.
Government, which have a 0% risk-weight. In converting off-balance sheet items,
direct credit substitutes including general guarantees and standby letters of
credit backing financial obligations, are given a 100% risk-weighing.
Transaction related contingencies such as bid bonds, standby letters of credit
backing nonfinancial obligations, and undrawn commitments (including commercial
credit lines with an initial maturity or more than one year) have a 50%
risk-weighing. Short term commercial letters of credit have a 20% risk-weighing
and certain short-term unconditionally cancelable commitments have a 0%
risk-weighing.
In addition to the risk-based capital guidelines, the FRB has adopted a
minimum Tier I capital (leverage) ratio, under which a bank holding company must
maintain a minimum level of Tier I capital to average total consolidated assets
of at least 3% in the case of a bank holding company that has the highest
regulatory examination rating and is not contemplating significant growth or
expansion. All other bank holding companies are expected to maintain a leverage
ratio of at least 100 to 200 basis points above the stated minimum.
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BANK REGULATION
As a New Jersey-chartered commercial bank, the Bank is subject to the
regulation, supervision, and control of the New Jersey Department of Banking. As
an FDIC-insured institution, the Bank is subject to regulation, supervision and
control of the FDIC, an agency of the federal government. The regulations of the
FDIC and the New Jersey Department of Banking impact virtually all activities of
the Bank, including the minimum level of capital the Bank must maintain, the
ability of the Bank to pay dividends, the ability of the Bank to expand through
new branches or acquisitions and various other matters.
Insurance of Deposits. The Bank's deposits are insured up to a maximum of
$100,000 per depositor under the Savings Association Insurance Fund of the FDIC.
The Federal Deposit Insurance Corporation Improvements Act of 1991 ("FDICIA")
effected a major restructuring of the federal regulatory framework applicable to
depository institutions and deposit insurance. FDICIA requires the FDIC to
establish a risk-based assessment system for all insured depository
institutions. Under this legislation, the FDIC is required to establish an
insurance premium assessment system based upon: (i) the probability that the
insurance fund will incur a loss with respect to the institution; (ii) the
likely amount of the loss; and (iii) the revenue needs of the insurance fund. In
compliance with this mandate, the FDIC has developed a matrix that sets the
assessment premium for a particular institution in accordance with its capital
level and overall rating by the primary regulator. The FDIC's risk based
insurance assessment system is not expected to have a material effect upon the
operations of the Bank.
Dividend Rights. Under the New Jersey Banking Act of 1948, a bank may
declare and pay dividends only if, after payment of the dividend, the capital
stock of the bank will be unimpaired and either the bank will have a surplus of
not less than 50% of its capital stock or the payment of the dividend will not
reduce the bank's surplus.
Recent Regulatory Enactments and Proposals. On September 29, 1994, the
Riegel-Neal Interstate Banking and Branching Efficiency Act (the "Interstate
Act") was enacted. The Interstate Act generally enhances the ability of bank
holding companies to conduct their banking business across state boarders. The
Interstate Act has two main provisions. The first provision generally provides
that commencing on September 29, 1995, bank holding companies may acquire banks
located in any state regardless of the provisions of state law. These
acquisitions are subject to certain restrictions, including caps on the total
percentage of deposits that a bank holding company may control both nationally
and in any single state. New Jersey law currently allows interstate acquisitions
by bank holding
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companies whose home state has "reciprocal" legislation which would allow
acquisitions by New Jersey based bank holding companies.
The second major provision of the Interstate Act permits, beginning on June
1, 1997, banks located in different states to merge and continue to operate as a
single institution in more than one state. States may, by legislation passed
before June 1, 1997, opt out of the interstate bank merger provisions of the
Interstate Act. In addition, states may elect to opt in and allow interstate
bank mergers prior to June 1, 1997.
A final provision of the Interstate Act permits banks located in one state
to establish new branches in another state without obtaining a separate bank
charter in that state, but only if the state in which the branch is located has
adopted legislation specifically allowing interstate de novo branching.
In April of 1996, the New Jersey legislature passed legislation which would
permit interstate bank mergers prior to June 1, 1997, provided that the home
state of the institution acquiring the New Jersey institution permits interstate
mergers prior to June 1, 1997. In addition, the legislation permits an
out-of-state institution to acquire an existing branch of a New Jersey based
institution, and thereby conduct business in New Jersey. The legislation does
not permit interstate de novo branching. This legislation is likely to enhance
competition in the New Jersey marketplace as bank holding companies located
outside of New Jersey become freer to acquire institutions located within the
State of New Jersey.
The RTC Completion Act became law in December 1993, and funds the SAIF,
which is one of the depository insurance funds administered by the FDIC. The RTC
Completion Act authorizes, but does not appropriate, $8.0 billion for the SAIF.
Before any money can be appropriated for the SAIF, the Chairman of the FDIC must
certify that SAIF insured institutions cannot pay their insurance premiums and
that their ability to attract and maintain capital would be adversely affected.
SAIF-insured institutions may be required to pay higher insurance premiums in
the future in order to recapitalize the SAIF to a level equal to 1.25% of
deposits. The FDIC has established a new assessment rate schedule of 0 to 31
basis points for BIF members beginning on September 30, 1995. Under the new
assessment schedule, approximately 92.0% of BIF members would pay only a
statutorily required minimum premium of $2,000. With respect to SAIF-member
institutions, the FDIC has retained the existing assessment rate schedule
applicable to SAIF-member institutions of 23 to 31 basis points. SAIF members,
such as the Bank, could be placed at a substantial competitive disadvantage to
BIF members with respect to pricing of loans and deposits and the ability to
achieve lower operating costs.
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Several alternatives to mitigate the effect of the BIF/SAIF premium
disparity have been proposed by Congress. In November of 1995, Congress passed
legislation designed to recapitalize the SAIF, thereby leading to equalized
premium assessments, requiring all SAIF member institutions, including the Bank,
to pay a one time fee of approximately 85 basis points on amounts on deposit
held by each SAIF member institution as of March 31, 1995. Under the
legislation, this payment would have been required in January, 1996. This
legislation was vetoed by President Clinton in December, 1995. Management of the
Company is not able to predict whether new legislation will be proposed or
adopted, or what terms it may contain. To the extent that SAIF-insured
institutions are required to pay higher federal deposit insurance premiums than
financial institutions that are members of the BIF, such institutions could be
placed at a competitive disadvantage, which may have an adverse effect on
operating expenses and results of operations.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
POSITION WITH THE COMPANY AND DIRECTOR
NAME AGE THE BANK(1) SINCE(2)
- ---- --- ----------------------------- --------
Robert Van 53 Chairman of the Board and Chief 1990
Volkenburgh Executive Officer and Director of
the Company; Chairman of the
Board of the Bank
James Hyman 50 President, Chief Operating 1990
Officer and Director of the
Company; President and Chief
Executive Officer of the Bank
David D. 42 Vice Chairman, Corporate 1990
Dallas Secretary and Director of the
Company; Vice Chairman of the
Bank.
- ----------
(1) Each director of the Company is also a director of the Bank.
(2) Includes prior years of service on Board of Directors
of the Bank.
No director of the Company is also a director of any other company registered
pursuant to Section 12 of the Securities
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Exchange Act of 1934 or any company registered as an investment company under
the Investment Company Act of 1940.
DIRECTORS OF THE BANK WHO DO NOT SERVE AS DIRECTORS OF THE
CORPORATION
DIRECTOR
NAME AGE POSITION WITH THE BANK SINCE
---- --- ---------------------- -----
Robert H. Dallas, II 49 Director 1990
Peter P. DeTommaso 70 Director 1991
John Fallone 42 Director 1994
Walter Hazard 53 Director 1990
Charles S. Loring 53 Director 1990
John O'Brien 58 Director 1994
Peter G. Schoberl 41 Director, Executive 1996
Vice President and Senior
Lending Officer
Samuel Stothoff 63 Director 1990
Allen Tucker 69 Director 1995
Robert J. van 31 Director 1995
Volkenburgh, Jr.,
M.D.
Mr. van Volkenburgh, Jr. is the son of Robert J. Van
Volkenburgh, the Chairman of the Board of the Company.
Set forth below is certain information regarding the Directors and
Executive Officers of the Company, including their principal occupation for the
past 5 years:
Robert Van Volkenburgh is Chief Executive Officer for Total Packaging
Corporation and Best Packaging & Design Corp. which develops, manufacturers and
distributes high quality point of purchase displays.
David A. Dallas is Chief Executive Officer of Dallas Group of America, a
chemical manufacturing firm.
James Hyman is President and Chief Operating Officer of the Company and
President and Chief Executive Officer of the Bank.
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Set forth below is certain information regarding the Directors of the Bank
who are not also Directors of the Company:
Robert H. Dallas II is President of Dallas Group of America, a chemical
manufacturing firm.
Peter P. DeTommaso is President of Home Owners Heaven Inc., a hardware and
lumber retail store.
John Fallone is President of Fallone Organization, a real estate
development company.
Walter Hazard is founder and President of Atrion Corporation, a computer
firm, and a Director of Atrion Communication Resources.
Charles S. Loring is the owner of the firm of Charles S.
Loring, CPA.
John O'Brien is the owner of O'Brien Funeral Home.
Peter G. Schoberl has been the Executive Vice President and Senior Lending
Officer of the Bank since 1995. Previously, he was a Senior Vice President and
the Senior Lending Officer of American Union Bank from 1990 to 1995.
Samuel Stothoff is President of Samuel Stothoff Company, a well drilling
firm.
Allen Tucker is President of Tucker Enterprises, a real estate development
firm.
Robert J. van Volkenburgh, Jr., M.D. is a physician. In addition, he is the
Chief Financial Officer of both Total Packaging Corporation and Best Packaging &
Design Corp. and the Chief Executive Officer of RJV Capital Management, LLC, a
family asset management company.
Robert J. van Volkenburgh, Jr., M.D. is the son of Robert J. Van
Volkenburgh, a Director of the Company.
PRINCIPAL OFFICERS
Set forth below is the name of and certain biographical information
regarding an additional principal officer of the Company who does not also serve
as a Director. The term of office for each officer is one year.
THOMAS B. MARESCA
Mr. Maresca, age 38, has been Senior Vice President of the Bank since 1994
and has been employed by the Bank since its
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inception. He has been Chief Financial Officer of the Company since its
inception.
EXECUTIVE COMPENSATION
The following table sets forth all remuneration earned in the past three
years for services performed for the Company by the Chief Executive Officer and
all other executive officers whose compensation from the Company exceeded
$100,000.
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SUMMARY COMPENSATION TABLE
CASH AND CASH EQUIVALENT FORMS
OF REMUNERATION
Name and Principal Annual Annual Other Annual
Position Year Salary Bonus Compensation(1)
-------- ---- ------ ----- ---------------
Robert Van Volkenburgh, 1995 $ 60,000 $ 0 $ 9,550
Chairman and Chief
Executive Officer 1994 32,000 0 7,650
1993 0 0 5,000
James Hyman, President 1995 $120,000 $27,900 $ 0
and Chief Operating (2)
Officer
1994 111,300 5,000 0
1993 109,788 6,000 0
- ----------
(1) Other annual compensation includes director fees, insurance premiums and the
personal use of Bank automobiles.
(2) $20,000 of the 1995 annual bonus paid to James Hyman represents the value of
2,457 shares of Common Stock issued to Mr. Hyman under the Company's Stock Bonus
Plan in February of 1995.
STOCK OPTION PLAN FOR EMPLOYEES
The Company maintains a 1994 Stock Option Plan for Employees (the "Employee
Plan"). Under the Employee Plan, 50,000 shares of Common Stock have been
reserved for issuance, subject to adjustments as set forth therein. Officers and
other key employees of the Company (including officers and employees who are
directors), the Bank and any other subsidiaries which the Company may acquire or
incorporate participate in the Employee Plan. The Option Committee administers
the Employee Plan. The Option Committee has the authority to determine the key
employees who will receive options under the Employee Plan, the terms and
conditions of options granted under the Employee Plan and the exercise price
therefor. For the fiscal year ended December 31, 1995, no options were granted
under the Employee Plan.
STOCK BONUS PLAN
The Company maintains a Stock Bonus Plan (the "Stock Bonus Plan"). Under
the Stock Bonus Plan, 20,000 shares of Common Stock have been reserved for
issuance. Officers and other key employees of the Company (including officers
and employees who are directors), the Bank and any other subsidiaries which the
Company may acquire or incorporate participate in the Stock Bonus
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Plan. The Board of Directors of the Company (or a committee appointed by the
Board) administers and supervises the Stock Bonus Plan. The Board has the
authority to determine the key employees or directors who will receive awards
under the Plan and the number of shares awarded to each recipient. In 1995, one
grant of 2,457 shares was awarded under the Stock Bonus Plan to James Hyman.
CHANGE IN CONTROL AGREEMENT
The Company has entered into a Change in Control Agreement with Peter
Schoberl, an Executive Vice President and Senior Lending Officer of the Bank.
The agreement has a four year term from January 1, 1995 through December 31,
1998. The agreement provides that upon the occurrence of a change in control (as
defined in the agreement) of the Company and in the event Mr. Schoberl is
terminated for reasons other than cause (as defined in the agreement), he will
be entitled to severance pay in amounts equal to 100%, 75%, 50% and 25% of his
base salary respectively in each of the first four years of the agreement. The
agreement further provides that Mr. Schoberl will be entitled to receive
benefits under the agreement in the event he resigns from his employment with
the Company within 18 months of a change in control and 30 days of the
occurrence of any of the following events after such change in control: (i) he
is reassigned to a position of lesser rank or status than his position at the
time of the change in control; (ii) his place of employment is relocated by more
than thirty miles from its location prior to the change in control or (iii) his
compensation or other benefits are reduced.
COMPENSATION OF DIRECTORS
Directors of the Company do not receive compensation for their service on
the Company's Board.
Directors of the Bank receive an annual retainer of up to $5,000, depending
upon their years of service on the Board. Directors who have one year of service
receive a $3,000 retainer, directors with two years of service receive a $4,000
retainer, and directors with three or more years of service receive the entire
$5,000 retainer. Each Committee Chairman also receives a $1,000 Committee
retainer. Directors also receive $300 for attendance at each Board of Directors
meeting and $150 for attendance at each Committee meeting. In addition, Mr. Van
Volkenburgh received a retainer of $8,333.33 per month for his services as
Chairman of the Board of the Bank and Mr. David Dallas received a retainer of
$4,166.66 per month for his service as Vice Chairman of the Board of the Bank.
The Corporation maintains a 1994 Stock Option Plan for Non-Employee
Directors (the "Plan") which provides for options to purchase shares of Common
Stock to be issued to non-employee
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directors of the Corporation, the Bank and any other subsidiaries which the
Corporation may acquire or incorporate in the future. Individual directors to
whom options are granted under the Plan are selected by the Option Committee of
the Board of Directors. The Option Committee has the authority to determine the
terms and conditions of options granted under the Plan and the exercise price
therefor. For the fiscal year ended December 31, 1995, no options were granted
under the Plan.
CERTAIN TRANSACTIONS WITH MANAGEMENT
The Bank has made in the past and, assuming continued satisfaction of
generally applicable credit standards, expects to continue to make loans to
directors, executive officers and their associates (i.e. corporations or
organizations for which they serve as officers or directors or in which they
have beneficial ownership interests of ten percent or more). These loans have
all been made in the ordinary course of the Bank's business on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons and do not involve more than
the normal risk of collectibility or present other unfavorable features.
The Company leases both its headquarters and its Scotch Plains office from
partnerships consisting of Messrs. Van Volkenburgh, R. Dallas and D. Dallas.
Under the leases for these facilities, the partnerships are to receive annual
rental payments of $391,708. The Company believes that these rent payments
reflect market rents and that the leases reflect terms which are comparable to
those which could have been obtained in a lease with an unaffiliated third
party.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of August 31, 1996, certain information
concerning the ownership of shares of Common Stock by (i) each person who is
known by the Company to own beneficially more than five percent (5%) of the
issued and outstanding Common Stock, (ii) each director of the Company and each
director of the Bank, (iii) each named executive officer described in the
section of this Prospectus captioned "Executive Compensation", and (iv) all
directors and officers as a group.
-60-
<PAGE>
THE COMPANY
Name and Position Number of Shares Percent
With Company Beneficially Owned (1) of Class
------------ ---------------------- --------
David D. Dallas
Vice Chairman, Secretary 105,911 (2) 9.68%
James Hyman
President and Chief 15,970 (3) 1.46%
Operating Officer
Robert Van Volkenburgh
Chairman of the Board and
Chief Executive Officer 204,822 (4) 18.67%
- ----------
(1) Beneficially owned shares include shares over which the named person
exercises either sole or shared voting power or sole or shared investment
power. It also includes shares owned (i) by a spouse, minor children or
relatives sharing the same home, (ii) by entities owned or controlled by
the named person, and (iii) by other persons if the named person has the
right to acquire such shares within sixty (60) days by the exercise of any
right or option. Unless otherwise noted, all shares are owned of record and
beneficially by the named person.
(2) Includes 14,561 shares owned by the Dallas Group of America Employee's
Profit Sharing Plan and Trust, 17,811 shares owned by the Dallas Group of
America, Inc. and 14,561 shares held by Trenton Liberty Insurance Company,
T/A Alexander Insurance Managers. These shares are also disclosed as
beneficially owned by Robert Dallas. Also includes 12,705 shares held by
Mr. Dallas' mother in her own name, 6,020 shares held by Mr. Dallas' minor
children in their own names, and 5,000 shares issuable upon the exercise of
immediately exercisable options.
(3) Includes 3,932 shares held by Mr. Hyman's spouse, of which Mr. Hyman
disclaims beneficial ownership, 4,348 shares held in a brokerage account
for Mr. Hyman's benefit, 262 shares held jointly with Mr. Hyman's spouse
and 3,000 shares issuable upon the exercise of immediately exercisable
options.
(4) Includes 56,891 shares held by Mr. Van Volkenburgh's spouse in her own
name, 21,150 shares held by Mr. Van Volkenburgh's son in his own name,
1,905 shares owned jointly by Mr. Van Volkenburgh and his spouse, 11,211
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<PAGE>
shares held by Total Packaging Corporation, a corporation owned by Mr. Van
Volkenburgh, and 15,000 shares held in a brokerage account for the benefit
of Mr. Van Volkenburgh. Also includes 7,500 shares issuable upon the
exercise of immediately exercisable stock options. Mr. Van Volkenburgh
disclaims beneficial ownership of the shares held by his spouse in her own
name and by his son in his name. Also includes 2,500 shares held by RJV
Capital Management LLC, a limited liability company owned by Mr. Van
Volkenburgh.
-62-
<PAGE>
THE BANK
Name and Position Number of Shares Percent
With Bank Beneficially Owned (1) of Class
--------- ---------------------- --------
Robert H. Dallas, II 84,721(2)(7) 7.76%
Peter P. DeTommaso 92,769(3)(7) 8.50%
John Fallone 28,872(7)(9) 2.65%
Walter Hazard 36,887(4)(7) 3.38%
Charles S. Loring 58,370(5)(7) 5.35%
John O'Brien 35,331(7) 3.24%
Samuel Stothoff 40,565(6)(7) 3.72%
Peter G. Schoberl 1,830(8) 0.17%
Allen Tucker 18,434(7) 1.69%
Robert J. van 24,400(7) 2.24%
Volkenburgh, Jr., M.D.
- ----------
(1) Beneficially owned shares include shares over which the named person
exercised either sole or shared voting power or sole or shared investment
power. It also includes shares owned (i) by a spouse, minor children or
relatives sharing the same home, (ii) by entities owned or controlled by
the named person, and (iii) by other persons if the named person has the
right to acquire such shares within sixty (60) days by the exercise of any
right or option. Unless otherwise noted, all shares are owned of record and
beneficially by the named person.
(2) Includes 14,561 shares held by the Dallas Group of America Employee's
Profit Sharing Plan and Trust, 14,561 shares held by the Trenton Liberty
Insurance Company, T/A Alexander Insurance Managers, and 17,811 shares held
by the Dallas Group of America, Inc. which 46,933 shares are also disclosed
as beneficially owned by David D. Dallas, and 3010 shares owned by Mr.
Dallas' minor child in his own name.
(3) Includes 71,401 shares owned jointly with Mr. DeTommaso's spouse, 10,510
shares owned by the Home Owners Heaven Profit Sharing Plan, and 8,333
shares owned jointly by Mr. DeTommaso and his brother.
-63-
<PAGE>
(4) Includes 10,596 shares held by the Atrion Corporation Pension Fund,
6,430 shares held by profit sharing funds controlled by Mr. Hazard,
4,166 shares held by Atrion Corporation and 2,083 shares held by Mr.
Hazard's spouse.
(5) Includes 5,028 shares held by Mr. Loring's spouse in her
own name, 10,972 shares owned jointly with his spouse, and
6,121 shares held by an Estate for which Mr. Loring is the
Executor. Mr. Loring disclaims beneficial ownership of the
shares held by his spouse.
(6) Includes 27,200 shares held jointly by Mr. Stothoff and his
spouse and 5,590 shares held by Mr. Stothoff's spouse in
her own name. Mr. Stothoff disclaims beneficial ownership
of the shares held by his spouse.
(7) Includes, 2,000 shares issuable upon the exercise of
immediately exercisable options.
(8) Includes 1,500 shares issuable upon the exercise of
immediately exercisable options.
(9) Includes 4,166 shares held jointly by Mr. Fallone and his
spouse.
-64-
<PAGE>
DESCRIPTION OF THE COMPANY'S SECURITIES
UNITS
Each Unit consists of one share of Common Stock and one Warrant. Each
Warrant entitles the holder thereof to purchase one additional share of Common
Stock at a purchase price of $17.00. The Common Stock and the Warrants will be
transferable separately upon the closing of the Offering.
COMMON STOCK
General. As a corporation incorporated under the laws of Delaware, the
rights of holders of the Company's stock are governed by the Delaware General
Corporation Law and the Company's Certificate of Incorporation. The Company's
Certificate of Incorporation provides for an authorized capitalization of
3,000,000 shares of capital stock, consisting of 2,500,000 shares of Common
Stock, and 500,000 shares of preferred stock. As of June 30, 1996, the Company
had 1,089,392 shares of Common Stock outstanding and no shares of preferred
stock outstanding.
Dividend Rights. The holders of the Company's Common Stock will be
entitled to dividends, when, as, and if declared by the Company's Board of
Directors, subject to the restrictions imposed by Delaware law. The only
statutory limitation applicable to the Company is that dividends must be paid
out of surplus or, if there is no surplus, out of net profits for the fiscal
year in which the dividend is declared or out of the preceding year's net
profit. However, as a practical matter, unless the Company expands its
activities, its only source of income will be the Bank. Therefore, the dividend
restrictions applicable to the Bank described under the heading "Supervision and
Regulation" will continue to impact the Company's ability to pay dividends.
Voting Rights. Each share of the Company's common stock is entitled to one
vote per share. Cumulative voting is not permitted.
Under Delaware Law, a merger or consolidation may be approved by a majority
of the votes cast at a meeting at which a quorum is present. Also, Delaware law
permits the Board of Directors to authorize certain mergers, amend the
certificate of incorporation in certain respects and take similar actions
without a shareholder vote.
Delaware law also permits a corporation to adopt provisions in its
certificate of incorporation requiring greater than a majority vote to approve
specified actions. The Company has not adopted such provisions. Delaware law
also permits a corporation in its certificate of incorporation to classify its
directors so
-65-
<PAGE>
that different classes are elected at different annual meetings, and the
Company's Certificate of Incorporation does so provide for a classified Board.
See "-- Directors."
Preemptive Rights. Under Delaware law, shareholders may have preemptive
rights if these rights are provided in the certificate of incorporation. The
Certificate of Incorporation of the Company does not provide for preemptive
rights.
Appraisal Rights. Under Delaware law, dissenting shareholders of the
Company have appraisal rights (subject to the broad exception set forth in the
next sentence) upon certain mergers or consolidations. Appraisal rights are not
available in any such transaction if shares of the corporation are listed for
trading on a national securities exchange or designated as a national market
system security on the NASDAQ system or held of record by more than 2,000
holders.
Directors. Under Delaware law and the Company's Certificate of
Incorporation, the Company is to have a minimum of 3 directors and a maximum of
25, with the number of directors at any given time to be fixed by the Board of
Directors. In addition, the Company's Certificate of Incorporation provides that
the Board of Directors is to be divided into three classes, consisting of as
nearly an equal number of directors as possible, with the term of office of one
class expiring each year. The Company has three members of its Board of
Directors. See "MANAGEMENT."
WARRANTS
Each Warrant entitles the holder thereof to purchase one share of Common
Stock at a purchase price of $17.00 for a period of two years after the issuance
of the Warrants. Upon the closing of the Offering, the Warrants will be freely
tradeable without the Common Stock. Any Warrant not exercised on or before the
expiration date shall expire and will not thereafter be exercisable. Warrant
holders do not have the rights and privileges of holders of Common Stock.
The Company will deliver to purchasers certificates representing one
Warrant for each Unit purchased hereunder (the "Warrant Certificates"). Each
Warrant Certificate will indicate the total number of shares for which the
Warrant is exercisable. Thereafter, Warrant Certificates may be exchanged for
new certificates of different denominations, and may be exercised or transferred
by presenting them at the office of FCTC Transfer Services, L.P. (the "Warrant
Agent"). If a market for the Warrants develops, holder may sell their warrants
instead of exercising them. However, although the Company intends to file an
application to have the Warrants listed on the American Stock
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<PAGE>
Exchange, there can be no assurance that a market for the Warrants will develop,
or if developed, will continue.
Each Warrant may be exercised by surrendering the Warrant Certificate, with
the form of election to purchase on the reverse side properly completed and
executed, together with payment of the exercise price to the Warrant Agent. The
Warrants may be exercised in whole or in part, but no fractional shares of
Common Stock will be issued upon exercise of the Warrant. If less than all of
the Warrants evidenced by the Warrant certificate are exercised, a new Warrant
Certificate will be issued for the remaining number of Warrants. The number of
shares purchasable upon exercise and the exercise price of each Warrant will be
proportionately adjusted upon the occurrence of certain events, including stock
dividends, stock splits, reclassification and reorganizations. The Warrants will
be issued and governed by a Warrant Agreement between the Company and the
Warrant Agent. The Warrant Certificate provides that the company and the Warrant
Agent may, without the consent of the Warrant holders, make changes in the
Warrant Agreement which are required by reason of any ambiguity, manifest error
or other mistake in the Warrant Agreement or Warrant Certificate, or that do not
adversely affect or change the interest of the holders of the Warrants.
TRANSFER AGENT AND WARRANT AGENT
The Company's transfer agent for the Common Stock and Warrant Agent for the
Warrants is FCTC Transfer Services, L.P. with offices at 111 Wood Avenue South,
Suite 206, Iselin, New Jersey 08830.
ANTI-TAKEOVER PROVISIONS
Under the Federal Change in Bank Control Act (the "Control Act"), a 60 day
prior written notice must be submitted to the FRB if any person, or any group
acting in concert, seeks to acquire 10% or more of any class of outstanding
voting securities of the Company, unless the FRB determines that the acquisition
will not result in a change of control of the Company. Under the Control Act,
the FRB has 60 days within which to act on such notice taking into consideration
certain factors, including the financial and managerial resources of the
acquiror, the convenience and needs of the community served by the bank holding
company and its subsidiary banks and the antitrust effects of the acquisition.
Under the BHCA, a company is generally required to obtain prior approval of the
FRB before it may obtain control of a bank holding company. Control is generally
described to mean the beneficial ownership of 25% or more of all outstanding
voting securities of a company.
-67-
<PAGE>
Pursuant to the Company's Certificate of Incorporation, the Board of
Directors of the Company is divided into three classes, each of which shall
contain approximately one-third of the whole number of the members of the Board.
Each class shall serve a staggered term, with approximately one-third of the
total number of directors being elected each year. The Company's Certificate of
Incorporation and Bylaws provide that the size of the Board shall be determined
by a majority of the directors. The Certificate of Incorporation and the Bylaws
provide that any vacancy occurring in the Board, including a vacancy created by
an increase in the number of directors or resulting from death, resignation,
retirement, disqualification, removal from office or other cause, shall be
filled for the remainder of the unexpired term exclusively by a majority vote of
the directors then in office. The classified Board is intended to provide for
continuity of the Board of Directors and to make it more difficult and time
consuming for a stockholder group to use its voting power to gain control of the
Board of Directors without the consent of the incumbent Board of Directors of
the Company.
Certain provisions of Delaware law are designed to provide Delaware
corporations with additional protection against hostile takeovers. The takeover
statute, which is codified in Section 203 of the Delaware General Corporate Law
("Section 203"), is intended to discourage certain takeover practices by
impeding the ability of a hostile acquiror to engage in certain transactions
with the target company.
In general, Section 203 provides that a "Person" (as defined therein) who
owns 15% or more of the outstanding voting stock of a Delaware corporation (an
"Interested Stockholder") may not consummate a merger or other business
combination transaction with such corporation at any time during the three-year
period following the date such "Person" became an Interested Stockholder. The
term "business combination" is defined broadly to cover a wide range of
corporate transactions including mergers, sales of assets, issuances of stock,
transactions with subsidiaries and the receipt of disproportionate financial
benefits.
The statute exempts the following transactions from the requirements of
Section 203: (i) any business combination if, prior to the date a person became
an Interested Stockholder, the Board of Directors approved either the business
combination or the transaction which resulted in the stockholder becoming an
Interested Stockholder; (ii) any business combination involving a person who
acquired at least 85% of the outstanding voting stock in the transaction in
which he became an Interested Stockholder, with the number of shares outstanding
for this purpose calculated without regard to those shares owned by the
corporation's directors who are also officers and by certain employee stock
plans; (iii) any business combination with an Interested
-68-
<PAGE>
Stockholder that is approved by the Board of Directors and by a two-thirds vote
of the outstanding voting stock not owned by the Interested Stockholder; and
(iv) certain business combinations that are proposed after the corporation had
received other acquisition proposals and which are approved or not opposed by a
majority of certain continuing members of the Board of Directors. A corporation
may exempt itself from the requirements of the statute by adopting an amendment
to its Certificate of Incorporation or Bylaws electing not to be governed by
Section 203. At the present time, the Board of Directors does not intend to
propose any such amendment.
THE OFFERING -- PLAN OF DISTRIBUTION
The Company is hereby offering 305,000 Units, each Unit consisting of one
share of Common Stock and one Warrant to purchase one share of Common Stock at
an exercise price of $17.00. The Company will solicit subscriptions to purchase
the Common Stock and will sell the Common Stock subscribed for hereby to the
general public.
The Company has reserved an option, exercisable for a period of ___ days
after the effective date of the Registration statement of which this Prospectus
forms a part, to sell up to an additional 30,500 Units to fill
over-subscriptions for the Units.
The Company has not engaged any underwriters in connection with the
Offering. Certain executive officers of the Company will participate in the
Offering by distributing offering materials, responding to inquiries from
potential investors, maintaining records of subscriptions and attending
information meetings, if any.
Prior to this Offering, there has been a limited public trading market for
the Common Stock of the Company and no public trading marked for the Warrants.
As a result, the Price to Public set forth on the cover page of the Prospectus
and the terms of the Warrants have been determined by the Company based upon a
number of factors. These factors included the most recent bid price of the
Company's common stock, the future prospects of the Company, the banking
industry in general, the Company's recent financial performance and its position
in the industry, and other factors deemed to be relevant by the Company.
METHOD OF SUBSCRIPTION
A prospective investor wishing to subscribe for Units in the Offering must
do the following:
(a) execute a Subscription Agreement; and
(b) deliver a check, bank draft, or money order made payable, in United
States currency to "UNITY BANCORP, INC."
The Subscription Agreement, together with the full amount of the
aggregate subscription price must be mailed, in the return envelope provided
herewith, to: Unity Bancorp, Inc., Attention: James Hyman, 62 Old Highway 22,
Clinton, NJ 08809. In order for the Stock Subscription Agreement to be valid, it
must be received by the Company on or before ________ p.m. on _______ ___, 1996,
unless the Offering is extended.
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<PAGE>
EXPIRATION OF THE OFFERING WILL BE AT ____ ON _______ ___, _______, UNLESS
THE COMPANY EXTENDS THE OFFERING.
THE COMPANY RESERVES THE RIGHT TO REJECT, IN WHOLE OR IN PART, IN ITS SOLE
DISCRETION, ANY SUBSCRIPTION FOR ANY REASON.
THE FULL SUBSCRIPTION PRICE FOR THE COMMON STOCK MUST BE INCLUDED WITH THE
SUBSCRIPTION AGREEMENT. THE PURCHASE PRICE MUST BE PAID IN UNITED STATES
CURRENCY BY CHECK, BANK DRAFT OR MONEY ORDER PAYABLE TO "UNITY BANCORP, INC."
FAILURE TO INCLUDE THE FULL SUBSCRIPTION PRICE WITH THE SUBSCRIPTION AGREEMENT
MAY CAUSE THE COMPANY TO REJECT THE SUBSCRIPTION IN WHOLE OR IN PART.
LEGAL MATTERS
The validity of the Units hereby will be passed upon for the Company by
McCarter & English, Newark, New Jersey.
EXPERTS
The consolidated statements of condition as of December 31, 1995 and 1994,
and the consolidated statements of income, changes in stockholders' equity and
cash flows for the years ended December 31, 1995, 1994 and 1993 included in this
Prospectus, have been included herein in reliance on the report of Arthur
Andersen LLP, independent public accountants, given on the authority of that
firm as experts in giving said reports.
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<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY Page
----
Consolidated Statements of Condition as of
June 30, 1996 and 1995................................................ F-2
Consolidated Statements of Income for the six months
ended June 30, 1996 and 1995.......................................... F-3
Consolidated Statements of Cash Flows for the six
months ended June 30, 1996 and 1995................................... F-4
AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY
Report of Independent Public Accountants................................... F-5
Consolidated Statements of Condition as of December 31, 1995
and 1994.............................................................. F-6
Consolidated Statements of Income for the years ended
December 31, 1995, 1994, and 1993..................................... F-7
Consolidated Statements of Changes in Shareholders' Equity
for the years ended December 31, 1995, 1994, and 1993................. F-8
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993...................................... F-9
Notes to Consolidated Financial Statements................................. F-10
F-1
<PAGE>
Consolidated Statements of Condition
<TABLE>
<CAPTION>
June 30 (Unaudited) 1996 1995
------------- -------------
<S> <C> <C>
Assets
Cash and due from banks ...................................................... $ 14,610,497 $ 12,332,826
Federal funds sold ........................................................... 1,925,000 4,325,000
------------- -------------
Total cash and cash equivalents .................................... 16,535,497 16,657,826
Securities
Available for sale (at market value) ................................... 13,854,797 7,348,748
Held to maturity (aggregate market value of $19,515,086 and $23,707,134) 20,353,571 24,563,239
------------- -------------
34,208,368 31,911,987
Loans (including loans held for sale of $2,863,482 and $1,963,334) ........... 84,064,412 46,032,706
Less: Unearned income ................................................. 15,168 28,432
Allowance for possible loan losses .......................... 774,417 478,792
------------- -------------
Net loans ................................................... 83,274,827 45,525,482
Premises and equipment, net .................................................. 2,408,277 944,623
Accrued interest receivable .................................................. 1,023,616 746,197
Organizational costs, net .................................................... 0 17,254
Other assets ................................................................. 997,312 777,693
------------- -------------
Total assets ....................................................... $ 138,447,897 $ 96,581,062
============= =============
Liabilities and Shareholders' Equity
Deposits
Demand
Noninterest Bearing ................................................ $ 23,283,463 $ 11,414,297
Interest bearing ................................................... 20,097,553 14,815,530
Savings ................................................................ 23,158,589 20,063,968
Time (includes deposits $100,000 and over of $8,546,364 and $3,741,341) 59,083,645 40,271,281
------------- -------------
Total deposits ..................................................... 125,623,250 86,565,076
Subordinated debt ............................................................ 2,010,000 1,510,000
Accrued interest payable ..................................................... 422,262 266,637
Accrued expenses and other liabilities ....................................... 136,138 364,905
------------- -------------
Total liabilities .................................................. 128,191,650 88,706,618
Commitments and contingencies
Shareholders' Equity
Common stock, no par value, 2,500,000 shares authorized;
1,089,392 and 917,760 issued and outstanding ....................... 9,462,444 7,371,889
Retained earnings ...................................................... 880,123 658,342
Net unrealized loss on available for sale securities ................... (86,320) (155,787)
------------- -------------
Total Shareholders' Equity ......................................... 10,256,247 7,874,444
------------- -------------
Total liabilities and Shareholders' Equity ......................... $ 138,447,897 $ 96,581,062
============= =============
</TABLE>
F-2
<PAGE>
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the Six Months Ended June 30 (Unaudited) 1996 1995
---------- ----------
<S> <C> <C>
Interest Income
Interest on loans ........................................ $3,486,678 $2,088,853
Interest on Securities ................................... 1,288,877 1,277,794
Interest on Federal Funds Sold ........................... 173,844 93,991
---------- ----------
Total interest income .................................... 4,949,399 3,460,638
Interest expense ........................................... 2,076,929 1,294,895
Interest on long term debt ................................. 59,211 55,164
---------- ----------
Total interest expense ..................................... 2,136,140 1,350,059
---------- ----------
Net interest income ........................................ 2,813,259 2,110,579
Provision for possible loan losses ......................... 257,288 145,405
---------- ----------
Net interest income after provision for possible loan losses 2,555,971 1,965,174
---------- ----------
Other income
Service charges on deposit accounts....................... 223,721 136,152
Gain on sale of loans .................................... 617,611 370,125
Gain on sale of securities ............................... 31,850 0
Other income ............................................. 177,022 488,589
---------- ----------
Total other income ....................................... 1,050,204 624,741
---------- ----------
Other expenses
Salaries and employee benefits ........................... 1,294,497 873,788
Occupancy expense ........................................ 328,168 94,338
Other operating expenses ................................. 1,168,597 808,230
---------- ----------
Total other expenses ..................................... 2,791,262 1,776,356
---------- ----------
Income before taxes ........................................ 814,913 813,559
Provision for income taxes ................................. 312,295 312,631
---------- ----------
Net income ................................................. $ 502,618 $ 500,928
========== ==========
Net income per share ....................................... $0.47 $0.52
========== ==========
Weighted average shares outstanding ........................ 1,058,282 962,380
========== ==========
</TABLE>
F-3
<PAGE>
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the six months ended June 30 (Unaudited) 1996 1995
------------ ------------
<S> <C> <C>
Operating activities:
Net income ....................................................... $ 502,618 $ 500,928
Adjustments to reconcile net income to net
cash provided by (used in) operating activities
Provision for possible loan losses ........................... 257,288 145,405
Depreciation and amortization ................................ 129,073 92,904
Gain on sale of premises and equipment ....................... 0 (1,033)
Gain on sale of securities ................................... (31,850) 0
Gain on sale of loans ........................................ (617,611) (370,125)
Amortization of securities premiums, net ..................... 32,128 21,229
Increase in accrued interest receivable ...................... (165,556) (93,533)
Increase in other assets ..................................... (493,091) (213,043)
Increase in accrued interest payable ......................... 30,737 133,018
Decrease in accrued expenses and other liabilities ........... (212,168) (181,527)
------------ ------------
Net cash (used in) provided by operating activities ..... (568,433) 34,223
------------ ------------
Investing activities:
Proceeds from sales of securities available for sale ............. 1,234,436 20,778
Purchases of securities held to maturity ......................... (1,006,172) (5,572,306)
Purchases of securities available for sale ....................... (3,999,921) 0
Maturities and principal payments on securities held to maturity . 508,674 4,243,031
Maturities and principal payments on securities available for sale 5,014,918 69,305
Proceeds from sale of loans ...................................... 6,814,863 4,761,908
Net increase in loans ............................................ (31,232,533) (14,048,391)
Capital Expenditures ............................................. (1,443,305) (207,521)
Proceeds from sale of premises and equipment ..................... 0 9,500
------------ ------------
Net cash used in investing activities ........................ $(24,109,040) $(10,723,696)
------------ ------------
Financing activities:
Increase in deposits ............................................. 14,625,626 15,870,029
Proceeds from issuance of subordinated debt ...................... 2,010,000 1,510,000
Proceeds from issuance of common stock, net ...................... 0 20,000
Other ............................................................ 7,917 0
Cash Dividends ................................................... (120,430) (137,418)
Net cash provided by financing activities .................... 16,523,113 17,262,611
(Decrease) increase in cash and cash equivalents ....................... (8,154,361) 6,573,137
Cash and cash equivalents at beginning of period ....................... 24,689,858 10,084,689
------------ ------------
Cash and cash equivalents at end of period ............................. $ 16,535,497 $ 16,657,826
============ ============
Supplemental disclosures:
Interest paid .................................................... $ 2,105,403 $ 1,217,041
Income taxes paid ................................................ 878,500 420,000
Subordinated debt exchanged for common stock ..................... 1,510,000 0
============ ============
</TABLE>
F-4
<PAGE>
Unity Bancorp. Inc. and Subsidiaries
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ARTHUR ANDERSEN LLP
To the Shareholders and Board of Directors of
Unity Bancorp, Inc.:
We have audited the accompanying consolidated statements of condition of Unity
Bancorp, Inc. and subsidiary as of December 31, 1995 and 1994, and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Unity Bancorp, Inc. and
subsidiary as of December 31, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995, in conformity with generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, effective
January 1, 1993 the Company changed its method of accounting for income taxes
and effective January 1, 1994 changed its method of accounting for securities.
/s/ ARTHUR ANDERSEN LLP
Roseland, New Jersey
January 26, 1996
F-5
<PAGE>
Unity Bancorp, Inc. and Subsidiaries
Consolidated Statements of Condition
<TABLE>
<CAPTION>
December 31 1995 1994
------------ ------------
<S> <C> <C>
Assets
Cash and due from banks .............................................................. $ 17,064,858 $ 7,684,689
Federal funds sold ................................................................... 7,625,000 2,400,000
------------ ------------
Total cash and cash equivalents (Note 2 and 12) ................................ 24,689,858 10,084,689
Securities (Notes 2, 3 and 12)
Available for sale (at market value) ............................................... 16,304,282 7,199,291
Held to maturity (aggregate market value of $19,264,315 and $21,341,158
in 1995 and 1994, respectively) .................................................. 19,856,743 23,276,844
------------ ------------
Total securities ............................................................... 36,161,025 30,476,135
Loans (including loans held for sale of $3,515,561 and $890,349
in 1995 and 1994, respectively) (Notes 2, 4, 5 and 12) ............................. 59,108,042 36,420,687
Less: Unearned income ............................................................ 49,278 26,217
Less: Allowance for possible loan losses ......................................... 561,931 380,191
------------ ------------
Net loans ...................................................................... 58,496,833 36,014,279
Premises and equipment, net (Notes 2 and 6) .......................................... 1,094,043 814,223
Accrued interest receivable .......................................................... 858,060 652,664
Other assets ......................................................................... 504,221 606,154
------------ ------------
Total Assets ................................................................... $121,804,040 $ 78,648,144
============ ============
Liabilities and Shareholders' Equity
Deposits (Note 12)
Demand
Noninterest bearing .............................................................. $ 18,662,191 $ 9,155,302
Interest bearing ................................................................. 19,345,467 11,728,480
Savings ............................................................................ 22,202,038 21,688,665
Time (includes deposits $100,000 and over of $6,706,000 and $2,517,000
in 1995 and 1994, respectively) .................................................. 50,787,928 28,122,600
------------ ------------
Total deposits ................................................................. 110,997,624 70,695,047
Subordinated debt (Notes 7 and 12) ................................................... 1,510,000 --
Accrued interest payable ............................................................. 391,525 133,619
Accrued expenses and other liabilities ............................................... 428,482 459,286
------------ ------------
Total Liabilities .............................................................. 113,327,631 71,287,952
------------ ------------
Commitments and contingencies (Note 10)
Shareholders' equity (Notes 1, 8 and 11)
Common stock, no par value, 2,500,000 shares authorized; 917,760 and
915,303 shares issued and outstanding in 1995 and 1994, respectively ............. 7,371,889 7,351,889
Retained earnings .................................................................. 1,070,573 294,832
Unrealized holding gain (loss) on securities available for sale, net of income taxes 33,947 (286,529)
------------ ------------
Total Shareholders' Equity ..................................................... 8,476,409 7,360,192
------------ ------------
Total Liabilities and Shareholders' Equity ..................................... $121,804,040 $ 78,648,144
============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-6
<PAGE>
Unity Bancorp, Inc. and Subsidiaries
Consolidated Statements of Income
<TABLE>
<CAPTION>
For the years ended December 31 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Interest Income
Interest on loans (Note 2) ................... $ 4,781,664 $ 2,962,336 $ 1,749,899
Interest on securities ....................... 2,696,182 1,881,830 1,704,136
Interest on Federal funds sold ............... 291,638 93,402 34,049
----------- ----------- -----------
Total interest income .......................... 7,769,484 4,937,568 3,488,084
Interest expense ............................... 3,333,866 1,829,989 1,609,501
----------- ----------- -----------
Net interest income ............................ 4,435,618 3,107,579 1,878,583
Provision for possible loan losses (Note 2) .... 228,560 160,563 183,288
----------- ----------- -----------
Net interest income after provision for
possible loan losses ......................... 4,207,058 2,947,016 1,695,295
----------- ----------- -----------
Other income
Service charges on deposits .................. 294,899 240,329 167,420
Net gain (loss) on sale of securities (Note 3) (18,999) -- 260,557
Gain on sale of loans (Note 2) ............... 871,185 247,236 301,173
Other income ................................. 238,093 140,851 67,658
----------- ----------- -----------
Total other income ........................... 1,385,178 628,416 796,808
----------- ----------- -----------
Other Expenses
Salaries and employee benefits ............... 1,974,038 1,193,369 936,334
Occupancy expense ............................ 237,502 141,995 119,202
Other operating expenses ..................... 1,766,730 1,265,111 922,496
----------- ----------- -----------
Total other expenses ......................... 3,978,270 2,600,475 1,978,032
----------- ----------- -----------
Income before provision for income taxes ..... 1,613,966 974,957 514,071
Provision for income taxes (Notes 2 and 9 ..... 609,031 219,007 7,500
----------- ----------- -----------
Net Income ..................................... $ 1,004,935 $ 755,950 $ 506,571
=========== =========== ===========
Net income per share (Note 2) .................. $ 1.04 $ .84 $ .78
=========== =========== ===========
Weighted average shares outstanding (Note 2) ... 963,019 900,954 650,358
=========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-7
<PAGE>
Unity Bancorp, Inc. and Subsidiaries
Consolidated Statements of Changes in Shareholders' Equity
<TABLE>
<CAPTION>
For the years ended December 31 Unrealized
Holding
Gain (Loss)
Additional Retained on Securities Total
Common Paid-in Earnings Available Shareholders'
Stock Capital (Deficit) for Sale Equity
----------- ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992 .............. $ 2,342,000 $ 2,307,000 $ (967,689) $ -- $ 3,681,311
Stock dividend - 10% .................. 234,200 (234,200) -- -- --
Issuance of common stock,
net of offering costs ............... 556,115 288,669 -- -- 844,784
Net income - 1993 ..................... -- -- 506,571 -- 506,571
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1993 .............. 3,132,315 2,361,469 (461,118) $ -- 5,032,666
Stock dividend - 10% .................. 360,975 (360,975) -- -- --
Issuance of common stock,
net of offering costs ............... 1,083,225 774,880 -- -- 1,858,105
Net income - 1994 ..................... -- -- 755,950 -- 755,950
Unrealized loss on securities available
for sale, net of income tax ......... -- -- -- (286,529) (286,529)
Exchange of bank common stock for
holding company common stock
(Notes 1 and 8) ..................... 2,775,374 (2,775,374) -- -- --
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1994 .............. 7,351,889 -- 294,832 (286,529) 7,360,192
Cash dividend - $.24 per share ........ -- -- (229,194) -- (229,194)
Issuance of common stock .............. 20,000 -- -- -- 20,000
Net income - 1995 ..................... -- -- 1,004,935 -- 1,004,935
Unrealized gain on securities available
for sale, net of income tax ......... -- -- -- 320,476 320,476
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1995 .............. $ 7,371,889 $ -- $ 1,070,573 $ 33,947 $ 8,476,409
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-8
<PAGE>
Unity Bancorp, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the years ended December 31 1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Operating activities:
Net income ....................................................... $ 1,004,935 $ 755,950 $ 506,571
Adjustments to reconcile net income to net
cash provided by operating activities
Provision for possible loan losses ........................... 228,560 160,563 183,288
Depreciation and amortization ................................ 209,278 155,504 124,575
(Gain) loss on sale of premises and equipment ................ (1,033) 4,027 --
Net loss (gain) on sale of securities ........................ 18,999 -- (260,557)
Gain on sale of loans ........................................ (871,185) (247,236) (301,173)
Amortization of securities premiums, net ..................... 47,919 29,649 127,780
Increase in accrued interest receivable ...................... (205,396) (241,016) (98,557)
Increase in other assets ..................................... (159,268) (123,141) (19,302)
Increase in accrued interest payable ......................... 257,906 58,374 31,261
(Decrease) increase in accrued expenses and other liabilities (30,804) 380,439 (7,972)
------------ ------------ ------------
Net cash provided by operating activities .................. 499,911 933,113 285,914
------------ ------------ ------------
Investing activities:
Proceeds from sales of securities available for sale ............. 501,779 -- 12,309,559
Purchases of securities held to maturity ......................... (14,081,604) (10,057,477) (22,810,836)
Purchases of securities available for sale ....................... (237,700) (2,490,000) --
Maturities and principal payments on securities held to maturity . 8,333,727 5,047,612 16,825,661
Maturities and principal payments on securities available for sale 266,097 312,999 --
Proceeds from sale of loans ...................................... 10,853,327 3,222,107 3,197,276
Net increase in loans ............................................ (32,693,256) (14,276,824) (14,726,017)
Capital expenditures ............................................. (449,995) (66,066) (103,280)
Proceeds from sale of premises and equipment ..................... 9,500 20,000 --
------------ ------------ ------------
Net cash used in investing activities ...................... (27,498,125) (18,287,649) (5,307,637)
------------ ------------ ------------
Financing activities:
Increase in deposits ............................................. 40,302,577 11,107,920 11,713,901
(Decrease) increase in other borrowed funds ...................... -- (905,036) 905,036
Proceeds from issuance of subordinated debt ...................... 1,510,000 -- --
Proceeds from issuance of common stock, net ...................... 20,000 1,858,105 844,784
Cash dividends ................................................... (229,194) -- --
------------ ------------ ------------
Net cash provided by financing activities .................. 41,603,383 12,060,989 13,463,721
Increase (decrease in cash and cash equivalents ................... 14,605,169 (5,293,547) 8,441,998
Cash and cash equivalents at beginning of year ..................... 10,084,689 15,378,236 6,936,238
------------ ------------ ------------
Cash and cash equivalents at end of year ........................... $ 24,689,858 $ 10,084,689 $ 15,378,236
============ ============ ============
Supplemental disclosures:
Interest paid .................................................... $ 3,075,960 $ 1,771,615 $ 1,578,240
Income taxes paid ................................................ 574,511 -- 7,500
============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-9
<PAGE>
Unity Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. Organization and principles of consolidation:
The accompanying consolidated financial statements include the accounts of
Unity Bancorp, Inc. (the "Parent Company") and its wholly-owned subsidiary,
First Community Bank (the "Bank", or when consolidated with the Parent
Company, "the Company"). All significant inter-company balances and
transactions have been eliminated in consolidation.
Effective December 1, 1994, each certificate representing common shares of
the Bank was exchanged for an equal number of common shares of the Parent
Company and the Parent Company acquired all of the outstanding common
shares of the Bank. This exchange of shares has been accounted for as a
reorganization of entities under common control resulting in no changes to
the underlying carrying amount of assets and liabilities.
The Bank was incorporated in the State of New Jersey on July 27,1990. The
Bank was subsequently granted a charter by the New Jersey Department of
Banking and commenced operations on September 13, 1991 after purchasing the
deposits of two existing branches of another financial institution through
the Resolution Trust Corporation.
2. Summary of significant accounting policies:
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Securities
The Company prospectively adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" (SFAS 115), effective January 1, 1994. SFAS 115 requires the
Company to classify its securities as: (1) held to maturity, (2) available
for sale and (3) trading.
Securities which the Company has the ability and intent to hold until
maturity are classified as held to maturity. These securities are carried
at cost adjusted for amortization of premiums and accretion of discounts.
Securities which are held for an indefinite period of time which management
intends to use as part of its asset/liability strategy, or that may be sold
in response to changes in interest rates, changes in prepayment risk,
increased capital requirements or other similar factors, are classified as
available for sale and are carried at market value. Differences between a
security's amortized cost and market value is charged/credited directly to
shareholders' equity, net of income tax effect. The cost of securities sold
is determined on a specific identification basis. Gains and losses on sales
of securities are recognized in the statements of income on the date of
sale.
The Company has not classified any of its securities as trading.
Loans
Interest is credited to operations primarily based upon the principal
amount outstanding. When management believes there is sufficient doubt as
to the ultimate collectibility of interest on any loan, the accrual of
applicable interest is discontinued.
Loan origination fees, net of direct loan origination costs, are deferred
and are recognized over the estimated life of the related loans as an
adjustment of the loan yield.
The Company prospectively adopted Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan" (SFAS
114) effective January 1, 1995. As defined in SFAS 114, a loan is impaired
when, based on current information and events, it is probable that a
creditor will be unable to collect all amounts due according to the
contractual terms of the loan agreement. SFAS 114 requires that the
impairment of a loan be based on the present value of expected future cash
flows, net of estimated costs to sell, discounted at the loan's effective
interest rate. Impairment can also be measured based on a loan's observable
market price or the fair value of collateral, if the loan is collateral
dependent. If the measure of the impaired loan is less than the recorded
investment in the loan, the Company establishes a valuation allowance, or
adjusts existing valuation allowances, with a corresponding charge or
credit to the provision for possible loan losses. The effect of adopting
this new accounting standard was not material.
Loans held for sale are reflected at the lower of aggregate cost or market
value.
F-10
<PAGE>
Unity Bancorp, Inc. and Subsidiaries
Allowance for Possible Loan Losses
The allowance for possible loan losses is maintained at a level management
considers adequate to provide for potential loan losses. The allowance is
increased by provisions charged to expense and reduced by net charge-offs.
The level of the allowance is based on management's evaluation of potential
losses in the loan portfolio, after consideration of prevailing economic
conditions in the Company's market area. Credit reviews of the loan
portfolio, designed to identify potential charges to the allowance, are
made during the year by management with the assistance of a loan review
consultant.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed on the straight-line method over the estimated
useful lives of the assets.
Sales and Service of Commercial Loans
The Company periodically sells certain loans to other financial
institutions. Gains on such sales are recognized at the time of sale in an
amount which approximates the present value of the difference between the
effective interest rate to the Company and the net yield to the investor,
excluding normal future loan servicing fees when applicable, over the
estimated remaining lives of the loans sold.
Serviced loans sold to other financial institutions are not included in the
accompanying consolidated statements of condition. The total amount of such
loans serviced, but owned by outside investors, amounted to approximately
$9,982,000 and $6,567,000 at December 31, 1995 and 1994, respectively.
Income Taxes
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). The
standard requires a change from the deferred to an asset and liability
method of computing deferred income taxes. Deferred income taxes are
recognized for tax consequences of "temporary differences" by applying
enacted statutory tax rates to differences between the financial reporting
and the tax basis of existing assets and liabilities. Prior years'
financial statements have not been restated to comply with the provisions
of SFAS 109. The effect of adopting SFAS 109 in 1993 was not significant,
except that the utilization of net operating loss carry forwards would have
been reflected as an extraordinary item in the accompanying consolidated
statements of income prior to the adoption of SFAS 109.
Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand, amounts due from banks
(including certificates of deposit) and Federal funds sold. Generally,
Federal funds are sold for a one-day period. At December 31, 1995 and 1994
certain certificates of deposit with maturities in excess of 90 days,
amounting to approximately $3,357,000 at both dates, were included in cash
and due from banks.
Net Income Per Share
Net income per share is computed based on the weighted average number of
common shares and common share equivalents outstanding during each year.
The weighted average shares have been adjusted retroactively for the effect
of stock dividends.
3. Securities:
Information with regard to the Company's securities portfolio at December
31, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1995 Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Held to maturity
Obligations of U.S. Government agencies ........ $10,760,758 $ 8,457 $ (504,387) $10,264,828
Mortgage-backed securities ..................... 9,095,985 1,005 (97,503) 8,999,487
----------- ----------- ----------- -----------
Total held to maturity ....................... $19,856,743 $ 9,462 $ (601,890) $19,264,315
=========== =========== =========== ===========
Available for sale
U.S. Treasury securities ....................... $ 1,963,616 $ 13,478 $ 0 $ 1,977,094
Obligations of U.S. Government agencies ........ 8,210,971 72,757 0 8,283,728
Obligations of states and political subdivisions 1,360,000 6,147 (810) 1,365,337
Mortgage-backed securities ..................... 838,976 13,607 0 852,583
Corporate debt securities ...................... 3,547,211 40,629 0 3,587,840
FHLB stock ..................................... 237,700 0 0 237,700
----------- ----------- ----------- -----------
Total available for sale ..................... $16,158,474 $ 146,618 $ (810) $16,304,282
=========== =========== =========== ===========
</TABLE>
F-11
<PAGE>
Unity Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
<TABLE>
<CAPTION>
1994 Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Held to maturity
U.S. Treasury securities $ 6,379,890 $ 430 $ (89,915) $ 6,290,405
Obligations of U.S. Government agencies 9,467,892 2,291 (1,111,049) 8,359,134
Corporate debt securities 2,907,515 0 (108,641) 2,798,874
Mortgage-backed securities 4,521,547 585 (629,387) 3,892,745
----------- ----------- ----------- -----------
Total held to maturity $23,276,844 $ 3,306 $(1,938,992) $21,341,158
=========== =========== =========== ===========
Available for sale
Obligations of U.S. Government agencies $ 2,043,650 $ 0 $ (93,503) $ 1,950,147
Mortgage-backed securities 4,633,171 0 (379,202) 4,253,969
Corporate debt securities 1,000,000 0 (4,825) 995,175
----------- ----------- ----------- -----------
Total available for sale $ 7,676,821 $ 0 $ (477,530) $ 7,199,291
=========== =========== =========== ===========
</TABLE>
The amortized cost and estimated market value of securities at December 31,
1995, by contractual maturity, are shown below.
Estimated
Amortized Market
Cost Value
----------- -----------
Held to maturity
Due after 1 year - 5 years $ 1,237,500 $ 1,215,501
Due after 5 years - 10 years 1,500,000 1,381,875
Due after 10 years 8,023,259 7,667,453
Mortgage-backed securities 9,095,984 8,999,486
----------- -----------
$19,856,743 $19,264,315
=========== ===========
Available for sale
Due in 1 year or less $11,683,570 $11,758,987
Due after 1 year - 5 years 3,398,228 3,455,012
FHLB stock 237,700 237,700
Mortgage-backed securities 838,976 852,583
----------- -----------
$16,158,474 $16,304,282
=========== ===========
Expected maturities may differ from contractual maturities because borrowers may
have the right to call or prepay obligations without call or prepayment
penalties.
Proceeds from sales of securities were $501,779 in 1995 and $12,309,559 in 1993.
Gross losses on sales of securities for 1995 were $18,999. Gross gains (losses)
on sales of securities were $299,234 and ($38,667) in 1993. No securities were
sold during 1994.
During December 1995, the Company transferred securities held to maturity with a
carrying value of approximately $15,920,000 and an unrealized gain of
approximately $145,800 to available for sale. The transfers resulted from a
reassessment of the Company's investment strategies pursuant to the release of a
special report issued by the Financial Accounting Standards Board entitled "A
Guide to Implementation of Statement No. 115 on Accounting for Certain
Investments in Debt and Equity Securities." This report allowed the Company to
make a one time reclassification of securities within the categories without
tainting other securities held to maturity.
Securities with carrying values aggregating $300,000 were pledged to secure
public deposits at December 31, 1995.
F-12
<PAGE>
Unity Bancorp, Inc. and Subsidiaries
4. Loans:
Loans outstanding by classification as of December 31, 1995 and 1994, are as
follows-
1995 1994
----------- -----------
Loans secured by real estate -
Residential properties $16,033,700 $ 9,514,489
Nonresidential properties 23,612,087 15,017,958
Construction loans 5,705,208 1,292,795
Commercial and industrial loans 9,125,192 6,951,838
Lease financing receivables 83,193 334,776
Loans to individuals 4,548,662 3,308,831
----------- -----------
$59,108,042 $36,420,687
=========== ===========
As of December 31, 1995 and 1994, loans accounted for on a nonaccrual basis
amounted to approximately $78,000 and $47,000, respectively. The interest income
that would have been recorded had these loans performed under the original
contract terms was not significant. At December 31, 1995, $262,000 in loans were
past due greater than 90 days but still accruing interest.
As of December 31,1995, the Bank's recorded investment in impaired loans,
defined as nonaccrual loans was $78,000 and the related valuation allowance was
$16,000. This valuation allowance is included in the allowance for possible loan
losses in the accompanying statement of condition.
As of December 31, 1995, approximately 77% of the Company's loans were secured
by real estate. As such, a substantial portion of the Company's borrowers'
ability to repay their loans is dependent on the economic environment of the
real estate industry in the Company's market area.
In the ordinary course of business, the Company may extend credit to officers,
directors or their associates. These loans are subject to the Company's normal
lending policy. An analysis of such loans, all of which are current as to
principal and interest payments, is as follows-
Balance at December 31, 1994 $ 2,127,506
New loans 3,670,954
Repayments (1,844,886)
-----------
Balance at December 31, 1995 $ 3,953,574
===========
5. Allowance for possible loan losses:
The allowance for possible loan losses is based on estimates and ultimate losses
may vary from current estimates. These estimates are reviewed periodically and,
as adjustments become known, they are reflected in operations in the periods in
which they become known.
An analysis of the change in the allowance for possible loan losses during 1995,
1994 and 1993 is as follows-
1995 1994 1993
--------- --------- ---------
Balance at beginning of year $ 380,191 $ 301,673 $ 133,603
Provision charged to expense 228,560 160,563 183,288
Loans charged-off (50,257) (82,045) (15,218)
Recoveries on loans
previously charged-off 3,437 0 0
--------- --------- ---------
Balance at end of year $ 561,931 $ 380,191 $ 301,673
========= ========= =========
6. Premises and equipment:
The detail of premises and equipment as of December 31, 1995 and 1994
is as follows-
1995 1994
----------- -----------
Land and building $ 631,966 $ 626,595
Furniture, fixtures and equipment 732,498 408,637
Leasehold improvements 116,332 21,400
----------- -----------
1,480,796 1,056,632
Less-Accumulated depreciation
and amortization (386,753) (242,409)
----------- -----------
$ 1,094,043 $ 814,223
=========== ===========
F-13
<PAGE>
Unity Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. Subordinated debt:
The Company issued subordinated debentures on February 1, 1995. The
debentures bear interest at 8 3/4%, payable quarterly and mature on
February 1, 1998. The debentures are callable at the option of the Company
at any time. The Company may also elect to convert the debentures to common
stock at an exchange ratio to be determined based on the market price of
the Company's stock at the time of conversion.
8. Shareholders' equity:
As discussed in Note 1, effective December 1, 1994, all common shares of
the Bank's stock outstanding were exchanged for common shares of the Parent
Company. Whereas the Parent Company's common stock has no par value or
stated value but the Bank's common stock has a par value of $5 per share,
this transaction resulted in an increase in common stock and a
corresponding decrease in additional paid-in capital in the amount of
$2,775,374.
9. Income taxes:
The components of the provision for income taxes are as follows-
1995 1994 1993
--------- --------- ---------
Federal:
Current $ 596,270 $ 233,386 $ 7,500
Deferred benefit (69,493) (68,229) 0
--------- --------- ---------
Total Federal 526,777 165,157 7,500
State 82,254 53,850 0
--------- --------- ---------
Total provision for
income taxes $ 609,031 $ 219,007 $ 7,500
========= ========= =========
A reconciliation between the reported income taxes and the amount computed
by multiplying income before taxes by the statutory Federal income tax rate
is as follows-
1995 1994 1993
--------- --------- ---------
Federal income taxes at
statutory rate $ 548,748 $ 331,485 $ 174,784
State income taxes, net of
Federal income tax effect 54,288 35,541 0
Utilization of net operating
loss carryforwards 0 (145,299) (167,284)
Other 5,995 (2,720) 0
--------- --------- ---------
Provision for income taxes $ 609,031 $ 219,007 $ 7,500
========= ========= =========
Deferred income taxes are provided for the temporary differences between
the financial reporting basis and the tax basis of the Company's assets and
liabilities. The components of the net deferred tax asset at December 31,
1995 and 1994 are as follows-
1995 1994
--------- ---------
Provision for possible loan losses $ 172,902 $ 97,028
Unrealized (gain) loss on
securities available for sale (22,400) 191,000
Other, net (2,754) (17,087)
--------- ---------
$ 147,748) $ 270,941
========= =========
10. Commitments and contingencies:
Lease Obligations-
The Company leases its branch facilities under operating leases. Future
minimum rental payments under these leases are as follows-
1996 $110,000
1997 64,000
1998 28,000
Litigation-
The Company may, in the ordinary course of business, become a party to
litigation involving collection matters, contract claims and other legal
proceedings relating to the conduct of its business. In management's
judgment, the financial position or results of operations of the Company
will not be affected materially by the final outcome of any present legal
proceedings.
F-14
<PAGE>
Unity Bancorp, Inc. and Subsidiaries
Commitments to Borrowers-
Commitments to extend credit are legally binding loan commitments with set
expiration dates. They are intended to be disbursed, subject to certain
conditions, upon request of the borrower. The Company was committed to
advance $8,780,000 to its borrowers as of December 31, 1995, which
commitments generally expire within one year.
Standby letters of credit are provided to customers to guarantee their
performance, generally in the production of goods and services or under
contractual commitments in the financial markets. The Company has entered
into standby letters of credit contracts with its customers totaling
$527,000 as of December 31, 1995, which generally expire within one year.
Other-
Deposits of the Bank are insured by the Savings Association Insurance Fund
(SAIF). The Bank is assessed premiums by SAIF semiannually based on the
collective experience of deposit institutions SAIF insures. Due to the
aggregate unfavorable experience, the SAIF has proposed a special one time
assessment of approximately 0.85% of qualifying deposits, the approval for
which must be received by the U.S. Congress prior to assessment. At
December 31, 1995 the Bank had approximately $111 million of deposits which
may be subject to such a special assessment, if and when enacted into law.
11. Regulatory capital:
Banking regulations provide that the Company must adhere to three minimum
capital requirements. These regulations require, at a minimum, Tier I
capital to risk-weighted assets of at least 4%, total capital of at least
8% of risk-weighted assets, and a leverage ratio of at least 3% to 5% of
adjusted assets. At December 31,1995, the Company had Tier I capital, Total
capital and leverage ratios of 10.77%, 11.48%, and 7.34%, respectively.
12. Fair value of financial instruments:
The Company adopted Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments" effective in 1995.
The statement requires that the Company disclose estimated fair values for
its financial instruments. The fair value estimates are made at a discrete
point in time based upon relevant market information and information about
the financial instruments.
Because no market exists for a portion of the Company's financial
instruments, fair value estimates are based on judgment regarding a number
of factors. These estimates are subjective in nature and involve some
uncertainties. Changes in assumptions and methodologies may have a material
effect on these estimated fair values. In addition, reasonable
comparability between financial institutions may not be possible due to a
wide range of permitted valuation techniques and numerous estimates which
must be made. This lack of uniform valuation methodologies also introduces
a greater degree of subjectivity to these estimated fair values.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to
estimate that value.
Cash and Federal Funds Sold- For those short-term instruments, the carrying
value is a reasonable estimate of fair value.
Securities-
For the held to maturity and available for sale portfolios, fair values are
based on quoted market prices or dealer quotes. If a quoted market price is
not available, fair value is estimated using quoted market prices for
similar securities.
Loans- The fair value of loans is estimated by discounting the future cash
flows using current market rates.
Deposit Liabilities-
The fair value of demand deposits and savings accounts is the amount
payable on demand at the reporting date. The fair value of fixed-maturity
certificates of deposit is estimated by discounting the future cash flows
using current market rates.
Subordinated Debt-
The carrying value is a reasonable estimate of fair value.
Unrecognized Financial Instruments-
At December 31, 1995, the Bank had standby letters of credit outstanding of
$527,000. The fair value of these commitments is nominal.
F-15
<PAGE>
Unity Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
At December 31, 1995, the bank had commitments to extend credit totaling
$8,780,000. The Bank does not charge a fee on these loan commitments and,
consequently, there is no basis to calculate a fair value.
The estimated fair value of the Company's financial instruments as of
December 31, 1995 is as follows-
Carrying Estimated
Amount Fair Value
------------ ------------
Financial assets-
Cash and Federal funds sold $ 24,689,858 $ 24,689,858
Securities held to maturity 19,856,743 19,264,315
Securities available for sale 16,304,282 16,304,282
Loans, net of allowance for
possible loan losses 58,496,833 58,428,286
Financial liabilities-
Deposits-
Demand 38,007,658 38,007,658
Savings 22,202,038 22,202,038
Time 50,787,928 50,472,202
------------ ------------
Total deposits 110,997,624 110,681,898
Subordinated debt 1,510,000 1,510,000
------------ ------------
F-16
<PAGE>
No person is authorized to give any information or make any representation other
than as contained in this Prospectus and, if given or made, such other
information or representations must not be relied upon as having been authorized
by the Company. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby to any
person in any jurisdiction where such offer would be unlawful. Neither the
delivery of this Prospectus nor any sale made hereunder shall under any
circumstances create any implications that there had been no change in the
affairs of the Company since any of the dates of which information of the dates
of which information is furnished herein or since the date hereof.
UNITS
UNITY BANCORP, INC.
----------------
PROSPECTUS
----------------
___________________, 1996
TABLE OF CONTENTS
Page
----
Available Information................................................ 2
Prospectus Summary................................................... 3
Selected Consolidated Financial Data................................. 7
Special Considerations and Risk Factors.............................. 9
Use of Proceeds...................................................... 14
Market and Price Range of Securities................................. 14
Dividend Policy...................................................... 16
Capitalization....................................................... 16
Management's Discussion and Analysis of Financial
Condition and Results of Operations................................ 19
Business............................................................. 44
Supervision and Regulation........................................... 49
Management........................................................... 54
Executive Compensation............................................... 57
Certain Transactions with Management................................. 60
Security Ownership of Certain Beneficial Owners and Management....... 60
Description of the Company's Securities.............................. 65
The Offering--Plan of Distribution................................... 69
Legal Matters........................................................ 70
Experts.............................................................. 70
Index to Consolidated Financial Statements........................... F-1
Consolidated Financial Statements.................................... F-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article Ninth of the Certificate of Incorporation of the Company and
Section 145 of the Delaware General Corporate Law ("DGCL") provides that the
corporation shall indemnify its present and former officers, directors,
employees, and agents and persons serving at its request ("corporate agents")
against expenses, including attorney's fees, judgments, fines or amounts paid in
settlement, incurred in connection with any pending or threatened civil or
criminal proceeding involving the corporate agent by reason of his being or
having been a corporate agent if (a) the agent acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interest of
the corporation, and (b) with respect to any criminal proceeding, the corporate
agent had no reasonable cause to believe his conduct was unlawful.
With respect to any derivative action, the Company is empowered to
indemnify a corporate agent against his expenses (but not his liabilities)
incurred in connection with any proceeding involving the corporate agent by
reason of his being or having been a corporate agent if the agent acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation. However, only the court in which the proceeding
was brought can empower a corporation to indemnify a corporate agent against
expenses with respect to any claim, issue or matter as to which the agent was
adjudged liable for negligence or misconduct.
Under Section 145 of the DGCL, the Company may indemnify a corporate agent
in a specific case if a determination is made by any of the following that the
applicable standard of conduct was met: (i) the Board of Directors, or a
committee thereof, acting by a majority vote of a quorum consisting of
disinterested directors; (ii) by independent legal counsel, if there is not a
quorum of disinterested directors or if the disinterested quorum empowers
counsel to make the determination; or (iii) by the shareholders.
Section 145 of the DGCL further provides that a corporate agent is entitled
to mandatory indemnification to the extent that the agent is successful on the
merits or otherwise in any proceeding, or in defense of any claim, issue or
matter in the proceeding. In advance of the final disposition of a proceeding,
the Company may pay an agent's expenses if the agent agrees to repay the
expenses unless it is ultimately determined he is entitled to indemnification.
II-1
<PAGE>
Article Ninth of the Certificate of Incorporation of the Company also
provides that such indemnification shall not exclude any other rights to
indemnification to which a person may otherwise be entitled, and authorizes the
corporation to purchase insurance on behalf of any of the persons enumerated
against any liability whether or not the corporation would have the power to
indemnify him under the provisions of Article Ninth.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
SEC Registration Fee.................................................... *
AMEX Filing Fee......................................................... *
Accounting Fees and Expenses ........................................... *
Printing and Engraving.................................................. *
Legal Fees and Expenses................................................. *
Blue Sky Fees and Expenses.............................................. *
Transfer Agent and Registrar Fees....................................... *
Miscellaneous Expenses.................................................. *
Total............................................................... *
- --------------------
* To be completed by amendment.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The following information relates to securities of the Bank or the Company
issued or sold within the past three years which were not registered under the
Securities Act of 1933, as amended (the "Securities Act"):
(i) In 1994 before the reorganization of the Bank and the Company, the Bank
issued a total of 216,645 shares of common stock at prices ranging from $8.00 to
$9.25 per share. These shares were issued without registration under the
Securities Act in reliance upon the exemption provided by Section 3(a)(5) of the
Securities Act. No underwriters were involved in these issuances.
(ii) In February 1995, the Company issued a total of $1.5 million of 8.75%
Subordinated Notes due 1998 to 32 investors (the "1995 Note Holders"). These
Subordinated Notes were issued without registration under the Securities Act in
reliance upon the exemption provided by Section 4(2) of the Securities Act. No
underwriters were involved in these issuances.
(iii) In February 1996, the Company issued 125,821 shares of Common Stock
to the 1995 Note Holders in exchange for the 8.75% Subordinated Debentures due
1998 held by them. No commission or renumeration was paid directly or indirectly
by the Company for soliciting the exchange. The transaction was completed
without registration under the Securities Act in reliance upon the exemption
provided in Section 3(a)(9) of the Securities Act.
II-2
<PAGE>
(iv) In April 1996, the Company issued $2.1 million of 8.25% Subordinated
Notes due 1999 to directors and executive officers of the Company and the Bank
and their affiliates (the "1996 Note Holders"). This transaction was completed
without registration under the Securities Act in reliance upon an exemption
provided in Section 4(2) of the Securities Act. No underwriters were involved in
this transaction.
(v) In September 1996, the Company issued 160,800 shares of Common Stock to
the 1996 Note Holders in exchange for the 8.25% Subordinated Notes due 1999. No
commission or renumeration was paid directly or indirectly by the Company for
soliciting the exchange. The exchange was completed without registration under
the Securities Act in reliance upon the exemption provided in Section 3(a)(9) of
the Securities Act.
ITEM 27. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
3(i) Certificate of Incorporation of the Company, as amended
3(ii) Bylaws of the Company(1)
4(i) Warrant Agreement/Form of Warrant
4(ii) Form of Stock Certificate
4(iii) 1994 Stock Option Plan for Employees(1)
4(iv) 1994 Stock Option Plan for Non-Employee Directors(1)
4(v) Stock Bonus Plan
4(vi) Subscription Agreement(2)
5 Opinion of McCarter & English(2)
10(i) Lease Agreement (for main office)
10 (ii) Lease Agreement for Flemington Branch Office; Addendums to
Lease and Lease for Parking
10(iii) Lease Agreement for Springfield Branch Office
10(iv) Lease Agreement for Scotch Plains Branch Office
10(v) 1994 Stock Option Plan for Employees and
II-3
<PAGE>
1994 Stock Option Plan for Non-Employee Directors
(See 4(iii) and 4(iv))
10(vi) Change in Control Agreement
10(vii) Stock Bonus Plan (See 4(v))
21 Subsidiaries of the Registrant
23(i) Consent of McCarter & English (See Item #5)
23(ii) Consent of Arthur Andersen LLP
24 Power of Attorney
27 Financial Data Schedule
- ----------
(1) Incorporated by reference from Exhibits 2(a) to 99(b) from the Registrant's
Registration Statement on Form S-4, Registration No. 33-76392.
(2) To be filed by amendment.
II-4
<PAGE>
ITEM 28. UNDERTAKINGS
-- Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.
-- In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
-- The undersigned registrant will:
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the small business issuer under Rule 44(b)(1) or (4)
or 497(h) under the Securities Act as part of this registration statement
as of the time the Commission declared it effective; and
(2) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial
bona fide offering of those securities.
II-5
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe it meets all of the
requirements for filing on Form SB-2 and has duly authorized this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Clinton, State of New Jersey on September 20, 1996.
UNITY BANCORP, INC.
By: /s/ ROBERT VAN VOLKENBURGH
-------------------------------
Robert Van Volkenburgh
Chairman of the Board and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints any one of Robert Van Volkenburgh or James Hyman,
his true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission granting unto said attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Name Title Date
- ---- ----- ----
/s/ ROBERT VAN VOLKENBURGH
- --------------------------
Robert Van Volkenburgh Chairman of the Board, Chief September 20, 1996
Executive Officer and
Director (Principal
Executive Officer) September 20, 1996
/s/ JAMES HYMAN
- -------------------------
James Hyman President, Chief Operating
Officer and Director September 20, 1996
/s/ DAVID DALLAS
- -------------------------
David Dallas Director, Vice Chairman of September 20, 1996
the Board and Secretary
/s/ THOMAS MARESCA
- -------------------------
Thomas Maresca Chief Financial Officer
(Principal Financial and
Accounting Officer) September 20, 1996
II-6
<PAGE>
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
PAGE NUMBER
3(i) Certificate of Incorporation
of the Company, as amended
3(ii) Bylaws of the Company(1)
4(i) Warrant Agreement/Form of Warrant
4(ii) Form of Stock Certificate
4(iii) 1994 Stock Option Plan for Employees(1)
4(iv) 1994 Stock Option Plan for Non-Employee
Directors(1)
4(v) Stock Bonus Plan
4(vi) Subscription Agreement(2)
5 Opinion of McCarter & English(2)
10(i) Lease Agreement (for main office)
10(ii) Lease Agreement for Flemington Branch
Office; Addendums to Lease and Lease for
Parking
10(iii) Lease Agreement for Springfield Branch
Office
10(iv) Lease Agreement for Scotch Plains Branch
Office
10(v) 1994 Stock Option Plan for Employees and
1994 Stock Option Plan for Non-Employee
Directors (See 4(iii) and 4(iv))
10(vi) Change in Control Agreement
10(vii) Stock Bonus Plan (See 4(v))
21 Subsidiaries of the Registrant
23(i) Consent of McCarter & English (See
Item #5)
23(ii) Consent of Arthur Anderson LLP
24 Power of Attorney
27 Financial Data Schedule
- ------------------
(1) Incorporated by reference from Exhibits 2(a) to 99(b) from the Registrant's
Registration Statement on Form S-4, Registration No. 33-76392. Exhibit
3(ii)
(2) To be filed by amendment.
Exhibit 3(i)
CERTIFICATE OF INCORPORATION
OF
UNITY BANCORP, INC.
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified and
referred to as the "Delaware General Corporation Law"), hereby certifies that:
FIRST: The name of the Corporation is Unity Bancorp, Inc.
SECOND: The address of the Corporation's registered office in
the State of Delaware is 1209 Orange Street, City of Wilmington, County of New
Castle, Delaware 19801. The Corporation Trust Company is the Corporation's
registered agent at that address.
THIRD: The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the Delaware
General Corporation Law.
FOURTH: The total number of shares of all classes of capital stock
which the Corporation shall have authority to issue is 2,500,000 shares of
Common Stock with no par value.
FIFTH: The name and mailing address of the incorporator is:
Robert A. Schwartz, Esq.
McCarter & English
Four Gateway Center
100 Mulberry Street
P.O. Box 652
Newark, N.J. 07101-0652
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: (a) The number of directors constituting the entire
Board of Directors shall be not less than three (3) nor more than twenty-five
(25) as fixed from time to time by vote of a majority of the entire Board,
provided, however, that the number of
<PAGE>
directors shall not be reduced so as to shorten the term of any director at the
time in office, and provided further, that the number of directors constituting
the entire Board shall be four (4) until otherwise fixed by a majority of the
entire Board.
(b) The Board of Directors shall be divided into three (3) classes,
as nearly equal in number as the then total number of directors constituting the
entire Board permits, with the term of office of one class expiring each year.
At the first annual meeting of stockholders, directors of the first class shall
be elected to hold office for a term expiring at the next succeeding annual
meeting, directors of the second class shall be elected to hold office for a
term expiring at the second succeeding annual meeting and directors of the third
class shall be elected to hold office for a term expiring at the third
succeeding annual meeting. Any vacancies in the Board of Directors for any
reason, and any directorships resulting from any increase in the number of
directors, may be filled by the Board of Directors, acting by a majority of the
directors then in office, although less than a quorum, and any directors so
chosen shall hold office until the next election of the class for which such
directors shall have been chosen and until their successors shall be elected and
qualified. At each annual meeting of stockholders the successors to the class of
directors whose term shall then expire shall be elected to hold office for a
term expiring at the third succeeding annual meeting.
EIGHTH: The Board of Directors shall have the power to make,
alter or repeal the By-laws of the Corporation, subject to the right of the
stockholders of the Corporation to alter or repeal any By-law made by the Board
of Directors.
NINTH: (a) A director of the Corporation shall not be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except to the extent such exemption
from liability or limitation thereof is not permitted under the Delaware General
Corporation Law.
(b) (i) The Corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil or criminal, administrative
or investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director or officer of the Corporation,
or is or was serving at the request of the Corporation as a director or officer
of another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his
-2-
<PAGE>
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or its
equivalent, shall not, in itself, create a presumption that the person did not
act in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the Corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe that his conduct was
unlawful.
(ii) The Corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a director or
officer of the Corporation, or is or was serving at the request of the
Corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claims, issues or matters as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability, but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnify for such expenses which the Court of Chancery or such other court
shall deem proper.
(iii) The right to indemnification conferred in this Article
Ninth shall also include the right to be paid by the Corporation the expenses
incurred in connection any such proceeding in advance of its final disposition
to the fullest extent permitted by the Delaware General Corporation Law.
(iv) The Corporation may, by action of its Board of Directors,
provide indemnification to such of the employees and agents of the Corporation
and such other persons serving at the request of the corporation as employees or
agents of another corporation, partnership, joint venture, trust or other
enterprise to such extent and to such effect as is permitted by the Delaware
General Corporation Law and the Board of Directors shall determine to be
appropriate.
(c) The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any expenses,
-3-
<PAGE>
liability or loss incurred by such person in any such capacity or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the Delaware General Corporation Law.
(d) The right to indemnification conferring in this Article
Ninth shall be a contract right. The rights and authority conferred in this
Article Ninth shall not be exclusive of any other right which any person may
otherwise have or hereafter acquire.
(e) No amendment, modification or repeal of this Article
Ninth, nor the adoption of any provision of this Certificate of Incorporation or
the By-laws of the Corporation, nor, to the fullest extent permitted by the
Delaware General Corporation Law, any amendment, modification or repeal of law
shall eliminate or reduce the effect of this Article Ninth or adversely affect
any right or protection then existing hereunder in respect of any acts or
omissions occurring prior to such amendment, modification, repeal or adoption.
TENTH: The election of directors of the Corporation need not by
written ballot, unless the By-laws of the Corporation otherwise provide.
ELEVENTH: From time to time any of the provisions of this
Certificate of Incorporation may be amended, altered or repealed, and other
provisions authorized by the laws of the State of Delaware at the time in force
may be added or inserted in the manner and at the time prescribed by said laws,
and all rights at any time conferred upon the stockholders of the Corporation by
this Certificate of Incorporation are granted subject to the provisions of this
Article Eleventh.
TWELFTH: The following named persons shall constitute the first
Board of Directors of the Corporation and shall hold office until the first
annual shareholders' meeting or until their successors are elected and
qualified:
Robert Van Volkenburgh Donald F. Ennis
c/o Unity Bancorp, Inc. c/o Unity Bancorp, Inc.
219 Concourse Drive 219 Concourse Drive
Annandale, NJ 08801 Annandale, NJ 08801
David Dallas James Hyman
c/o Unity Bancorp, Inc. c/o Unity Bancorp, Inc.
219 Concourse Drive 219 Concourse Drive
Annandale, NJ 08801 Annandale, NJ 08801
-4-
<PAGE>
THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the Delaware General Corporation
Law, does make this certificate, hereby certifying and declaring that this is
his act and deed
and the facts herein stated are true, and accordingly has hereunto set his hand
this 3rd day of February, 1994.
/S/ROBERT A. SCHWARTZ
---------------------
Robert A. Schwartz
-5-
<PAGE>
CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF
INCORPORATION OF UNITY BANCORP, INC.
Unity Bancorp, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of the
Corporation, resolutions were duly adopted setting forth a proposed amendment of
the Certificate of Incorporation of the Corporation, declaring said amendment to
be advisable and calling for consideration thereof at the Annual Meeting of the
Shareholders of the Corporation. The resolution setting for the proposed
amendment is as follows:
RESOLVED, that the Certificate of Incorporation of the Corporation
be amended as follows:
"By striking out the whole of Article FOURTH as it exists now
and inserting in lieu and instead thereof a new Article Fourth
reading as follows:
FOURTH: (a) The total authorized capital stock of
the Corporation shall be 3,000,000 shares, consisting of
2,500,000 shares of Common Stock and 500,000 shares of
Preferred Stock which may be issued in one or more classes or
series. The shares of Common Stock shall constitute a single
class and shall be without nominal or par value. The shares of
Preferred Stock of each class or series shall be without
nominal or par value, except that the amendment authorizing
the initial issuance of any class or series, adopted by the
Board of Directors as provided herein, may provide that shares
of any class or series shall have a specified par value per
share, in which event all of the shares of such class or
series shall have the par value per share so specified.
(b) The Board of Directors of the Corporation is
expressly authorized from time to time to adopt and to cause
to be executed and filed without further approval of the
shareholders amendments to this Certificate of Incorporation
authorizing the issuance of one or
-6-
<PAGE>
more classes or series of Preferred Stock for such
consideration as the Board of Directors may fix. In an
amendment authorizing any class or series of Preferred Stock,
the Board of Directors is expressly authorized to determine:
(i) The distinctive designation of the class or
series and the number of shares which will constitute
the class or series, which number may be increased or
decreased (but not below the number of shares then
outstanding in that class or above the total shares
authorized herein) from time to time by action of the
Board of Directors;
(ii) The dividend rate of the shares of the class or
series, whether dividends will be cumulative, and, if
so, from what date or dates;
(iii) The price or prices at which, and the terms and
conditions on which, the shares of the class or series
may be redeemed at the option of the Corporation;
(iv) Whether or not the shares of the class or series
will be entitled to the benefit of a retirement or
sinking fund to be applied to the purchase or redemption
of such shares and, if so entitled, the amount of such
fund and the terms and provisions relative to the
operation thereof;
(v) Whether or not the shares of the class or
series will be convertible into, or exchangeable for,
any other shares of stock of the Corporation or other
securities, and if so convertible or exchangeable, the
conversion price or prices, or the rates of exchange,
and any adjustments thereof, at which such conversion or
exchange may be made, and any other terms and conditions
of such conversion or exchange;
(vi) The rights of the shares of the class or series in
the event of voluntary or involuntary liquidation,
dissolution or winding up of the Corporation;
(vii) Whether or not the shares of the class or series
will have priority over, parity with, or be junior to
the shares of any other class or series in any respect,
whether or not the
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<PAGE>
shares of the class or series will be entitled to the
benefit of limitations restricting the issuance of
shares of any other class or series having priority over
or on parity with the shares of such class or series and
whether or not the shares of the class or series are
entitled to restrictions on the payment of dividends on,
the making of other distributions in respect of, and the
purchase or redemption of shares of any other class or
series of Preferred Stock or Common Stock ranking junior
to the shares of the class or series;
(viii) Whether the class or series will have voting
rights, in addition to any voting rights provided by
law, and if so, the terms of such voting rights; and
(ix) Any other preferences, qualifications, privileges,
options and other relative or special rights and
limitations of that class or series.
SECOND: That thereafter, pursuant to the resolution of the Board of
Directors, the Annual Meeting of the Shareholders of the Corporation was duly
called and held, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware, at which meeting the necessary number
of shares as required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to
be signed this _______ day of May, 1995.
by James Hyman, its President.
Unity Bancorp, Inc.
By: /S/ JAMES HYMAN
----------------------
James Hyman, President
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Exhibit 4(i)
WARRANT AGREEMENT
Agreement, dated as of this ____ day of ______, 1996, by and
between Unity Bancorp, Inc., a Delaware corporation (the "Company") and FCTC
Transfer Services, Inc., (the "Warrant Agent").
W I T N E S S E T H
WHEREAS, the Company is offering for sale up to 335,500 Units
(the "Units"), each Unit consisting of one share of the Company's Common Stock,
no par value (the "Common Stock"), and one Warrant (the "Warrant") which
entitles the holder thereof to purchase one share of Common Stock at the
purchase price of $17.00 per share at any time on or before ______ __, 1998.
WHEREAS, the Company desires to appoint the Warrant Agent to
act on its behalf in connection with the (i) issuance, transfer and exchange of
the certificates representing the Warrants (the "Warrant Certificates"), (ii)
the exercise of the Warrants by the holders thereof (together with any
registered successors or assigns, the "Holders") and (iii) the adjustment of the
Warrants in certain events as contained herein in accordance with the terms of
the Warrants and this Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1.0. APPOINTMENT OF WARRANT AGENT. The Company hereby appoints
the Warrant Agent as its agent to issue the Warrant Certificates, as set forth
herein, subject to resignation or replacement of the Warrant Agent as provided
herein. The Warrant Agent agrees to accept such appointment, subject to the
terms and conditions as set forth herein and to issue, transfer and exchange the
Warrant Certificates pursuant to the terms provided for herein and to notify the
Company's transfer agent to issue the certificates representing the appropriate
number of shares of Common Stock (or other consideration) upon exercise of the
Warrants. The Company agrees to issue and honor the Warrants on the terms and
conditions as herein set forth and to instruct its transfer agent to issue its
Common Stock (or other securities) upon notice from the Warrant Agent of the
proper exercise of any Warrant. The Warrant Agent is hereby empowered to enforce
any rights of the Holders for the benefit of any Holders, subject to the terms
and conditions contained herein.
<PAGE>
2.0. ISSUANCE OF WARRANT CERTIFICATES.
2.1. FORM OF WARRANT CERTIFICATE. All Warrants shall be issued
substantially in the form of the Warrant Certificate annexed hereto as Exhibit
A. The terms of any such Warrant Certificate are incorporated herein by
reference.
2.2. EXECUTION OF WARRANTS. The Warrants shall be issued in
registered form only. No Warrants shall have been duly and validly issued until
a Holder has received a Warrant Certificate executed by the chairman or
president of the Company and the secretary or treasurer of the Company and such
Certificate is countersigned by an authorized officer of the Warrant Agent. All
Warrant Certificates shall bear the Company's corporate seal. Any Warrant
Certificates may be executed by the officers of the Company by means of a
facsimile signature. The Warrant Agent shall maintain the register of all
Holders.
2.3. MAXIMUM NUMBER OF WARRANTS. The Company hereby authorizes
the Warrant Agent to issue up to 335,500 Warrants pursuant to the terms hereof
subject to adjustment as hereafter provided in Section 4 hereof.
2.4. INITIAL HOLDERS. The Company shall deliver to the Warrant
Agent a list of the names of the persons who shall be the initial Holders of the
Warrants and the number of Warrants to which each such person is entitled. The
Warrant Agent is hereby authorized by the Company to promptly issue Warrant
Certificates for up to 335,500 Warrants upon receipt of the written request of
the Company, which shall include the list referred to in the preceding sentence.
The Company shall deliver to the Warrant Agent, along with this Warrant
Agreement, a sufficient number of duly executed Warrant Certificates. The
Warrant Certificates requested by the Company shall be completed and
countersigned by the Warrant Agent and promptly delivered to the Company to be
mailed or delivered to the Holders pursuant to the terms hereof. When requested
by the Warrant Agent, from time to time hereafter, the Company will execute
additional Warrant Certificates in blank for the Warrant Agent to issue
hereunder.
2.5. RIGHTS OF A HOLDER. Subject to adjustment as provided
herein, each Warrant shall evidence the right to purchase one share of the
Company's Common Stock at the Warrant Price of $17.00. Following the Expiration
Date, as defined in Section 3.1 below, any Warrant not previously exercised
shall be null and void.
3.0. EXERCISE OF WARRANT.
3.1. EXERCISE PERIOD. The Warrants may be exercised, in whole
or in part, at any time commencing __________ __, 1996, but not later than 5:00
P.M., New Jersey time, on __________ __, 1998 (the "Expiration Date"). If the
Expiration Date is not a Business Day, it shall automatically be extended to
5:00 P.M. on the next day which is a Business Day. Business Day
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means any day other than a Saturday, Sunday, or holiday on which banks in New
Jersey are authorized by law to close.
3.2. MEANS OF EXERCISE. In order to exercise a Warrant, the
Holder must present and surrender the Warrant Certificate to the Warrant Agent
at its office, with the Subscription Form on the back of the Warrant Certificate
duly executed and it must be accompanied by payment in full, in the form of
cash, by certified or official bank check payable to the order of the Company or
its successor, of the aggregate Warrant Price for the number of shares of Common
Stock specified in such Subscription Form. The Warrant Agent shall immediately
pay over to the Company any funds received upon such exercise of Warrants.
3.3. ISSUANCE OF COMMON STOCK. Upon the request of the Warrant
Agent, the Company shall promptly deliver or cause its transfer agent to deliver
to the Holder exercising a Warrant a certificate or certificates evidencing the
shares of Common Stock purchased when any Warrant is validly exercised.
3.4. CERTAIN EXERCISE PROVISIONS. If any Warrant is exercised
in part only, a new Warrant Certificate, dated the date of such exercise,
evidencing the rights of the Holder thereof to purchase the balance of the
shares of Common Stock purchasable under such original Warrant shall promptly be
issued to such Holder. Upon receipt of any Warrant Certificate by the Warrant
Agent, at its office, in proper form for exercise and accompanied by payments as
herein provided, the Holder shall be deemed to be the holder of record of the
shares of Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of the Company shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually delivered to
the Holder.
4.0. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES
PURCHASABLE AND OTHER TERMS IN CERTAIN EVENTS. The Warrant Price and the number
of shares of Common Stock purchasable upon exercise of any Warrant and the other
terms and conditions of the Warrant shall be subject to adjustment and
modification as follows in the circumstances provided:
4.1. DECLARATION OF STOCK DIVIDEND, SPLITS, REVERSE
SPLITS OR RECLASSIFICATION OR REORGANIZATION.
(a) In case the Company shall declare any dividend or other
distribution upon its outstanding shares of Common Stock payable in Common Stock
or shall subdivide its outstanding shares of Common Stock into a greater number
of shares, then the number of shares of Common Stock which may thereafter be
purchased upon the exercise of any Warrant shall be increased in proportion to
the increase in the number of shares of Common Stock outstanding through such
dividend or subdivision and the Warrant Price per
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share shall be decreased in such proportion. In case the Company shall at any
time combine the outstanding shares of its Common Stock into a smaller number of
shares, the number of shares of Common Stock which may thereafter be purchased
upon the exercise of any Warrant shall be decreased in proportion to the
decrease in the number of shares of Common Stock outstanding through such
combination and the Warrant Price per share shall be increased in such
proportion. The Company shall cause a notice to be mailed to each Holder at
least twenty (20) days prior to the applicable record date for the activity
covered by this Section 4.1(a). The Company's failure to give the notice
required by this Section 4.1(a) or any defect therein shall not affect the
validity of the activity covered by this Section 4.1(a).
(b) In case the Company shall at any time (i) distribute any
rights, options or warrants to all holders of shares of Common Stock, (ii) issue
other securities to all holders of shares of Common Stock by reclassification of
its shares of Common Stock, or (iii) issue by means of a capital reorganization
other securities of the Company in lieu of the Common Stock or in addition to
the Common Stock, then the number of shares purchasable upon exercise of each
Warrant immediately prior thereto shall be adjusted so that the Holder of each
Warrant shall be entitled to receive the kind and number of shares or other
securities of the Company which the Holder would have owned or have been
entitled to receive after the happening of the event described above, had such
Warrant been exercised immediately prior to the happening of such event or any
record date with respect thereto. The Company shall cause a notice to be mailed
to each Holder at least 20 days prior to the applicable record date for the
activity covered by this Section 4.1(b). The Company's failure to give the
notice required by this Section 4.1(b) or any defect therein shall not affect
the validity of the activity covered by this Section 4.1(b).
(c) An adjustment made pursuant to this Section 4.1 shall
become effective immediately after the effective date of such event retroactive
to the record date, if any, for such event.
(d) For the purpose of this Section 4.1, the term "shares of
Common Stock" shall mean (x) the class of stock designated as the Common Stock
at the date of this Warrant Agreement, or (y) any other class of stock resulting
from successive changes or reclassifications of such shares consisting solely of
changes in par value, from no par value to par value or from par value to no par
value. In the event that at any time, as a result of an adjustment made pursuant
to this Section 4.1, the Holder shall become entitled to purchase any shares of
the Company other than shares of Common Stock, thereafter the number of such
other shares so purchasable upon exercise of each Warrant and the Warrant Price
of such shares shall be subject to adjustment from time to time in a manner and
on terms as nearly equivalent as
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practicable to the provisions with respect to the shares of Common Stock
contained in this Section 4.1.
4.2. LIQUIDATION, DISSOLUTION OR WINDING UP. Notwithstanding
any other provisions hereof, in the event of the liquidation, dissolution, or
winding up of the affairs of the Company (other than in connection with a
consolidation, merger or sale or conveyance of all or substantially all of its
assets outside of the ordinary course of business), the right to exercise this
Warrant shall terminate and expire at the close of business on the last full
business day before the earliest date fixed for the payment of any distributable
amount on the Common Stock. The Company shall cause a notice to be mailed to
each Holder at least 20 days prior to the applicable record date for such
payment stating the date on which such liquidation, dissolution or winding up is
expected to become effective, and the date on which it is expected that holders
of shares of Common Stock of record shall be entitled to exchange their shares
of Common Stock for securities or other property or assets (including cash)
deliverable upon such liquidation, dissolution or winding up, and that each
Holder may exercise outstanding Warrants during such 20 day period and, thereby,
receive consideration in the liquidation on the same basis as other previously
outstanding shares of the same class as the shares acquired upon exercise. The
Company's failure to give notice required by this Section 4.2 or any defect
therein shall not affect the validity of such liquidation, dissolution or
winding up.
4.3. MERGER, CONSOLIDATION, ETC.
(a) In case of any consolidation with or merger of the Company
into another corporation or sale or conveyance of all or substantially all of
its assets outside of the ordinary course of business (such consolidation,
merger, sale or conveyance, collectively referred to hereinafter as a "Change")
then, as a condition of such Change, lawful and adequate provisions shall be
made whereby the Holders shall thereafter have the right to receive upon payment
of the Warrant Price in effect immediately prior to such Change, upon the basis
and upon the terms and conditions specified in this Agreement (including but not
limited to all provisions contained in this Section 4.3), and in lieu of the
shares of the Company's Common Stock purchasable upon the exercise of the
Warrants, such shares of stock, securities, cash or assets which such Holder
would have been entitled to receive after the happening of such Change had such
Warrant been exercised immediately prior to such Change. The provisions of this
Section 4.3 shall similarly apply to successive Changes. The Company shall cause
a notice to be mailed to each Holder at least 20 days prior to the applicable
record date for the Change covered by this Section 4.3(a) and shall provide
notice of the Change and shall set forth the first and last date on which the
Holder may exercise outstanding Warrants. The Company's failure to give the
notice
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<PAGE>
required by this Section 4.3(a) or any defect therein shall not affect the
validity of the Change covered by this Section 4.3(a).
(b) Notwithstanding the foregoing, if as a result of such
Change, holders of the Company Common Stock shall receive consideration other
than solely in shares of stock or other securities in exchange for their Company
Common Stock, the Company may, at its option, fulfill its obligation hereunder
by causing the Notice required by Section 4.3(a) hereof to include notice to
Holders of the opportunity to exercise their Warrants before the applicable
record date for the Change, and thereby receive consideration in the Change, on
the same basis as other previously outstanding shares of the Company Common
Stock. If the notice specified in the preceding sentence is provided to Holders,
Warrants not exercised in accordance with this Section 4.3(b) before
consummation of the Change shall be canceled and become null and void on the
effective date of the Change. The notice provided by the Warrant Agent pursuant
to this Section 4.3(b) shall include a description of the terms of this
Agreement providing for cancellation of the Warrants in the event that Warrants
are not exercised by the prescribed date. The Company's failure to give any
notice required by this Section 4.3(b) or any defect therein shall not affect
the validity of any such Change.
4.4. DUTY TO MAKE FAIR ADJUSTMENTS IN CERTAIN CASES. If any
event occurs as to which in the opinion of the Board of Directors of the Company
the other provisions of this Section 4 are not strictly applicable or if
strictly applicable would not fairly protect the purchase rights of the Holders
in accordance with the essential intent and principles of this Agreement, then
the Board of Directors shall make an adjustment in the application of such
provisions, in accordance with such essential intent and principles, as to
protect the purchase rights of the Holders. Notwithstanding the foregoing, the
issuance of Common Stock or any securities convertible into Common Stock by the
Company either for cash or in a merger, consolidation, exchange or acquisition
shall not, by itself, constitute a basis for requiring any adjustment in the
Warrants unless specifically enumerated herein.
4.5. GOOD FAITH DETERMINATION. Any determination as to whether
an adjustment or limitation of exercise is required pursuant to this Section 4
(and the amount of any adjustment), shall be binding upon the Holders and the
Company if made in good faith by the Board of Directors of the Company.
4.6. NOTICE OF ADJUSTMENT. Whenever the number of shares of
Common Stock purchasable upon the exercise of the Warrants or the Warrant Price
is adjusted, the Company shall promptly file in the custody of its Secretary or
an Assistant Secretary at its principal office and with the Warrant Agent, an
officer's certificate setting forth the number of shares of Common Stock
purchasable upon the exercise of the Warrants, the Warrant
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<PAGE>
Price after such adjustment, a statement, in reasonable detail, of the facts
requiring such adjustment and the computation by which such adjustment was made.
Each such officer's certificate shall be made available at all reasonable times
for inspection by the Warrant Holders, and the Warrant Agent shall, forthwith
after each such adjustment, promptly mail a copy of such certificate to such
Holders by first class mail, postage prepaid.
4.7. NO CHANGE OF WARRANT NECESSARY. Irrespective of any
adjustment in the Warrant Price or in the number or kind of shares issuable upon
exercise of the Warrants, the Warrant Certificates may continue to express the
same price and number and kind of shares as are stated in the Warrant
Certificates as initially issued.
5.0. SHARES TO BE FULLY PAID; RESERVATION OF SHARES.
The Company covenants and agrees for the benefit of the Holders:
5.1. That all shares of Common Stock which may be issued upon
the exercise of the rights represented by the Warrant Certificates will, upon
issue and payment of the aggregate Warrant Price therefor, be duly authorized,
validly issued, fully paid and non-assessable and free and clear of all liens
and encumbrances, with no personal liability attaching to the ownership thereof.
5.2. That during the period within which the rights
represented by the Warrant Certificates may be exercised, the Company will at
all times have authorized and reserved for the purpose of issue upon exercise of
the rights evidenced by the Warrant Certificates, a sufficient number of shares
of Common Stock to provide for the exercise of the rights represented by the
Warrant Certificates.
5.3. That the Company will take all such action as may be
necessary to ensure that the shares of Common Stock issuable upon the exercise
of the Warrants may be so issued without violation of any applicable federal or
state law or regulation, or of any requirements of any securities exchange upon
which any capital stock of the Company may be listed, if any.
5.4. That the Company has filed a registration statement under
the Securities Act of 1933 with the United States Securities and Exchange
Commission and has made all appropriate state blue sky filings with state
securities administrators with respect to Warrants and the Common Stock issuable
thereunder and, if necessary, will use its best efforts to keep such
registration statement and blue sky filings or a substitute registration
statement and blue sky filings effective and current with respect to the Common
Stock while any Warrants are outstanding. Notwithstanding the foregoing or
anything contained in Section 5.3, the Company shall not be obligated to keep
effective and current blue sky filings in any state in which there are a small
number of
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holders of Warrants in such state, such holders own an immaterial number of
Warrants, and keeping such filings current and effective creates an unreasonable
financial burden under the circumstances.
5.5. That prior to the issue of any shares of Common Stock,
the Company shall promptly secure the listing thereof upon all securities
exchanges on which the Common Stock of the Company is then listed.
6.0. EXCHANGE, ASSIGNMENT OR LOSS OF WARRANT CERTIFICATE.
6.1. EXCHANGE. The Warrants shall be exchangeable at the
option of the Holder, upon presentation and surrender of the Warrant Certificate
at the office of the Warrant Agent for other Warrant Certificates of different
denominations. Any Warrant Certificate may be divided or combined with other
Warrant Certificates into a Warrant Certificate evidencing the same aggregate
number of Warrants.
6.2. TRANSFER OR ASSIGNMENT. The Warrants and all rights of
Holders thereof are immediately assignable and transferable in whole or in part
by the Holders thereof, in person or by duly authorized attorney, by surrender
of any Warrant Certificate to the Warrant Agent at its office with the
Assignment Form annexed thereto duly executed and funds sufficient to pay any
applicable transfer tax. In such event, the Warrant Agent shall execute and
deliver, in the case of an assignment or transfer in whole, a new Warrant
Certificate in the name of the assignee or transferee, or, in the case of an
assignment or transfer in part, a new Warrant Certificate in the name of such
assignee or transferee representing the number of Warrants so assigned or
transferred and a new Warrant Certificate in the name of the assignor or
transferor representing the number of Warrants not so assigned or transferred.
6.3. LOST OR DESTROYED WARRANT CERTIFICATES. Upon receipt by
the Warrant Agent of evidence satisfactory to it of the loss, theft, destruction
or mutilation of a Warrant Certificate and (i) in the case of such loss, theft
or destruction, of reasonably satisfactory indemnification and bonding, or (ii)
if mutilated, upon surrender and cancellation of such Warrant Certificate, the
Warrant Agent shall execute and deliver a new Warrant Certificate of like tenor.
Any such new Warrant Certificate executed and delivered shall constitute an
additional contractual obligation on the part of the Company, whether or not the
Warrant Certificate so lost, stolen, destroyed or mutilated shall be at any time
enforceable by anyone.
7.0. NO ISSUANCE OF FRACTIONAL INTERESTS IN COMMON STOCK. The
Company shall not be required to issue fractional shares of Common Stock on the
exercise of the Warrants. If any
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fraction of a share of Common Stock would be issuable upon the exercise of the
Warrants (or any specified portion thereof), the Company shall pay an amount in
cash equal to the product of (a) such fraction and (b) the closing price per
share of Common Stock as quoted by the American Stock Exchange System, or on any
other exchange on which the Common Stock is listed, on the trading day prior to
the date the Warrant is exercised.
8.0. NO RIGHTS AS STOCKHOLDERS; CERTAIN NOTICES AND REPORTS TO
HOLDERS. Except as specifically provided in this Agreement, nothing contained in
this Agreement or in the Warrant Certificates shall be construed as conferring
upon the Holders or any transferees the right to vote or to receive dividends or
to receive notice as stockholders in respect of any meeting of stockholders for
the election of directors of the Company or any other matter, or any rights
whatsoever as stockholders of the Company. If, however, between the date hereof
and the Expiration Date (or if earlier the occurrence of any event specified in
Section 4.2 or 4.3(b) terminating the Warrants), any of the following events
shall occur:
(a) the Company shall declare any cash dividend upon its
shares of Common Stock payable at a rate more than 50% in excess of
the rate of the last cash dividend theretofore paid; or
(b) the Company shall declare any dividend payable in any
securities other than shares of Common Stock upon its shares of
Common Stock or make any distribution (other than a regular cash
dividend out of undistributed net income) to the holders of its
shares of Common Stock; or
(c) the Company shall distribute any rights,
options or warrants to the holders of shares of Common
Stock; or
(d) a capital reorganization or reclassification of
the Company's capital stock shall be proposed;
then in any one or more of said events, the Company shall give to the Holders at
least twenty (20) days' prior written notice of the date fixed as a record date
or the date of closing of the transfer books for the determination of the
stockholders entitled to receive such dividend or distribution. Any such notice
shall also specify, in the case of any such dividend or distribution, the date
on which holders of shares of Common Stock are entitled thereto. Failure to mail
such notice or any defect therein or in the mailing thereof shall not affect the
validity of any action taken in connection with such dividend or distribution.
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8.1. REPORTS. The Company shall transmit by mail to all
registered Holders, all reports and other documents that the Company transmits
to holders of shares of Common Stock generally, at the same time and in the same
manner as such reports and other documents are transmitted to holders of shares
of Common Stock.
9.0. AGREEMENT OF WARRANT HOLDERS. Every Holder of a Warrant,
by his acceptance thereof, consents and agrees with the Company, the Warrant
Agent and every other Holder of a Warrant that:
(a) The Warrants are transferable only on the registry books
of the Company by the Holder thereof in person or by his attorney duly
authorized in writing and only if the Warrant Certificates representing such
Warrants are surrendered at the office of the Warrant Agent, duly endorsed or
accompanied by a proper instrument of transfer satisfactory to the Warrant Agent
and the Company in their sole discretion, together with payment of any
applicable transfer taxes; and
(b) The Company and the Warrant Agent may deem and treat the
person in whose name the Warrant Certificate is registered as the Holder and as
the absolute, true and lawful owner of the Warrants represented thereby for all
purposes, and neither the Company nor the Warrant Agent shall be affected by any
notice or knowledge to the contrary.
10.0. DUTIES OF WARRANT AGENT. The Warrant Agent acts
hereunder as agent and in a ministerial capacity for the Company, and its duties
shall be determined solely by the provisions hereof. The Warrant Agent shall
not, by issuing and delivering Warrant Certificates or by any other act
hereunder be deemed to make any representations as to the validity, value or
authorization of the Warrant Certificates or the Warrants represented thereby or
of any securities or other property delivered upon exercise of any Warrant or
whether any stock issued upon exercise of any Warrant is fully paid and
nonassessable.
The Warrant Agent shall not at any time be under any duty or
responsibility to any Holder of Warrant Certificates to make or cause to be made
any adjustment of the Warrant Price provided in this Agreement, or to determine
whether any fact exists which may require any such adjustment, or with respect
to the nature or extent of any such adjustment, when made, or with respect to
the method employed in making the same. It shall not (i) be liable for any
recital or statement of facts contained herein or for any action taken, suffered
or omitted by it in reliance on any Warrant Certificate or other document or
instrument believed by it in good faith to be genuine and to have been signed or
presented by the proper party or parties, (ii) be responsible for any failure on
the part of the Company to comply with any of its covenants and obligations
contained in this Agreement or in any Warrant
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Certificate, or (iii) be liable for any act or omission in connection with this
Agreement except for its own gross negligence or willful misconduct.
The Warrant Agent may at any time consult with counsel
satisfactory to it (who may be counsel for the Company) and shall incur no
liability or responsibility for any action taken, suffered or omitted by it in
good faith in accordance with the opinion or advice of such counsel.
Any notice, statement, instruction, request, direction, order
or demand of the Company shall be sufficiently evidenced by an instrument signed
by the President, any Vice President, its Secretary, or Assistant Secretary
(unless other evidence in respect thereof is herein specifically prescribed).
The Warrant Agent shall not be liable for any action taken, suffered or omitted
by it in accordance with such notice, statement, instruction, request,
direction, order or demand believed by it to be genuine.
The Company agrees to pay the Warrant Agent reasonable
compensation for its services hereunder and to reimburse it for its reasonable
expenses hereunder and further agrees to indemnify the Warrant Agent and save it
harmless against any and all losses, expenses and liabilities, including
judgments, costs and counsel fees, for anything done or omitted by the Warrant
Agent in the execution of its duties and powers hereunder except losses,
expenses and liabilities arising as a result of the Warrant Agent's gross
negligence or willful misconduct.
The Warrant Agent may resign its duties and be discharged from
all further duties and liabilities hereunder (except liabilities arising as a
result of the Warrant Agent's own gross negligence or willful misconduct), after
giving thirty days' prior written notice to the Company. At least fifteen days
prior to the date such resignation is to become effective, the Warrant Agent
shall cause a copy of such notice of resignation to be mailed to the Holder of
each Warrant Certificate at the Company's expense. Upon such resignation, or any
inability of the Warrant Agent to act as such hereunder, the Company shall
appoint a new warrant agent in writing. The Company shall have complete
discretion in the naming of a new warrant agent, who may be an affiliate,
subsidiary or department of the Company, or any person used by the Company as
transfer agent for the Common Stock. If the Company shall fail to make such
appointment within a period of fifteen days after it has been notified in
writing of such resignation by the resigning Warrant Agent, then the Holder of
any Warrant Certificate may apply to any court of competent jurisdiction for the
appointment of a new warrant agent.
The Company may, upon notice to the Holders, remove and
replace the Warrant Agent if the Warrant Agent is the transfer
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agent for the Company's Common Stock and the Warrant Agent ceases to be the
transfer agent for the Company Common Stock for any reason.
After acceptance in writing of an appointment by a new warrant
agent is received by the Company, such new warrant agent shall be vested with
the same powers, rights, duties and responsibilities as if it had been
originally named herein as the Warrant Agent, without any further assurance,
conveyance, act or deed. Any former warrant agent hereby agrees to cooperate
with and deliver all records and Warrant Certificates to the new warrant agent
at the direction of the new agent and the Company.
Not later than the effective date of an appointment of a new
warrant agent by the Company, the Company shall file notice with the resigning
or terminated warrant agent and shall forthwith cause a copy of such notice to
be mailed to each Holder.
Any corporation into which the Warrant Agent or any new
warrant agent may be converted or merged or any corporation resulting from any
consolidation to which the Warrant Agent or any new warrant agent shall be a
party or any corporation succeeding to the trust business of the Warrant Agent
shall be a successor warrant agent under this Agreement without any further act.
Any such successor warrant agent shall promptly cause notice of its succession
as warrant agent to be mailed to the Company and to each Holder.
Nothing herein shall preclude the Warrant Agent from acting in
any other capacity for the Company.
11.0. MODIFICATION OF AGREEMENT. The Warrant Agent and the
Company may by supplemental agreement make any changes or corrections in this
Agreement: (i) that they shall deem appropriate to cure any ambiguity or to
correct any defective or inconsistent provision or manifest mistake or error
herein contained; or (ii) that they may deem necessary or desirable and which
shall not adversely affect the purchase or other material rights of the Holders
of Warrant Certificates. This Agreement shall not otherwise be modified,
supplemented or amended in any respect except with the consent in writing of the
Holders of Warrant Certificates representing not less than 50% of the Warrants
then outstanding, but no such amendment, modification or supplement which
changes the number or nature of the securities purchasable upon the exercise of
any Warrant, the Warrant Price or accelerates the Expiration Date, shall be made
without the consent in writing of each and every Holder (but no consent shall be
required for such changes as are specifically contemplated by this Agreement as
originally executed).
-12-
<PAGE>
12.0. MISCELLANEOUS.
12.1. ENTIRE AGREEMENT. This Agreement and the form of Warrant
Certificate annexed hereto as Exhibit A contains the entire Agreement between
the parties hereto with respect to the transactions contemplated by this
Agreement and supersedes all prior negotiations, arrangements or understandings
with respect thereto.
12.2. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and each of which shall be deemed an original.
12.3. GOVERNING LAW. This Agreement shall be governed by the
laws of the State of New Jersey, without giving effect to the principles of
conflicts of laws thereof.
12.4. DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are for convenience only and shall not control or affect the meaning
or construction of any provision of this Agreement.
12.5. NOTICES. Any notice or other communications required
hereunder to be given to a Holder shall be in writing and shall be sufficiently
given, if mailed (first class, postage prepaid), or personally delivered,
addressed in the name and at the address of such Holder appearing from time to
time on the records of the Warrant Agent. Notices or other communications to the
Company shall be deemed to have been sufficiently given if delivered by hand or
mailed to the Company at its then principal office, Attention: President, or at
such other address as the Company shall have designated by written notice to the
Warrant Agent. Notices or other communications to the Warrant Agent shall be
deemed to have been sufficiently given if delivered by hand or mailed (first
class, postage prepaid) to its then principal office. Notice by mail shall be
deemed given when deposited in the mail, postage prepaid.
IN WITNESS WHEREOF, the Company and the Warrant Agent have
executed this Agreement by their duly authorized officers as of the date first
set forth above.
UNITY BANCORP, INC.
By:_____________________________
Name:
Title:
FCTC TRANSFER SERVICES, INC.
By:_____________________________
Name:
-13-
<PAGE>
Title:
-14-
<PAGE>
Exhibit A
WARRANT CERTIFICATE
Certificate Number
- ------------------
Initial Issuance
Dated: ____________ ____________ Warrants
VOID AFTER ____________, 1998
WARRANT CERTIFICATE FOR
PURCHASE OF COMMON STOCK
UNITY BANCORP, INC.
This certifies that FOR VALUE RECEIVED
_____________________________________________________________________
or his registered assigns (the "Holder") is the registered owner of
_____________________________________________________________________
Warrants ("Warrants") issued by Unity Bancorp, Inc., a Delaware corporation
(the "Company"). The Warrants are subject to the terms and conditions set forth
in this certificate and the Warrant Agreement (as hereinafter defined). Each
Warrant entitles the Holder to purchase one share of common stock, no par value
("Common Stock"), of the Company, at any time after the Initial Issuance Date of
the warrants set forth above until the Expiration Date (as hereinafter defined),
upon the presentation and surrender of this Warrant Certificate with the
Subscription Form on the reverse side hereof duly executed, at the corporate
office of the Warrant Agent (as hereafter defined), accompanied by payment of
$_____ (the "Warrant Price") in cash, by official bank or certified check made
payable to the Company or its successor.
This Warrant Certificate and each Warrant represented hereby
are issued pursuant to and are subject in all respects to the terms and
conditions set forth in the Warrant Agreement (the "Warrant Agreement"), dated
___________________ , 1996 by and between the Company and FCTC Transfer
Services, Inc. (the "Warrant Agent"), a copy of which may be obtained from the
Company at 64 Old Highway 22, Clinton, New Jersey 08809 or the Warrant Agent at
111 Wood Avenue South, Suite 206, Iselin, New Jersey 08830 by a written request
from the Holder hereof or which may be inspected by any Holder or his agent at
the principal office of the Company or the Warrant Agent.
-15-
<PAGE>
As provided in Section 4 of the Warrant Agreement, in certain
circumstances: (i) the Warrant Price and the number of shares of Common Stock
the Holder is entitled to receive upon the exercise of any Warrants shall be
adjusted; (ii) the Warrants shall automatically represent the right to receive
upon exercise consideration which is different from or in addition to the
consideration specified on the face of this Certificate; and (iii) the Warrants,
at the option of the Company under specifically defined circumstances, may
expire prior to the Expiration Date.
No fractional shares of Common Stock will be issued upon
exercise of the Warrant. In the case of the exercise of less than all the
Warrants represented hereby, the Company shall cancel this Warrant Certificate
upon the surrender hereof and shall execute and deliver a new Warrant
Certificate or Warrant Certificates of like tenor, which the Warrant Agent shall
countersign, for the balance of such Warrants.
The term "Expiration Date" shall mean 5:00 P.M. (New Jersey
time) on _____________, 1998. If such date is not a Business Day as defined in
the Warrant Agreement, the Expiration Date shall mean 5:00 P.M. (New Jersey
time) the next following Business Day. The Expiration Date may be accelerated as
provided in the Warrant Agreement under certain specifically defined
circumstances upon notice to the registered holder hereof.
A Registration Statement with respect to the Warrants and the
Common Stock issuable thereunder has been filed with and declared effective by
the Securities and Exchange Commission under the Securities Act of 1933, as
amended, and the Company has taken action under appropriate blue sky laws. The
Company has covenanted and agreed that it will use its best efforts to keep the
SEC registration statement current while any of the Warrants are outstanding.
The Company is not obligated to keep current state blue sky filings in states
where there are a small number of holders of Warrants, the number of Warrants
held by such persons are immaterial and the cost to keep such filings current
and effective creates an unreasonable financial burden under the circumstances.
This Warrant shall not be exercisable by a Holder in any state where such
exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender
hereof by the Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants. Upon due presentment of this Warrant Certificate
for registration or transfer at such office, upon payment of any tax or
governmental charge imposed in connection therewith, a new Warrant Certificate
or Warrant Certificates representing an equal or aggregate number of Warrants
will be issued to the transferee in exchange there for.
-16-
<PAGE>
The Warrants and all rights of Holders thereof are immediately
assignable and transferable in whole or in part by the Holders thereof, in
person or by duly authorized attorney, by surrender of any Warrant Certificate
to the Warrant Agent at its office with the Assignment Form annexed thereto duly
executed and funds sufficient to pay any applicable transfer tax.
Prior to the exercise of any Warrant represented hereby, the
Holder shall not be entitled to any rights of a stockholder of the Company by
reason of such person being a Holder, including, without limitation, the right
to vote or to receive dividends or other distributions, and shall not be
entitled to receive any notice of any proceedings of the Company, except as
provided in the Warrant Agreement.
Prior to due presentment for registration of transfer hereof,
the Company and the Warrant Agent shall treat the Holder as the absolute owner
hereof and of each Warrant represented hereby for all purposes and shall not be
affected by any notice to the contrary.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New Jersey.
This Warrant Certificate is not valid unless countersigned by
the Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed, manually or in facsimile by two of its officers
thereunto duly authorized and a facsimile of its corporate seal to be imprinted
thereon.
(SEAL) UNITY BANCORP, INC.
Dated: _________________ By:_________________________
Chairman or President
By:_________________________
Secretary or Treasurer
FCTC TRANSFER SERVICES, INC.
as Warrant Agent
By:____________________
Name:
Title:
-17-
<PAGE>
SUBSCRIPTION FORM
Dated: , 199_
The undersigned hereby irrevocably elects to exercise the
within Warrant to the extent of purchasing ______ shares of Common Stock and
hereby makes payment of _____________ in payment of the Warrant Price thereof.
----------------
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name_____________________________________________________________
(please typewrite or print in block letters)
Address__________________________________________________________
Signature________________________________________________________
Tax Identification Number________________________________________
-----------------
ASSIGNMENT FORM
FOR VALUE RECEIVED,______________________________________________
hereby sells, assigns and transfer unto
Name_____________________________________________________________
(please typewrite or print in block letters)
Address__________________________________________________________
______ Warrants and does hereby irrevocable Constitute and
appoint___________________________________________ Attorney, to
transfer the same on the books of the Company with full power of
substitution in the premises.
Date________________, 199__
Signature______________________________
-18-
UNITY
Bancorp, Inc.
[LOGO]
NUMBER SHARES
UBI
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
SEE REVERSE SIDE FOR
CERTAIN DEFINITIONS
This is to Certify that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, NO PAR VALUE, OF
UNITY BANCORP, INC.
a corporation incorporated under the laws of the State of Delaware. The shares
evidenced by this certificate are transferable only on the stock transfer books
of Unity Bancorp, Inc. by the holder hereof, in person or by attorney, upon
surrender of this certificate properly endorsed.
IN WITNESS WHEREOF UNITY BANCORP, INC. has caused this certificate to be
executed by the signatures of its duly authorized officers and has caused its
facsimile seal to be hereunto affixed.
Dated: UNITY BANCORP, INC.
[SEAL]
[Signature} [Signature]
------------------------ ------------------------
` Secretary Chairman of the Board
Countersigned and Registered:
MIDLANTIC BANK, N.A.
By Transfer Agent
and Registrar
Authorized Officer
<PAGE>
UNITY BANCORP, INC.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM--as tenants in common UNIF GIFT MIN ACT--.....Custodian.....
(Cust) (Minor)
TEN ENT--as tenants by the entireties under Uniform Gifts to Minors
JT TEN --as joint tenants with right Act.........................
of survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above list.
For value received,________hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
________________________________________
_______________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE.
_______________________________________________________________________________
_______________________________________________________________________________
_________________________________________________________________________Shares
represented by the within Certificate, and do hereby irrevocably
constitute and appoint_________________________________________________________
Attorney to transfer the said Shares on the books of the within
named corporation with full power of substitution in the premises.
Dated:_______________
In the presence of ________________________________________________
Signature
________________________________________________
Signature
NOTE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME OF THE STOCKHOLDER(S) AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
Exhibit 4(v)
UNITY BANCORP, INC.
STOCK BONUS PLAN
1. PURPOSE. The Stock Bonus Plan (the "Plan") is intended to
provide incentives which will attract and retain highly competent key employees
and directors of Unity Bancorp, Inc. (the "Company") and any subsidiaries it may
from time to time own or establish, by providing them with opportunities to
acquire common stock of the Company ("Common Stock") pursuant to awards
("Awards") described herein.
2. ADMINISTRATION. The Board of Directors ("Board") of the
Company shall supervise and administer the Plan. Any questions of interpretation
of the Plan or of any Awards issued under it shall be determined by the Board
and such determination shall be final and binding upon all persons. Any or all
powers and discretion vested in the Board under the Plan (except the power to
amend or terminate the Plan) may be exercised by a committee (the "Committee")
authorized by the Board to do so. A majority of members of the Committee shall
constitute a quorum, and all determinations of the Committee shall be made by a
majority of its members. Any determination of the Committee under the Plan may
be made without notice or meeting of the Committee, by a writing signed by a
majority of the Committee members.
3. PARTICIPANTS. Participants shall consist of select
key employees and members of the Board of Directors of the Company
and its subsidiaries as the Board may select from time to time.
4. SHARES RESERVED UNDER THE PLAN. There is hereby
reserved for issuance as Awards under the Plan an aggregate of
20,000 shares of no par value common stock, which may be authorized
but unissued or treasury shares.
5. AWARDS. Awards will consist of Common Stock
transferred to Participants as a bonus for service rendered to the
Company and in recognition of their expertise and devotion that
have enabled the Company to prosper and grow.
6. SECURITIES ACT RESTRICTIONS. Unless the Plan and the Common
Stock issued pursuant to Awards is registered with the Securities and Exchange
Commission ("SEC") pursuant to the Securities Act of 1933, as amended (the
"Act"), the Common Stock issued pursuant to the Awards will be issued pursuant
to an exemption from registration contained in SEC Rule 701. The provisions of
Rule 701 are hereby incorporated into and made a part of this Plan as if
restated herein. Parties receiving awards of Common Stock hereunder will
therefore be required to resell their shares of Common Stock either in
conformity with SEC Rule 144,
<PAGE>
pursuant to another exemption from the Act, or pursuant to an effective
Registration Statement filed under Section 5 of the Act. A participant in the
Plan may not transfer their shares without delivery to the Company of an opinion
of counsel in form satisfactory to the Company attesting to satisfaction of one
of the three conditions set forth above. The certificates representing the
shares of Common Stock issued pursuant to Awards shall bear the following
legend:
THE SHARES OF COMMON STOCK OF THE COMPANY REPRESENTED HEREBY
HAVE BEEN ISSUED PURSUANT TO AN EXEMPTION FROM THE SECURITIES
ACT OF 1933, AND HAVE NOT BEEN REGISTERED PURSUANT TO SECTION
5 THEREOF. THESE SHARES MAY NOT BE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNLESS TRANSFERRED IN A
TRANSACTION EXEMPT FROM THE SECURITIES ACT OF 1933.
7. TENURE. A Participant's right, if any, to continue
to serve the Company as an officer, employee or otherwise, shall
not be enlarged or otherwise affected by his designation as a
Participant under the Plan.
8. DURATION, AMENDMENT, AND TERMINATION. No Award shall be
granted more than six (6) years after the date of adoption of this Plan. The
Board may amend the Plan from time to time or terminate the Plan at any time.
However, no action authorized by this paragraph shall reduce the amount of any
existing Award or change the terms and conditions thereof.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
signed by its duly authorized officer as of this 6th day of February, 1995.
ATTEST: UNITY BANCORP, INC.
By:/S/ JAMES HYMAN
----------------
President
-2-
REVISED LEASE AGREEMENT
This Lease Agreement, made this l5th day of December, 1995, between CLINTON
UNITY GROUP, L.L.C., a New Jersey Limited Liability Company, having its
principal place of business at Allen Center, Suite 103, 150 Allen Road, Liberty
Corner, New Jersey, 07938 (hereinafter "Landlord"), and FIRST COMMUNITY BANK, a
banking institution organized under the laws of the State of New Jersey, having
its principal offices at Route 31 South at Beaver Brook, P. 0. Box 591,
Annandale, New Jersey 08801 (hereinafter "Lessee")
WITNESSETH
WHEREAS, Landlord is the owner of certain lands and premises located on New
Jersey Highway Route 22, in the Town of Clinton, County of Hunterdon and State
of New Jersey, which said lands and premises are more specifically described as
proposed Lot 22, Block 22, on a Minor Subdivision Plat prepared by Studer &
McEldowney, P.A., dated April 8, 1994, (hereinafter "Property"); and
WHEREAS, Landlord intends to construct on said property a commercial
building to use for office, banking and retail purposes (hereinafter
"Building"), together with associated site improvements; and
WHEREAS, Lessee desires to rent and occupy a portion of the first floor of
said Building as a retail bank facility and a portion of the second floor of
said Building for administrative/office purposes.
NOW, THEREFORE, in consideration of the covenants and promises herein made,
the Landlord does demise, lease and let unto the Lessee, and the Lessee herein
leases from the Landlord, the Leased Premises subject to the terms and
conditions as hereinafter set forth.
1. LEASED PREMISES
1.1. The Leased Premises shall consist of the following portions of the
Building to be constructed as more specifically set forth on a
description of the Tenant Space as prepared by Kenneth Fox, Fox Architectural
Design, attached hereto as Schedule A, and on a calculation of Office Space
Percentages and Annual Rents, attached hereto as Schedule B.
a) First Floor Space consisting of 5,012 gross rentable square feet,
based upon outside dimensions to centerline of common wall, including 1,023
square feet attributable to common area and core space.
b) First Floor Space consisting of 4,656 gross rentable square feet,
based upon outside dimensions to centerline of common wall, including 952
square feet attributable to common area and core space.
<PAGE>
c) Second Floor Space consisting of 9,853 gross rentable square feet,
based upon outside dimensions to centerline of common wall, including 2,008
square feet attributable to common area and core space.
d) Three Lane Drive-Thru Teller Facility containing 1,274 gross
rentable square feet, based upon outside dimensions of drive-thru canopy.
1.2 The Leased Premises shall also include the right, in common with all
other lessees of the Building, to use all common areas including, but not
limited to common entranceways, foyers, hallways, elevators, stairways,
sidewalks, parking areas and motor vehicle accessways.
1.3 Landlord covenants and agrees with Lessee that it will provide 90
Reserved parking spaces to be used by Lessee's employees, agents, servants and
invitees.
2. CONSTRUCTION OF IMPROVEMENTS
2.1 Landlord agrees to construct, at its expenses, the commercial center in
accordance with a site plan to be prepared by Studer & McEldowney, P.A., and
architectural plans to be prepared by A.J. O'Sullivan, P.A.
a) Lessee shall approve the site and architectural plans in writing
within ten (10) days of Landlord's written request.
b) Lessee shall be responsible to provide, at its expense, all
architectural plans as required to complete the construction of the
interior of the leased premises pursuant to Lessee's obligations as set
forth in paragraph 2.3.
2.2 Landlord shall make the following improvements to the premises to be
leased by Lessee:
a) As to the first and second floor spaces:
(i) Complete the outside of all outside walls.
(ii) Install required subflooring.
(iii) Supply all required electrical, plumbing, heating
ventilation and air conditioning (HVAC) service to interior space.
(iv) Install required fire suppression sprinkler system.
b) As to the three-lane drive-thru facility, Landlord shall, at its
expense, install the canopy, drive-thru window, drive-thru lanes, and
concrete islands.
2
<PAGE>
2.3 Lessee shall, at its expense, complete all of the required improvements
to the first and second floor portions of the premises to be leased by Lessee
required for its use and occupancy not completed and/or installed by Landlord
pursuant to paragraph 2.2, hereinabove, including, but not limited to:
a) Install all electrical, plumbing, and mechanical, including all
duct work for heating, ventilation and air conditioning (HVAC).
b) Install insulation and construct inside of outside walls.
c) Install all flooring, ceilings, interior walls and doors.
d) Install security system.
e) Install bank vault.
f) Complete interior painting and decorating.
g) Install all electrical, mechanicals and equipment as required to
complete the three-lane drive-thru teller facility and operate the remote
teller stations.
2.4 All improvements constructed and/or installed by Lessee pursuant to
paragraph 2.3, with the exception of those items listed on Exhibit "A," shall
become the property of Landlord and shall remain upon and be surrendered with
the leased premises as part thereof at the expiration or termination of this
Lease.
3. LEASE TERM
3.1 The term of this Lease shall be for a period of ten (10) years and
shall commence thirty (30) days subsequent to the date Landlord installs and/or
completes all of the improvements to the leased premises as set forth in
paragraph 2.2. above.
4. LESSEE'S OPTION TO RENEW LEASE
4.1 Landlord herein grants Lessee an option to renew this Lease for two (2)
five-year terms on the same terms and conditions as contained in this Agreement.
a) This right of renewal shall expire unless Lessee provides Landlord
with written notice of its intention to renew the Lease for the first
5-year renewal term at least 180 days prior to the expiration the initial
term of this Lease as set forth in paragraph 3.1.
3
<PAGE>
b) This right of renewal for the second 5-year renewal term shall
expire unless Lessee provides Landlord with written notice of its intention
to renew the Lease at least 180 days prior to the expiration of the first
renewal term.
5. BASE RENT
5.1 The Annual Base Rent to be paid by Lessee to Landlord during the first
year of this said Lease shall be Three Hundred Thirty-One Thousand Seven Hundred
Twenty-One ($331,721.00) Dollars, calculated in the manner following:
a) First Floor Rental Space:
5,012 square feet X $22.00 per square foot = $110,264.00
b) First Floor Rental Space:
4,656 square feet X $15.00 per square foot = $ 69,840.00
c) Second Floor Rental Space:
9,853 square feet X $15.00 per square foot = $147,795.00
d) Drive-Thru Teller Facility:
1,274 square feet X $3.00 per square foot = $ 3,822.00
5.2 The Annual Base Rent to be paid by Lessee to Landlord during the second
year of this Lease shall be Three Hundred Fifty-One Thousand, Six Hundred
Twenty-Four and 26/100 ($351,624.26) Dollars (Annual Base Rent for year one,
plus six percent (6%).
5.3 The Annual Base Rent to be paid by Lessee to Landlord during the third
year of this lease shall be Three Hundred Seventy-Two Thousand, Seven Hundred
Twenty-One and 72/100 ($372,721.72) Dollars (Annual Base Rent for year two, plus
six percent (6%).
5.4 The Annual Base Rent to be paid by Lessee to Landlord for years four
through ten of the initial term of this Lease, and during each year of any
renewals thereof, shall be a sum equal to the Annual Base Rent for the preceding
year, together with an increase equivalent to the increase in the Consumer Price
Index for all urban consumers (CPI-U) for that area encompassing New York City,
northern New Jersey and Long Island as published by the United States Department
of Labor, Bureau of Labor Statistics. This increase shall be calculated by
comparing the CPI-U as it exists on the 30th day prior to the first rental
payment for the year in which rent is being established with the CPI as it
existed when the rent for the preceding year was established.
6. ADDITIONAL RENT
6.1 In addition to the Base Rent, as provided for in paragraph 5 hereof,
Lessee agrees to pay the following to the Landlord as additional rent.
4
<PAGE>
a) Lessee's pro rata share of all real estate taxes imposed upon the
property (Block 22, Lot 22).
b) Lessee's pro rata share of all maintenance expenses incurred by
Landlord in maintaining the common areas, as defined in paragraph 14.1(c).
c) Lessee's pro rata share of the hazard and liability insurances
maintained by Landlord pursuant to paragraph 15.5 and paragraph 15.6.
7. COMMENCEMENT OF RENT
7.1 All Base and Additional Rent shall be payable annually in twelve equal
monthly installments. The first said monthly payment shall be due and payable on
the first day of the initial 10-year term and successive payments on the same
day of each month thereafter during the entire term hereof, inclusive of all
renewals.
8. SECURITY
8.1 Lessee shall pay to Landlord simultaneously with the execution of this
Lease, the sum of Thirty Four Thousand Four Hundred Fifty-Nine and 33/100
($34,459.33) Dollars (two months' rent), which said sum shall constitute a
security deposit with respect to Lessee's rental obligations and with respect to
damage to the premises and the full and faithful performance by the Lessee of
the covenants and conditions on the part of Lessee to be performed. Landlord
shall have the right to apply said security or any portion thereof with respect
to any rental or other payment that is over 15 days in arrears and to cover the
cost of any damages to the leased premises caused by Lessee to the leased
premises. In the event of Landlord's application as aforesaid, then Lessee shall
be obligated to replenish that portion of said security utilized and/or applied
by Landlord for the purposes aforesaid within 15 days of written notice by
Landlord to Lessee. Lessee's failure to do so shall constitute a default under
the terms and conditions of this Lease. The security deposit and accumulated
interest thereon shall be held in an interest-bearing account for the benefit of
the Lessee.
9. USE AND OCCUPANCY OF PREMISES
9.1 It is understood and agreed that the use of the premises by Lessee
shall be limited to banking and such other financial service activities which
Lessee or any affiliate or subsidiary thereof is lawfully permitted to engage.
It is agreed that Lessee shall not put the leased premises to any other use
absent prior written consent of Landlord, which consent shall not be
unreasonably withheld.
5
<PAGE>
10. LEASE CONTINGENCIES
10.1 This Lease is herein made expressly contingent upon Landlord, at
Landlord's sole cost and expense, obtaining all necessary land use and other
governmental approvals and permits, including, but not limited to, approval of
present minor subdivision application pending before Clinton Township Planning
Board, preliminary and final site plan approval and building permits as required
to erect, construct and occupy the commercial building on Block 22, Lot 22, as
hereinabove described, within 270 days of the execution of this Lease or such
extended date as may be agreed to in writing between the parties hereto.
10.2 This Lease is herein made expressly contingent upon Landlord obtaining
all financing as required to finance the erection and construction of the
hereinabove described commercial center on Block 22, Lot 22, as determined by
Landlord in its sole discretion, within 270 days of the execution of this Lease
or such extended date as may be agreed to in writing between the parties hereto.
10.3 This Lease is herein made expressly contingent upon Lessee obtaining
all necessary regulatory approvals so as to (a) permit Lessee to be a party to
this Lease; (b) establish a branch bank at the leased premises, and (c) relocate
its principal offices to the leased premises, within 90 days of the execution of
this Lease or such extended date as may be agreed to in writing between the
parties hereto.
11. COMPLIANCE WITH LAWS
11.1 The Lessee shall promptly comply with all laws, ordinances, rules,
regulations, requirements and directives of the federal, state, and municipal
governments or public authorities and of all their departments, bureaus and
subdivisions, applicable to and affecting the use and occupancy of said premises
for the correction, prevention and abatements of nuisances, violations, and
other grievances in, upon or connected with the use and occupancy of said
premises, during the term hereof, and shall promptly comply with all reasonable
orders, regulations, requirements and directives of the Board of Fire
Underwriters or similar authority and of any insurance companies which have
issued or are about to issue policies of insurance covering the use and
occupancy of the said premises and its contents, for the prevention of fire and
other casualty, damage or injury, at the Lessee's own costs and expense.
12. REPAIRS AND MAINTENANCE
12.1 Subsequent to completion of Lessee's obligations pursuant to paragraph
2.3 of the Lease, Lessee shall make no alterations, changes, additions or
improvements in the leased premises without the written consent of Landlord,
which consent shall not be unreasonably withheld.
6
<PAGE>
12.2 Any alterations, additions and/or improvements made by either party
upon the leased premises shall become the property of Landlord and shall remain
upon and be surrendered with the leased premises as part thereof at the
expiration or termination of the Lease.
13. UTILITY CHARGES
13.1 Lessee agrees to pay directly to the suppliers before delinquency all
charges for water, gas, heat, electricity, power and other similar charges
incurred by Lessee with respect to and during its occupancy of the leased
premises.
13.2 In the event Lessee is not provided with its own sewer hookup, Lessee
shall pay its pro rata share of all sewage user fees.
14. REPAIRS AND MAINTENANCE
14.1 LANDLORD'S RESPONSIBILITIES: The Landlord shall keep the following
described portions of the building and premises is in good repair, provided,
however, there shall be no obligation on the Landlord to make any repairs
required of it unless and until there has been written notice served upon
Landlord by the Lessee advising Landlord of the necessity of the repair or
repairs, and there shall be no liability upon the Landlord to the Lessee for any
loss or damage caused by any failure on the part of the Landlord to make any
repairs required of it under this Lease, unless Landlord, after receipt of
notice from Lessee, shall fail to proceed to make such repair or repairs in a
commercially-reasonable manner.
a) The roof and exterior walls with the exception of plate glass and
glazing situate on the leased premises. The phrase "exterior waIls" shall
not be construed so as to require the Landlord to make repairs to the
interior surfaces of such walls.
b) All structural, electrical, plumbing and mechanical systems,
including the HVAC system, with the exception that Landlord shall not be
obligated to repair any portion of electrical, plumbing and mechanical
systems installed by Lessee.
c) All interior and exterior common areas, including foyers, hallways,
stairways, elevators, parking areas, access ways and landscaping (this
shall include janitorial and snow plowing services).
14.2 LESSEE'S RESPONSIBILITlES: Lessee shall, at its own cost and expense,
keep and maintain all of the leased premises, including, but not limited to,
exterior entry and exit doors, plate glass and glazing in and on the leased
premises in good condition and repair and in compliance with all applicable laws
and regulations, during the entire term of this Lease.
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15. INSURANCE
15.1 Lessee shall, at its expense, at all times during the term of this
Lease maintain in full force a comprehensive general liability insurance policy
with an insurance company, approved by Landlord, which will insure Lessor
against liability for injury to or death of persons or loss or damage to their
property occurring in or about the leased premises. The minimum policy limits
shall be One Million ($1,000,000.00) Dollars combined single limit coverage for
each occurrence with general aggregate limit of Two Million ($2,000,000.00)
Dollars.
15.2 Lessee, at its own expense, at all times during the term of this Lease
maintain in full force adequate plate glass insurance on all plate glass
installed on the leased premises. Landlord to be named as insured party.
15.3 Lessee shall, at its own expense, at all times during the term of this
Lease maintain in full force all employees' workmens' compensation insurance
required under the laws of the State of New Jersey.
15.4 Lessee shall, at its own expense, at all times during the term of this
Lease maintain in full force a policy or policies of fire insurance, with
extended coverage, on all of Lessee's fixtures, equipment and inventory situate
in the leased premises with an insurance company or companies approved by
Landlord. Said policy or policies to provide insurance equal to the replacement
value of the fixtures and equipment, together with adequate inventory insurance.
15.5 Lessor shall maintain hazard insurance on the commercial building and
such associated improvements as are insurable to cover loss or damage by fire
and other hazards normally included under "extended coverage" insurance. The
amount of insurance coverage shall be a sum equal to the full replacement value
of the building and other improvements to the extent available.
15.6 Landlord shall, at its expense, at all times during the term of this
Lease maintain in full force a comprehensive general liability insurance policy
with an insurance company, approved by Landlord, which will insure Lessor
against liability for injury to or death of persons or loss or damage to their
property occurring in or about the exterior and interior common areas. The
minimum policy limits shall be One Million Dollars combined single limit
coverage for each occurrence with general aggregate limit of Two Million
Dollars. The Landlord shall have the right, but not the obligation, to obtain
such additional general liability insurance as it deems appropriate.
15.7 All insurance policies maintain by Lessee, with the exception of
workmens compensation, shall add Landlord as an additional insured (except as to
contents), shall contain standard mortgagee endorsements and shall provide that
the insurance carrier shall not cancel the coverage unless the carrier notifies
Landlord and any mortgagee so
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designated by Landlord at least thirty (30) days prior to the effective date of
such cancellation.
15.8 In the event the leased premises shall be damaged or destroyed by fire
or other casualty so insured against, Lessee agrees that it will claim no
interest in any insurance settlement arising out of any such loss where premiums
are paid by Lessor, or where Lessor is named as the sole beneficiary, and that
it will sign any and all documents required by lessor or the insurance company
or companies that may be necessary for use in connection with the settlement of
any such loss
15.9 Should Lessee fail to keep in effect and pay for such insurance as
required by this Section, the Lessor may do so, in which event the insurance
premiums paid by Lessor shall become due and payable promptly and failure of
Lessee to pay them on demand shall constitute a default of this Lease.
16. FIRE AND OTHER CASUALTY
16.1 In case of fire or other casualty, the Lessee shall give immediate
notice to the Landlord. If the premises shall be partially damaged by fire, the
elements or other casualty, the Landlord shall repair the same as speedily as
practicable, but the Lessee's obligation to pay the rent hereunder shall not
cease, but be adjusted according to the use that Lessee can make of the
premises. If the premises be so extensively and substantially damaged as to
render them untenantable, then the rent shall cease until such time as the
premises shall be made tenantable by the Landlord. However, if in the reasonable
judgment of the Landlord, the premises be totally destroyed or so extensively
and substantially damaged as to require a rebuilding thereof, then, upon notice
in writing, within thirty (30) days of the damage, to Lessee of such judgment,
the rent shall be paid up to the time of such destruction and then and from
thenceforth, this Lease shall come to an end.
17. INSPECTION AND REPAIR
17.1 The Lessee agrees that the Landlord and the Landlord's agents,
employees or other representatives, shall have the right to enter into and upon
the said premises and any part thereof, at all reasonable hours, upon 24 hours'
notice to Lessee, for the purpose of examining the same or making such repairs,
alterations or improvements therein as may be required of the Landlord under
this Lease.
18. DAMAGE, REPAIRS
18.1 In the case of the destruction of or damage of any other kind to the
leased premises caused by the carelessness, negligence or improper conduct on
the part of Lessee or the Lessee's agents, employees, guests, licensees,
invitees, sublessees,
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assignees or successors, the Lessee shall repair the said damage or replace or
restore any destroyed parts of the premises, as speedily as possible, at the
Lessee's own cost and expense.
19. ASSIGNMENT AND SUBLET
19.1 Lessee shall not assign this Lease or any interest in this Lease, or
sublet the leased premises or any part of the premises, or license the use of
all or any portion of the leased premises or business conducted there, or
encumber or hypothecate this Lease, without first obtaining the written consent
of Landlord; and any assignment, subletting, licensing, encumbering or
hypothecating of this Lease without such prior written consent shall, at the
option of Lessor, terminate this Lease.
20. MORTGAGE PRIORITY SUBORDINATION
20.1 This Lease shall not be a lien against the said premises in respect to
any mortgages that may hereafter be placed upon said premises, so long as the
total of all such mortgages do not exceed 90% of the market value of the
premises. The recording of such mortgage or mortgages shall have preference and
precedence and be superior and prior in lien to this Lease, irrespective of the
date of recording, and the Lessee agrees to execute any instruments, without
cost, which may be deemed necessary or desirable, to further effect the
subordination of this Lease to any such mortgage or mortgages. A refusal by the
Lessee to execute such instruments shall entitle the Landlord to the option of
cancelling this Lease, upon ten (10) days' notice in writing to Lessee, and the
term hereof is hereby expressly limited accordingly.
21. ENVIRONMENTAL COVENANTS
21.1 Lessee shall, at Lessee's cost and expense, comply with all applicable
environmental laws and regulations pertaining to Lessee's use and occupancy of
the leased premises. Lessee covenants to indemnify and hold Landlord harmless
from any damages sustained by Landlord, including legal fees and costs of suit,
proximately related to alleged environmental contamination or environmental
damage resulting from Lessee's use and occupancy of the leased premises.
22. LESSEE REGULATIONS
22.1 Any reasonable rules and regulations with regard to the use and
occupancy of the building or the leased premises by Lessee as attached hereto or
as adopted at any time during the term of this Lease and of which Lessee is
notified in writing, shall in all things be observed and performed by lessee,
its servants, agents and invitees, provided
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that such rule shall not be inconsistent with the Lessee's rights or the
Landlord's obligations as herein expressed.
23. NON-LIABILITY OF LANDLORD
23.1 The Landlord shall not be liable for any damage or injury which may be
sustained by the Lessee or any other person, as a consequence of the failure,
breakage, leakage or obstruction of the water, plumbing, steam, sewer, waste or
soil pipes, roof, overhead doors, drains, leaders, gutters, downspouts or the
like or of the electrical, gas, power, conveyor, refrigeration, sprinkler,
air-conditioning or heating systems, elevators, or by reason of the elements.
24. RIGHT TO EXHIBIT
24.1 The Lessee agrees to permit the Landlord and the Landlord's agents,
employees or other representative to show the premises to persons wishing to
purchase the same, and Lessee agrees that on and after six (6) months preceding
the expiration of the term hereof, or any extension term, the Landlord of the
Landlord's agents, employees or other representatives shall have the right to
show the premises to prospective lessees and to place notices on the front of
said premises or any part thereof, offering the premise for rent or for sale.
All such showings of the premises shall be made at reasonable hours, upon
reasonable notice to Lessee.
25. CONDEMNATION, EMINENT DOMAIN
25.1 If the land and premises leased herein, or of which the leased
premises are a part, or a major portion thereof, shall be taken under eminent
domain or condemnation proceedings, or if suit or other action shall be
instituted for the taking or condemnation thereof, of or in lieu of any formal
condemnation proceedings or actions, the Landlord shall sell and convey the said
premises of such portion thereof, to the governmental or other public authority,
agency, body or public utility, seeking to take said land and premises or such
portion thereof, then this Lease, at the option of the Landlord, shall
terminate, and the term hereof shall end as of such date of transfer of title;
and the Lessee shall have no claim or right to claim or be entitled to any
portion of any amount which may be awarded as damages to Landlord or paid to
Landlord as the result of such condemnation proceedings or paid to Landlord as
the purchase price for such sale or conveyance in lieu of formal condemnation
proceedings. The Lessee agrees to execute and deliver any instruments, at the
expense of the Landlord, as may be deemed necessary or required to expedite any
condemnation proceedings or to effectuate a proper transfer of title to such
governmental or other public authority, agency, body or public utility seeking
to take or acquire the said lands and premises or such portion
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thereof. The Lessee covenants and agrees to vacate the said premises, remove all
of Lessee's property therefrom and deliver up peaceable possession thereof to
the said purchaser. Failure by the Lessee to comply with any provisions in this
clause shall subject the Lessee to such costs, expenses, damages and losses as
the Landlord may incur by reason of the Lessee's default thereof. The Lessee
shall be entitled to receive any relocation expenses awarded by a court in
condemnation or paid in any negotiated acquisition in lieu of condemnation.
26. REMEDIES UPON LESSEE'S DEFAULT
26.1 If there should occur any default on the part of the Lessee in the
performance of any conditions and covenants herein contained, or should the
Lessee be evicted by summary proceedings or otherwise, the Landlord, in addition
to any other remedies herein contained or as may be permitted by law, may
re-enter the said premises and the same have and again possess and enjoy; and as
agent for the Lessee or otherwise, relet the premises and received the rents
therefore and apply the same, first, to the payment of such expenses, reasonable
attorneys' fees and costs, as the Landlord may have been put to in re-entering
and repossessing the same and, second, to the payment of the rents due
hereunder. The Lessee shall remain liable for such rents as may be in arrears
and also the rents as may accrue subsequent to the re-entry by the Landlord, to
the extent of the difference between the rents reserved hereunder and the rents,
if any, received by the Landlord during the remainder of the unexpired term
hereof, after deducting the aforementioned expenses, fees and costs; the same to
be paid as such deficiencies arise and are ascertained each month.
27. TERMINATION ON DEFAULT
27.1 Upon the occurrence of any of the contingencies set forth in the
preceding clauses, or should the Lessee be adjudicated or bankrupt, insolvent,
or placed in receivership, or should proceedings be instituted by or against the
Lessee for bankruptcy, insolvency, receivership, agreement of composition, or
assignment for the benefit of creditors, and the Lessee shall fail to have said
proceeding terminated within sixty (60) days, or if this Lease or the estate of
the Lessee hereunder shall pass to another by virtue of any court proceedings,
writ of execution, levy, sale or by operation of law, the Landlord may, if the
Landlord so elects, at any time thereafter, terminate this Lease, and the term
hereof upon giving to the Lessee or to any trustee, receiver, assignee or other
person in charge of or acting as custodian of the assets or property of the
Lessee, five (5) days' notice in writing of the Landlord's intention so to do.
Upon giving of such notice, this Lease and the term hereof shall end on the date
fixed in such notice as if the said date was the date originally fixed in this
Lease for the expiration hereof.
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28. REMOVAL OF LESSEE'S PROPERTY
28.1 Any equipment, fixtures, goods or other property of the Lessee, not
removed by the Lessee upon the termination of this Lease, or upon the Lessee's
eviction, shall be considered as abandoned after ten (10) days, and the Landlord
shall have the right thereafter, upon five (5) days' notice in writing to the
Lessee, to sell or otherwise dispose of the same, and shall not be accountable
to the Lessee for any part of the proceeds of such sale, if any. All costs
associated with removal of abandoned property should be at the expense of the
Lessee.
29. REIMBURSEMENT OF LANDLORD
29.1 If the Lessee shall fail or refuse to comply with and perform any
conditions and covenants of the written Lease, the Landlord may, upon twenty
(20) days' notice in writing to the Lessee, if Landlord so elects, carry out and
perform such conditions and covenants, at the cost and expense of the Lessee,
and the said cost and expense shall be payable on demand, or at the option of
the Landlord, shall be added to the installment of rent due immediately
thereafter, but in no cause later than one (1) month after such demand,
whichever occurs sooner, and shall be due and payable as such. This remedy shall
be in addition to such other remedies as the Landlord may have hereunder by
reason of the default of the Lessee of any of the covenants and conditions in
this Lease contained.
30. LESSEE PURCHASE OPTION
30.1 Landlord herein grants Lessee an option to purchase the Property
(proposed Block 22, Lot 22 and all improvements constructed thereon) from
Landlord pursuant to the following terms and conditions:
a) Method of Exercising Option. Lessee shall exercise this option by
providing Landlord with written notice of its intention to do so at any
time during the periods as set forth hereinafter.
b) Time Periods Within Which Options May Be Exercised. Lessee must
exercise this option within the following time frames:
(1) Within the ninety (90) day period immediately preceding the
termination date for the initial ten (10) year term of this Lease.
(2) Within the ninety (90) day period immediately preceding the
termination date for the first five (5) year renewal term of this
Lease.
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(3) Within the ninety (90) day period immediately preceding the
termination date for the second five (5) year renewal term of this
Lease.
(c) Right of Exercise Contingency. Lessee's right to exercise this
option is herein expressly made contingent upon Lessee not being in default
of any of its obligations pursuant to this said lease.
(d) Purchase Price. The purchase price to be paid by Lessee to
Landlord shall be established in the manner following:
(1) Lessee's notice to Landlord of Lessee's intention to exercise
the purchase option pursuant to 30(a) shall include the purchase price
that Lessee is proposing to pay.
(2) Landlord shall have fifteen (15) business days from receipt
of Lessee's notice to advise Lessee as to whether the proposed
purchase price as set forth in Lessee's notice is acceptable to
Landlord.
(3) In the event that Landlord does not accept the purchase price
as proposed by Lessee then, in that event, Landlord and Lessee shall
both obtain and exchange written appraisals from qualified independent
appraisers within forty-five (45) days of Landlord's receipt of
Lessee's notice to exercise the purchase option.
(4) If the value established by the independent appraisals
obtained by Landlord and Lessee do not vary by more than five (5)
percent then, in that event, the purchase price shall be the higher of
the two appraisals.
(5) In the event that the independent appraisals obtained by
Landlord and Lessee vary by more than five (5) percent, then the
appraisers selected by Landlord and Lessee shall jointly select a
third appraiser who shall prepare, at Landlord and Lessee's joint
expense, a third appraisal. The purchase price shall be the average of
the three appraisals provided, however, in no event shall Landlord be
required to convey the Property to Lessee for a purchase price of less
than:
(i) $4,967,000.00 in the event the option is exercised
during the initial ten (10) year term.
(ii) $6,965,000.00 in the event the option is exercised
during the first five (5) year renewal term of this Lease.
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(iii) $9,769,000.00 in the event the option is exercised
during the second five (5) year renewal term of this Lease.
(e) Closing of Title. Landlord shall convey by Bargain and Sale Deed
CVG at closing of title which shall take place at Landlord's principal
place of business on or about the 90th day subsequent to the purchase price
having been established. At closing, Landlord shall pay the purchase price
by way of certified check.
(f) Quality of Title. The title to be conveyed by Landlord shall be
good and marketable title and such title as will be insurable by a
reputable title insurance company subject to easements and restrictions of
record, applicable zoning regulations and such facts as shall be
demonstrated by accurate survey.
31. NON-PERFORMANCE BY LANDLORD
31.1 This Lease and the obligation of the Lessee to pay the rent hereunder
and to comply with the covenants and conditions hereof, shall not be affected,
curtailed, impaired or excused because of the Landlord's inability to supply any
service or material called for herein, or by reason of any rule, order,
regulation or pre-emption by any governmental entity, authority, department,
agency or subdivision or for any delay which may arise by reason of negotiations
for the adjustment of any fire or other casualty loss or because of strikes or
other labor trouble or for any cause beyond the control of the Landlord.
32. VALIDITY OF LEASE
32.1 The terms, conditions, covenants and provisions of this Lease shall be
deemed to be severable. If any clause of provisions herein contained shall be
adjudged to be invalid of unenforceable by a Court of competent jurisdiction or
by operation of any applicable law, it shall not affect the validity of any
other clause or provision herein, but such other clauses or provisions shall
remain in full force and effect.
33. NON-WAIVER BY LANDLORD
33.1 The various rights, remedies, option and elections of the Landlord,
expressed herein, are cumulative and the failure of the Landlord to enforce
strict performance by the Lessee of the conditions and covenants of this Lease
or to exercise any election or option or to resort or have recourse to any
remedy herein conferred or the acceptance by the Landlord of any installment or
rent after any default by the Lessee, in any or more instances shall not be
construed or deemed to be a waiver or a
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relinquishment for the future by the Landlord or any such condition and
covenants, options, elections or remedies, but the same shall continue in full
force and effect.
34. NOTICES
34.1 All notices required under the terms of this Lease shall be given and
shall be complete by mailing such notices by certified mail, return receipt
requested, to the address of the party to be noticed or to such other address as
may be designated in writing, which change of address shall be given in the same
manner, as follows:
For Landlord: Attn: Robert Van Volkenburgh
Clinton Unity Group, LLC
24 County Line Road
Branchburg
Somerville, NJ 08876
For the Lessee: Attn: James Hyman
First Community Bank
64 Old Highway 22
Clinton, NJ 08801
35. COVENANT OF QUIET ENJOYMENT
35.1 The Lessee, upon payment of the rent herein reserved and upon the
performance of all the terms of the Lease, shall at all times during the Lease
term and during any extension term, peaceably and quietly enjoy the leased
premises without any disturbance from the Landlord or from any other person
claiming through the Landlord. The Landlord shall comply with all the terms of
and make all payments due on mortgages placed by the Landlord on the premises,
and shall pay all real estate taxes on the premises before they become
delinquent.
36. LATE PAYMENTS
36.1 A late charge of 5% of all amounts due shall be assessed against any
payment not received within fifteen (15) days after such payment is due.
37. ENTIRE CONTRACT
37.1 This Lease contains the entire contract between the parties. No
representative, agent or employee of the Landlord has been authorized to make
any representations or promises with reference to the within letting or to vary,
alter or modify the terms hereof. No additions, changes or modifications,
renewals or extensions hereof, shall be binding unless reduced to writing and
signed by the Landlord and Lessee.
37.2 The respective parties hereto agree that this Revised Lease Agreement
replaces and supersedes an original Lease Agreement dated July 13, 1994, along
with a First Amendment to Lease dated April 28, 1995 and a Second Amendment to
Lease dated December 1, 1995.
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ALL THE TERMS, COVENANTS AND CONDITIONS herein contained shall inure to the
benefit of and shall bind the respective parties hereto, and their heirs,
executors, administrators, personal or legal representatives, successors and
assignees.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals, or
caused these presents to be signed by their proper corporate officers and caused
their proper corporate seal to be affixed hereto.
LANDLORD:
CLINTON UNITY GROUP, L.L.C.
a New Jersey Limited Liability Company
WITNESS:
/s/ LINDA B. McDERMOTT By: /s/ ROBERT VAN VOLKENBURGH
- ------------------------ -----------------------------------
Linda B. McDermott Robert Van Volkenburgh
LESSEE:
FIRST COMMUNITY BANK
WITNESS:
/s/ LINDA B. Mc DERMOTT By: /s/ JAMES HYMAN
- ------------------------ -----------------------------------
Linda B. Mc Dermott James Hyman, President/CEO
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FOX ARCHITECTURAL DESIGN
17 Robert Street -- Wharton, New Jersey 07885 -- (201) 989-7772
Facsimile (201) 989-7795
SCHEDULE A
CLINTON UNITY GROUP
Agway Site, Route 173
Clinton, NJ
TENANT SPACES
First Floor:
Retail Bank 3989 sq.ft.
Drive Thru Canopy 1274 sq.ft.
Bank Offices 1829 sq.ft.
Tenant Space 1875 sq.ft.
Common Space 1975 sq.ft.
TOTAL FLOOR AREA 9668 sq.ft.
Second Floor:
Bank Space 7845 sq.ft.
Common Space 1802 sq.ft.
TOTAL FLOOR AREA 9647 sq.ft.
Third Floor:
Tenant Space 4669 sq.ft.
Common Space 1391 sq.ft.
TOTAL FLOOR AREA 6060 sq.ft.
[Signature]
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Sheet 1
SCHEDULE B
CLINTON UNITY GROUP LLC
1st Community Bldg.
NET % OF NET COMMON GROSS LEASE ANNUAL
TENANT USABLE S.F. USABLE S.F. RENTABLE S.F. RATE $ REVENUE
- --------------------------------------------------------------------------------
1st Floor
Retail 3,989 19.7 1,023 5,012 22.00 110,264
1st Floor
S.E. Corner 1,829 9.1 470 2,299 15.00 34,485
1st Floor
S.W. Corner 1,875 9.3 482 2,357 15.00 35,355
2nd Floor 7,845 38.8 2,008 9,853 15.00 147,795
3rd Floor 4,669 23.1 1,189 5,858 17.50 102,515
- --------------------------------------------------------------------------------
TOTAL 20,207 100 5,172 25,379 17.50 $430,414
BANK CANOPY 1,274 3.00 3,822
- --------------------------------------------------------------------------------
GRAND TOTAL $434,236
DDCUSF
Parties This Lease, dated the 22ND day of DECEMBER 1994 between
110 Main Street Associates hereinafter referred to as the
Landlord, and
First Community Bank hereinafter referred to as the
Tenant, WITNESSETH: That the Landlord hereby demises and
leases unto the Tenant, and the Tenant hereby hires and
takes from the Landlord for the term and upon the rentals
hereinafter specified, the premises described as follows,
situated in the Borough of Flemington County of Hunterdon
Premises and State of New Jersey 2,670 square feet of first floor
space located at 110 Main Street, Flemington, NJ as more
fully described in Schedule A floor plan attached hereto.
Term The term of this demise shall be for Three Years
beginning April 1, 1995 and ending March 31, 1998.
Rent The rent for the demised term shall be One Hundred Twenty
Thousand - One Hundred Fifty and No Cents ($120,150.00),
which shall accrue at the yearly rate of Forty Thousand and
Fifty Dollars ($40,050.00)
The said rent is to be payable monthly in advance on
the first day of each calendar month for the term hereof, in
installments as follows:
Payment of Three Thousand Three Hundred Thirty Seven and Fifty
Rent Cents. ($3,337.50) at the office of 110 Main Street
Associates, Cust, Dori & Benick CPA 110 Main St.,
Flemington, NJ 08822 or as may be otherwise directed by
the Landlord in writing.
THE ABOVE LETTING IS UPON THE FOLLOWING CONDITIONS:
Peaceful First.--The Landlord covenants that the Tenant, on
Possession paying the said rental and performing the covenants and
conditions in this Lease contained, shall and may peaceably
and quietly have, hold and enjoy the demised premises for
the term aforesaid.
Second.--The Tenant covenants and agrees to use the
demised premises as a
Purpose financial institution.
and agrees not to use or permit the premises to be used for
any other purpose without the prior written consent of the
Landlord endorsed hereon.
Default, in Pay- Third.--The Tenant shall, without any previous demand
ment of Rent therefor, pay to the Landlord, or its agent, the said rent
at the times and in the manner above provided. In the event
Abandonment of the non-payment of said rent, or any instalment thereof,
of Premises at the times and in the manner above provided, and if the
same shall remain in default for 30 days after becoming due,
Re-entry and or if the Tenant shall be dispossessed for non-payment of
Reletting by rent, or if the leased premises shall be deserted or
Landlord vacated, the Landlord or its agents shall have the right to
and may enter the said premises as the agent of the Tenant,
Tenant Liable either by force or otherwise, without being liable for any
for Deficiency prosecution or damages therefor, and may relet the premises
as the agent of the Tenant, and receive the rent therefor,
Lien of upon such terms as shall be satisfactory to the Landlord,
Landlord to and all rights of the Tenant to repossess the premises under
Secure this lease shall be forfeited. Such re-entry by the Landlord
shall not operate to release the Tenant from any rent to be
Performance paid or covenants to be performed hereunder during the full
Attorney's Fees term of this lease. For the purpose of reletting, the
Landlord shall be authorized to make such repairs or
alterations in or to the leased premises as may be necessary
to place the same in good order and condition. The Tenant
shall be liable to the Landlord for the cost of such repairs
or alterations, and all expenses of such reletting. If the
sum realized or to be realized from the reletting is
insufficient to satisfy the monthly or term rent provided in
this lease, the Landlord, at its option, may require the
Tenant to pay such deficiency month by month, or may hold
the Tenant in advance for the entire deficiency to be
realized during the term of the reletting. The Tenant shall
not be entitled to any surplus accruing as a result of the
reletting. The Landlord is hereby granted a lien, in
addition to any statutory lien or right to distrain that may
exist, on all personal property of the Tenant in or upon the
demised premises, to secure payment of the rent and
performance of the covenants and conditions of this lease.
The Landlord shall have the right, as agent of the Tenant,
to take possession of any furniture, fixtures or other
personal property of the Tenant found in or about the
premises, and sell the same at public or private sale and to
apply the proceeds thereof to the payment of any monies
becoming due under this lease, the Tenant hereby waiving the
benefit off all laws exempting property from execution, levy
and sale on distress or judgment. The Tenant agrees to pay,
as additional rent, all attorney's fees and other expenses
incurred by the Landlord in enforcing any of the obligations
under this lease.
Sub-letting and Fourth.--The Tenant shall not sub-let the demised
Assignment premises nor any portion thereof, nor shall this lease be
assigned by the Tenant without the prior written consent of
the Landlord endorsed hereon.
Condition of Fifth.--The Tenant has examined the demised premises,
Premises, and accepts them in their present condition (except as
Repairs otherwise expressly provided herein) and without any
representations on the part of the Landlord or its agents as
to the present or future condition of the said premises. The
Tenant shall keep the demised premises in good condition,
and shall redecorate, paint and renovate the said premises
as may be to necessary to keep them in repair and good
appearance. The Tenant shall quit and surrender the premises
at the end of the demised term in as good condition as the
reasonable use thereof will permit. The Tenant shall not
make any alterations, additions, or improvements to said
premises without the
<PAGE>
Alterations and prior written consent of the Landlord. All erections,
Improvements alterations, additions and improvements, whether temporary
or permanent in character, which may be made upon the
Sanitation, premises either by the Landlord or the Tenant, except
Inflammable furniture or movable trade fixtures installed at the expense
Materials of the Tenant, shall be the property of the Landlord and
shall remain upon and be surrendered with the premises as a
Sidewalks part thereof at the termination of this Lease, without
compensation to the Tenant. The Tenant further agrees to
keep said premises and all parts thereof in a clean and
sanitary condition and free from trash, inflammable material
and other objectionable matter. If this lease covers
premises, all or a part of which are on the ground floor,
the Tenant further agrees to keep the sidewalks in front of
such ground floor portion of the demised premises clean and
free of obstructions, snow and ice.
Mechanics' Sixth.--In the event that any mechanics' lien is filed
Liens against the premises as a result of alterations, additions
or improvements made by the Tenant, the Landlord, at its
option, after thirty days' notice to the Tenant, may
terminate this lease and may pay the said lien, without
inquiring into the validity thereof, and the Tenant shall
forthwith reimburse the Landlord the total expense incurred
by the Landlord in discharging the said lien, as additional
rent hereunder.
Glass Seventh.--The Tenant agrees to replace at the Tenant's
expense any and all glass which may become broken in and on
the demised premises. Plate glass and mirrors, if any, shall
be insured by the Tenant at their full insurable value in a
company satisfactory to the Landlord. Said policy shall be
of the full premium type, and shall be deposited with the
Landlord or its agent.
Liability of Eighth.--The Landlord shall not be responsible for the
Landlord loss of or damage to property, or injury to persons,
occurring in or about the demised premises, by reason of any
existing or future condition, defect, matter or thing in
said demised premises or the property of which the premises
are a part, or for the acts, omissions or negligence of
other persons or tenants in and about the said property. The
Tenant agrees to indemnify and save the Landlord harmless
from all claims and liability for losses of or damage to
property, or injuries to persons occurring in or about the
demised premises.
Services and Ninth.--Utilities and services furnished to the demised
Utilities premises for the benefit of the Tenant shall be provided and
paid for as follows: water by the Tenant; gas by the Tenant
N/A; electricity by the Tenant; heat by the Tenant;
refrigeration by the Tenant; hot water by the Tenant.
The Landlord shall not be liable for any interruption or
delay to any of the above services for any reason.
Right to Inspect Tenth.--The Landlord, or its agents, shall have the
and Exhibit right to enter the demised premises at reasonable hours in
the day or night to examine the same, or to run telephone or
other wires, or to make such repairs, additions or
alterations as it shall deem necessary for the safety,
preservation or restoration of the improvements, or for the
safety or convenience of the occupants or users thereof
(there being no obligation, however, on the part of the
Landlord to make any such repairs, additions or
alterations), or to exhibit the same to prospective
purchasers and put upon the premises a suitable "For Sale"
sign. For three months prior to the expiration of the
demised term, the Landlord, or its agents, may similarly
exhibit the premises to prospective tenants, and may place
the usual "To Let" signs thereon.
Damage by Fire, Eleventh.--In the event of the destruction of the
Explosion, demised premises or the building containing the said
The Elements or premises by fire, explosion, the elements or otherwise
Otherwise during the term hereby created, or previous thereto, or such
partial destruction thereof as to render the premises wholly
untenantable or unfit for occupancy, or should the demised
premises be so badly injured that the same cannot be
repaired within ninety days from the happening of such
injury, then and in such case the term hereby created shall,
at the option of the Landlord, cease and become null and
void from the date of such damage or destruction, and the
Tenant shall immediately surrender said premises and all the
Tenant's interest therein to the Landlord, and shall pay
rent only to the time of such surrender, in which event the
Landlord may re-enter and re-possess the premises thus
discharged from this lease and may remove all parties
therefrom. Should the demised premises be rendered
untenantable and unfit for occupancy, but yet be repairable
within ninety days from the happening of said injury, the
Landlord may enter and repair the same with reasonable
speed, and the rent shall not accrue after said injury or
while repairs are being made, but shall recommence
immediately after said repairs shall be completed. But if
the premises shall be so slightly injured as not to be
rendered untenantable and unfit for occupancy, then the
Landlord agrees to repair the same with reasonable
promptness and in that case the rent accrued and accruing
shall not cease or determine. The Tenant shall immediately
notify the Landlord in case of fire or other damage to the
premises.
Observation Twelfth.--The Tenant agrees to observe and comply with
of Laws, all laws, ordinances, rules and regulations of the Federal,
Ordinances, State, County and Municipal authorities applicable to the
Rules and business to be conducted by the Tenant in the demised
Regulations premises. The Tenant agrees not to do or permit anything to
be done in said premises, or keep anything therein which
will increase the rate of fire insurance premiums on the
improvements or any part thereof, or on property kept
therein, or which will obstruct or interfere with the rights
of other tenants, or conflict with the regulations of the
Fire Department or with any insurance policy upon said
improvements or any part thereof. In the event of any
increase in insurance premiums resulting from the Tenant's
occupancy of the premises, or from any act or omission on
the part of the Tenant, the Tenant agrees to pay said
increase in insurance premiums on the improvements or
contents thereof as additional rent.
Signs Thirteenth.--No sign, advertisement or notice shall be
affixed to or placed upon any part of the demised premises
by the Tenant, except in such manner, and of such size,
design and color as shall be approved in advance in writing
by the Landlord.
Subordination Fourteenth.--This lease is subject and is hereby
to Mortgages subordinated to all present and future mortgages, deeds of
and Deeds trust and other encumbrances affecting the demised premises
of Trust or the property of which said premises are a part. The
Tenant agrees to execute, at no expense to the Landlord, any
instrument which may be deemed necessary or desirable by the
Landlord to further effect the subordination of this lease
to any such mortgage, deed of trust or encumbrance.
Sale of
Premises
Rules and Sixteenth.--The rules and regulations regarding the
Regulations of demised premises, affixed to this lease, if any, as well as
Landlord any other and further reasonable rules and regulations which
shall be made by the Landlord, shall be observed by the
Tenant and by the Tenant's employees, agents and customers.
The Landlord reserves the right to rescind any presently
existing rules applicable to the demised premises, and to
make such other and further reasonable rules and regulations
as, in its judgment, may from time to time be desirable for
the safety, care and cleanliness of the premises, and for
the preservation of good order therein, which rules, when so
made and notice thereof given to the Tenant, shall have the
same force and effect as if originally made a part of this
lease. Such other and further rules shall not, however, be
inconsistent with the proper and rightful enjoyment by the
Tenant of the demised premises.
Violation of Seventeenth.--In case of violation by the Tenant of any
Covenants, of the covenants, agreements and conditions of this lease,
Forfeiture of or of the rules and regulations now or hereafter to be
Lease, Re-entry reasonably established by the Landlord, and upon failure to
by Landlord discontinue such violation within ten days after notice
thereof given to the Tenant, this lease shall thenceforth,
Non-waiver at the option of the Landlord, become null and void, and the
of Breach Landlord may re-enter without further notice or demand. The
rent in such case shall become due, be apportioned and paid
on and up to the day of such re-entry, and the Tenant shall
be liable for all loss or damage resulting from such
violation as aforesaid. No waiver by the Landlord of any
violation or breach of condition by the Tenant shall
constitute or be construed as a waiver of any other
violation or breach of condition, nor shall lapse of time
after breach of condition by the Tenant before the Landlord
shall exercise its option under this paragraph operate to
defeat the right of the Landlord to declare this lease null
and void and to re-enter upon the demised premises after the
said breach or violation.
<PAGE>
Notices Eighteenth.--All notices and demands, legal or
otherwise, incidental to the lease, or the occupation of the
demised premises, shall be in writing. If the Landlord or
its agent desires to give or serve upon the Tenant any
notice or demand, it shall be sufficient to send a copy
thereof by registered mail, addressed to the Tenant at the
demised premises, or to leave a copy thereof with a person
of suitable age found on the premises, or to post a copy
thereof upon the door to said premises. Notices from the
Tenant to the Landlord shall be sent by registered mail or
delivered to the Landlord at the place hereinbefore
designated for the payment of rent, or to such party or
place as the Landlord may from time to time designate in
writing.
Bankruptcy, Nineteenth.--It is further agreed that if at any time
Insolvency, during the term of this lease the Tenant shall make any
Assignment for assignment for the benefit of creditors, or be decreed
Benefit of insolvent or bankrupt according to law, or if a receiver
Creditors shall be appointed for the Tenant, then the Landlord may, at
its option, terminate this lease, exercise of such option to
be evidenced by notice to that effect served upon the
assignee, receiver, trustee or other person in charge of the
Liquidation of the property of the Tenant or the Tenant's
estate, but such termination shall not release or discharge
any payment of rent payable hereunder and then accrued, or
any liability then accrued by reason of any agreement or
covenant herein contained on the part of the Tenant, or the
Tenant's legal representatives.
Holding Over Twentieth.--In the event that the Tenant shall remain
by Tenant in the demised premises after the expiration of the term of
this lease without having executed a new written lease with
the Landlord, such holding over shall not constitute a
renewal or extension of this lease. The Landlord may, at its
option, elect to treat the Tenant as one who has not removed
at the end of his term, and thereupon be entitled to all the
remedies against the Tenant provided by law in that
situation, or the Landlord may elect, at its option, to
construe such holding over as a tenancy from month to month
subject to all the terms and conditions of this lease,
except as to duration thereof, and in that event the Tenant
shall pay monthly rent in advance at the rate provided
herein as effective during the last month of the demised
term.
Eminent Twenty-first.--If the property or any part thereof
Domain, wherein the demised premises are located shall be taken by
Condemnation public or quasi-public authority under any power of eminent
domain or condemnation, this lease, at the option of the
Landlord, shall forthwith terminate and the Tenant shall
have no claim or interest in or to any award of damages for
such taking.
Security Twenty-second.--The Tenant has this day deposited with
the Landlord the sum of $______ as security for the full and
faithful performance by the Tenant of all the terms,
covenants and conditions of this lease upon the Tenant's
part to be performed, which said sum shall be returned to
the Tenant after the time fixed as the expiration of the
term herein, provided the Tenant has fully and faithfully
carried out all of said terms, covenants and conditions on
Tenant's part to be performed. In the event of a bona fide
sale, subject to this lease, the Landlord shall have the
right to transfer the security to the vendee for the benefit
of the Tenant and the Landlord shall be considered released
by the Tenant from all liability for the return of such
security; and the Tenant agrees to look to the new Landlord
solely for the return of the said security, and it is agreed
that this shall apply in every transfer or assignment made
of the security to a new Landlord. The security deposited
under this lease shall not be mortgaged, assigned or
encumbered by the Tenant without the written consent of the
Landlord.
Arbitration Twenty-third.--Any dispute arising under this lease
shall be settled by arbitration. Then Landlord and Tenant
shall each choose an arbitrator, and the two arbitrators
thus chosen shall select a third arbitrator. The findings
and award of the three arbitrators thus chosen shall be
final and binding on the parties hereto.
Delivery of Twenty-fourth.--No rights are to be conferred upon the
Lease Tenant until this lease has been signed by the Landlord,
and executed copy of the lease has been delivered to the
Tenant.
Lease Twenty-fifth.--The foregoing rights and remedies are
Provisions Not not intended to be exclusive but as additional to all rights
Exclusive and remedies the Landlord would otherwise have by law.
Lease Binding Twenty-sixth.--All of the terms, covenants and
on Heirs, conditions of this lease shall inure to the benefit of and
Successors, Etc. be binding upon the respective heirs, executors,
administrators, successors and assigns of the parties
herein. However, in the event of the death of the Tenant, if
an individual, the Landlord may, at its option, terminate
this lease by notifying the executor or administrator of the
Tenant at the demised premises.
Twenty-seventh.--This lease and the obligation of
Tenant to pay rent hereunder and perform all of the other
covenants and agreements hereunder on part of Tenant to be
performed shall in nowise be affected, impaired or excused
because Landlord is unable to supply or is delayed in
supplying any service expressly or impliedly to be supplied
or is unable to make, or is delayed in making any repairs,
additions, alterations or decorations or is unable to supply
or is delayed in supplying any equipment or fixtures if
Landlord is prevented or delayed from so doing by reason of
governmental preemption in connection with the National
Emergency declared by the President of the United States or
in connection with any rule, order or regulation of any
department or subdivision thereof of any governmental agency
or by reason of the conditions of supply and demand which
have been or are affected by the war.
Twenty-eighth.--This instrument may not be changed
orally.
Twenty-ninth.--Tenant shall pay pro-rata share of the
following costs:
Real Estate Taxes
Water and Sewer
Insurance
Refuse Disposal
Repairs and Maintenance
2,670
(-------)
Tenants pro-rate share is 28.10%. 9,500
Bills will be submitted quarterly.
Thirty.--Tenant has an option to renew this lease under
the same terms and conditions subject to the following: (180
days notice must be given)
1st Option - 5 years commencing April 1, 1998 ending
March 31, 2003 at $46,725.00 per annum.
2nd Option - 5 years commencing April 1, 2003 ending
March 31, 2008 at $46,725.00 plus the cumulative increase in
the consumer price index from April 1, 2003 through March
31, 2008.
IN WITNESS WHEREOF, the said Parties have hereunto set
their hands and seals the day and year first above written.
Witness: ____________________________(SEAL)
Landlord
110 Main Street Associates
/s/[Illegible] By /s/ John J. Cast, Jr.
----------------------- -------------------------
John J. Cust, Jr.
----------------------- -------------------------(SEAL)
Tenant
First Community Bank
By /s/ [Illegible]
----------------------- ------------------------
<PAGE>
GUARANTY
In consideration of the execution of the within lease by the Landlord, at
the request of the undersigned and in reliance of this guaranty, the undersigned
hereby guarantees unto the Landlord, its successors and assigns, the prompt
payment of all rent and the performance of all of the terms, covenants and
conditions provided in said lease, hereby waiving all notice of default, and
consenting to any extensions of time or changes in the manner of payment or
performance of any of the terms and conditions of the said lease the Landlord
may grant the Tenant, and further consenting to the assignment and the
successive assignments of the said lease, and any modifications thereof,
including the sub-letting and changing of the use of the demised premises,all
without notice to the undersigned. The undersigned agrees to pay the Landlord
all expenses incurred in enforcing the obligations of the Tenant under the
within lease and in enforcing this guaranty.
Witness:_________________________ ____________________________(SEAL)
_________________________ ____________________________(SEAL)
Date:____________________________
LEASE
====================================
Landlord
to
Tenant
====================================
Premises leased:
From:_______________________________
To:_________________________________
ASSIGNMENT AND ACCEPTANCE OF ASSIGNMENT
For value received the undersigned Tenant hereby assigns all of said
Tenant's right, title and interest in and to the within lease from and after
_________________ unto _______________ heirs, successors, and assigns, the
demised premises to be used and occupied for ___________________ and for no
other purpose, it being expressly agreed that this assignment shall not in any
manner relieve the undersigned assignor from liability upon any of the covenants
of this lease.
Witness:_________________________ ____________________________(SEAL)
_________________________ ____________________________(SEAL)
Date:____________________________
In consideration of the above assignment and the written consent of the
Landlord thereto, the undersigned assignee, hereby assumes and agrees from and
after ___________________ to make all payments and to perform all covenants and
conditions provided in the within lease by the Tenant therein to be made and
performed.
Witness:_________________________ ____________________________(SEAL)
_________________________ ____________________________(SEAL)
Date:____________________________
CONSENT TO ASSIGNMENT
The undersigned Landlord hereby consents to the assignment of the within
lease to ___________________ on the express conditions that the original Tenant
___________________, the assignor, herein, shall remain liable for the prompt
payment of the rent and the performance of the covenants provided in the said
lease by the Tenant to be made and performed, and that no further assignment of
said lease or sub-letting of any part of the premises thereby demised shall be
made without the prior written consent of the undersigned Landlord.
____________________________
Landlord
Date:____________________________ By__________________________
<PAGE>
EXHIBIT A
-2-
3. Except as set forth hereinafter, upon vacating the premises, NatWest
shall remove all equipment and personal property, but shall not remove or damage
any alterations, additions or improvements made by it to the premises.
(a) The Automatic Teller Machine (ATM) shall remain on the premises and
become the property of 110. NatWest shall arrange for the termination
and disconnection of the said ATM from any appropriate service and
connecting lines.
(b) The Wells Fargo security system in the premises is leased by NatWest.
NatWest will make arrangements and cooperate fully with Wells Fargo
and the new tenant at the premises to (i) transfer the service to the
new tenant, or (ii) arrange for the removal of the security system at
the option of the new tenant.
4. NatWest hereby represents that it owns said Automatic Teller Machine
referred to above free and clear of any and all liens, claims and encumbrances,
and agrees to execute a Bill of Sale or other documents to effectuate the
transfer of the said ATM on an "as is" basis to 110 for no additional
consideration. The conveyance of the ATM is made without warranty or
representation.
5. NatWest shall pay simultaneously with the execution hereof the sum of
$--- INTENTIONALLY DELETED AS EXHIBIT TO ADDENDUM
6. Until cessation of occupancy, NatWest shall pay and be responsible for
its pro-rata share of real estate taxes, maintenance and insurance (triple-net
expenses) based on its pro-rata share of 26.04% as recited in Paragraph 33 of
the original Lease.
7. The use and occupancy of the premises by NatWest after March 31, 1995,
shall not be considered a tenancy and the parties agree that they are not in a
landlord-tenant arrangement.
8. There shall be no grace period for the failure of NatWest to perform
pursuant to the terms and conditions hereof.
9. In the event of any default or breach on the part of NatWest in the
performance of any terms, conditions and covenants
<PAGE>
[FLOOR PLAN OF
110 MAIN STREET,
FLEMINGTON, NJ]
<PAGE>
December 22, 1994
ADDENDUM TO LEASE BETWEEN
110 MAIN STREET ASSOCIATES AND
FIRST COMMUNITY BANK
DATED: DECEMBER 22, 1994
Thirty-One:
Tenant's responsibility under the Lease is subject to its obtaining all
necessary approvals from governmental agencies to open and maintain a
full-service banking branch at the demised premises.
Tenant agrees to take all steps necessary to apply for and obtain such
approvals.
Tenant: Landlord
FIRST COMMUNITY BANK 110 MAIN STREET ASSOCIATES
By: /s/ [Illegible] By: /s/ [Illegible]
------------------------ --------------------------
<PAGE>
SECOND ADDENDUM TO LEASE DATED DECEMBER 22, 1994 BETWEEN 110 MAIN STREET
ASSOCIATES, LANDLORD, AND FIRST COMMUNITY BANK, TENANT
Date of Amendment:_________________, 1995
- --------------------------------------------------------------------------------
WHEREAS, the parties hereto having entered into an Agreement dated December
22, 1994, and desiring to amend same at this time, and in consideration of their
mutual promises, covenants and undertakings hereinafter set forth, and the
mutual benefits to be gained by the performance hereof, intending to be legally
bound, the parties hereto, for themselves, their heirs, executors,
administrators, successors and assigns, AGREE AS FOLLOWS:
1. Said lease is subject to a certain Termination Agreement dated
February 21, 1995, by and between Landlord, 110 Main Street
Associates, and NatWest Bank N.A., the present occupant of the
premises to be leased, a copy of which is attached hereto and made a
part hereof as Exhibit A.
2. The term of this Lease shall commence on the date of the delivery of
possession to the Tenant and shall run for the balance of that month
plus three (3) years. All option periods shall be adjusted
accordingly. As used in this Lease the term "date of delivery of
possession" shall mean May 16, 1995 or five (5) days after the
Landlord has given Tenant written notice that the occupant has vacated
pursuant to the Termination Agreement, which ever occurs first.
3. In the event Tenant shall take possession of the premises on a date
other than the first day of the month, it shall pay on or before the
date of possession the pro-rata portion of the rent for that partial
month and shall thereafter pay said rent monthly on the first day of
each calendar month for the term hereof. All other payments required
under the Lease shall be adjusted for this initial period. There shall
be no rent charged for the period May 15th 1995 through May 31st,
1995.
4. Tenant shall lease from Landlord the Automatic Teller Machine (ATM)
referred to in Paragraph 3(a) of the attached Termination Agreement
for the sum of $115.00 per month. The lease of this ATM is made on an
"as is" basis without warranty or representation and all costs of
maintenance and upkeep of the machine together with any third-party
service contract shall be the sole responsibility of the Tenant. The
term of the lease of the ATM shall be for the initial term of the
Lease of the premises. At the expiration of the original lease term,
the ATM will become the property of the tenant.
5. The Tenant hereby assumes all responsibility for transferring the
service of the Wells Fargo Security System or the removal thereof
pursuant to Paragraph 3(b) of the attached Termination Agreement.
Landlord assumes no responsibility therefor and makes no
representations or warranties as to the condition of the Security
System.
<PAGE>
6. In all other respects, the terms and conditions of the Agreement date
December 22, 1994, not inconsistent herewith shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LANDLORD:
110 MAIN STREET ASSOCIATES
WITNESS: DATE BY:
/s/ [Illegible] __/__/95 /s/ John J. Cust, Jr.
- ------------------------- -------- -----------------------------
John J. Cust, Jr.
TENANT:
FIRST COMMUNITY BANK
ATTEST: DATE BY:
/s/ [Illegible] 3/24/95 /s/ [Illegible]
- ------------------------- -------- -----------------------------
<PAGE>
EXHIBIT A
TERMINATION AGREEMENT
This AGREEMENT is made this 21 day of February, 1995, by and between 110
MAIN STREET ASSOCIATES, whose mailing address is c/o John J. Cust, Jr., CPA,
P.O. Box 372, Flemington, N.J. 08822 (hereinafter referred to as "110") and
NatWest Bank N.A., which has a place of business at 10 Exchange Place, Jersey
City, N.J. 07302 (hereinafter referred to as "NatWest").
WITNESSETH:
WHEREAS, 110 and First National Bank of Central Jersey, predecessor to
NatWest, entered into a certain Lease on or about January 20, 1987; and,
WHEREAS, said Lease and subsequent extensions thereto shall expire on March
31, 1995; and,
WHEREAS, NatWest relinquishes any right it has to renew the said Lease or
modifications thereto; and,
WHEREAS, 110 has committed the premises to a new tenant and any delay in
securing possession of the premises will cause irreparable damage to 110 and the
new tenant; and,
WHEREAS, NatWest has requested additional time within which to vacate said
premises; and,
WHEREAS, 110 has made arrangements with the new tenant for the delay in
occupancy provided the terms and conditions hereof are strictly adhered to;
NOW, THEREFORE, in consideration of the mutual promises of the parties
hereto and of the mutual benefits to be gained by the performance hereof,
intending to be legally bound, the parties hereby agree as follows:
1. Said Lease between 110 and NatWest shall terminate on March 31, 1995.
2. NatWest shall be permitted to occupy the premises subject to the terms
and conditions hereof until the earlier of the following:
(a) May 15, 1995, or
(b) five (5) business days following NatWest's cessation of its
operation in the premises as a full-service banking facility.
<PAGE>
EXHIBIT A
-2-
3. Except as set forth hereinafter, upon vacating the premises, NatWest
shall remove all equipment and personal property, but shall not remove or damage
any alterations, additions or improvements made by it to the premises.
(a) The Automatic Teller Machine (ATM) shall remain on the premises
and become the property of 110. NatWest shall arrange for the
termination and disconnection of the said ATM from any
appropriate service and connecting lines.
(b) The Wells Fargo security system in the premises is leased by
NatWest. NatWest will cooperate with 110 to make arrangements and
cooperate fully with Wells Fargo and the new tenant at the
premises to (i) transfer the service to the new tenant, or (ii)
arrange for the removal of the security system at the option of
the new tenant.
4. NatWest hereby represents that it owns said Automatic Teller Machine
referred to above free and clear of any and all liens, claims and encumbrances,
and agrees to execute a Bill of Sale or other documents to effectuate the
transfer of the said ATM on an "as is" basis to 110 for no additional
consideration. The conveyance of the ATM is made without warranty or
representation.
5. NatWest shall pay simultaneously with the execution hereof the sum of
$--- INTENTIONALLY DELETED AS EXHIBIT TO ADDENDUM
6. Until cessation of occupancy, NatWest shall pay and be responsible for
its pro-rata share of real estate taxes, maintenance and insurance (triple-net
expenses) based on its pro-rata share of 26.04% as recited in Paragraph 33 of
the original Lease.
7. The use and occupancy of the premises by NatWest after March 31, 1995,
shall not be considered a tenancy and the parties agree that they are not in a
landlord-tenant arrangement.
8. There shall be no grace period for the failure of NatWest to perform
pursuant to the terms and conditions hereof.
9. In the event of any default or breach on the part of NatWest in the
performance of any terms, conditions and covenants
<PAGE>
EXHIBIT A
-3-
contained herein, 110, in addition to any remedies which they may have either in
law or equity, may by force or otherwise, without being liable for prosecution
therefor, or for damage, take possession of the premises. In addition, 110 shall
be entitled to reimbursement for any and all expenses, reasonable attorney fees
and costs in connection with its retaking of the premises. It is agreed by the
parties that such action is deemed commercially reasonable under the terms and
conditions hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
110 MAIN STREET ASSOCIATES
Witness: By:
/s/ [Illegible] /s/ [Illegible]
- ------------------------ -------------------------------
NatWest Bank N.A. (formerly known as
NATIONAL WESTMINSTER BANK, NJ)
Attest: By:
/s/ [Illegible] /s/ [Illegible]
- ------------------------ -------------------------------
Asst. Vice President
<PAGE>
LEASE (FOR PARKING)
Lease agreement is made on July 1, 1995 between G&S Holdings of 100 Main
Street, Borough of Flemington, County of Hunterdon, State of New Jersey, herein
referred to as "Lessor", and First Community Bank with offices at Main Street in
the Borough of Flemington, County of Hunterdon, State of New Jersey, herein
referred to as "Lessee".
SECTION ONE
RENTAL
Lessor hereby rents and leases to Lessee and Lessee hereby hires and leases
from Lessor six (6) parking spaces numbered 10, 11, 54, 54-A (compact cars
only), 55 and 56 together with the nonexclusive right to use the "visitors"
parking area (for twenty minute intervals) located at the premises of Lessor at
90-100 Main Street, Borough of Flemington, County of Hunterdon, State of New
Jersey, for the term and at the rental provided for under this lease.
SECTION TWO
AMOUNT OF RENT
The monthly rental for the spaces hired by Lessee shall be $750. payable
monthly in advance, with the first payment, on a prorated basis to the first day
of the following month, made concurrently with the execution of this lease
agreement, receipt of which is hereby acknowledged. There shall be no refund on
any monthly rental should the lease be terminated by Lessee before the end of
the month.
SECTION THREE
SECURITY DEPOSIT
In addition to the rental provided for in this lease, Lessor acknowledges
receipt of the sum of ($750.) which constitutes a security deposit for the
faithful performance of the lease, which shall be returned to Lessee upon
faithful performance of this agreement or termination of the tenancy under this
lease.
SECTION FOUR
TERM
This lease agreement shall be for an initial term of thirty (30) days, and
thereafter, unless Lessor or Lessee gives thirty (30) days written notice of
their intention to terminate this lease agreement, this lease agreement shall
continue on a month-to-month basis until terminated by thirty (30) days written
notice by either Lessor or Lessee or by the mutual agreement of the parties to
this agreement or by failure of Lessee to pay the rent when due and payable. It
is expressly understood by Lessee that it has no vested right to the spaces
being rented under this lease beyond the term of the lease.
-1-
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SECTION FIVE
USE OF THE SPACES
Lessee shall use the spaces only for the parking of its employees, or other
Lessee personnel.
SECTION SIX
DEFAULT
Rental payments shall be due and payable on the first day of each calendar
month in advance. In the event that rental payment is not received by the 5th
day of the month in which the same has become due and payable, such rental
payments shall be considered as delinquent. Failure to pay the rental payment by
the 5th day of each calendar month shall also constitute a basis for termination
of this lease agreement.
SECTION SEVEN
DELINQUENT PAYMENT
Rental payments shall be due and payable on the first day of each calendar
month in advance. In the event that rental payment is not received by the 5th
day of the month in which the same has become due and payable, such rental
payments shall be considered as delinquent. Failure to pay the rental payment by
the 5th day of each calendar month shall also constitute a basis for termination
of this lease agreement.
SECTION EIGHT
COMPLIANCE WITH RULES AND REGULATIONS
The rules and regulations attached to this lease, as well as such rules and
regulations may be adopted in the future by Lessor for the safety, care and
cleanliness of the premises and the preservation of good order on the premises,
are hereby expressly made a part of this lease, and Lessee agrees to obey all
such rules and regulations.
Dated: July 1, 1995
First Community Bank, Lessee
by:/s/[Illegible] attest:/s/[Illegible]
-------------------------- -------------------------
G&S Holdings, Lessor
by:/s/[Illegible]
--------------------------
,GP
-2-
LEASE
This Lease made this 7 day of August, 1995 by and between Sumas Realty
Corp., having its offices at 733 Mountain Avenue, Springfield, NJ 07081,
(hereinafter referred to as "Landlord") and First Community Bank, a New Jersey
Corporation, having its office at Route 31 South at Beaver Brook, Annadale, NJ
08801, (hereinafter referred to as "Tenant").
ARTICLE 1
DEMISED PREMISES AND QUIET ENJOYMENT
SECTION 1.01 The Property and the Demised Premises
A. The "Property" consists of the entire office building commonly known as 733
Mountain Avenue, also known as Block 147, Lot 14 on the tax map of the
Township of Springfield, consisting of an office building containing two
floors and a basement area, together with all parking areas, driveways,
entrances, exits, landscaped area and sidewalks which serve the Property.
The "Building" is the office building located on the Property. Landlord
leases most of the Building to Village Super Market, Inc. The "Demised
Premises" is a portion of the Building and consists of approximately 1,200
square feet of first floor space that had been leased by Landlord to
Crestmont Savings Bank (which has been acquired by Summit Bank). The Lease
between Landlord and Crestmont ends on December 31, 1995. The Demised
Premises previously had been used by Crestmont as a bank but Crestmont has
vacated the Demised Premises. The Demised Premises shall include the
existing drive-up window that had been used by Crestmont. The Demised
Premises shall not include the remainder of the Building that Landlord
leases to Village Super Market, Inc. As noted elsewhere in this Lease,
Tenant shall have the right to use portions of the Building and Property
together with Village.
B. This lease is contingent upon Tenant satisfying the following conditions
within the time periods set forth below:
1. Tenant obtaining approval to execute this Lease from its Board of
Directors on or before July 31, 1995;
2. Tenant obtaining all governmental approvals on or before October 1, 1995
from all state and federal agencies that are required for Tenant to open
and operate a full service bank branch in the Demised Premises. Tenant
agrees to take all steps necessary to apply for these approvals as soon as
possible and Tenant agrees to diligently pursue such approvals.
3. Within thirty (30) days of the date hereof, Tenant performing whatever
due diligence Tenant believes is necessary to determine whether Tenant will
be able to obtain a Building
<PAGE>
Permit to make the improvements to the Demised Premises that Tenant deems
necessary and to obtain a Certificate of Occupancy for the Demised Premises
to operate Tenant's banking facility; and
4. Tenant obtaining a building permit on or before October 1, 1995.
5. Landlord obtaining a Lease Termination Agreement on or before September
1, 1995 from Crestmont/Summit ending the existing lease on the Demised
Premises. In the event that Landlord is unable to obtain this Lease
Termination Agreement, then Tenant may terminate this Lease and this Lease
shall be null and void and of no force and effect and neither party shall
have any further obligation to the other party.
In the event that Tenant or Landlord do not satisfy or waive these
conditions within the time periods set forth above, then either party may
terminate this Lease by providing written notice to the other party of such
termination. If either party terminates this agreement Lease because Tenant
or Landlord have not satisfied or waived the conditions set forth above,
then this Lease shall be null and void and of no force and effect and
neither party shall have any further obligation to the other party.
SECTION 1.02 Landlord's Status
A. When the term "Landlord" is used in this Lease, it shall mean and include
only the then current fee or leasehold owner of the Demised Premises. Upon
any transfer of title, Landlord shall give notice to Tenant of the name of
Landlord's transferee, whereupon the transferor Landlord shall
automatically be released from all liability hereunder.
ARTICLE II
INTERIM LEASE TERM
SECTION 2.01 Interim Lease Term
A. The "Rent Commencement Date" shall begin on the earlier of the following to
occur: (i) the first day upon which the Tenant is given possession of the
Demised Premises; or (ii) October 1, 1995. Tenant shall pay rent to
Landlord beginning on the Rent Commencement Date. If Tenant takes
possession before October 1, 1995, then the "Interim Lease Term" shall
begin on the date that Tenant takes possession on the Demised Premises and
shall end on September 30, 1995. The Lease Term shall begin on October 1,
1995 and shall end three years later on September 30, 1998. If the Rent
Commencement Date occurs on a day other than the first day of a month,
Tenant shall pay to Landlord a prorated Rent.
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ARTICLE III
POSSESSION, GOVERNMENTAL APPROVALS AND CONSTRUCTION
Section 3.01 Possession, Governmental Approvals and Construction
A. The Landlord delivers the Demised Premises to Tenant, and Tenant accepts
the same, in "as is" conditions without any further obligation on the part
of the Landlord and without any representation with respect to the Demised
Premises or the use which may be made thereof. Crestmont Savings Bank
previously utilized the Demised Premises as a bank. Tenant proposes to use
the Demised Premises for a full service bank branch ("Tenant's Use").
B. After Tenant's due diligence condition has been satisfied or waived, Tenant
shall apply for and diligently pursue all governmental approvals required
to obtain a building permit and certificate of occupancy to use the Demised
Premises for Tenant's Use. Tenant shall give a copy of Tenant's
construction drawings and all other plans to Landlord at least ten (10)
days before Tenant applies for its building permit. Landlord shall not
unreasonably withhold its approval for these plans.
C. Tenant's applications shall cover whatever work Tenant wishes to do inside
the Demised Premises. In addition, the applications shall seek the
following:
1) To install an unisex bathroom in the Demised Premises (Tenant
acknowledges that Tenant shall have no right to use the bathrooms in the
rest of the Building);
2) Tenant shall perform all work required so that Tenant's employees and
customers can enter the Demised Premises from the existing driveways and
sidewalks and install whatever ramps may be necessary so that its employees
and customers can enter the Demised Premises from the driveways and
sidewalk that lead into the sidewalk directly in front of the entrance to
the Demised Premises. In addition, Tenant will do whatever work is
necessary to the entrance of the Demised Premises so that its customers and
employees can enter the Demised Premises and so that Village may lock the
door that separates the Demises Premises from the portion of the Building
leased to Village; and
3) During all hours that Village is open for business, Tenant may utilize
the portions of the Building leased to Village. Village may lock the door
that separates the Demised Premises from the rest of the Building when
Village's office is closed. Village shall have exclusive control over the
door that separates Village's portion of a Building from the Demised
Premises.
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SECTION 3.02 Alterations
Other than Tenant's initial improvement, Tenant shall not make alterations
costing more than $10,000.00 without Landlord's consent, which consent shall not
be unreasonably withheld. Tenant shall not make structural alterations or
additions without Landlord's consent. All alterations shall be performed in a
good and workmanlike manner and shall become part of the realty upon completion.
SECTION 3.03 Trade Fixtures and Signs
A. At least thirty (30) days prior to the termination of this Lease, Tenant
shall give Landlord written notice of all trade fixtures and other items
that Tenant will remove from the Demised Premises and all items that Tenant
proposes to leave in the Demised Premises. Landlord and Tenant agree that
Tenant's automatic teller machine, sign, furniture, desk and other
equipment are Tenant's trade fixtures which Tenant shall remove when this
lease terminates. All other alterations, improvements and additions to the
Demised Premises shall be deemed to have attached to the realty and to have
become the property of Landlord and shall remain for the benefit of the
Landlord at the end of the Lease Term in as good order and condition as
they were when installed, reasonable wear and tear excepted; provided,
however, that within fifteen (15) days of receiving Tenant's notice,
Landlord may send a notice to Tenant directing Tenant to remove
non-structural improvements, fixtures and installations which were placed
in the Demised Premises by Tenant and which are designated in said notice
and Tenant shall repair any damage occasioned by such removal and, in
default thereof, Landlord may effect said removals and repairs at Tenant's
expense.
B. Landlord and Tenant recognizes that Village has existing signage on the
Property. Village shall have the right to maintain or replace that signage
provided that such replacement sign does not contain more square feet than
the existing sign. Provided that Tenant obtains all necessary governmental
approvals, Tenant shall have the right to install, maintain and place on
the Demised Premises such signs as Tenant may desire, subject to the
approval of the Landlord, which Landlord agrees not to unreasonably
withhold, so long as the signs relate to a bank. Tenant shall maintain its
signs in good order and condition and in conformity with applicable
governmental laws and requirements. Landlord shall be permitted to remove
any sign temporarily to perform repair or work and shall replace same as
soon as practicable.
C. If Landlord chooses to remove the existing bank vault or vault door at the
end of Tenant's lease, Tenant agrees to pay a maximum of $2,500.00 towards
the cost of the money Landlord actually spends to remove the vault or door
from the Demises Premises and to restore any damage caused as a part of
this removal. If Tenant chooses to remove the existing bank vault or vault
door at
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the end of Tenant's lease, Tenant agrees to restore any damage cause by
this removal.
ARTICLE IV
RENT
SECTION 4.01 Net Rent
A. Tenant covenants and agrees to pay rent to Landlord, without prior demand
and without any deduction or set-off, the sum of $24,000 per year for the
Interim Lease Term, if applicable, and the Initial Lease Term of the Lease
in equal monthly installments of $2,000.00 on the first day of each month
of the Interim and Initial Lease Terms.
The Initial Lease Term shall be three years from October 1, 1995 to
September 30, 1998. The First Lease Year shall be the twelve (12) month
period beginning on the Rent Commencement Date.
If Tenant is not in default under this Lease, then Tenant may elect to
renew this Lease for a First Option Period of five years provided that
Tenant gives written notice to Landlord on or before April 1, 1998 that
Tenant is exercising this First Option Period. The First Option Period
shall begin on October 1, 1998, after the Initial Lease Term has ended, and
it shall terminate five years thereafter on September 30, 2003. If Tenant
does not provide such written notification to Landlord or if Tenant is in
default, then Tenant shall have no right to exercise this First Option
Period and this Lease shall terminate at the end of the Third Lease Year,
or sooner if Tenant has defaulted.
If Tenant has timely exercised its First Option Period and if Tenant is not
in default under this Lease, then Tenant may elect to renew this Lease for
a Second Option Period of five years provided that Tenant gives written
notice to Landlord on or before April 1, 2003 that Tenant is exercising
this Second Option Period. The Second Option Period shall begin on October
1, 2003, after the First Option Period has ended, and it shall terminate
five years later on September 30, 2008. If Tenant does not provide such
written notification to Landlord or if Tenant is in default, then Tenant
shall have no right to exercise this Second Option Period and this Lease
shall terminate at the end of the First Option Period, or sooner if Tenant
has defaulted.
Beginning with the first month of the First Option Period, October 1, 1998,
the Rent shall be increased by the percentage increase in the cost of
living as determined by the Consumer Price Index for all Urban Consumer's
(CPI-U) - US city average (1982 - 1984 = 100) as issued by the Bureau of
Labor Statistics for New York, Northern New Jersey and Long Island between
April 1, 1995 and April 1, 1998. Tenant shall pay this increased Rent for
each of the sixty (60) months during the First Option Period.
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If the aforesaid Index is no longer being published, the rent increase
shall be based upon a successor or substitute comparable price index
appropriately adjusted. In no event shall the Rent decrease, even if the
CPI decreases.
For example, assume that the CPI is 165 on April 1, 1995 and it is 180 by
April of 1998. If so, Tenant's rent would increase by 9.09% from $24,000
per year to $26,181.80 per year for the First Option Period.
Beginning with the first month of the Second Option Period, October 1,
2003, the Rent shall increase by the percentage increase in the cost of
living as determined by the increase in the CPI between April 1, 1995 and
April 1, 2003. Tenant shall pay this increased Rent for each of the sixty
(60) months during the Second Option Period. If the aforesaid Index is no
longer being published, the rent increase shall be based upon a successor
or substitute comparable price index appropriately adjusted. In no event
shall the Rent decrease, even if the CPI decreases.
B. Landlord shall provide and pay for the costs of providing heat, air
conditioning, electricity, water and sewer. In addition, Landlord shall pay
the costs of the snow plowing and maintenance of the Property. Tenant shall
pay for and provide its own telephone and insurance, as set forth in this
Lease. Parking on the Property shall be on a first come, first serve basis
between Tenant and Village. There will be no reserved parking spaces for
either Tenant or Village.
SECTION 4.02 Definition of Rent
A. All payment obligations of Tenant under this Lease, other than Rent,
including, without limitation, late payment charges, and all costs and
expenses which Landlord incurs by reason of Tenant's Default, are hereby
deemed "Additional Rent" whether or not designated as such, and shall be
due and payable on demand.
B. Rent shall be paid at the office of Landlord or such other place that the
Landlord may designate in writing.
SECTION 4.03 Late Payment Charges
If Rent, or any portion thereof, or Additional Rent, is unpaid for more
than five (5) days after the date on which it was due, Tenant shall immediately
pay, for each and every late payment, a late payment charge equal to one and one
half (1 1/2%) percent per month (eighteen percent (18%) per year) of the amount
in arrears for each month the arrears remains unpaid.
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ARTICLE V
TAXES
SECTION 5.01 Tax Expense
Landlord shall pay the real estate taxes on the Demised Premises.
ARTICLE VI
USE OF THE DEMISED PREMISES AND TRADE NAME
SECTION 6.01 Limitation of Use and Trade Name
A. The Demised Premises shall be used and operated by the Tenant during the
Lease Term as a bank and for no other use or purpose whatsoever. For the
purposes of this paragraph, Tenant's Use shall mean any business or
commercial activity that a bank is permitted to engage in.
B. Tenant shall conduct its business in a high class and reputable manner.
C. Tenant will not permit any act to be done or any condition to exist on the
Demised Premises or any part thereof or any article to be brought thereon
which is or may be deemed to be dangerous unless same shall be safeguarded
as required by law, or which shall, in law, constitute a public or private
nuisance, or which may make void or voidable any insurance required by this
Lease to be carried by Tenant with respect to the Demised Premises.
SECTION 6.02 Repairs
A. Tenant shall keep and maintain the Demised Premises in good order and
condition. Tenant shall make all repairs necessary to keep the Demised
Premises in good order and condition. In addition, notwithstanding the
preceding sentence, if Tenant is required to make a repair, alteration or
improvement to comply with such laws or regulations that costs more than
$5,000.00, then Tenant may provide written notice to Landlord stating that:
1) a law or regulation obligates Tenant to make a repair, alteration or
improvement to the Demised Premises; 2) that such repair will cost more
than $5,000.00; and 3) that Tenant will terminate this lease unless
Landlord agrees to make such repair on Tenant's behalf. Landlord shall have
thirty (30) days from the date that the Landlord receives Tenant's notice
to notify Tenant whether Landlord will make the repair or whether Tenant
may terminate this Lease. If Landlord elects to make this repair, then
Tenant shall have no right to terminate this Lease and Tenant shall pay to
Landlord the sum of $5,000.00 within thirty (30) days of the date that the
repair is completed. Landlord shall pay for the costs of the repairs above
$5,000.00. If Landlord makes the repairs, Landlord shall select the
contractor who shall make said repairs. Tenant agrees that this provision
does not apply to
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repairs or improvements that pertain to Tenant's Use or to Tenant's
obligation to make all repairs to the Demised Premises but only shall
pertain to repairs or improvements needed due to future laws, codes, orders
or regulations.
B. Tenant shall indemnify, defend and hold the Landlord harmless from fines,
claims, losses and expenses (including legal and consultant's fees) of
every kind arising out of or in connection with the Tenant's failure to
comply with such laws and regulations.
C. If Tenant fails to comply with the requirements of the foregoing Paragraph
A, Landlord or its agents may enter the Demised Premises after ten (10)
days' notice in order to effectuate compliance at Tenant's expense,
whereupon Tenant shall reimburse Landlord for all costs incurred. The
notice required in this Paragraph shall not apply in an emergency.
D. Landlord agrees to repair approximately 100 feet of curbing along the
driveup window to the Demised Premises and to secure or replace the two
"grids" that exist in the driveway in front of the driveup window. If
Landlord fails to accomplish said improvements by September 7, 1995, the
Tenant reserves the right to complete said improvements and charge back the
Landlord for said costs.
ARTICLE VII
ASSIGNMENT AND SUBLETTING
SECTION 7.01 Assignment or Sublease
Tenant may assign this Lease or sublet the Demised Premises to any entity
provided that the Demised Premises are used for Tenant's Use. In addition,
Tenant may sell this bank branch to another bank or Tenant may merge with
another bank provided that Tenant or Tenant's successor does not violate the
permitted use clause.
ARTICLE VIII
UTILITIES AND MAINTENANCE
SECTION 8.01 Utilities
Landlord shall provide and pay for heat, air conditioning, electricity,
water service and sewer service to the Demised Premises. Tenant shall pay for
its own phone service. Landlord shall not be liable in anyway for any damage
suffered by Tenant as a result of the cessation or interruption of the utilities
to the Demised Premises caused by fire, accidents, strikes, necessary
maintenance, power failure, other casualties or other causes beyond Landlord's
control.
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ARTICLE IX
INSURANCE
SECTION 9.01 Insurance
A. Tenant shall, at its expense, at all times during the term of this Lease,
maintain in full force a comprehensive general liability insurance policy
with an insurance company, approved by Landlord, which will insure Landlord
against liability for injury to or death of persons or loss or damage to
their property occurring in or about the Demised Premises. The minimum
policy limits shall be One Million ($1,000,000.00) Dollars combined single
limit coverage for each occurrence with general aggregate limit of Two
Million ($2,000,000.00) Dollars. The minimum limit shall be increased
periodically during the Lease Term and the Option Periods as may be
required by Landlord in accordance with the then current industry
standards.
B. Tenant shall, at its own expense, at all times during the term of this
Lease, maintain in full force adequate plate glass insurance on all plate
glass installed on the Demised Premises.
C. Tenant shall, at its own expense, at all times during the term of this
Lease, maintain in full force all employees' workmen's compensation
insurance required under the laws of the State of New Jersey.
D. Tenant shall, at its own expense, at all times during the term of this
Lease, maintain in full force a policy or policies of fire and other hazard
insurance with extended coverage on all of Tenant's fixtures, equipment and
inventory situated in the Demised Premises with an insurance company or
companies approved by Landlord. Said policy or policies to provide
insurance equal to the replacement value of the fixtures and equipment,
together with adequate inventory insurance.
E. Landlord shall, at its own expense, maintain hazard insurance on the
Building and such associated improvements as are insurable to cover loss or
damage by fire and other hazards normally included under "extended
coverage" insurance. The amount of insurance coverage shall be a sum equal
to the full replacement value of the Building and other improvements to the
extent available.
F. Landlord shall, at its expense, at all times during the term of this Lease,
maintain in full force a comprehensive general liability insurance policy
with an insurance company, which will insure Landlord against liability for
injury to or death of persons or loss or damage to their property occurring
in or about the exterior and interior common areas. The minimum policy
limits shall be One Million ($1,000,000.00) Dollars combined single limit
coverage for each occurrence with general aggregate limit of Two Million
($2,000,000.00) Dollars. The Landlord shall
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have the right, but not the obligation, to obtain such additional general
liability insurance as it deems appropriate.
G. All insurance policies maintained by Tenant under this lease, with the
exception of workmen's compensation, shall add Landlord as an additional
insured (except as to contents), shall contain standard mortgagee
endorsements and shall provide that the insurance carrier shall not cancel
the coverage unless the carrier notifies Landlord and any mortgagee so
designated by Landlord at least thirty (30) days prior to the effective
date of such cancellation.
H. In the event the Demised Premises shall be damaged or destroyed by fire or
other casualty so insured against, Tenant agrees that it will claim no
interest in any insurance settlement arising out of any such loss where
premiums are paid by Landlord, or where Landlord is named as the sole
beneficiary, and that it will sign any and all documents required by
Landlord or the insurance company or companies that may be necessary for
use in connection with the settlement of any such loss.
I. Should Tenant fail to keep in effect and pay for such insurance as required
by this Section, the Landlord may do so, in which event the insurance
premiums paid by Landlord shall become due and payable promptly and failure
of Tenant to pay them on demand shall constitute a default of this Lease.
ARTICLE X
INDEMNIFICATION
SECTION 10.01 Indemnification
A. Landlord shall indemnify, protect, defend and hold Tenant and Tenant's
agents and employees harmless from all claims, losses and expenses
(including, without limitation, attorney's fees) arising out of or in
connection with any occurrence inside, outside or about the Demised
Premises, Building or Property resulting from the act or omission of
Landlord, its agents, employees, or contractors, or from any breach or
default in the performance of any obligation of Landlord under this Lease.
B. Tenant shall indemnify, protect, defend and hold, Landlord and Landlord's
agents, employees and mortgagees harmless from all claims, losses and
expenses (including, without limitation, attorney's fees) arising out of or
in connection with any occurrence inside, outside or about the Demised
Premises, Building or Property resulting; from the act or omission of
Tenant, its agents, employees, or contractors, or from any breach or
default in the performance of any obligation of Tenant under this Lease.
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ARTICLE XI
CONDEMNATION
SECTION 11.01 Condemnation
A. If the entire Demised Premises, or a substantial part of the Demised
Premises which renders the balance unusable, shall be taken under power of
eminent domain, this Lease shall terminate as of the date possession is
taken by the condemning authority.
ARTICLE XII
DEFAULT AND REMEDIES
SECTION 12.01 Events of Default
Each of the following shall constitute a "Default" by Tenant under this
Lease:
A. if Tenant fails to pay Rent or fails to deliver, as and when required by
this Lease, any instrument of subordination, estoppel certificate or
insurance certificate;
B. if Tenant's due diligence contingency has been satisfied or waived and
Tenant fails to diligently pursue its building permit, Certificate of
Occupancy or Approvals;
C. if Tenant mortgages or encumbers Tenant's interest in this Lease, or if
Tenant assigns, sublets or grants a right to a third party to use or occupy
all or a portion of the Demised Premises for a use other than Tenant's Use;
D. if Tenant or any guarantor of Tenant makes an assignment for the benefit of
creditors, files a petition in bankruptcy or applies for the appointment of
a trustee or receiver;
E. if a bankruptcy petition is filed against Tenant or any guarantor of Tenant
and is not dismissed or vacated within sixty (60) days;
F. if a receiver or trustee is appointed for Tenant or any guarantor of
Tenant, for all or any portion of the assets of either of them, and such
receivership or trusteeship is not vacated or dismissed with sixty (60)
days;
G. if Tenant fails to perform or observe any other material condition,
covenant or obligation in this Lease required of Tenant.
SECTION 12.02 Landlord's Remedies
A. In the event of a Default involving the payment of Rent or Additional Rent,
Landlord shall have the right to terminate this Lease if Landlord does not
receive payment within fifteen (15)
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days of the date that such payment was due. In the event of a Default,
other than a Default in payment of Rent or Additional Rent, Landlord shall
have the right to terminate this Lease by giving Tenant fifteen (15) days'
written notice, and at the expiration of such fifteen (15) day period,
Tenant shall immediately surrender possession of the Demised Premises;
however, Tenant shall be permitted, within the aforesaid fifteen (15) day
period, to cure any Default and thereby vitiate Landlord's notice of
termination, and the fifteen (15) day period shall be extended if such
Default cannot be cured within fifteen (15) days, provided Tenant has
commenced and diligently continues to cure same to completion.
B. If this Lease is terminated for Default, or if Tenant vacates the Demised
Premises prior to the expiration of the Lease Term, Tenant shall remain
liable to the extent legally permissible for Rent, Additional Rent and all
other charges Tenant would have been required to pay until the date this
Lease would have expired had such Default or vacation not occurred.
Tenant's liability shall continue notwithstanding reentry or repossession
of the Demised Premises by Landlord.
C. If this Lease is terminated for Default or if Tenant vacates, Tenant shall
pay "Damages" to Landlord. Damages shall mean the difference between (a)
the sum of all Rent and Additional Rent that would be owed under the
remainder of the Lease, and all other expenses which Landlord incurs in
reentering the Demised Premises; repossessing the Demised Premises; making
good any Default of the Tenant; painting, altering or dividing the Demises
Premises; putting the Demised Premises in proper repair; protecting and
preserving the Demised Premises; reletting the Demised Premises (including
attorney's fees and brokerage fees); and any expenses which Landlord may
incur during the occupancy of any new tenant; minus (b) the proceeds of any
reletting. In addition, Tenant shall pay to Landlord all costs of suit and
attorney's fees that Landlord incurs with regard to any successful lawsuit
or action instituted by Landlord to enforce the provisions of this Lease.
Landlord may relet all or any part of the Demised Premises for all or any
part of the unexpired portion of the term of this Lease or for any longer
period. Landlord may accept any rental then obtainable; grant any
concession of rent; and agree to paint or make any special repairs,
alterations or decorations for the new tenant as Landlord may deem
advisable in its sole and absolute discretion.
D. Landlord shall make reasonable attempts to relet the Demised Premises.
E. If Tenant shall fail to pay Rent when due, for two consecutive months, or
three or more times in any period of twelve (12) consecutive months, or if
Tenant fails to pay Additional Rent when due three or more times in twelve
consecutive months,
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Landlord may in addition to all other remedies: (1) declare all Rent
reserved under this Lease for the next six months to be immediately due and
payable; or (2) require a Security Deposit of not more than six months'
Rent. Notwithstanding the preceding sentence, Landlord shall first provide
written notice to Tenant that Tenant has failed to pay rent when due for
one month or two or more times in any period of eleven (11) consecutive
months or that Tenant has failed to pay Additional Rent two or more times
during eleven (11) consecutive months before Landlord may declare six
months Rent to be immediately due and payable or require a security deposit
of six months Rent.
F. In the event of a breach by Tenant of any of its obligations under this
Lease, Landlord shall be permitted all equitable remedies in addition to
those provided herein.
G. The rights and remedies of Landlord set forth herein shall be in addition
to any other right and remedy in law or in equity now or hereinafter
available, and all such rights and remedies shall be cumulative. Any action
or failure to act by Landlord shall not constitute a waiver of Default and
any waiver of Default shall be effective only if in writing and signed by
the Landlord. Any failure of Landlord to insist upon the strict performance
of any of Tenant's obligations under this lease or to exercise any right or
remedy available upon a breach thereof by Tenant, or the acceptance of Rent
during the continuance of such breach, shall not constitute a waiver
thereof.
H. Any payment by Tenant of a lesser amount than the Rent provided for in this
Lease shall not be deemed to be other than a payment on account of the
earliest stipulated Rent, and any endorsement or statement on any check or
any letter accompanying any check or payment as Rent shall not be an accord
and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such Rent or pursue
any other remedy provided in this Lease.
SECTION 12.03 Waiver of Jury Trial
Landlord and Tenant hereby waive trial by jury in any action, proceeding or
counterclaim on any matters whatsoever arising out of or in any way connected
with this Lease.
SECTION 12.04 Waiver of Redemption
If Landlord recovers possession of the Demised Premises by reason of
Tenant's Default, Tenant waives its right of redemption granted under any
present or future laws and Tenant further waives Notice of Default, Notice to
Quit and Notice of Landlord's Intention to Re-enter except as otherwise provided
in this Lease.
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ARTICLE XIII
END OF TERM
SECTION 13.01 End of Term
Upon expiration or other termination of the Lease Term, Tenant shall
peaceably and quietly quit and surrender the Demised Premises broom clean, in
good order and condition, ordinary wear-and-tear excepted. If the Demised
Premises are not surrendered as and when aforesaid, or if Tenant shall fail to
remove its trade fixtures and equipment within fifteen (15) days after receiving
written notice from Landlord to do so, Tenant shall indemnify Landlord against
loss or liability resulting from the failure by Tenant to so do, including
without limitation, any claims made by any succeeding occupant founded on and
directly attributable to such failure. All property not removed by Tenant shall
be deemed abandoned and Landlord shall have the right to dispose of same without
accountability to Tenant and charge the cost of removal to Tenant, together with
the cost to repair and restore as aforesaid, and this obligation shall survive
the expiration of the Lease Term and surrender of the Demised Premises, and
acceptance thereof by Landlord.
SECTION 13.02 Holding Over
Should Tenant remain in possession of the Demised Premises after the
expiration of the Lease Term (or any renewal term hereof) without the execution
of a new lease, such holding over, in the absence of a written agreement to the
contrary, shall be deemed to have created and be construed to be a tenancy from
month-to-month terminable on thirty (30) days notice by either party to the
other, at a monthly rental equal to two times the sum of the monthly installment
of Net Rent and Additional Rent during the last month of the Lease term; subject
to all the other terms, covenants and conditions, provisions and obligations of
the Lease insofar as the same are applicable to a month-to-month tenancy.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.01 Subordination
This Lease shall be subordinate to the lien of any mortgage or the lien
resulting from any other method of financing or refinancing now or hereafter in
force against the Demised Premises, or any portion thereof, and to any and all
advances to be made under such mortgages, and all renewals, modifications,
extensions, consolidations and replacements thereof, provided that any such
Mortgagee will honor this Lease. These provisions shall be self-operative and
shall require no further writing as evidence thereof. Nevertheless, Tenant shall
execute and deliver within fifteen (15) days after request, an instrument in
recordable form subordinating this Lease or evidencing such subordination as
required by Landlord or any mortgagee, prospective mortgagee, purchaser or
prospective purchaser. In
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addition to Landlord's other remedies, upon Tenant's failure to execute and
deliver such instrument, Tenant hereby appoints Landlord as Tenant's
attorney-in-fact to execute and deliver such instrument or instruments, and
acknowledges that said agency is coupled with an interest and therefore
irrevocable.
SECTION 14.02 Notices
All notices required under this Lease shall be in writing and shall have
been properly served only if sent by Certified or Registered Mail, Return
Receipt Requested, postage prepaid, to the Tenant c/o James Hyman, President,
First Community Bank, Route 31 South at Beaver Brook, Annadale, NJ 08801 and a
copy to Robert Benbrook, Esq., Benbrook & Benbrook, Route 31 N., Box 5300,
Clinton, NJ 08809 and to the Landlord c/o Perry Sumas, President, Village Super
Market, Inc., 733 Mountain Avenue, Springfield, NJ 07081 with a copy to Frank
Sauro, Esq., General Counsel, Village Super Markets, Inc., 733 Mountain Avenue,
Springfield, NJ 07081. Date of service shall be two days after the date the
notice is deposited in a facility under the exclusive control of the United
States Postal Service. Either party may designate a change of address by serving
notice as provided herein.
SECTION 14.03 Estoppel Certificate
Within fifteen (15) days after request by Landlord, Tenant agrees to
deliver to Landlord or to any prospective mortgagee or purchaser, a Certificate
in recordable form certifying: (1) that the Lease has not been modified and is
in full force and effect or, if there have been modifications, certifying that
same is in full force and effect as modified, and stating the modification; (2)
there are no defenses or offsets against the enforcement of any right or remedy
of Landlord (or if so, specifying same); (3) the dates to which Rent and
Additional Rent have been paid; (4) whether Tenant is in possession of the
Demised Premises; and (5) whether Tenant contends that Landlord is in default
under this Lease, and if so, specifying in detail the nature of the default.
SECTION 14.04 Lease Interest Rate Defined
The Lease Interest Rate is eighteen percent (18%) per year or one and one
half percent (1.5%) per month.
SECTION 14.05 Showing of Demised Premises
Landlord shall have the right during the Lease Term to enter the Demised
Premises to show the Demised Premises to prospective purchasers. Landlord shall
have the further right during the last six (6) months of the Lease Term to enter
the Demised Premises to show the Demised Premises to prospective tenants and to
place therein "For Rent" or other offering signs, as Landlord may deem
appropriate. Any such showing shall be by appointment only, shall be accompanied
by
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Tenant's personnel and shall be during Tenant's business hours.
Tenant shall have the right during the Lease Term to enter the Demised
Premises to show the Demised Premises to prospective purchasers. Tenant shall
have the further right during the last six (6) months of the Lease Term to enter
the Demised Premises to show the Demised Premises to prospective tenants and to
place therein "For Rent" or other offering signs, as Landlord may deem
appropriate. Any such showing shall be by appointment only, shall be accompanied
by Landlord's personnel and shall be during Landlords's business hours.
SECTION 14.06 Applicable Law
The laws of the State of New Jersey shall govern the validity, performance
and enforcement of this Lease.
SECTION 14.07 Titles and Section Numbers
The titles, article numbers, section numbers and table of contents
appearing in this Lease are inserted for convenience only, and shall not define
or limit the scope or intent of same or in any way affect this Lease.
SECTION 14.08 Tenant Defined; Use of Pronoun
The word "Tenant" shall mean every person or party named as a Tenant
herein. Whenever used in this Lease the singular includes the plural and the
plural includes the singular.
SECTION 14.09 Successors and Assigns
This Lease shall be binding upon and inure to the benefit of, and be
enforceable by and against the parties hereto and their respective heirs,
personal representatives and executors.
SECTION 14.10 Partial Invalidity
If any provision of this Lease shall be invalid, unenforceable or
inapplicable with respect to any party, the remainder of this Lease, or the
application of such provision to persons other than those as to which it is held
invalid of unenforceable, shall not be affected and each provision of this Lease
shall be valid and be enforced to the fullest extent permitted by law.
SECTION 14.11 Survival of Obligations
Tenant's obligations to pay Rent, to indemnify Landlord and to reimburse
Landlord for costs to perform any obligation that Tenant has failed to perform
shall survive the expiration or earlier termination of the Lease Term.
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SECTION 14.12 Transmittal
This Lease is transmitted for examination only and does not constitute an
offer to lease. This Lease shall become effective only upon execution and
unconditional delivery by Landlord and Tenant.
SECTION 14.13 Remedies Cumulative
No reference to any specific right or remedy in this Lease shall preclude
Landlord from exercising any other right, having any other remedy, or from
maintaining any action to which it may otherwise be entitled under this Lease,
at law or in equity.
SECTION 14.14 Broker's Commission
Tenant warrants and represents it has not dealt with any real estate broker
or agent in connection with this Lease and agrees to indemnify, defend and hold
Landlord harmless from liability to any real estate broker or agent with respect
to this Lease or the negotiation thereof including costs and attorney's fees
incurred in the defense of any claim for compensation.
Landlord warrants and represents it has not dealt with any real estate
broker or agent in connection with this Lease and agrees to indemnify, defend
and hold Tenant harmless from liability to any real estate broker or agent with
respect to this Lease or the negotiation thereof including costs and attorney's
fees incurred in the defense of any claim for compensation.
SECTION 14.15 Entire Agreement
This Lease made a part hereof and itemized below, set forth the entire
lease between Landlord and Tenant with respect to the Demised Premises. No
amendment to this Lease shall be binding unless in writing and signed by
Landlord and Tenant.
IN WITNESS WHEREOF, the parties have executed this Lease on the date set
forth above.
Witness: SUMAS REALTY CORP., Landlord
/s/ FRANK SAURO By: /s/ PERRY SUMAS
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Frank Sauro Perry Sumas,
President
Witness: FIRST COMMUNITY BANK, Tenant
/s/ LINDA B. McDERMOTT By: /s/ PETE SCHOBERL
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Linda B. McDermott Pete Schoberl,
Executive Vice President
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LEASE AGREEMENT
This Lease Agreement made this 12th day of April, 1996 between Premiere
Development, L.L.C. a New Jersey Limited Liability Company, having its principal
place of business at Allen Center, Suite 103, 150 Allen Road, Liberty Corner,
New Jersey 07938 (hereinafter "Lessor"), and FIRST COMMUNITY BANK, a banking
institution organized under the laws of the State of New Jersey, having its
principal offices at 64 Old Highway 22, Clinton, New Jersey 08809 (hereinafter
"Lessee").
W I T N E S S E T H
WHEREAS, Lessor is the owner of certain lands and premises located on 2222
South Avenue, in the Township of Scotch Plains, County of Union and State of New
Jersey, which said lands and premises are more specifically described as Lot No.
1, in Block 8401 as shown on a map entitled, "New York Suburban Lanco, Map
Section No. 1," which map was filed in the Union County Registers office on
June 22, 1908 as map #127E (hereinafter "Property") ; and
WHEREAS, Lessee desires to rent and occupy the entire property.
NOW THEREFORE, in consideration of the covenants and promises herein made,
the Lessor does demise, lease and let unto the Lessee, and the Lessee herein
leases from the Lessor, the Leased Premises subject to the terms and conditions
as hereinafter set forth.
1. LEASED PREMISES
1.1 The Leased Premises shall consist of the premises as more specifically
set forth on the description attached hereto and made a part hereof as Schedule
A, and further described as follows:
a) First Floor Space consisting of approximately 1,947 square feet;
b) Basement space of approximately 1,947 square feet; and
1.2 The Lease Premises shall also include the right to use all common areas
including, but not limited to common entranceways, foyers, hallways, elevators,
stairways, sidewalks, parking areas and motor vehicle accessways.
1.3 Lessor covenants and agrees with Lessee that Lessee may utilize all
parking spaces on the property to be used Lessee's employees, agents, servants
and invitees.
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2. INTENTIONALLY OMITTED
3. LEASE TERM
3.1 The term of this Lease shall be for a period of ten (10) years and
shall commence on May 1, 1996, and end on April 30, 2006.
4. LESSEE'S OPTION TO RENEW LEASE
4.1 Lessor herein grants Lessee an option to renew this Lease for two (2)
five-year terms on the same terms and conditions as contained in this Agreement.
a) This right of renewal shall expire unless Lessee provides Lessor with
written notice of its intention to renew the Lease for the first 5-year renewal
term at least 180 days prior to the expiration of the initial term of this Lease
as set forth in 3.1.
b) This right of renewal for the second 5-year renewal term shall expire
unless Lessee provides Lessor with written notice of its intention to renew the
Lease at least 180 days prior to the expiration of the first renewal term.
5. BASE RENT
5.1 The Annual Base Rent to be paid by Lessee to Lessor during the first
year of this said Lease shall be ($59,987.07) calculated in the manner
following:
a) First Floor Rental Space:
1,947 square feet x $20.54 per square foot = $39,991.38
b) Basement Floor Rental Space:
1,947 square feet x $10.27 per square foot = $19,995.69
5.2 The Annual Base Rent to be paid by Lessee to Lessor during the second
year of this Lease shall be ($63,586.29) (Annual Base Rent for year one, plus
six (6%) percent).
5.3 The Annual Base Rent to be paid by Lessee to Lessor during the third
year of this lease shall be ($67,401.47) (Annual Base Rent for year two, plus
six (6%) percent).
5.4 The Annual Base Rent to be paid by Lessee to Lessor for years four
through ten of the initial term of this Lease, and during each year of any
renewals thereof, shall be a sum equal to the Annual Base Rent for the preceding
year, together with an increase equivalent to the increase in the Consumer Price
Index for all urban consumers (CPI-U) for that area encompassing New York City,
northern New Jersey and Long Island as published by the
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United States Department of Labor, Bureau of Labor Statistics. This increase
shall be calculated by comparing the CPI-U as it exists on the 30th day prior to
the first rental payment for the year in which rent is being established with
the CPI as it existed when the rent for the preceding year was established.
Notwithstanding the foregoing, in the event any such adjustment results in an
increase of less than three percent (3%) in any given year, then the amount of
the increase for such year shall be three percent (3%).
6. ADDITIONAL RENT
6.1 In addition to the Base Rent, as provided for in paragraph 5 hereof,
Lessee agrees to pay the following to the Lessor as additional rent:
a) All real estate taxes imposed upon the property.
7. COMMENCEMENT OF RENT
7.1 All Base and Additional Rent shall be payable annually in twelve equal
monthly installments. However, the first said monthly payment shall be due and
payable on May 15, 1996 and pro-rated for two (2) weeks. The next rent payment
will be due on June 1, 1996 and successive payments of rent shall be due on the
same day of each month thereafter during the entire term hereof, inclusive of
all renewals.
8. SECURITY
8.1 Lessee shall pay to Lessor simultaneously with the execution of this
Lease, the sum of ($9,997.84) (two months' rent), which said sum shall
constitute a security deposit with respect to Lessee's rental obligations and
with respect to damage to the premises and the full and faithful performance by
the Lessee of the covenants and conditions on the part of Lessee to be
performed. Lessor shall have the right to apply said security or any portion
thereof with respect to any rental or other payment that is over 15 days in
arrears and to cover the cost of any damages to the leased premises caused by
Lessee to the leased premises. In the event of Lessor's application as
aforesaid, then Lessee shall be obligated to replenish that portion of said
security utilized and/or applied by Lessor for the purposes aforesaid within is
days of written notice by Lessor to Lessee. Lessee's failure to do so shall
constitute default under the terms and conditions of this Lease. The security
deposit and accumulated interest thereon shall be held in an interest-bearing
account for the benefit of the Lessee.
9. USE AND OCCUPANCY OF PREMISES
9.1 It is understood and agreed that the use of the premises by Lessee
shall be limited to banking and such other financial
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services activities which Lessee or any affiliate or subsidiary thereof is
lawfully permitted to engage. It is agreed that Lessee shall not put the leased
premises to any other use absent prior written consent of Lessor, which consent
may be unreasonably withheld.
10. LEASE AND CONTINGENCIES
10.1 This Lease is herein made expressly contingent upon Lessor obtaining
title to the property on or before the commencement date of the lease, which
commencement date may be extended as agreed in writing between the parties
hereto.
10.2 This Lease is herein made expressly contingent upon Lessee obtaining
all necessary regulatory approvals so as to (a) permit Lessee to be a party to
this Lease; and (b) establish a branch bank at the leased premises.
11. COMPLIANCE WITH LAWS
11.1 The Lessee shall promptly comply with all laws, ordinances, rules,
regulations, requirements and directives of the federal, state, and municipal
governments or public authorities and of all their departments, bureaus and
subdivisions, applicable to and affecting the use and occupancy of said premises
for the correction, prevention and abatements of nuisances, violations, and
other grievances in, upon or connected with the use and occupancy of said
premises, during the term hereof, and shall promptly comply with all reasonable
orders, regulations, requirements and directives of the Board of Fire
Underwriters or similar authority and of any insurance companies which have
issued or are about to issue policies of insurance covering the use and
occupancy of the said premises and its contents, for the prevention of fire and
other casualty, damage or injury, at the Lessee's own costs and expense.
12. REPAIRS AND MAINTENANCE
12.1 Lessee shall make no alterations, changes, additions or improvements
in the leased premises without the prior written consent of Lessor. It is
recognized that Lessee seeks to construct a drive through canopy. Such
construction shall occur only after written consent of Lessor, and shall be at
the sole cost of Lessee.
12.2 Any alterations, additions and/or improvements made by either party
upon the leased premises shall become the property of Lessor and shall remain
upon and be surrendered with the leased premises as part thereof at the
expiration or termination of the Lease.
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13. UTILITY CHARGES
13.1 Lessee agrees to pay directly to the suppliers before delinquency all
charges for water, gas, heat, electricity, power and other similar charges
incurred by Lessee with respect to and during its occupancy of the leased
premises.
14. REPAIRS AND MAINTENANCE
14.1 LESSOR'S RESPONSIBILITIES: As Lessee shall occupy one hundred percent
of the property during the term of the Lease, and any extensions thereto, Lessor
shall not have any responsibilities regarding any repairs or replacements which
repairs and replacements shall be the responsibility of the Lessee as set forth
in Paragraph 14.2. Additionally, Lessee recognizes that Lessor shall not be
responsible for any loss or damage with respect to repairs or replacements, or
the lack of repairs or replacements.
14.2 LESSEE'S RESPONSIBILITIES: The Lessee shall keep the property in good
repair, at its own cost and expense, including but not limited to the roof, all
structural, electrical, plumbing and mechanical systems (including the HVAC
system), elevators, landscaping and parking areas. Lessee shall also comply with
all applicable laws and regulations respecting the property during the entire
term of this Lease.
15. INSURANCE
15.1 Lessee shall, at its own expense, at all times during the term of this
Lease maintain in full force a comprehensive general liability insurance policy
with an insurance company, approved by Lessor, which will insure Lessor against
liability for injury to or death of persons or loss or damage to their property
occurring in or about the leased premises. The minimum policy limits shall be
One Million ($1,000,000.00) Dollars combined single limit coverage for each
occurrence with general aggregate limit of Two Million ($2,000,000.00) Dollars.
15.2 Lessee, at its own expense, at all times during the term of this Lease
shall maintain in full force adequate plate glass insurance on all plate glass
installed on the leased premises.
15.3 Lessee shall, at its own expense, at all times during the term of this
Lease maintain in full force all employees' workmen's, compensation insurance
required under the laws of the State of New Jersey.
15.4 Lessee shall, at its own expense, at all times during the term of this
Lease maintain in full force a policy or policies of fire insurance, with
extended coverage, on all of Lessee's fixtures, equipment and inventory situate
in the leased premises
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with an insurance company or companies approved by Lessor. Said policy or
policies to provide insurance equal to the replacement value of the fixtures and
equipment, together with adequate inventory insurance.
15.5 Lessee shall, at its own expense, maintain hazard insurance on the
commercial building and such associated improvements as are insurable to cover
loss or damage by fire and other hazards normally included under "extended
coverage" insurance. The amount of insurance coverage shall be a sum equal to
the full replacement value of the building and other improvements to the extent
available.
15.6 All insurance policies maintain by Lessee, with the exception of
workmen's compensation, shall add Lessor as an additional insured (except as to
contents), shall contain standard mortgagee endorsements and shall provide that
the insurance carrier shall not cancel the coverage unless the carrier notifies
Lessor and any mortgagee so designated by Lessor at least thirty (30) days prior
to the effective date of such cancellation.
15.7 In the event the leased premises shall be damaged or destroyed by fire
or other casualty so insured against, Lessee agrees that it will claim no
interest in any insurance settlement arising out of any such loss, and it will
sign any and all documents required by Lessor or the insurance company or
companies that may be necessary for use in connection with the settlement of any
such loss.
15.8 Should Lessee fail to keep in effect and pay for such insurance as
required by this Section, the Lessor may do so, in which event the insurance
premiums paid by Lessor shall become due and payable promptly and failure of
Lessee to pay them on demand shall constitute a default of this Lease.
16. FIRE AND OTHER CASUALTY
16.1 In case of fire or other casualty, the Lessee shall give immediate
notice to the Lessor. Rent shall not abate for the property unless and until
Lessor provides written notice to Lessee that the Lease is terminated as a
result of fire or other casualty.
17. INSPECTION AND REPAIR
17.1 The Lessee agrees that the Lessor and the Lessor's agents, employees
or other representatives, shall have the right to enter into and upon the said
premises and any part thereof, at all reasonable hours, upon 24 hours' notice to
Lessee (except in the event of an emergency), for the purpose of examining the
same or making such repairs alterations or improvements therein as may be
required of the Lessor under this Lease.
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18. DAMAGE, REPAIRS
18.1 In the case of the destruction of or damage of any other kind to the
leased premises caused by the carelessness, negligence or improper conduct on
the part of Lessee or the Lessee's agents, employees, guests, licensees,
invitees, sublessees, assignees or successors, the Lessee shall repair said
damage or replace or restore any destroyed parts of the premises, as speedily as
possible, at the Lessee's own cost and expense.
19. ASSIGNMENT AND SUBLET
19.1 Lessee shall not assign this Lease or any interest in this Lease, or
sublet the leased premises or any part of the premises, or license the use of
all or any portion of the leased premises or business conducted there, or
encumber or hypothecate this Lease, without first obtaining the written consent
of Lessor; and any assignment, subletting, licensing, encumbering or
hypothecating of this Lease without such prior written consent shall, at the
option of Lessor, terminate this Lease.
20. MORTGAGE PRIORITY/SUBORDINATION
20.1 This Lease shall not be a lien against the said premises in respect to
any mortgages that may hereafter be placed upon said premises, so long as the
total of all such mortgages do not exceed 9% of the market value of the
premises. The recording of such mortgage or mortgages shall have preference and
precedence and be superior and prior in lien to this Lease, irrespective of the
date of recording, and the Lessee agrees to execute any instruments, without
cost, which may be deemed necessary or desirable, to further effect the
subordination of this Lease to any such mortgage or mortgages. A refusal by the
Lessee to execute such instruments shall entitle the Lessor to the option of
cancelling this Lease, upon ten (10) days' notice in writing to lessee, and the
term hereof is hereby expressly limited accordingly.
21. ENVIRONMENTAL COVENANTS
21.1 Lessee shall, at Lessee's cost and expense, comply with all applicable
environmental laws and regulations pertaining to Lessee's use and occupancy of
the leased premises. Lessee covenants to indemnify and hold Lessor harmless from
any damages sustained by Lessor, including legal fees and costs of suit,
proximately related to alleged environmental contamination or environmental
damage resulting from Lessee's use and occupancy of the leased premises.
22. LESSEE REGULATIONS
22.1 Any reasonable rules and regulations with regard to the use and
occupancy of the building or the leased premises by Lessee
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adopted at any time during the term of this Lease and of which Lessee is
notified in writing, shall in all things be observed and performed by Lessee,
its servants, agents and invitees, provided that such rule shall not be
inconsistent with the Lessee's rights or the Lessor's obligations as herein
expressed.
23. NON-LIABILITY OF LESSOR
23.1 The Lessor shall not be liable for any damage or injury (of any nature
or of any kind) which may be sustained by the Lessee or any other person, as a
consequence of the failure, breakage, leakage or obstruction of the water,
plumbing, steam, sewer, waste or soil pipes, roof, overhead doors, drains,
leaders, gutters, downspouts or the like or of the electrical, gas, power,
conveyor, refrigeration, sprinkler, air-conditioning or heating systems,
elevators, or by reason of the elements, or by the acts or negligence of any
person or entity not within the sole control of Lessor.
24. RIGHT TO EXHIBIT
24.1 The Lessee agrees to permit the Lessor and the Lessor's agents,
employees or other representative to show the premises to persons wishing to
purchase the same, and Lessee agrees that on and after six (6) months preceding
the expiration of the term hereof, or any extension term, the Lessor of the
Lessor's agents, employees or other representatives shall have the right to show
the premises to prospective lessees and to place notices on the front of said
premises or any part thereof, offering the premise for rent or for sale. All
such showings of the premises shall be made at reasonable hours, upon reasonable
notice to Lessee.
25. CONDEMNATION, EMINENT DOMAIN
25.1 If the land and premises leased herein, or of which the leased
premises are a part, or a major portion thereof, shall be taken under eminent
domain or condemnation proceedings, or if suit or other action shall be
instituted for the taking or condemnation thereof, of or in lieu of any formal
condemnation proceedings or actions, the Lessor shall sell and convey the said
premises of such portion thereof, to the governmental or other public authority,
agency, body or public utility, seeking to take said land and premises or such
portion thereof, then this Lease, at the option of the Lessor, shall terminate,
and the term hereof shall end as of such date of transfer of title; and the
Lessee shall have no claim or right to claim or be entitled to any portion of
any amount which may be awarded as damages to landlord or paid to Lessor as the
result of such condemnation proceedings or paid to landlord as the purchase
price for such sale or conveyance in lieu of formal condemnation proceedings.
The Lessee agrees to execute and deliver any instruments, at the expense of the
Lessor, as may be deemed necessary or required to expedite any condemnation
proceedings or
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<PAGE>
to effectuate a proper transfer of title to such governmental or other public
authority, agency, body or public utility seeking to take or acquire the said
lands and premises or such portion thereof. The Lessee covenants and agrees to
vacate the said premises, remove all of Lessee's property therefrom and deliver
up peaceable possession thereof to and said purchaser. Failure by the Lessee to
comply with any provisions in this clause shall subject the Lessee to such
costs, expenses, damages and losses as the Lessor may incur by reason of the
Lessee's default thereof. The Lessee shall be entitled to receive any relocation
expenses awarded by a court in condemnation or paid in any negotiated
acquisition in lieu of condemnation.
26. REMEDIES UPON LESSEE'S DEFAULT
26.1 If there should occur any default on the part of the Lessee in the
performance of any conditions and covenants herein contained, or should the
Lessee be evicted by summary proceedings or otherwise, the Lessor, in addition
to any other remedies herein contained or as may be permitted by law, may
re-enter the said premises and the same have and again possess and enjoy; and as
agent for the Lessee or otherwise, relet the premises and received the rents
therefore and apply the same, first, to the payment of such expenses, reasonable
attorneys' fees and costs, as the Lessor may have been put to in re-entering and
repossessing the same and, second, to the payment of the rents due hereunder.
The Lessee shall remain liable for such rents as may be in arrears and also the
rents as may accrue subsequent to the re-entry by the Lessor, to the extent of
the difference between the rents reserved hereunder and the rents, if any,
received by the Lessor during the remainder of the unexpired term hereof, after
deducting the aforementioned expenses, fees and costs; the same to be paid as
such deficiencies arise and are ascertained each month.
27. TERMINATION ON DEFAULT
27. 1 Upon the occurrence of any of the contingencies set forth in the
preceding clauses, or should the Lessee be adjudicated bankrupt, insolvent, or
placed in receivership, or should proceedings be instituted by or against the
Lessee for bankruptcy, insolvency, receivership, agreement of composition, or
assignment for the benefit of creditors, and the Lessee shall fail to have said
proceeding terminated within sixty (60) days, or if this Lease or the estate of
the Lessee hereunder shall pass to another by virtue of any court proceedings,
writ of execution, levy, sale or by operation of law, the Lessor may, if the
Lessor so elects, at any time thereafter, terminate this Lease, and the term
hereof upon giving to the Lessee or to any trustee, receiver, assignee or other
person in charge of or acting as custodian of the assets or property of the
Lessee, five (5) days' notice in writing of the Lessor's intention so to do.
Upon giving of such notice, this Lease and the term hereof shall end on the date
fixed in such
- 9 -
<PAGE>
notice as if the said date was the date originally fixed in this Lease for the
expiration hereof.
28. REMOVAL OF LESSEE'S PROPERTY
28.1 Any equipment, fixtures, goods or other property of the Lessee, not
removed by the Lessee upon the termination of this Lease, or upon the Lessee's
eviction, shall be considered as abandoned after ten (10) days, and the Lessor
shall have the right thereafter, upon five (5) days, notice in writing to the
Lessee, to sell or otherwise dispose of the same, and shall not be accountable
to the Lessee for any part of the proceeds of such sale, if any. All costs
associated with removal of abandoned property should be at the expense of the
Lessee.
29. REIMBURSEMENT OF LESSOR
29.1 If the Lessee shall fail or refuse to comply with and perform any
conditions and covenants of the written Lease, the Lessor may, upon twenty (20)
days' notice in writing to the Lessee, if Lessor so elects, carry out and
perform such conditions and covenants, at the costs and expense of the Lessee,
and the said cost and expense shall be payable on demand, or at the option of
the Lessor, shall be added to the installment of rent due immediately
thereafter, but in no case later than one (1) month after such demand, whichever
occurs sooner, and shall be due and payable as such. This remedy shall be in
addition to such other remedies as the Lessor may have hereunder by reason of
the default of the Lessee of any of the covenants and conditions in this Lease
contained.
30. LESSEE PURCHASE OPTION
30.1 Lessor herein grants Lessee an option to purchase the Property (Block
8401, Lot 1 and all improvements constructed thereon) from Lessor pursuant to
the following terms and conditions:
(a) Method of Exercising Option. Lessee shall exercise this option by
providing Lessor with written notice of its intention to do so at
any time during the periods as set forth hereinafter.
(b) Time Periods Within Which Options May Be Exercised. Lessee must
exercise this option within the following time frames:
1) Within the one hundred eighty (180) day period immediately
preceding the termination date for the initial ten (10) year term
of this Lease.
- 10 -
<PAGE>
2) Within the one hundred eighty (180) day period immediately
preceding the termination date for the first five (5) year renewal
term of this Lease.
3) Within the one hundred eighty (180) day period immediately
preceding the termination date for the second five (5) year
renewal term of this Lease.
(c) Right to Exercise Contingency. Lessee's right to exercise this
option is herein expressly made contingent upon Lessee not being
in default of any of its obligations pursuant to this said Lease.
(d) Purchase Price. The purchase price to be paid by Lessee to Lessor
shall be established in the manner following:
1) Lessee's notice to Lessor of Lessee's intention to exercise the
purchase option pursuant to 30.1(a) shall include the purchase
price that Lessee is proposing to pay.
2) Lessor shall have fifteen (15) business days from receipt of
Lessee's notice to advise Lessee as to whether the proposed
purchase price as set forth in Lessee's notice is acceptable to
Lessor.
3) In the event that Lessor does not accept the purchase price as
proposed by Lessee then, in that event, Lessor and Lessee shall
both obtain and exchange written appraisals from qualified
independent appraisers within forty-five (45) days of landlord's
receipt of Lessee's notice to exercise the purchase option.
4) If the value established by the independent appraisals obtained
by Lessor and Lessee do not vary by more than five (5) percent
then, in that event, the purchase price shall be the higher of the
two appraisals.
5) In the event that the independent appraisals obtained by Lessor
and Lessee vary by more than five (5) percent, then the appraisers
selected by Lessor and Lessee shall jointly select a third
appraiser who shall prepare, at Lessor and Lessee's joint expense,
a third appraisal. The purchase price shall be the average of the
three appraisals provided, however, in no event shall Lessor be
required to convey the Property to Lessee for a purchase price of
less than:
- 11 -
<PAGE>
(i) $675,000 in the event the option is exercised during the
initial ten (10) year term.
(ii) $904,000 in the event the option is exercised during the
initial five (5) year renewal term.
(iii) $1,210,000 in the event the option is exercised during
the second five (5) year renewal term.
(e) Closing of Title. Lessor shall convey by Bargain and Sale Deed
with Covenants Against Grantor's Acts at closing of title which
shall take place at Lessor's principal place of business on or
about the 90th day subsequent to the purchase price having been
established. At closing, Lessor shall be paid the purchase price
by way of certified check.
(f) Quality of Title. The title to be conveyed by Lessor shall be good
and marketable title and such title as will be insurable by a
reputable title insurance company subject to easements and
restrictions of record, applicable zoning regulations and such
facts as shall be demonstrated by accurate survey.
31. NON-PERFORMANCE BY LESSOR
31.1 This Lease and the obligation of the Lessee to pay the rent hereunder
and to comply with the covenants and conditions hereof, shall not be affected,
curtailed, impaired or excused because of the Lessor's inability to supply any
service or material called for herein, or by reason of any rule, order,
regulation or pre-emption by any governmental entity, authority, department,
agency or subdivision or to any delay which may arise by reason of negotiations
for the adjustment of any fire or other casualty loss or because of strikes or
other labor trouble or for any cause beyond the control of the Lessor.
32. VALIDITY OF LEASE
32.1 The terms, conditions, covenants and provisions of this Lease shall be
deemed to be severable. If any clause of provisions herein contained shall be
adjudged to be invalid of unenforceable by a Court of competent jurisdiction or
by operation of any applicable law, it shall not affect the validity of any
other clause or provision herein, but such other clauses or provisions shall
remain in full force and effect.
- 12 -
<PAGE>
33. NON-WAIVER BY LESSOR
33.1 The various rights, remedies, option and elections of the Lessor,
expressed herein, are cumulative and the failure of the Lessor to enforce strict
performance by the Lessee of the conditions and covenants of this Lease or to
exercise any election or option or to resort or have recourse to any remedy
herein conferred or the acceptance by the Lessor of any installment or rent
after any default by the Lessee, in any or more instances shall not be construed
or deemed to be a waiver or a relinquishment for the future by the Lessor or any
such condition and covenants, options, elections or remedies, but the same shall
continue in full force and effect.
34. NOTICES
34.1 All notices required under the terms of this Lease shall be given and
shall be complete by mailing such notices by certified mail, return receipt
requested, to the address of the party to be noticed or to such other address as
may be designated in writing, which change of address shall be given in the same
manner, as follows:
For Lessor: Attn: Robert Van Volkenburgh
PREMIERE DEVELOPMENT, L.L.C.
Allen Center, Suite 103
150 Allen Road
Liberty Corner, NJ 07938
For the Lessee: Attn: James Hyman
FIRST COMMUNITY BANK
64 Old Highway 22
Clinton, New Jersey 08809
35. COVENANT OF QUIET ENJOYMENT
35.1 The Lessee, upon payment of the rent herein reserved and upon the
performance of all the terms of the Lease, shall at all times during the Lease
term and during any extension term, peaceably and quietly enjoy the leased
premises without any disturbance from the Lessor or from any other person
claiming through the Lessor. The Lessor shall comply with all the terms of and
make all payments due on mortgages placed by the Lessor on the premises, and
shall pay all real estate taxes on the premises before they become delinquent.
36. LATE PAYMENTS
36.1 A late charge of 5% of all amounts due shall be assessed against any
payment not received within fifteen (15) days after such payment is due.
- 13 -
<PAGE>
37. SPECIAL CONDITIONS TERMINATION
37.1 Notwithstanding any other provisions contained in this Lease, in the
event (a) Lessee or its successors or assignees shall become insolvent or
bankrupt, or if it or their interests under this Lease shall be levied upon or
sold under execution or other legal process, or (b) the depository institution
then operating on the Premises is closed, or is taken over by any depository
institution supervisory authority ("Authority") , Lessor may, in either such
event, terminate this Lease only with the concurrence of any Receiver or
Liquidator appointed by such Authority; provided, that in the event this Lease
is terminated by the Receiver or Liquidator, the maximum claim of Lessor for
rent, damages, or indemnity for injury resulting from the termination,
rejection, or abandonment of the unexpired Lease shall by law in no event be in
an amount equal to all accrued and unpaid rent to the date of termination.
38. ENTIRE CONTRACT
38.1 This Lease contains the entire contract between the parties. No
representative, agent or employee of the Lessor has been authorized to make any
representations or promises with reference to the within letting or to vary,
alter or modify the terms hereof. No additions, changes or modifications,
renewals or extensions hereof, shall be binding unless reduced to writing and
signed by the Lessor and Lessee.
[BALANCE OF THIS PAGE INTENTIONALLY OMITTED]
- 14 -
<PAGE>
ALL THE TERMS, COVENANTS AND CONDITIONS herein contained shall inure to the
benefit of and shall bind the respective parties hereto, and their heirs,
executors, administrators, personal or legal representatives, successors and
assignees.
PREMIERE DEVELOPMENT, L.L.C., as Lessor
By: /S/ [SIGNATURE]
------------------------------------
FIRST COMMUNITY BANK, as Lessee
By: /S/ [SIGNATURE]
------------------------------------
- 15 -
Exhibit 10(vi)
UNITY BANCORP, INC.
CHANGE IN CONTROL AGREEMENT
This Agreement is made as of the ___ day of ____________, 1995 by
and between UNITY BANCORP INC., a Delaware corporation, having its principal
place of business at 219 Concourse Drive, Annandale, New Jersey 08801
("Company") and PETER SCHOBERL, an individual having his place of residence at
__________________ (the "Executive").
PURPOSE. Executive is presently employed by the Company's banking
subsidiary, First Community Bank (the "Bank"), as its Executive Vice President.
The purpose of this Agreement is to protect Executive from any financial
hardship in the event there is a Change in Control (as defined herein) of the
Company.
NOW, THEREFORE, it is agreed as follows:
Section 1. DEFINITIONS. For purposes of this Agreement,
the following terms shall have the meanings assigned to them below:
(a) The terms "Base Salary" shall mean the
Executive's annual salary as of January, 1995. The Executive's
current Base Salary is $_____________.
(b) The term "Change in Control" means a merger or
consolidation of the Bank or the Company into another corporation as a result of
which the shareholders of the Company prior to such merger or consolidation have
less than 50% of the voting power of the surviving or resulting corporation.
<PAGE>
(c) "Date of Termination" means the last day the Executive is
employed by the Company or its successor.
(d) "Notice of Termination" means the notice required to be
given pursuant to Section 2.
(e) The term "for Cause" shall mean:
(i) Any willful and continued failure to perform the material
terms of this Agreement required to be performed by the Executive after demand
for performance is delivered by the Company in a writing that specifically
identifies the manner in which the Company believes the Executive has not
performed such material duty; or
(ii) Any deliberate disobedience, willful neglect or refusal
by the Executive to comply with any lawful and reasonable directions of the
Board of Directors the Company or any member of senior management to whom the
Executive reports; or
(iii) The conviction of Executive for a felony, with the
willful commission by Executive of a criminal or other act that in the judgment
of the Board of Directors of the Company causes or will probably cause
substantial economic damage to the Company or substantial injury to the business
reputation of the Company; or
(iv) The order of any federal or state regulatory agency or
court of competent jurisdiction requiring the termination or suspension of
Executive's employment. No act or failure to act on the Executive's part shall
be considered willful unless done or omitted to be done by him both in bad faith
and without reasonable belief that his action or omission
-2-
<PAGE>
was in the best interests of the Company. The Executive shall be entitled to
reasonable notice and shall be entitled to an opportunity to be heard and in all
cases the Company shall act reasonably and in good faith in asserting that
Executive has been terminated "for Cause." In no event shall any failure,
disobedience or neglect be deemed to be willful in the event the Executive
reasonably (even though it is later determined incorrectly) believed that such
performance or compliance was either not unlawful or was not required by him.
Section 2. RIGHTS OF THE EXECUTIVE ON A CHANGE IN CONTROL.
(a) Upon the occurrence of a Change In Control during the term
hereof, in the event Executive's employment is terminated other than for
"cause", the Executive shall be entitled to receive the following payments from
the Company or its successors:
(i) 100% of his Base Salary through December 31,1995;
thereafter,
(ii) 75% of his Base Salary from January 1, 1996 through
December 31, 1996; thereafter,
(iii) 50% of his Base Salary from January 1, 1997 through
December 31, 1997; and thereafter,
(iv) 25% of his Base Salary from January 1, 1998 through
December 31, 1998.
-3-
<PAGE>
(b) After December 31, 1998, the Executive will not be
entitled to any compensation from the Company or the Bank, or their successors,
under this Agreement.
(c) Upon the occurrence of any Change in Control during the
term of this Agreement, Executive shall be entitled to resign from his
employment with the Company, the Bank or their successors, and have such
resignation treated as a termination without "cause" for purposes of paragraph
(a) above, in the event that within eighteen (18) months of the occurrence of a
Change In Control, the Company, the Bank or their successors (i) reassigns the
Executive to a position of lesser rank or status than that which he held prior
to the Change In Control, (ii) relocates the Executive's principal place of
employment by more than thirty miles from its location prior to the Change In
Control, or (iii) reduces the Executive's compensation or other benefits. Upon
the occurrence of any of these events, the Executive shall have thirty days to
resign from his employment with the Company, the Bank or their successors.
Section 3. OTHER TERMINATION.
In the event the Executive's employment is terminated and there has
been no Change in Control and no Change in Control is being negotiated, the
Company and the Bank shall have no further obligations to Executive hereunder.
Section 4. TERM.
-4-
<PAGE>
The term of this Agreement shall be deemed to have commenced as of
January 1, 1995 and shall continue until December 31, 1998, unless a Change Of
Control shall have occurred.
Section 5. SUCCESSORS; BINDING AGREEMENT.
The Company shall require any successor or assignee, whether direct
or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Company or the Bank, expressly
and unconditionally to assume and agree to perform the Company's obligations
under this Agreement, in the same manner and to the same extent that the Company
would be required to perform if no such succession or assignment had taken
place.
Section 6. NOTICE. For the purpose of this Agreement, notices,
demands and all other communications provided for in the Agreement shall be in
writing and shall be deemed sufficient if sent by registered mail, return
receipt requested, to the Executive's residence as last known to the Company in
the case of the Executive, or to the Company's principal office in the case of
the Company.
Section 7. MISCELLANEOUS. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and the Company. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed
-5-
<PAGE>
by such other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time. No agreement or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of New
Jersey.
Section 8. VALIDITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in
force and effect.
Section 9. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original agreement.
Section 10. ARBITRATION. Any dispute or controversy arising under or
in connection with this Agreement shall be settled exclusively by arbitration,
conducted by a single arbitrator in Newark, New Jersey, in accordance with the
rules of the American Arbitration Association then in effect. Such arbitrator
shall be mutually agreed upon by the Company and the Executive and shall be a
person who is familiar with Executive practices in the banking industry. In the
event the parties are unable to agree upon a single arbitrator, arbitration
shall be made by a three member panel with each party selecting one member and
such two members agreeing on a third. Each party shall act reasonably in
attempting
-6-
<PAGE>
to agree on an arbitrator. Judgment may be entered on the arbitrators' award in
any court having jurisdiction. The expense of such arbitration, including the
Executive's reasonable legal fee, shall be borne by the Company, unless it is
found that the Executive was discharged for Cause, or that the Executive did not
act in good faith in challenging the Company's position, in which event the
Company and the Executive shall each pay one-half of the cost of the arbitration
and each shall bear the cost of its case.
IN WITNESS WHEREOF, the parties hereto have signed, or cause their
duly authorized agents to sign this Agreement as of the date first above
written.
UNITY BANCORP, INC.
By:_____________________
Name
Position
EXECUTIVE
By:/S/ PETER SCHOBERL
------------------
-7-
EXHIBIT 21
Subsidiaries of the Registrant
First Community Bank
Exhibit 23(ii)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Unity Bancorp, Inc.
As independent public accountants, we hereby consent to the use of our report
and to all references to our firm included in this Registration Statement on
Form SB-2.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
September 23, 1996
EXHIBIT 24
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints any one of Robert Van Volkenburgh or James Hyman,
his true and lawful attorn6y-in-fact and agent, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission granting unto said attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ ROBERT VAN VOLKENBURGH
- --------------------------
Robert Van Volkenburgh Chairman of the Board, Chief
Executive Officer and
Director (Principal September 20, 1996
Executive Officer)
/s/ JAMES HYMAN
- --------------------------
James Hyman President, Chief Operating
Officer and Director September 20, 1996
/s/ DAVID DALLAS
- --------------------------
David Dallas Director, Vice Chairman of September 20, 1996
the Board and Secretary
/s/ THOMAS MARESCA
- --------------------------
Thomas Maresca Chief Financial officer
(Principal Financial and
Accounting Officer) September 20, 1996
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE REGISTRANT'S UNAUDITED JUNE 30, 1996 INTERIM FINANCIAL
STATEMENTS AND AUDITED DECEMBER 31, 1995 YEAR END FINANCIAL
STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-END> JUN-30-1996 DEC-31-1995
<CASH> 3,683,048 1,147,764
<INT-BEARING-DEPOSITS> 10,927,449 15,917,094
<FED-FUNDS-SOLD> 1,925,000 7,625,000
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 13,854,797 16,304,282
<INVESTMENTS-CARRYING> 20,353,571 19,856,743
<INVESTMENTS-MARKET> 19,515,086 19,264,315
<LOANS> 84,064,412 59,108,042
<ALLOWANCE> 774,417 561,931
<TOTAL-ASSETS> 138,447,897 121,804,040
<DEPOSITS> 125,623,250 110,997,624
<SHORT-TERM> 0 0
<LIABILITIES-OTHER> 558,400 820,007
<LONG-TERM> 2,010,000 1,510,000
0 0
0 0
<COMMON> 9,462,444 7,371,889
<OTHER-SE> 793,803 1,104,520
<TOTAL-LIABILITIES-AND-EQUITY> 138,447,897 121,804,040
<INTEREST-LOAN> 3,486,678 4,781,664
<INTEREST-INVEST> 1,288,877 2,696,182
<INTEREST-OTHER> 173,844 291,638
<INTEREST-TOTAL> 4,949,399 7,769,484
<INTEREST-DEPOSIT> 2,076,929 3,210,623
<INTEREST-EXPENSE> 2,136,140 3,333,866
<INTEREST-INCOME-NET> 2,813,259 4,435,618
<LOAN-LOSSES> 257,288 228,560
<SECURITIES-GAINS> 31,850 (18,999)
<EXPENSE-OTHER> 2,791,262 3,978,270
<INCOME-PRETAX> 814,913 1,613,966
<INCOME-PRE-EXTRAORDINARY> 814,913 1,613,966
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 502,618 1,004,935
<EPS-PRIMARY> 0.47 1.04
<EPS-DILUTED> 0.47 1.04
<YIELD-ACTUAL> 4.55 4.70
<LOANS-NON> 166,129 77,977
<LOANS-PAST> 151,385 261,704
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 561,931 380,191
<CHARGE-OFFS> 44,802 50,257
<RECOVERIES> 0 3,437
<ALLOWANCE-CLOSE> 774,417 561,931
<ALLOWANCE-DOMESTIC> 774,417 561,931
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
